Chapter 47 Personal Property and Bailments 2004

Introduction üDefinition: Property consists of legally protected rights and interests a person has in anything with an ascertainable value that is subject to ownership. § Difference Between Real and Personal Property. § Ownership rights in each. © 2004 West Legal Studies in Business A Division of Thomson Learning 2

§ 1: Property Classification üProperty is divided into real and personal property. Real property (see Chapter 48) includes land everything permanently attached to it. Personal property is both tangible and intangible (stocks, copyrights). Real Property © 2004 West Legal Studies in Business A Division of Thomson Learning Personal Tangible Intangible 3

§ 2: Fixtures üA fixture is personal property that becomes permanently affixed to real property. § Intent that it become a fixture is necessary. § Intent is determined by: • The fact that the property cannot be removed without causing damage to the realty. • The fact that the property is so adapted to the realty that it has become part of the realty. § Case 47. 1: In Re Sand & Sage Farm & Ranch (2001). © 2004 West Legal Studies in Business A Division of Thomson Learning 4

Trade Fixtures üTrade fixtures: installed for commercial purposes by a tenant. üThey remain the property of the tenant and can be removed when tenant leaves, repairing any damage caused by removal. © 2004 West Legal Studies in Business A Division of Thomson Learning 5

§ 3: Property Ownership üProperty ownership is viewed as a “bundle of rights”, including the: § § § Right to possess. Right to sell. Right to give. Right to lease. Right to destroy. © 2004 West Legal Studies in Business A Division of Thomson Learning 6

Fee Simple üPerson who owns the entire “bundle of rights” is said to be the owner in fee simple. üFee simple gives the owner the maximum possible estate or right of ownership of real property, continuing forever. üChapter 48 will deal with realty estates. © 2004 West Legal Studies in Business A Division of Thomson Learning 7

Concurrent Ownership üTenancy in common (Fig. 1). A and B own an undivided interest in the property. Upon B’s death interest passes to B’s heir, “C”. üJoint Tenancy (Fig. 2). A and B own an undivided interest in property but, upon B’s death, B’s interest passes to A, the surviving joint tenant. © 2004 West Legal Studies in Business A Division of Thomson Learning A B Fig. 1 C Fig. 2 A B 8

Concurrent Ownership [2] üTenancy by the Entirety (not common) § Usually between husband wife. üCommunity Property (limited # of states) § Property acquired by couple during their marriage is owned as an undivided ½ interest in property (real and personal). © 2004 West Legal Studies in Business A Division of Thomson Learning 9

§ 4: Acquiring Ownership of Personal Property üPersonal property can be acquired through: § § § Possession. Production. Gift. Will or Inheritance. Accession. Confusion. © 2004 West Legal Studies in Business A Division of Thomson Learning 10

Possession üCapture of wild animals (wild animals belong to no one). üFinding of abandoned

Production üWriters, inventors, manufacturers, and others who produce personal property acquire title to it.

Gifts üVoluntary transfer of property ownership from Donor (owner) to Donee (recipient) for no consideration. üThree types § Intervivos—while donor is living. § Causa Mortis: -- made by donor in contemplation of imminent death. § Testamentary – after death, by will/inheritance. © 2004 West Legal Studies in Business A Division of Thomson Learning 13

Gifts [2] üThree requirements for valid gift: § Delivery—actual or “constructive” (symbolic, such as keys to car). • Donor must give up complete control or dominion. Delivery by a 3 rd party is OK. § Donative intent on the part of the donor • Case 47. 2: In Re Estate of Piper (1984). § Acceptance by the Donee. © 2004 West Legal Studies in Business A Division of Thomson Learning 14

Accession ü“Something added. ” üSomeone adds value to a piece of personal property by use of either labor or materials. üWith owner’s consent. üWithout owner’s consent. © 2004 West Legal Studies in Business A Division of Thomson Learning 15

Confusion üCommingling so that a person’s personal property cannot be distinguished from another’s. üFungible goods consists of identical particles such as oil or grain. • Commingled in bad faith. • Commingled in good faith. © 2004 West Legal Studies in Business A Division of Thomson Learning 16

§ 5: Mislaid, Lost or Abandoned Property üMislaid Property: Voluntarily placed somewhere, then inadvertently forgotten. Finder is caretaker for true owner. üLost Property: Involuntarily left. Property owner acquires title against whole world, except for true owner. Finder may be liable for: § Conversion. § Involuntary Bailment. © 2004 West Legal Studies in Business A Division of Thomson Learning 17

Mislaid, Lost or Abandoned Property [2] üAbandoned Property: Discarded by true owner with no intention of recovering. Acquires title against all the world, including the original owner. § Trespassers: no title. § Treasure Trove: Title against all world except true owner. © 2004 West Legal Studies in Business A Division of Thomson Learning 18

§ 6: Bailments üA bailment is formed by the delivery of personal property, without transfer of title, by one person (Bailor) to another (Bailee), usually under an agreement for a particular purpose. üThe property must be returned by the Bailee to the Bailor, or a third party as directed by the Bailor, in the same or better condition. © 2004 West Legal Studies in Business A Division of Thomson Learning 19

Elements of a Bailment üPersonal Property. (Tangible or Intangible-but not persons or realty. ) üDelivery of Possession. § Bailee given exclusive control or possession. § May be actual or constructive. § Bailee must knowingly accept (Bailee must intend to exercise control over chattel). üBailment Agreement. § Express or Implied. © 2004 West Legal Studies in Business A Division of Thomson Learning 20

§ 7: Ordinary Bailments üBailment for the sole benefit of the Bailor: § A gratuitous Bailment; Bailee owes Bailor a low duty of care, liable only for gross negligence. üBailment for the sole benefit of the Bailee: § Bailee owes Bailor a high duty of care and is liable for even slight negligence. üMutual Benefit Bailment: most common. § Each party owes the other a reasonable duty of care. © 2004 West Legal Studies in Business A Division of Thomson Learning 21

Degree of Care Bailor’s Sole Benefit Slight © 2004 West Legal Studies in Business

Rights and Duties of the Bailee üRight To Possess. § Bailee may acquire or use property temporarily. Title does not pass. üRight to Use Bailed Property. üRights of Compensation. § Reimbursed for costs or services as provided in the agreement. üRight to Limit Liability. © 2004 West Legal Studies in Business A Division of Thomson Learning 23

Rights and Duties of Bailee [2] üDuty to Return bailed property in same condition to Bailor. Bailee may liable for conversion and/or negligence. üCase 47. 3: Sunbelt Cranes Construction and Hauling, Inc. v. Gulf Coast Erectors, Inc. (2002). üCase 47. 4: Lembaga v. Cace Trucking (1999). © 2004 West Legal Studies in Business A Division of Thomson Learning 24

Rights and Duties of the Bailor ü Right to have property protected and used as agreed. ü Right to have property back at end of bailment with service or repair done properly. ü Right to have the Bailee not convert. ü Right to not be bound to limitation of liability unless Bailor knows. ü Duty to Provide safe goods: §Mutual Benefit Bailment: free from known or hidden defects; Sole Benefit of Bailee: notify if any known defect. © 2004 West Legal Studies in Business A Division of Thomson Learning 25

Termination of Bailments üMutual agreement of both parties. üDemand by either party. üCompletion of the purpose of the bailment. üAct by the bailee that is inconsistent with the terms of the bailment. üOperation of law. © 2004 West Legal Studies in Business A Division of Thomson Learning 26

§ 8: Special Types of Bailments üDocuments of Title and Article 7. üNegotiability of Documents of Title. § Possessor of document is entitled to receive, hold, and dispose of the document and the goods it covers. § A good faith purchaser of the document may acquire a greater right to the document and goods it covers than the transferor had. © 2004 West Legal Studies in Business A Division of Thomson Learning 27

Common Carriers ü Publicly licenses to provide transportation services to general public. ü Common Carriers are strictly liable for damages except if the damages caused by: § § § An act of God. An act of the public enemy. An order of the public authority. An act of the shipper. The inherent nature of the goods. ü Shipper’s loss. ü Connecting Carriers. © 2004 West Legal Studies in Business A Division of Thomson Learning 28

Warehouses and Innkeepers üWarehouses: § Owe duty of reasonable care. § Can’t exculpate, can limit. üInnkeepers: § Owe duty of strict liability, modified by state statutes; if innkeeper provides safe and notifies guests. § If parking area provided and innkeeper accepts bailment, then may be liable. © 2004 West Legal Studies in Business A Division of Thomson Learning 29