23-1 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin.

23-1 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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5• Personal Property and Bailments

• Real Property• Landlord and Tenant

• Estates and Trusts• Insurance Law

Property

PART

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Personal Property and Bailments

PA ET RHC 23

Few rich men own their own property. The property owns them.

Robert Green IngersollIn an address to the McKinleyLeague, New York City (October 29, 1896)

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Learning Objectives

• Understand concept of property ownership as bundle of rights recognized by law

• Differentiate types of property• Explain bailments, including

creation, rights and duties• Identify various documents of title

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• Property refers to (a) something that may be owned, or (b) a right or interest that allows a person to exercise dominion over a thing that may be owned or possessed

• Property ownership is a bundle of rights that the law recognizes and enforces, including the rights to use, transfer, or destroy the property

Property Overview

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• Property is classified as real or personal• Personal property may be classified as:

– Tangible – has a physical existence•Examples: cars, clothing, animals,

furniture– Intangible -- has no physical existence

•Examples: intellectual property (patent, copyright, trademark), stocks, and bonds

Classifying Property

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• Ownership of personal property may be acquired by:– Production– Purchase– Leasing– Gift– Will or inheritance– Confusion– Accession– Taking possession of unowned property

Acquiring Ownership

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Possession of Unowned Property

• Two major examples of unowned property that may be acquired by possession are wild animals and abandoned property

• The first person to take possession of a wild animal normally becomes the owner– If a captured wild animal escapes and is

caught by another person, that person becomes the owner unless s/he knew the animal had escaped from the first person

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Abandoned or Lost Property

• A person who finds abandoned, mislaid, or lost property may – or may not – be the owner

• Property is considered abandoned if owner intentionally placed property out of his/her possession with intent to give up ownership

• Property is lost when the owner did not intend to part with possession of the property– Finder does not acquire ownership of property,

but acquires better rights to the lost property than anyone other than the true owner

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Mislaid Property

• A person who finds mislaid property acquires no rights to the property, but has the right to hold property for the true owner and has better rights to the property than anyone other than the true owner– Property is mislaid when owner voluntarily

leaves the property, but forgets to retake possession

– Finder must return the property when real owner asks for the property

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Estray Statutes and Embedded Property

• Estray statutes allow finders of property to clear their title to the property through court action after giving public notice

• Embedded property refers to property found underwater or in the ground– Example: Corliss v. Wenner and Anderson

• Court: “We hold that the owner of the land has constructive possession of all personal property secreted in, on, or under his or her land.”

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Leasing

• A lease of personal property is not a transfer of ownership, but a transfer of the right to possess and use personal property belonging to another; common in business settings

Example: lease of

harvesting combine

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Inheritance & Gift

• Ownership of personal property may transfer through inheritance upon the death of the former owner– Property passes by terms of a will or state

law

• A gift is a voluntary transfer of property to the donee (the person who receives a gift), for which the donor (the person who gives the gift) gets no consideration in return

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A Conditional Gift is Not a Gift

• If a person conditions a gift by requiring that the donee comply with certain rules or perform certain actions, the conditional gift is not a completed gift– Example: Lindh v. Surman

about gift in contemplation of marriage

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Confusion & Accession

• Ownership of personal property may be acquired by confusion, or the intermixing of different owners’ goods in such a way that they cannot later be separated

• Accession means increasing property value by adding materials, labor, or both. – In general, owner of original property is

owner of improvements, but person(s) adding value may claim an ownership interest until paid

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Bailments

• Bailment occurs when a bailor who owns personal property (or someone holding the right to possess it) delivers it to another (the bailee) who accepts it and is under an express or implied agreement to return it to the bailor or someone designated by the bailor

Example: bailment of car

to valet

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Creation of a Bailment

Express or implied contract

Bailor (owns or has right to

possess property)

Bailee (knowingly accepts

property withunderstanding thats/he must return it)

Delivery of, exclusive

possession of, andcontrol over

property

Bailee has duty to return property upon termination of bailment

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Duties & Rights of The Bailee

• A bailee has two basic duties:– To take care of the entrusted property– To return property at the bailment’s

termination

• A bailee may have right to compensation– Depends on the bailment agreement

• A person who finds lost or misplaced property may be considered the involuntary bailee or constructive bailee of the property

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Bailee’s Duty of Care

• Degree of care required of bailee to protect the property depends on the type of bailment

1. Bailment for the benefit of the bailor• Only minimal, or slight, degree of care

2. Bailment for mutual benefit• Ordinary or reasonable care

3. Bailment for the benefit of the bailee• High degree of care

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• Professional bailees, such as innkeepers and common carriers, are held to a higher duty of care than the ordinary bailee

• Bailees may try to limit or relieve themselves of liability for bailed property

– Attempt by bailee to avoid liability for intentional wrongful acts is against public policy and will not be enforced

Bailee’s Duty of Care

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If Bailee Fails to Satisfy Duty

• A bailee is obligated to return property to the bailor in the same or similar condition as when bailed, subject to the degree of care

• Thus, if a bailee with an ordinary or high duty of care damages or fails to return the property, bailee may be liable to the bailor for compensation or conversion

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• Some types of bailees are held to a higher level of responsibility than normally required by bailees, making these bailees almost an insurer of the bailed goods– Common carriers– Innkeepers– Safe-deposit boxes

• Document of title refers to the document that identifies ownership of property

Special Bailments

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• The warehouse receipt or the bill of lading may be either negotiable or non-negotiable– A person who acquires a negotiable

document of title generally acquires both title to the document and title to the goods

• To be negotiable, a warehouse receipt, bill of lading, or other document of title must provide that the goods are to be delivered to the bearer or to the order of a named person

Negotiability

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Thought Questions

• Have you ever been a bailee? A bailor? What type of problems may arise in a bailment situation?