Class Six:Personal Property II

Liens, Bailments and Special Property Interests

Last Time – We Spoke About:•Part One: Introduction to Personal Property

• An introductory discussion on Personal Property.

•Part Two: Acquiring and Losing Rights in Personal Property

• Acquiring and losing the Rights, Ownership, and Possession of Personal Property; and

•Part Three: Personal Property – The Law of Gifts• A very significant area of property law – Gifts - IDA.

• Gifts Intervivos • Gifts Causa Mortis

Tonight – We Will Speak About:•Part One: A Brief Review•Part Two: A Continuation of Rights, Ownership,

Possession and Transfers – Including:

- Liens,

- Bailments and

- Special Interests. •So here we go.

Review – Looking back – Looking forward

• In Review:

The Four Postulates of Property Law:1. Property needs to be seen as a collection of “Rights”

not a collection of “Things”;

2. Property Rights are those recognized by Law and the Law evolved from Property Rights;

3. Our Foundations of Law recognized that we are endowed with Property Rights; and

4. Property Rights can be summarized by E-PUTThe right to EXCLUDE;The right to POSSESS;The right to USE; andThe right to TRANSFER

Summation of Property Rights• E-PUT

1. The Right to Exclude;

2. The Right to Possess;

3. The Right to Use; and

4. The Right to Transfer.

And so, just what is the “Law”?• The “Law” has been defined by Black’s Law Dictionary as follows:

• “That which is laid down, ordained, or established.

• A rule or method according to which a phenomena or actions co-exist or follow each other.

• Law, in its generic sense, is a body of rules of action or conduct proscribed by controlling authority, and having binding legal force. …

• Law is a solemn expression of the will of the supreme power of the state.”

Perhaps the simplest description of the Law, however, is that:

“Law is the Rules by which civilization is ordered.”

Rome was an empire based upon trade and its military. The law helped both these institutions promote civilization across the then known world by instilling both consumer and merchant confidence and providing a consistent template for the governance and operation of conquered lands and peoples.

The Law of Rome, often referred to as the Code due to its written history, helped to make the Empire the greatest of its time.

Rome and Our LawThe concept of a body of law first emerged in Rome.

Although Rome developed a quasi legislative body known as the Senate as well as a system of Courts to arbitrate disputes, their concept of the Law, put down in Code, was largely the edicts of the emperor.

England and America – Bound by Heritage and Law

Henry, Eleanor, Richard and John

• After the reign of Stephen, in 1154 Henry the Second, and his Wife Eleanor of Aquitaine took over England, Normandy, and Aquitaine (which belonged to Eleanor) thereby comprising not only England but also half of modern France as well.

• When Henry died, he left the throne to his son Richard. Richard, known popularly as Richard the Lionhearted, was a handsome, noble and brave.

• Leading English forces for the 3rd Crusade, King Richard left his younger brother John in charge during his absence.

The First Real Battle for Property Rights

• On June 15, 1215, their forces confronted King John at Runnymede, and forced him to put his seal on the Magna Carta. (the Great Charter).

The Magna Carta is Signed

• The Magna Carta was one of the forerunners of modern British law, the US Constitution and its Amendments (the Bill of Rights) and the guiding documents of many other countries that have further expanded the rights and liberties of the people and limited the power of the government.

• Containing 63 clauses, this landmark document:

- Created a council to the King (a forerunner to parliament), - Promised all freemen access to courts and a fair trial, - Specified many property rights from infringement by the king and his agents, - Eliminated unfair fines and punishments, - Gave certain legal powers to the Catholic Church, and - Addressed many lesser issues.

• It did not abolish serfdom or slavery

Since the time of the Magna Carta the system of modern Anglo-American Law evolved to flow from three sources.

1. Constitutional Law

2. Statutes

3. Case (or Common) Law (Laws made by Judges).

• The law of early America was based largely upon

the law of England.

• We were, of course prior to the Revolution, English subjects.

• Our founders initially spoke of redressing their grievances under a format of the “Rights of Englishmen”

• There was very little statutory law, and even after the US and State Constitutions, most law was still based upon English Court precedent. This is best stated under the Doctrine of Stare Decisis – Latin for “Let the Decision Stand”.

• Indeed statutes were looked upon with a skeptical eye.

- For it should be remembered that the Quartering Act, Stamp Act and the Townsend Acts were all statutes that ignited the Revolution to occur in the first place.

• Sir William Blackstone was an jurist and professor who produced the historical and analytic treatise on the law known as Commentaries on the Law of England.

• First published in four volumes over 1765–1769. It had an extraordinary success.

• A baseline “Bible of the law” of his time, these famous Commentaries still remain an important source on classical views of the common law and its principles.

• It was used not only through out England but through out the United States as well.

Pierson v. Post

Queens NY Case about Possession

Remember – chase that fox – get nothing!

Shoot that fox – and carry it away- get the prize for possession.

Mere pursuit is not possession!

Types of Property• Property can be:

– Real (Rights in Land);

Real Estate – Ownership/Leaseholds/Easements/Life Estates

– Personal (Rights in Objects); and/or

Chattels – Tangible, visible “things”– Intellectual (Rights in Ideas)

Patents – Idea for Product or Process

Trademarks – Logo, Identification or Distinction

Copyrights – Written or Performed Works

Common Law

• Real property means land, things fixed to land. and things incidental or appurtenant to land (basically immovable property).

• Personal property is movable property, but includes virtually every kind of physical property that is not real property.

• Real property may be converted to personal property by severance.

• Personal property may be converted to real property by an annexation intended to be permanent.

REAL AND PERSONAL PROPERTY DISTINCTIONS

Leases

• Under the common law, a lease of land for a term of years constituted personal property.

• This was because the lease did not fall within the common law definition of land, tenements, or hereditaments.

• A lease was considered an interest in land less than a freehold and therefore a real chattel.

• Modern statutes changed the common law rule for leases, defining them as real property.

REAL AND PERSONAL PROPERTY DISTINCTIONSCrops

a. Fructus Naturales

Crops that grow spontaneously on land, e.g., trees, bushes, and grass, are described as fructus naturales and are considered to be a part of the land, and therefore real property.

Title to the land includes such crops.

b. Fructus Industriales

Crops that are the result of annual planting, labor, and cultivation, e.g., grains, vegetables, and other crops, are described as fructus industriales.

These crops are, as a general rule, regarded as personalty.

REAL AND PERSONAL PROPERTY DISTINCTIONS

Fixtures

Under the concept of fixtures, a chattel that has been annexed to real property is converted from personalty to realty. The former chattel becomes an accessory to the land (i.e., a fixture) and passes with ownership of the land. (See Real Property outline.)

ACQUISITION AND LOSS OF RIGHT OR TITLE TO PERSONAL PROPERTY

• Rights and title to personal property are acquired or lost by

1. Transfer - Sale

2. Occupancy,

3. Adverse possession,

4. Accession,

5. Confusion,

6. Judgment,

7. When the chattel is lost, mislaid, or abandoned, or

8. Gift

ACQUISITION AND LOSS OF RIGHT OR TITLE TO PERSONAL PROPERTY

The Finder of “Lost Property”

Property with Value Under Twenty Dollars• A finder of lost property of less than $20 in value must make a reasonable effort to

find the owner and restore the property to them; if unable to do so after a reasonable effort, title vests in the finder one year after the finding. [N.Y. Pers. Prop. Law §252( I )]

Property with Value of Twenty Dollars or More and Instruments• A finder of lost property with a value of $20 or more, or an instrument as defined

for purposes of the statute, who knows the property was lost, must within 10 days of finding it either return it to the owner or report such a finding and deposit the property with the local police. [N.Y. Pers. Prop. Law §252(l)]

Abandoned Property

• Abandoned property is that which the owner has voluntarily relinquished all ownership of without reference to any particular person or purpose.

• The owner must intend to give up both title and possession.

ACQUISITION AND LOSS OF RIGHT OR TITLE TO PERSONAL PROPERTY

Escheat• Where abandoned property is held by an intermediary with no property interest in

the property (e.g., unclaimed funds held by banks or other depositories), the state may assume title to the property through a process called escheat.

• Property may be escheated only by the state in which the property is located.

• Intangible property is considered to be located at the domicile of the property owner.

Accession• Accession is the addition of value to property by the expenditure of labor or the

addition of new material.

• If the added article can be detached from the principal chattel, this will be ordered and each party will be put in status quo ante.

• If the added expenditure or thing cannot be detached from the principal chattel, the question arises as to who is the owner of the chattel in its enhanced state.

• The answer depends upon whether the trespasser acted in good faith or is a willful trespasser.

ACQUISITION AND LOSS OF RIGHT OR TITLE TO PERSONAL PROPERTY

Title by Judgment

Election of Remedies

• One who destroys, misuses, misdelivers, or otherwise wrongfully deprives the owner of chattel of his possessory rights, may be liable to the owner under various theories of recovery.

1) Replevin - Replevin is an action to recover the chattel itself.

2) Trespass - The action in trespass is to recover money damages incurred by reason of the dispossession.

3) Trover - The action in trover is to recover the value of the chattel along with damages for dispossession.

GIFTS

Types of Gifts

Gifts Inter Vivos (Gifts During Lifetime)

Gifts Causa Mortis (Gifts in Contemplation of Death)

The Three Factors that make a Gift

a. Donor's Intent

b. Delivery

c. Acceptance

GIFTS

When it comes to gifts

remember your dear Aunt IDA

The Three Factors that make a Gift

a. Donor's Intent

b. Delivery

c. Acceptance

GIFTSInter Vivos Gifts

Gifts in Contemplation of Marriage

• Engagement gifts (e.g., a diamond engagement ring) are made in contemplation of marriage and are conditioned upon the subsequent ceremonial marriage taking place.

• If the marriage does not occur, engagement gifts must be returned regardless of who is at fault for breaking off the engagement.

• The donor may recover gift even if donor is at fault.

GIFTSGifts Causa Mortis

a. Gifts of Personal Property Only• Only personal property may be transferred as a gift causa mortis.

b. Delivery and Acceptance• Delivery and acceptance must be sufficient to vest control and dominion in the

donee.

• Delivery to an agent does not complete the gift, since death is an event that terminates the agency.

c. Connection Between the Gift and the Donor's Fear of Death• At the time of the gift, the donor must have an immediate and present fear of

death.

• However, the actual cause of the death need not necessarily be the specific one the donor feared (i.e.• donor hospitalized for cancer, but dies of stroke).

• A gift causa mortis is revocable and is automatically revoked by the donor's recovery or by the donee's death.

Class Six:Personal Property II

Liens, Bailments and Special Property Interests

PART TWO: Today’s Class

Personal Property Continued

Part One: LiensSo just what is a Lien?

Well lets go to Blacks Law Dictionary, and remember we need to think of property as a collection of “Rights” and not a collection of “Things”;

Blacks defines a “LIEN” as:1. A charge or security or encumbrance upon property2. A claim or charge on property for payment of some debt,

obligation or duty3. A right to retain property for payment of debt or demand

A simple definition of Lien is:

“The Right to encumber certain property for security on a debt”

Liens A lien is a security device to enforce paymentTypes of LiensA. Common Law Lien

A Common Law Lien is a common law, customary right to possess or retain personal property which has been improved or enhanced in value by the person who claims the lien until the person claiming the property pays in full all charges attaching to the property for such improvement. Every lien requires that:1. A debt has arisen from services performed on the thing;2. Title to the thing is in the debtor; and3. Possession of the thing is in the creditor.

B. Statutory LienA Statutory Lien is an express right to enforce a lien pursuant to statute.

LiensClasses of LiensA. General Lien

A general lien is the right to retain ALL OF THE PROPERTY of another person as security for a general balance due from such other person. Certain creditors and universal agents can have a general lien.

B. Special LienA special lien is the right to retain SPECIFIC PROPERTY of another to secure some particular claim or charge which has attached to the property retained. A common or private carrier, a warehouser or ordinary bailee, a trustee, attorney, arbitrator, and a general or special agent may have a special lien.

Consequence of ClassificationThe question as to whether a lien is general or special becomes important only when the lienholder releases a portion of the chattels held as security. Where a doubt exists as to whether the lienholder has a general or special lien, the law presumes the lien to be special rather than general.

General LienIf the lienholder has a general lien and releases part of the chattels, he releases no portion of the lien and he may hold the unreleased portion until the entire lien charge is paid.

Special LienIf the lien is a special lien and the lienholder releases a portion of the chattels held, he thereby waives the lien to the extent of the chattels released.

Liens

Particular Issues Regarding Liens

1. Lien Given By One Not The OwnerA lien is a proprietary interest, a qualified ownership, and, in general, can only be created by the owner or someone authorized by the owner.

Example: A person in possession of a truck with the owner’s permission cannot create a lien for repairs. The fact that the repairs are for the benefit of the owner is immaterial.

LiensParticular Issues Regarding Liens2. Innkeepers and Common Carriers

The lien of an innkeeper and a common carrier is recognized at common law on the theory that common carriers and innkeepers, being compelled by law to indiscriminately accept all persons who present themselves, must be protected and secured in their just charges for the services rendered.

a. Innkeepers: This lien is peculiar in nature. It attaches to any property brought into the inn by the guest. It is not essential that the guest should, in all cases, be the owner of such property. The property may be that of a third person, or even stolen goods. If the innkeeper has no knowledge that such property is not rightfully in the possession of the guest, such lien will attach generally to all such property to the extent of a reasonable charge for the services rendered.

b. Common Carriers: Although a common carrier is generally required, like an innkeeper, to accept all goods delivered, it has no lien on the goods which it receives from persons other than the owner. The reason for this rule is that the carrier may demand transportation charges in advance, or in the alternative, proof from the shipper that he is acting with the authority of the owner (i.e. as his agent).

LiensParticular Issues Regarding Liens (Continued)3. Warehouser

At common law a warehouser was not recognized to have a lien on bailed chattel.

Such a lien is NOW RECOGNIZED pursuant to statute under the New York Uniform Commercial Code (Section 7-209).

It should be noted, however, that despite this statutory lien, the courts have held that a garagekeeper (a subclass of warehouser as opposed to a mechanic) does not have a right under our state’s constitution to conduct a satisfaction of this lien through an ex parte sale.

4. Statutory LiensNew York’s Lein Law expressly recognizes a number of liens to enforce payment for goods or services performed. These include liens for:

1. Mechanics, 2. Hospitals, 3. Artisians,4. Animal caretakers – including vets, 5. Stone carvers,6. Shipkeepers, and 7. Virtually all creditors.

LiensWaiver of Liens1. Contract

A lien can be waived either by provision or fulfillment of a contract (such as payment).

2. Substitution of Other SecurityWhere a lienor accepts security for payment, the security eliminates the lien.

3. Demand for Unlawful ChargesWhere the lienor includes within his valid lien, amounts in excess of his lawful charges, he is deemed to state that a tender of the lawful amount will not be accepted, and as such the lien is deemed waived, with the lienor’s remedies being those under the law for default.

4. Reservation or Temporary UseThe lien is NOT deemed waived if the lienholder temporarily surrenders the goods to the bailor, if such lienor reserves their lien or permits bailor to have temporary use.

5. SatisfactionA lien can be satisfied upon the sale of the item by the lienor or payment by the lienee.

BAILMENTS

DEFINITION

General Definition• A bailment is the relationship created by the transfer

of possession of an item of personal property by one called the bailor to another called the bailee for the accomplishment of a certain purpose.

• Blacks defines Bailment as: “A delivery of goods or personal property, by one person to another, in trust for the execution of a special object upon or in relation to such goods, beneficial to the bailor or the bailee or both, and upon a contract, express or implied, to perform the trust and carry out such object, and thereupon redeliver the goods to the bailor or otherwise dispose of the same in conformity with the purpose of the trust.”

A simple definition of a Bailment is:

“A contractual relationship created by the transfer of possession of personal property for a purpose”

BAILMENTS

Elements of a Bailment

DAPPER• Delivery• Agreement• Personal Property• Purpose• Entered into for the Benefit of one or both parties; and• ended with Redelivery

BAILMENTS Specific Issues Concerning Bailment Relationship

No Transfer of Title The bailment relationship involves the transfer of possession of an item of personal property to the bailee without a transfer of title. Under the terms of the typical bailment, the bailee has the right to possess the property for a period of time and the obligation to return it to the bailor or otherwise dispose of it.

Contractual Aspect The bailment relationship may arise from an express contractual arrangement between the parties; however, an express contract is not necessary.

BAILMENTS CREATION OF A BAlLMENT

1. Transfer of Possession

Since no bailment arises unless the bailee obtains possession of the item of personal property, the first element to the creation of a bailment is the transfer of possession from the bailor to the bailee. For a bailment to exist, there must be actual or constructive delivery by the bailor of the personalty which is accepted by the bailee, actually or constructively. [Weinshenker v. B.T.S., Inc., 210 N.Y.S.2d 271 (1961)]

a. Actual Transfer

Until and unless the item of personal property comes into the possession of the bailee. the bailee has no rights in that item of personal property.

b. Breach

If there was a contract between the parties that the would-be bailor breached by failing to turn over the item of personal property to the bailee, a cause of action for money damages only would lie in favor of the prospective bailee. If, however, there was no contract between the parties, then no cause of action would lie.

BAILMENTS CREATION OF A BAlLMENT (Continued)

2. Intent to Exercise Control

The fact of possession alone is viewed by the New York courts as insufficient evidence of the creation of a bailment.

To create a bailment that imposes some element of responsibility on the bailee, New York holds that the bailee must have an intent to exercise control over the item, in addition to possession.

Under this view, the often-quoted phrase is: Possession cannot be thrust on a bailee without her consent.

The bailee must knowingly take goods into her possession [General Motors Acceptance Corp. V. Grafinger, 61 Misc. 2d 670 (1969)]; thus, liability is not imposed on a bailee in the absence of evidence of delivery and acceptance of the property by the bailee [Swarth v. Barney's Clothes, Inc., 40 Misc. 2d 423 (1963)].

BAILMENTS CREATION OF A BAlLMENT (Continued)

2. Intent to Exercise Control (Continued)

a. Custody Distinguished The delivery of an item of personal property without the acceptance or acquiescence of the bailee does not, in the view of the New York courts, create a bailment. Mere custody of the item of personal property results where possession is forced on the possessor. [Posner v. New York Central Railroad, 154 Misc. 591 (1935)]

b. Involuntary Bailee Some courts hold that where there is a transfer of possession but there is no acquiescence on the part of the possessor (would-be bailee) to receive possession, a bailment nevertheless results. This would follow from the straightforward interpretation of the bailment definition that the bailment arises from possession of the item of personal property. Following this line of cases, the bailee can be described as an involuntary bailee. While he holds the goods subject to an involuntary bailment, no affirmative duty of care is placed on him which would render him liable to the bailer. [Portable Machinery Co. v. Krakawka, 141 Misc. 123 (1931) - buyer notifying seller of refusal to accept defective property became bailee thereof]

c. Generic Intent It may be that one may acquire possession of an article without knowing its precise identity. A bailment will nonetheless result as long as the person receiving possession (i.e. the bailee) has formed a generic intent to receive the article and create a bailment. The most common example is where an article is contained within another item of personal property which is the actual subject matter of the bailment. A voluntary bailment will be created where the bailee receives an article and has constructive knowledge of its contents.

BAILMENTS CREATION OF A BAlLMENT (Continued)

2. Intent to Exercise Control (Continued)

d. Examples

1) Usual Automobile Contents: An automobile is brought to a parking lot and bailed. The bailee has created a voluntary bailment with regard to not only the automobile but also all contents which are normally found within the automobile. The bailee will be presumed to have constructive knowledge of, and be liable for, such normal contents as a spare tire even though they may have no precise knowledge that the item is contained within the automobile.

2) Special Automobile Contents: Other articles in the trunk of a car stored in a parking lot may not be the subject of a bailment (nor should they be considered the subject of an involuntary bailment) where the bailee does not actually know or have constructive knowledge of the contents. On this basis, if the car were to contain a fur coat, no bailment would result as long as the bailee of the automobile did not actually know of the fur coat. As a result, such bailee would not be charged with constructive knowledge of the fur coat.

3) Hidden Fur Piece: Where a coat in which a fur piece is concealed is deposited in a checkroom and the fur piece is not returned, the owner of the checkroom is not liable for the loss because he was not a bailee for the fur piece. For in this case, the owner of the checkroom did not know the fur piece was concealed in the coat and would have no reason to know that such item would be concealed within a cloth coat. On this basis, one could say that no bailment resulted nor did an involuntary bailment result.

BAILMENTS SPECIAL SITUATIONS

1. Parking Lots (Bailment of Space Rental?)Parking a car in a parking lot may constitute a renting of parking space or it may create a bailment. Whether a particular transaction amounts to a bailment or to the mere renting of parking space will depend on whether the owner surrendered control over the car to the operator of the parking garage. Thus, the turning over of the keys by the owner to the operator or the use by the latter of a checking system would indicate a bailment. [Fire Association of Philadelphia v. Fabian, 170 Misc. 665 (1938)] If, however, the car owner does not surrender the keys, the New York position is that the transaction was a mere leasing of space.

2. Safe Deposit Boxes The relationship between the proprietor of a safe deposit vault and one who rents a box is that of bailor and bailee. Usually, the bank and the "renter" of the box have duplicate keys, but the renter cannot have access to the box without the consent and use of the bank's duplicate key. This type of almost absolute control by the bank over the box and its contents renders the bank a bailee.

3. Garagekeeper A garagekeeper is a bailee for hire.

BAILMENTS SPECIAL SITUATIONS (Continued)

4. Checkroom Deposit a. Negligence General Business Law Section 201: Limits recovery by a patron who sues for negligence:

1) To the value of the coat if: (i) negligence is shown, (ii) a fee is charged for checking the coat, (iii) a value in excess of $200 is declared, and (iv) a written receipt stating the value is issued when the coat is given to the attendant.

2) To $300 if: (i) a value in excess of $200 is declared, and (ii) the other conditions are met, but negligence cannot be shown.

3) To $200 if:No fee or charge is exacted; or (i) a value in excess of $200 is not declared; and (ii) a written receipt is not obtained when the coat is delivered.

b. Posting of Statute General Business Law section 201 protects owners of hotels, motels, or inns, provided that the owner causes copies of the statute to be posted in conspicuous places on the premises. This section can also protects the owner of a restaurant, even though the statute is not clearly posted about the premises. [Weinberg v. D-M Restaurant Corp., 53 N.Y.2d 499 (1981)]

c. Conversion The provisions of General Business Law section 201 DO NOT APPLY when the customer sues for theft (conversion) by the owner or owner's employees.

BAILMENTS SPECIAL SITUATIONS (Continued)

5. Restauranteurs Coats on Hooks: Restaurateurs are not liable for coats on hooks near a guest's seat.

[Wielar v Silver Standard, Inc., 263 A.D. 521 (1942)]

6. Storekeeper Items Necessarily Laid Aside: A storekeeper is a bailee of articles necessarily laid aside and is liable for loss or damage, such as where an old coat is put aside while the customer is trying on a new one, or where money is stolen from pants in a booth while the customer is involved in a new measuring.

9. Bank as BaileeBailee of Deposits: A bank is a bailee of deposits received during the period after its closing time and the opening of its next business day.

BAILMENTS BAILMENTS DISTINGUISHED

1. Bailment vs. Consignment A consignee differs from an ordinary bailee in that he is authorized to sell the goods in the ordinary course of trade.

Hence, a consignment may be described as a special bailment for the purpose of sale. In a true consignment for sale, the consignee is not only a bailee but also an agent of the consignor to sell the goods.

2. Bailment vs. SaleA sale involves the transfer of title to the vendee.

A bailment, on the other hand, involves merely a transfer of possession to the ballee. The title to the goods remains in the bailor.

A fairly workable rule to determine the nature of any given transaction has been presented as follows: When the identical thing delivered, is to be restored in the same or in an altered form, the contract is one of bailment, and the title to the property is not changed. When there is no obligation to restore the specific article, and the receiver is at liberty to return another thing of equal value, or the money value, then the title to the property is passed and it is a sale and NOT a Bailment.

BAILMENTS BAILEE'S RIGHTS WITH RESPECT TO THE BAILED GOODS

1. Possession The bailee has the exclusive right to possession of the property during the bailment, provided he is exercising this right according to the terms and conditions of the bailment.

2. Use of Bailed GoodsOrdinarily, the bailee has no right to use the subject matter of the bailment. However, he may acquire this right by express or implied agreement with the bailor.

a. Implied Use Preserve the Condition of the Item: Older decisions establish that a stable keeper has presumed authority to exercise a horse or to milk a cow to preserve the health of the animal.

b Agreed Use The Parties Agree to the Use: In bailments for the hired use of personal property, the bailee obviously has the right to make the agreed use of the property bailed. The same is true of the gratuitous loan of an article for use. In such cases, however, the bailee's use of the bailed article is limited by the terms of the agreement.

c. Incidental Use Incident to Bailment Purpose: In bailments for storage, repairs, or transportation, the bailee is under a duty not to make any use of the property except such use as is incidental to the performance of his services.

3. Actions Against the Bailee When, due to the wrongful act of the bailee, the goods bailed have been lost or damaged, the bailor has several options available to him.

a. Breach of Contract; b. Action in Tort for Damages; c. Action in Conversion; and d. Replevin

BAILMENTS BAILEE'S DUTY WITH RESPECT TO THE BAILED GOODS

4. Bailee's Duty of Care The traditional view is that the standard of care applicable to a bailee depends on the type of bailment involved.

A bailee is not an insurer of the safety of the goods bailed, but will be liable only for failure to adhere to the standard of care imposed on them by virtue of the type of bailment.

a. Sole Benefit of the Bailor (Gratuitous)

Generally, where the bailment is for the sole benefit of the bailor (e.g., where the bailee is uncompensated), the bailee must exercise only slight care with respect to the goods bailed. He is liable only for gross negligence with respect to the bailed goods.

Examples: 1) A gratuitous bailee of furniture could be held liable for failure to insure the furniture after making a promise to insure it 2) A gratuitous bailee of storage trunks may be liable for an unexplained failure to return the property. [Dalton v. Hamilton Hotel Operating Co., 242 N.Y. 481 (1926)] Note: A three-year statute of limitations applies to actions in which a bailor seeks a recovery because of loss of or damage to goods held under a gratuitous bailment.

BAILMENTS BAILEE'S DUTY WITH RESPECT TO THE BAILED GOODS

4. Bailee's Duty of Care (Continued)

b. Sole Benefit of the Bailee (Gratuitous)

When the bailment is for the sole benefit of the bailee (e.g., the bailor gratuitously loans his property), great diligence is required. The bailee will be liable for even slight negligence.

1. Limitation No liability is imposed on a bailee for loss caused by an independent agency where the bailee exercised at least ordinary care. [Hobbie v. Ryan, 130 Misc. 221 (1927)]

Note: A bailee's promise of freedom from "risk from all hazards“ makes them liable for robbery. [Eckel v. Trencher Furs, Inc., 191 Misc. 14 (1947); Balice v. Erie Railroad, 208 A.D. 427 (1924)]

2. Bailor's Duty A bailor has a duty to warn a gratuitous bailee user of known defects. [Hood v. State, 48 Misc. 2d 43 (1965), aff’d: 28 A.D.2d 1034 (1967)]

BAILMENTS

BAILEE'S DUTY WITH RESPECT TO THE BAILED GOODS

4. Bailee's Duty of Care

c. Mutual Benefit Bailment (Commercial) Bailments for hire and pledges are for the mutual benefit

of the bailor and bailee. In such instances, the bailee must

exercise a duty of ordinary care. The bailee will be liable

for their ordinary negligence.

d. Modern Approach to Duties Modern courts tend to reject this three-step standard and

simply hold the bailee to a duty of ordinary care in light of

the circumstances. New York decisions appear to be moving

toward this trend.

BAILMENTS BAILEE'S DUTY WITH RESPECT TO THE BAILED GOODS

5. Absolute Liability

The bailee is absolutely liable for loss or damage without regard to her degree of care under each of the following circumstances:

a. Departure from Terms of Bailment The bailee is rendered absolutely liable as a converter if they depart from the terms of the bailment, (e.g., by using the goods for a different purpose than the one agreed on). In addition, absolute liability attaches if the bailee removes the goods from an agreed place of storage to another without the bailor's knowledge or consent.

b. Breach of an Agreement to Insure When the bailee expressly agrees, or by custom or previous course of dealing impliedly agrees, to insure the goods against hazards, but fails to do so, and the goods are damaged or destroyed by such hazard, the bailee is rendered absolutely liable.

c. MisdeliveryUpon the termination of the bailment, the bailee owes a duty to redeliver or account for the thing bailed in its original or agreed-upon altered form. Delivery must be made to the bailor or someone claiming under him.

Almost Always Absolute Liability

Although a bailee is held only to a standard of reasonable care with respect to protection and preservation of the bailed chattel, they are absolutely liable for improperly delivering the bailed chattel to someone other than the bailor. Such misdelivery is a breach of the bailment and a conversion of the bailed chattel. Therefore, the liability is absolute and not based on negligence.

Exceptions - Adverse Claimants and Contractual Limitation of Liability

BAILMENTSREIMBURSEMENT AND COMPENSATION

1. Reimbursement The general rule is that ordinary expenses must be borne by he bailee and extraordinary expenses by the bailor.

Consequently, if the bailee pays an extraordinary expense, not incurred through their own fault, they are entitled to reimbursement from the bailor with respect to such expense.

For example, in the rental of a car, the cost of gasoline, oil, and such minor repairs as fixing a flat tire, would be ordinary expenses.

The cost of a new tire and tube, necessitated by a blowout (there being no spare tire), or the repair of a broken axle would be extraordinary expenses.

2. Compensation In a bailment for the mutual benefit of the bailor and the bailee, the bailee is entitled to receive the agreed compensation for their services or, in the absence of such agreement, the reasonable value of such services.

In other types of bailments (ie., gratuitous, sole benefit of bailee or bailor), however, the bailee is entitled to no compensation.

BAILMENTS

TERMINATION

Generally, a bailment may be terminated by agreement

or by conduct of the parties.

1. By Agreement

The mere lapse of a specified time for the accomplishment of the purpose terminates a bailment. [Rentways, lnc. v. O'Neill Milk & Cream Co., 308 N.Y. 342 (1955)]

2. By Conduct of the Parties

Notice to the other party, where the bailment is for an indefinite period, resumption of possession by the bailor, mutual agreement, destruction of the property, or misconduct of the bailee will terminate a bailment. [Pezzo v. Paterno, 277 AD. 496(1950), rev'd on other grounds, 302 N.Y. 884 (1951)]

The Case of the Party Lost at Sea Regina v. Dudley and Stephens

• Bonus Question of the Day

For next time – Read Assignments for Classes 1 to 6

for the Midterm

• Next Week – Guest Lecture

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