Chapter 28 – 30 Personal Property and Bailments Presented by Roland Cyr 5/4/09
What is real property? What is personal property?
What does it mean to own property in fee simple? What is the difference between a joint tenancy and a tenancy in common?
What are the three elements necessary for an effective gift? How else can property be acquired?
What are the three elements of a bailment?
What are the basic rights and duties of the bailee? What are the basic rights and duties of the bailor?
Definition: 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.
Acquiring Ownership of Personal Property.
Laws Governing Mislaid, Lost, or Abandoned Property.
Personal property includes all property not classified as real property
Living Room Set
All forms of property other than real property – Real Estate/Land
Nature of Real Property
Real property is immovable and includes:
Plant Life and Vegetation.
Subsurface (mineral) rights.
A 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 29.1 In re Sand & Sage Farm and Ranch, Inc. (2001).
Trade fixtures: installed for commercial purposes by a tenant.
They remain the property of the tenant and can be removed when tenant leaves, repairing any damage caused by removal.
Property 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.
Basis for property ownership?
Concurrent Ownership methods!
Owns the entire “bundle of rights”.
Fee simple gives the owner the maximum possible estate or right of ownership of real property, continuing forever…..
Various methods of ownership….
Ownership in Fee Simple
Fee Simple (sometimes called fee simple absolute) gives the owner the greatest aggregation of rights, powers and privileges possible under American law and can assigned to heirs.
A “conveyance” (transfer of real estate) “from A to B” creates a fee simple. A is the Grantor and B is the Grantee .
Fee Simple Defeasible: grants conditional ownership to Grantee as long as he complies with condition. “A to B as long as ….”
What does Fee Simple Mean?
An owner in fee simple is entitled to use, possess, or dispose of the property as he or she chooses during his or her lifetime, and on this owner’s death, the interests in the property descend to his or her heirs.
Tenancy in Common
A and B own an undivided interest in the property. Upon B’s death interest passes to B’s heir, “C”.
CASE 28.1 Clark v. Dady (2004).
A B C
Tenancy in Common
A tenancy in common is a form of co-ownership in which each of two or more persons owns an undivided interest in the whole property.
On the death of a tenant in common, that tenant’s interest passes to her or his heirs.
Tenancy in Common
When concurrent owners own a fractional interest in a property which may vary according to owner, or usually it is divided equally.
Title list all owners and share of ownership if not equal
If not specific, then divided equally
Example – if 4 people own a property, each has a 25% interest in the entire property
Each owner can sell his interest, but not the entire property.
Joint Tenancy A and B own an undivided interest in property but, upon B’s death, B’s interest passes to A, the surviving joint tenant. A B
In a joint tenancy , each of two or more persons owns an undivided interest in the property, and a deceased joint tenant’s interest passes to the surviving joint tenant or tenants. This right distinguishes the joint tenancy from the tenancy in common.
Is like a tenancy in common, but..
Joint tenants have an undivided interest with right of survivorship
An undivided interest is an ownership right to use an possess the entire property, however
No single co-owner can mortgage, sell or otherwise convey any piece of the property w/out the consent of all joint tenants.
Tenancy by the Entirety
A tenancy by the entirety is ownership by a husband and wife. Neither spouse may transfer separately his or her interest during his or her life.
Like a joint tenancy but differs in that there can only be two tenants.
Must be married and interest can not be conveyed w/out signature of both tenants.
Tenancy by the Entirety
If a married couple buys a property and the deed does not stipulate the form of ownership, a tenancy by the entirety is formed…
Can be terminated by death of spouse, (Severalty) by divorce, (tenancy in common) by agreement of both spouses, or by court order (bankruptcy
Limited # of states – Ten States allow community Property
If property is held as community property, each spouse technically owns an undivided one-half interest in it.
Joint ownership of property by husband & wife inn which each spouse owns an undivided ½ interest in property acquired during marriage.
An owner in fee simple is entitled to use, possess, or dispose of the property as he or she chooses during his or her lifetime, and on this owner’s death, the interests in the property descend to his or her heirs. A tenancy in common is a form of co-ownership in which each of two or more persons owns an undivided interest in the whole property. On the death of a tenant in common, that tenant’s interest passes to her or his heirs. In a joint tenancy , each of two or more persons owns an undivided interest in the property, and a deceased joint tenant’s interest passes to the surviving joint tenant or tenants. This right distinguishes the joint tenancy from the tenancy in common.
Time, Title, Interest & Possession
Both the joint tenancy and tenancy by the entirety require that certain preconditions
First, the owners of the estate must have both received their interests at the same time ( unity of time ).
Second, the owners of the estate must both draw their title from the same deed or document ( unity of title ).
Third, the owners of the estate must have equal interests in the land ( unity of interest ).
Fourth, the owners must have an unrestricted right to use the entire property ( unity of possession ).
A tenancy in common may exist without any of these unities except that relating to the unity of possession because tenants in common, despite the unevenness of their respective interests in the property, still have the right to use the entire property.
Acquiring Ownership of Personal Property
Possession of Property.
Capture of wild animals (wild animals belong to no one).
Finding of abandoned property.
Writers, inventors, manufacturers, and others who produce personal property acquire title to it.
Voluntary transfer of property ownership from Donor (owner) to Donee (recipient) for no consideration.
Can’t be under duress or fraud (IRS)
Intervivos —while donor is living. – Not in contemplation of imminent death
Causa Mortis : -- made by donor in contemplation of imminent death. – The donee must survive the donor in order to accept the gift, if the donor does not die as expected, the gift is revoked
Testamentary – after death, by will/inheritance.
Three 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.
CASE 28.2 In re Estate of Piper (1984).
Donative intent on the part of the donor – Must intend on for the transfer of the gift
Acceptance by the Donee.
Often, when a couple decides to marry, one party gives the other an engagement ring. If the engagement is called off, typically the ring is returned. Yet what if the recipient of the ring refuses to return it and a dispute over who owns the ring reaches a court? What law should apply in determining ownership rights in this particular form of personal property? In the eyes of the law, is an engagement ring a “conditional gift” that becomes effective only when the couple actually marries? Or is it an effective gift to begin with, meaning that it belongs to the person to whom it was given—the donee? Furthermore, does ownership of the ring depend on who breaks the engagement?
WHAT DO YOU THINK?
WHO SHOULD KEEP THE RING?
IF YOU WERE THE JUDGE, WHO WOULD GET THE RIING BACK?
IS THE RING A GIFT? IS THE RING A CONDITIONAL GIFT PENDING MARRIAGE?
Some courts hold that an engagement ring is a conditional gift that becomes an absolute (effective) gift only on marriage. Other courts conclude that when an engagement ring is given to the donee, the donee should have full ownership rights in the property.
Michigan - $19k ring – prenuptial agreement - Court ruled for male -conditional gift that becomes final only if the marriage occurs
PA - $17k ring – PA Supreme Court ruled temporary gift that becomes absolute only when the marriage takes place.
Courts in Kansas, Ohio, New York, and New Mexico have held likewise.
Montana Supreme Court held a $29k ring did belong to the female… “transfer of personal property made voluntarily and without consideration.”
Acquiring Ownership of Personal Property
Will or Inheritance.
Someone adds value to a piece of personal property by use of either labor or materials.
Commingling so that a person’s personal property cannot be distinguished from another’s. – (Tenants in common)
Mislaid, Lost or Abandoned Property
Mislaid Property: Voluntary placed somewhere, then inadvertently forgotten. Finder is steward for true owner. – Finder does not obtain title to the property, but rather holds it in trust for the true owner. If the property is later found, the original owner becomes legal owner
Lost Property: Involuntarily left. Property owner acquires title against whole world, except for true owner. Finder must return to true owner or be liable for conversion.
Abandoned Property: Discarded by true owner with no intention of recovering. Acquires title against all the world, including the original owner.
Lost Property - Summary
The well-known children’s adage, “Finders keepers, losers weepers,” is actually written into law—provided that the loser (the rightful owner) cannot be found. A finder of lost personal property may acquire good title to the property against everyone except the true owner.
A number of landmark cases have made this principle clear.
A 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.
The 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.
CASE 28.3 Sunbelt Cranes Construction and Hauling, Inc. v. Gulf Coast Erectors, Inc. (2002).
Elements of a Bailment
Personal Property. (Tangible or Intangible--but not persons or realty.)
Delivery 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).
Express or Implied.
Express – written
Implied – no written
Assumes property will be returned……
Bailments: Duty of Care
Bailment for the sole benefit of the Bailor:
A gratuitous Bailment; Bailee owes Bailor a low duty of care , liable only for gross negligence. (Video) Vinny is the bailee, he benefited from using the rug cleaner.
Bailment for the sole benefit of the Bailee:
Bailee owes Bailor a high duty of care and is liable for even slight negligence. – Because the bailment is for the sole benefit of the bailee, Vinny will be held to a higher standard of care and will be liable for damages caused by even slight negligence.
Mutual Benefit Bailment: most common.
Each party owes the other a reasonable duty of care.
The facts state that Vinny did not bother to vacuum the rug, pick up the large objects off his floor (tennis ball, items of clothing), or move the furniture prior to using the rug-cleaning machine. Clearly, Vinny’s careless use of the equipment would establish that he was negligent and failed to exercise the high degree of care that he was required to use in this situation. (In fact, it would probably even be negligent under the reasonable standard of care that would be applied if a person had rented the equipment.) The standard a court would apply in this situation was correctly stated by Oscar in the video—Vinny should have treated the machine as if it were Oscar’s (the supermarket’s) and not his own. The court will hold Vinny liable for any damage that his carelessness caused to the rug-cleaning machine.
Bailments: Duty of Care Benefit of Bailor Benefit of Bailee Low Duty of Care High Duty of Care Reasonable Care Mutual Benefit
Rights and Duties of the Bailee
Right To Possess.
Bailee may acquire or use property temporarily. Title does not pass.
Right to Use Bailed Property.
Rights of Compensation.
Reimbursed for costs or services as provided in the agreement.
Rights and Duties of the Bailee
Right to Limit Liability.
Duty to Return bailed property in same condition to Bailor.
Bailee may liable for conversion and/or negligence.
Rights and Duties of the Bailor
Right to have property protected and used as agreed.
Right to have property back at end of bailment with service or repair done properly.
Right to have the Bailee not convert.
Right to not be bound to limitation of liability unless Bailor knows.
Duty to Provide safe goods:
Mutual Benefit Bailment: free from known or hidden defects; Sole Benefit of Bailee : notify if any known defect.
Special Bailments: Common Carriers
Publicly licenses to provide transportation services to general public.
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.
Special Bailments: Warehouses and Innkeepers
Owe duty of reasonable care.
Can’t exculpate, can limit.
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.
Termination of Bailments
Mutual agreement of both parties.
Demand by either party.
Completion of the purpose of the bailment.
Act by the bailee that is inconsistent with the terms of the bailment.
Operation of law.
Estate that lasts for the life of some specified individual. “A grants to B for B’s life” grants B a life estate in land/house.
When B dies, B returns to A or his heirs or assigns, or a third party in the same condition, normal wear and tear excepted.
Grantor A retains a “future interest” in the property.
During B’s life, she can possess, use, and take the fruits of the estate, but not take from the property itself.
An easement is a right of a person to make limited use of another person's real property without taking anything from the property.
A profit is the right to go onto land in possession of another and take away some part of the land itself or some product of the land.
Property that is benefited by easement/profit carries the the interest with the sale of land.
Easements or profits can be created by:
Deed (physical delivery is sufficient).
Will (at Grantor’s death).
Contract between Grantor and Grantee.
Implication: circumstances surrounding creation of easement imply its creation.
Prescription: easement by adverse possession.
Transfer of Ownership
Ownership in real property can be transferred by:
A written Deed.
A Deed is the instrument setting forth the interests in real property being transferred.
Necessary components of a Deed:
Names of Grantor and Grantee.
Words evidencing intent to convey.
Legally sufficient description of the land.
Delivery of the Deed.
Types of Deeds
Special Warranty Deed.
Period of redemption.
Recording a deed ( or any interest in real property ) puts the public on notice of the new owner’s interest in the land and prevents the previous owner from fraudulently conveying the same interest to another buyer.
Transfer By Inheritance
Owner of real property dies, his property is transferred by:
Without Will (intestate).
Title is transferred at the time state law so provides in its testate and intestate laws.
Transfer By Adverse Possession
One person possesses the property of another for a certain statutory period of time, that person automatically acquires title to the land, just as if there had been a conveyance by deed. Must be:
Actual and exclusive.
Open, visible and notorious.
Continuous and peaceable.
Hostile and adverse.
Rights in property are not absolute. They are constrained by federal and state laws, e.g., nuisance, tax and environmental.
A “Taking” By Eminent Domain : The 5 th amendment gives the government the right to “take” private land for public use with just compensation.
CASE 29.2 Kelo v. City of New London, Connecticut (2005).
Anyone who rents housing to the public for commercial purposes subjects herself to various state and federal Landlord-Tenant laws.
Owner of the property is the LESSOR and Tenant is LESSEE; the contract is called the LEASE. The property interest is called a leasehold estate.
Lease Agreement can be oral or written (oral may not be enforceable). Lease gives Tenant the temporary right to exclusively possess the property.
Sources of Law:
State and Local Statutes, and
The Uniform Residential Landlord and Tenant Act (URLTA) which has been adopted by 1/4 of the states.
Landlord-Tenant Lease Contract
Form of the Contract:
Must express intent to establish the lease.
Provide for transfer of possession to the Tenant.
Provide for the Landlord’s “reversionary” interest.
Describe the property.
Indicate length of the term, amount of rent, when and where rent paid.
Trend in the law is to curtail, by contract and real estate law, the immense freedom that Landlords had in the past.
Using the Premises.
Maintaining the Premises.
Rights and Duties
Rights and Duties
Landlord has a duty to deliver actual physical possession under URLTA or legal right to possession (“American” rule).
Tenant’s right to exclusive possession is only subject to Landlord’s limited right to come unto the property.
Tenant has a “covenant of quiet enjoyment” by which Landlord promises Tenant’s peace and enjoyment of the property.
Eviction occurs when Landlord:
Deprives Tenant of possession of the leased property; or
Interferes with this use or enjoyment of the property to the extent that Tenant cannot use or enjoy.
Constructive eviction occurs when Landlord:
Breaches lease or covenant or quiet enjoyment; and
Makes it impossible for the Tenant to use and enjoy the property .
Rights and Duties
Rights and Duties
Tenant’s Duty Not To Commit Waste:
Tenant is liable for destruction or abuse of the property.
Tenant not liable for normal wear and tear or depreciation in value over time.
Altering the Premises:
Tenant needs Landlord’s consent to make material alterations.
Installation of fixtures become the property of the Landlord. Whether Tenant can remove depends on state law and consent of Landlord.
Residential property -- Landlord must furnish premises in habitable condition.
Landlord is responsible for maintaining common areas such as stairs, parking lots, elevators and swimming pools.
Commercial property -- may still require Tenant to maintain depending on the lease.
Rights and Duties
Rights and Duties
Implied Warranty of Habitability applies to major (substantial) defects if Landlord knew or should have known about & he had a reasonable time to repair.
To determine breach, Courts consider:
Whether Tenant caused damage.
How long defect existed and age of building.
Defects impact on Tenant’s safety and health.
Whether defect contravenes relevant statutes.
If Landlord breaches the warranty of habitability, depending on state law, Tenant may:
Withhold rent -- put in escrow.
Repair and Deduct -- notify, repair, and deduct repair from rent.
Cancel the Lease -- must be constructive eviction or breach of habitability.
Sue for Damages -- difference between what paid for and what received.
Transferring Rights to Leased Property
Transferring Landlord's Interest.
Landlord may sell any and all of his rights in the real property.
New owner buys “subject to the lease,” if lease is recorded.
Transferring Tenant’s Interest.
Landlord’s consent may or may not be required by statute or the lease itself.
Transferring the Tenant’s Interest ( cont’d )
Assignments: Tenant transfers his entire interest in the lease to a third person. Original Tenant is not released from liability under the lease.
Subleases: Tenant transfers all or part of his interest in the lease for a shorter period of time than the lease. Original Tenant is not relieved of liability under the lease.
What is an insurable interest? When must an insurable interest exist—at the time the insurance policy is obtained, at the time the loss occurs, or both?
Is an insurance broker the agent of the insurance applicant or the agent of the insurer?
What are the basic requirements for executing a will? How may a will be revoked?
What are the four essential elements of a trust? What is the difference between an express trust and an implied trust?
Insurance is a contractual arrangement for transferring and allocating risk .
Prediction concerning potential loss based on known and unknown factors.
Involves the transfer of certain risks from the individual to the insurance company by a contractual agreement.
Classifications of Insurance.
All risk insurance (added terrorism).
CASE 30.1 Omni Berkshire Corp. v. Wells Fargo Bank, N.A. (2004).
Policy (Insurance contract).
Premium is the consideration to be paid to the insurer.
Underwriter (usually an insurance company).
Broker v. Agent.
A person can insure anything in which he or she has an insurable interest .
Types of insurable interest:
The Insurance Contract
Governed by the general principles of contract law, and regulated by the state.
Application is an offer, which insurance company can either reject or accept.
Acceptance sometimes conditional.
Parties need capacity.
The Insurance Contract
Application For Insurance.
Provisions and Clauses.
Interpreting Provisions of an Insurance. Contract.
Basic Duties and Rights.
Defenses Against Payment.
Insurance Contract: Application
Filled in application attached to the policy and made a part of the contract.
Misstatements or misrepresentation can void a policy, specially if company can show it would not have issued policy if it had known the facts.
Insurance Contract: Effective Date
Broker is agent for the applicant.
Agent is agent for the insurance company. He can issue a binder, if some consideration is paid, which will immediately bind the insurance company, depending on certain conditions being met.
Parties may agree contract will not be effective until policy is issued and delivered or sent to applicant.
Parties may agree policy will be binding, not be effective, until first premium paid, or physical exam passed.
Insurance Contract: Provisions and Clauses
Provisions Mandated by Statute.
Appraisal and Arbitration Clauses.
Multiple Insurance Coverage.
Insurance Contract: Incontestability Clauses
State statutes sometimes provide that once a life or health insurance policy has been in force for a specified length of time, the insurer cannot contest statements made in the application.
Insurance Contract: Coinsurance Clauses
If owner insures her property for at least 80% of its value, owner will be able to recover up to the face value of the policy.
If owner insures for less than 80%, owner will be responsible for a proportionate share of the loss.
Amount of insurance recovery Coinsurance percentage = percentage (80%) x Property value
Insurance Contract: Appraisal and Arbitration Clauses
If insurer and insured cannot agree on value of property, an appraisal can be demanded.
Contract may also provide for arbitration.
Insurance Contract: Cancellation and Good Faith
Insured can cancel policy at any time, and the insurer can cancel according to terms of policy.
Insurer must give written notice of cancellation .
Good Faith Obligations.
CASE 30.2 Columbia National Insurance Co. v. Freeman (2002).
Defenses Against Payment
Insurance company can raise any of the defenses that would be valid in any ordinary action or contract:
Not if information given was optional.
Not incorrect statement of age.
Concurrent causation doctrine.
Business Liability Insurance
A business may be vulnerable to all sorts of risks……
A will is the final declaration of the disposition that a person desires to have made of his or her property after death. A will is referred to as a testamentary disposition of property. It is a formal instrument that must follow exactly the requirements of the appropriate state’s statutes to be effective. A will becomes effective only upon the death of the testator.
Will provides for a disposition of property by the Testator (one making the will).
A will is the final declaration of how a person desires to have his or her property disposed of after death.
Die testate (One who dies after having made a valid will) or
Intestate (without a will). (Passes to State)
Executor is a personal representative named in the will.
Administrator appointed by court.
What are the four basic requirements for a valid will?
(1) must be in writing;
(2) signed by the testator;
(3) witnessed by two or three witnesses; and
(4) published (declared by the testator to the witnesses that the document they are about to sign is his or her “last will and testament”).
Types of Testamentary Gifts
Devise: gift of real estate.
Bequest or Legacy: gift of personal property.
Types of Gifts:
Requirements for a Valid Will
Testamentary Capacity and Intent.
Legal age and sound mind
Multiple Signature Requirements.
Multiple Witness Requirements.
Publication Requirements .
Only in some States
Revocation of Wills
Revocation by a Physical Act of the Market.
Burning, tearing, canceling, etc, etc, at the maker’s direction
Revocation by a Subsequent Writing.
A new will may revoke a prior will, depending on the language. If there are inconsistent dispositions, the second will controls.
Revocation By Operation of Law.
A marriage, divorce or annulment, or the birth of children after a will has been executed generally revokes a will. Depending on State laws, new children get intestate shares, and an ex-spouse gets nothing.
Basic requirements for executing a will
Basic requirements for executing a will include testamentary capacity and intent, a writing, the testator’s signature, witnesses’ attestation, and in some states publication
The will’s maker may revoke a will by a physical act, including by writing a later will. Wills can also be revoked by operation of law, which includes marriage, divorce, annulment, and the birth of a child
Statues of descent and distribution which attempt to carry out the likely “natural” intent and wishes of the decedent.