Quiz 27: Personal Property and Bailments

ISSUE SPOTTERS Quintana Corporation sends important documents to Regal Nursery, Inc., via Speedy Messenger Service. While the documents are in Speedy's care, a third party causes an accident to Speedy's delivery vehicle that results in the loss of the documents. Does Speedy have a right to recover from the third party for the loss of the documents? Why or why not? (See page 670.)

What is real property? What is personal property?

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What is real property? What is personal property?

Duties of the Bailee. Discuss the standard of care traditionally required of the bailee for the bailed property in each of the following situations and determine whether the bailee breached that duty. (See Bailments.) 1. Ricardo borrows Steve's lawn mower because his own lawn mower needs repair. Ricardo mows his front yard. To mow the backyard, he needs to move some hoses and lawn furniture. He leaves the mower in front of his house while doing so. When he returns to the front yard, he discovers that the mower has been stolen. 2. Alicia owns a valuable speedboat. She is going on vacation and asks her neighbor, Maureen, to store the boat in one stall of Maureen's double garage. Maureen consents, and the boat is moved into the garage. Maureen needs some grocery items for dinner and drives to the store. She leaves the garage door open while she is gone, as is her custom, and the speedboat is stolen during that time.

Vanessa Denai owned forty acres of land in rural Louisiana with a 1,600-square-foot house on it and a metal barn near the house. Denai met Lance Finney, who had been seeking a small plot of rural property to rent. After several meetings, Denai invited Finney to live on a corner of her land in exchange for Finney's assistance in cutting wood and tending her property. Denai agreed to store Finney's sailboat in her barn. With Denai's consent, Finney constructed a concrete and oak foundation on Denai's property and purchased a 190-square-foot dome from Dome Baja for $3,395. The dome was shipped by Doty Express, a transportation company licensed to serve the public. When it arrived, Finney installed the dome frame and fabric exterior so that the dome was detachable from the foundation. A year after Finney installed the dome, Denai wrote Finney a note stating, "I've decided to give you four acres of land surrounding your dome as drawn on this map." This gift violated no local land-use restrictions. Using the information presented in the chapter, answer the following questions. 1. Is the dome real property or personal property? Explain. 2. Is Denai's gift of land to Finney a testamentary gift, a gift causa mortis, or a gift inter vivos? 3. What type of bailment relationship was created when Denai agreed to store Finney's boat? What degree of care was Denai required to exercise in storing the boat? 4. What standard of care applied to the shipment of the dome by Doty Express? DEBATE THIS: Common carriers should not be able to limit their liability.

ISSUE SPOTTERS Rosa de la Mar Corporation ships a load of goods via Southeast Delivery Company. The load of goods is lost in a hurricane in Florida. Who suffers the loss? Explain your answer. (See page 674.)

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What is the difference between a joint tenancy and a tenancy in common?

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What is the difference between a joint tenancy and a tenancy in common?

Gifts. Jaspal has a severe heart attack and is taken to the hospital. He is aware that he is not expected to live. Because he is a bachelor with no close relatives nearby, Jaspal gives his car keys to his close friend Friedrich, telling Friedrich that he is expected to die and that the car is Friedrich's. Jaspal survives the heart attack, but two months later he dies from pneumonia. Sam, Jaspal's uncle and the executor of his estate, wants Friedrich to return the car. Friedrich refuses, claiming that the car was a gift from Jaspal. Discuss whether Friedrich will be required to return the car to Jaspal's estate. (See Acquiring Ownership.)

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What are the three necessary elements for an effective gift?

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What are the three necessary elements for an effective gift?

Question with Sample Answer-Bailments. Curtis is an executive on a business trip to the West Coast. He has driven his car on this trip and checks into the Hotel Ritz. The hotel has a guarded underground parking lot. Curtis gives his car keys to the parking lot attendant but fails to notify the attendant that his wife's $10,000 fur coat is in a box in the trunk. The next day, on checking out, he discovers that his car has been stolen. Curtis wants to hold the hotel liable for both the car and the coat. Discuss the probable success of his claim. (See page 699.)

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What are the three elements of a bailment?

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What are the three elements of a bailment?

Spotlight on Joint Tenancy-Property Ownership. Vincent Slavin was a partner at Cantor Fitzgerald Securities in the World Trade Center (WTC) in New York City. In 1998, Slavin and Anna Baez became engaged and began living together. They placed both of their names on three accounts at Chase Manhattan Bank according to the bank's terms, which provided that "accounts with multiple owners are joint, payable to either owner or the survivor." Slavin arranged for the direct deposit of his salary and commissions into one of the accounts. On September 11, 2001, Slavin died when two planes piloted by terrorists crashed into the WTC towers, causing their collapse. At the time, the balance in the three accounts was $656,944.36. On September 14, Cantor Fitzgerald deposited an additional $58,264.73 into the directdeposit account. Baez soon withdrew the entire amount from all of the accounts. Mary Jelnek, Slavin's mother, filed a suit against Baez to determine the ownership of the funds that had been in the accounts. In what form of ownership were the accounts held? Who is entitled to which of the funds and why? [In re Jelnek, 3 Misc.3d 725, 777 N.Y.S.2d 871 (2004)] (See pages 661-662.)

What are the basic rights and duties of a bailee? What are the rights and duties of a bailor?

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What are the basic rights and duties of a bailee? What are the rights and duties of a bailor?

Case Problem with Sample Answer In July 2003, Chester Dellinger and his son Michael opened a joint bank account with Advancial Federal Credit Union in Dallas, Texas. Both of them signed the "Account Application," which designated Chester as a "member" and Michael as a "joint owner." Both of them received a copy of the "Account Agreement, Disclosures and Privacy Policy," which provided that "a multiple party account includes rights of survivorship." Chester died in February 2005. His will designated Michael as the executor of the estate, most of which was to be divided equally between Michael and his brother, Joseph, Chester's other son. Michael determined the value of the estate to be about $117,000. He did not include the Advancial account balance, which was about $234,000. Joseph filed a suit in a Texas state court against Michael, contending that the funds in the Advancial account should be included in the estate. Michael filed a motion for summary judgment. Who owned the Advancial account when Chester was alive? Who owned it after he died? What should the court rule? Explain. [ In re Estate of Dellinger, 224 S.W.3d 434 (Tex.App.-Dallas 2007)]

Gifts. John Wasniewski opened a brokerage account with Quick and Reilly, Inc., in his son James's name. Twelve years later, when the balance was $52,085, the account was closed. The funds were then transferred into a joint account in the names of James's father and brother. Only after the transfer, when James received a tax form for the prior account's final year, did James learn of this new account. He filed a suit in a Connecticut state court against Quick and Reilly, alleging breach of contract and seeking to recover the account's principal and interest. What are the elements of a valid gift? Did John's initial opening of the account with Quick and Reilly constitute a gift to James? What is the likely result in this case, and why? [ Wasniewski v. Quick and Reilly, Inc., 292 Conn. 98, 971 A.2d 8 (2009)]

Bailment Obligation. Don Gray, who ran an aircraft paint shop, was hired to repaint an airplane owned by Bob Moreland. When Moreland left the plane for the paint job, a bailment was created. The price agreed upon was $9,470. When Moreland picked up the airplane, he was disappointed in the quality of the work and pointed out numerous defects. Gray had signed the airplane logbooks, indicating that the work was complete. Moreland flew the plane to another shop, which redid the paint job and estimated the cost of repairing the damage caused by Gray to be about $7,000. Moreland refused to pay Gray, who then sued for the work he had performed on Moreland's plane. Moreland made a counterclaim. The jury awarded Moreland damages of $9,385, plus attorneys' fees of $12,420. Gray appealed, contending that when Moreland took possession of the airplane after the job was completed, he had accepted the work. Moreland had no right to take it to another shop without giving Gray a chance to repair any defects. Is that argument correct? Why or why not? [ Gray v. Moreland, 2010 Ark.App. 207 (2010)]

A Question of Ethics-Gifts. Marcella Lashmett was engaged in farming in Illinois. Her daughter Christine Montgomery was also a farmer. Christine often borrowed Marcella's farm equipment. More than once, Christine used the equipment as a trade-in on the purchase of new equipment titled in Christine's name alone. After each transaction, Christine paid Marcella an agreed-to amount, and Marcella filed a gift tax return. Marcella died on December 19, 1999. Her heirs included Christine and Marcella's other daughter, Cheryl Thomas. Marcella's will gave whatever farm equipment remained on her death to Christine. If Christine chose to sell or trade any of the items, however, the proceeds were to be split equally with Cheryl. The will named Christine to handle the disposition of the estate, but she did nothing. Eventually, Cheryl filed a petition with an Illinois state court, which appointed her to administer the will. Cheryl then filed a suit against her sister to discover what assets their mother had owned. [In re Estate of Lashmett, 369 Ill.App.3d 1013, 874 N.E.2d 65 (4 Dist. 2007)] (See pages 662-666.) 1. Cheryl learned that three months before Marcella's death Christine had used Marcella's tractor as a trade-in on the purchase of a new tractor. The trade-in credit had been $55,296.28. Marcella had been paid nothing, and no gift tax return had been filed. Christine claimed, among other things, that the old tractor had been a gift. What is a "gift"? What are the elements of a gift? What do the facts suggest on this claim? Discuss. 2. Christine also claimed that she had tried to pay Marcella $20,000 on the trade-in of the tractor but that her mother had refused to accept it. Christine showed a check made out to Marcella for that amount and marked "void." Would you rule in Christine's favor on this claim? Why or why not?

Critical Thinking Legal Question Suppose that a certificate of deposit (CD) owned by two joint tenants (with the right of survivorship) is given by one of the joint tenants as security for a loan (without the other joint tenant's knowledge). Further suppose that the joint tenant dies after defaulting on the loan. Who has superior rights in the CD, the creditor or the other surviving joint tenant? Explain.

Video Question To watch this chapter's video, Personal Property and Bailments, go to www.cengagebrain.com. Register the access code that came with your new book or log in to your existing account. Select the link for the "Business Law Digital Video Library Online Access" or "Business Law CourseMate." Click on "Complete Video List," view Video 53, and then answer the following questions: 1 What type of bailment is discussed in the video? 2 What were Vinny's duties with regard to the rug-cleaning machine? What standard of care should apply? 3 Did Vinny exercise the appropriate degree of care? Why or why not? How would a court decide this issue?

FACTS Jean Knowles Goodman, who was eighty-five years old, gave Dr. Steven Atwood several checks over a period of three months that totaled $56,100. Atwood was a veterinarian who had cared for Goodman's dogs for nearly twenty years. Atwood and Goodman had become friends, and he had regularly visited her house to care for her dogs and socialize with her. Shortly after writing the last check, Goodman was hospitalized and diagnosed with dementia (loss of brain function) and alcohol dependency. A guardian was appointed for Goodman. The guardian filed a lawsuit against Atwood to invalidate the gifts, claiming that Goodman had lacked mental capacity and donative intent. At trial, a psychiatrist who had examined Goodman testified on behalf of Atwood that while Goodman lacked the capacity to care for herself, she would have understood that she was giving away her funds. The trial judge ruled that Goodman had the capacity and intent to make the gifts to Atwood. The guardian appealed ISSUE Was there sufficient proof that Goodman had donative intent to make the gifts to Atwood, even though she was later found to be mentally incompetent? DECISION Yes. The state appellate court affirmed the lower court's judgment in favor of Atwood, the defendant. There was sufficient evidence of the donor's capacity and intent to support the trial judge's findings. REASON The plaintiff in civil actions bears the burden of proving the essential elements of a claim-in this case, the lack of capacity and intent. The court found that the trial judge had used the proper standard of evidence and had kept the burden of proof on the plaintiff. There was sufficient evidence of the donor's capacity and intent to support the trial judge's findings. "The plaintiff's own witness conceded the possibility that the donor experienced periods of mental awareness in addition to her lucidity regarding financial affairs." The appellate court acknowledged "that a reasonable and conscientious finder of fact could have reached a different conclusion." Nonetheless, it is not the task of an appellate court "to substitute our judgment for that of the fact finder, and on this record we do not conclude that a mistake has clearly been made." WHAT IF THE FA CTS WERE DIFFERENT? If there had been a jury trial, and the jury had concluded that Goodman lacked mental capacity and intent at the time she made the gifts to Atwood, would the appellate court still have affirmed the decision? Why or why not ?

FACTS Gladys Piper died intestate (without a will) in 1982. At her death, she owned miscellaneous personal property worth $5,000 and had in her purse $200 in cash and two diamond rings, known as the Andy Piper rings. The con- tents of her purse were taken by her niece Wanda Brown, allegedly to preserve them for the estate. Clara Kaufmann, a friend of Piper's, filed a claim against the estate for $4,800. From October 1974 until Piper's death, Kaufmann had taken Piper to the doctor, beauty shop, and grocery store; had written her checks to pay her bills; and had helped Piper care for her home. Kaufmann maintained that Piper had promised to pay her for these services and had given her the diamond rings as a gift. A Missouri state trial court denied her request for payment. The court found that her services had been voluntary. Kaufmann then filed a petition for delivery of personal property-the rings-which was granted by the trial court. Brown, other heirs, and the administrator of Piper's estate appealed. ISSUE Had Piper made an effective gift of the rings to Kaufmann? DECISION No. The state appellate court reversed the judgment of the trial court on the ground that Piper had never delivered the rings to Kaufmann. REASON Kaufmann claimed that the rings belonged to her by reason of a "consummated gift long prior to the death of Gladys Piper." Two witnesses testified at the trial that Piper had told them that she was going to wear the rings until she died but that the rings belonged to Kaufmann. The appellate court, however, found "no evidence of any actual delivery." The court pointed out that the essentials of a gift are (1) a present intention to make a gift on the part of the donor, (2) a delivery of the property by the donor to the donee, and (3) an acceptance by the donee. Here, the evidence showed only an intent to make a gift. Because there was no delivery-either actual or constructive-a valid gift was not made. For Piper to have made a gift, she would have had to execute her intention by the complete and unconditional delivery of the property or the delivery of a proper written instrument evidencing the gift. As this did not occur, the court found that there had been no gift. WHAT IF THE FA CTS WERE DIFFERENT? Suppose that Gladys Piper had told Clara Kaufmann that she was giving the rings to Clara but wished to keep them in her possession for a few more days. Would this have affected the court's decision in this case? Explain. IMPACT OF THIS CASE ON TODAY 'S LAW This case clearly illustrates the delivery requirement when making a gift. Assuming that Piper did, indeed, intend for Kaufmann to have the rings, it was unfortunate that Kaufmann had no right to receive them after Piper's death. Yet the alternative could lead to perhaps even more unfairness. The policy behind the delivery requirement is to protect property owners and their heirs from fraudulent claims based solely on parol evidence. If not for this policy, a person could easily claim that a gift had been made when, in fact, it had not.

LaPlace v. Briere New Jersey Superior Court, Appellate Division, 404 N.J.Super. 585, 962 A.2d 1139 (2009). www.lawlibrary.rutgers.edu/search.shtml FACTS Michael LaPlace boarded his horses, including a trained Quarter Horse named Park Me In First, at Pierre Briere's stable in New Jersey. Charlene Bridgwood also boarded a horse at the stable. About a dozen years earlier, LaPlace had boarded horses at the farm owned by Bridgwood's husband. To exercise a horse, its handler often uses a technique known as lunging -that is, having the horse walk, trot, or canter in a circle while it is secured to a lunge line held by the handler, who stands in the center of the circle. Bridgwood had often lunged the horses, including those owned by LaPlace. In 2006, after a snowy night while LaPlace and Briere were at a horse show, Bridgwood offered to help Briere's shorthanded staff by lunging the horses, even though she was not an employee of the stable. During the exercise, Park Me In First suddenly reared up on his hind legs. He then collapsed with blood pumping from his nose and died. The veterinarian could not determine the cause of death without performing a necropsy (autopsy). Briere and Bridgwood offered to pay for the procedure, but none was performed because LaPlace did not authorize it until after the horse's remains had been removed. LaPlace filed a suit in a New Jersey state court against Briere, claiming negligence. The court issued a summary judgment in the defendant's favor. LaPlace appealed. ISSUE Without proof of negligence, can a bailee (Briere) be absolved of liability on a claim for the loss of bailed goods (Park Me In First)? DECISION Yes. The state intermediate appellate court affirmed the lower court's judgment. Briere could not be held liable on that claim for the death of Park Me In First. REASON A bailee has a duty to take reasonable care of bailed property and is liable for any loss caused by a failure to do so. If the property is damaged in the care of the bailee, a presumption of negligence arises. But this presumption may be rebutted by proof that the loss was not caused by the bailee's negligence or that he or she exercised due care. In this case, LaPlace's horse, Park Me In First, died in Briere's care during its bailment, giving rise to a presumption of negligence. Briere showed, however, that at the time the horse died, Bridgwood, who was experienced in handling horses, was exercising the horse in an ordinary manner. This proof is "devoid of any evidence of negligence causing the death of the horse, and thus rebuts the presumption of negligence." LaPlace did not offer any additional proof of negligence, and "determining the cause of death was uniquely within the control of plaintiff," whose permission was required for a necropsy. FOR CRITICAL ANALYSIS-Legal Consideration As a bailee, was Briere liable in conversion for the death of Park Me In First? Explain. (Hint: Did Briere wrongfully possess or use the horse without permission and without just cause?)