978-1285427003 Chapter 34 Lecture Note Part 3

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Additional Case: Mitchell v. Bank of America National Association1

Facts: Donna and Timothy Mitchell rented a safe deposit box from a Dallas branch of the Bank of

America. The lease agreement stated that the bank “had no possession or custody of, nor control over,

the contents of the Box, and the Lessee [the couple] assumes all risks in connection with the depositing

of such content.” The lease also permitted the bank to remove the box’s contents if the rental fee went

unpaid.

Bank officers, believing the Mitchells were behind in their rental fees, drilled into the box and

removed the contents, which they inventoried and sent to a central vault elsewhere. The Mitchells

expressed their displeasure and, a week later, the bank returned the contents to the Dallas branch. The

couple placed the contents into a bag under the front seat of their car. Shortly after leaving the bank,

the Mitchells had a flat tire. A stranger offered assistance. While they were all changing the tire, the

bag disappeared.

The Mitchells sued the bank, claiming that its negligence enabled bank employees to learn of the

box’s contents, orchestrate the flat tire, and steal the bag.

The trial court gave summary judgment for the bank, finding that the contract language quoted

above meant that there was no bailment, and no possible negligence. The Mitchells appealed.

Issue: Was there a bailment?

Holding: Summary judgment for the Bank reversed. Common law negligence principles generally

govern liability in bailment relationships. Parties to a bailment can alter the law of bailment by

agreeing to contract terms that clearly vary the liability imposed by law. To the extent the lease

agreement clearly addressed the duties and liabilities of the Bank for the Mitchells’ property, the lease

agreement controls.

To establish a bailment, there must be a delivery of personal property from one person to another for a

specific purpose. The lease clearly provides that so long as the contents of the box remained in the box,

there was no delivery of the property to the Bank. Accordingly, no bailment occurred due to the deposit

of the Mitchells’ property into the box.

However, the lease authorized the Bank to remove the contents of the box for nonpayment of rent.

The lease thus contemplated a delivery of the property to the Bank under certain circumstances and did

not change the duties imposed by law once the Bank exercised its right to take control of the property.

The trial court thus erred in granting summary judgment for the Bank on the grounds the Mitchells’

common law cause of action for breach of bailment was superseded by the written contract.

Question: What law governed the Mitchells’ lease of the safe deposit box from the Bank?

Question: How did the box-rental agreement deal with the parties’ liability?

Question: Why do the Mitchells argue that there was a bailment?

Answer: Because if the box-rental agreement controlled, the Bank as a matter of law is entitled to

Question: Why?

Question: The box-rental agreement said the Bank had no possession, custody, or control over the

contents of the box. Since bailment requires that the bailee exercise control over the property, how

can there be a bailment?

1 2002 WL 31139375 Court of Appeals of Texas, 2002.

Question: Viewed as a bailment relationship, which party is liable for the loss?

Rights of the Bailee

The bailee’s primary right is possession of the property. Anyone who interferes with the bailee’s

rightful possession is liable to her. Even a bailor is liable if he wrongfully takes back property from a

bailee. The bailee is typically, though not always, permitted to use the property.

Duties of the Bailee

The bailee is strictly liable to redeliver the goods on time to the bailor or to whomever the bailor

designates. Strict liability means there are virtually no exceptions.

Due Care

The bailee is obligated to exercise due care. The level of care required depends upon who receives the

benefit of the bailment:

if the bailee is the sole beneficiary, she must use extraordinary care;

if the parties mutually benefit, the bailee must use ordinary care;

and if the bailor is the sole beneficiary of the bailment, the bailee must use only slight care.

Burden of Proof

In an ordinary negligence case, the plaintiff has the burden of proof to demonstrate that the defendant

was negligent and caused the harm alleged. In bailment cases, the burden of proof is reversed. Once the

bailor has proven the existence of a bailment and loss or harm to the goods, a presumption of

negligence arises, and the burden shifts to the bailee to prove adequate care.

Long before his time as President, Abraham Lincoln was a lawyer who argued more than 150 cases

before the Supreme Court of Illinois. The case for Weedman is modeled after the arguments that a

young Lincoln actually made.

You Be the Judge: Johnson v. Weedman2

Facts: Johnson left his horse with Weedman, paying him to board and feed the animal. Johnson did not

grant Weedman permission to ride the horse. Nonetheless, Weedman took the horse for a 15-mile ride.

Later that day, the horse died. However, the trial court found that Weedman had not abused the

animal, and that the ride had not caused the horse’s death. The court did not grant damages to Johnson,

and Johnson appealed.

You Be the Judge: Should Johnson pay for Weedman’s dead horse?

Argument for Johnson: Your honor, Weedman was in possession of my client’s horse only to feed him

and see to his basic needs. My client did not give him permission to take the horse out of the pasture.

Weedman made personal use of my client’s property when he took a 15-mile ride that was in no way

necessary. The trial court’s finding that Weedman did not abuse the horse during the ride is irrelevant.

My client must be compensated for the loss of his animal.

Argument for Weedman: My client had a legal right to possession of the horse. Riding the horse was

not a substantial abuse of his rights as bailee. The horse was returned to the pasture in good condition.

It was not abandoned, and was not devalued in any way by the ride. The plaintiff is therefore not

entitled to any compensation. The coincidental death of the horse does not change that fact.

2 5 Ill. 495, Supreme Court of Illinois, 1843.

NOTE: The Supreme Court of Illinois affirmed. They agreed that the horse’s death was coincidental, and

that because the ride did not cause the death, no losses could be attributed to it.

There seems to be no record of the evidence that generated the conclusion that the joyride did not kill the

horse.

Question: How could Johnson possibly have lost this case?

Answer: Johnson’s lawyer had argued that the use of the horse by the bailee (Weedman) beyond

Question: So, despite that the horse died after the 15-mile ride, Johnson was not awarded

damages?

Question: Who was Weedman’s lawyer?

Rights and Duties of the Bailor

The bailor’s rights and duties are the reverse of the bailee’s. The bailor is entitled to the return of his

property on the agreed-upon date. He is also entitled to receive the property in good condition and to

recover damages for harm to the property if the bailee failed to use adequate care.

Multiple Choice Questions

1. Quick, Onyx, and Nash were deeded a piece of land as tenants in common. The deed provided

that Quick owned one-half the property and Onyx and Nash owned one-quarter each. If Nash

dies, the property will be owned as follows:

(a) Quick 1⁄2, Onyx 1⁄2.

(b) Quick 5⁄8, Onyx 3⁄8.

(d) Quick 1/2 Onyx 1/4, Nash’s heirs 1/4.

2. Which of the following forms of tenancy will be created if a tenant stays in possession of

leased premises without the landlord’s consent, after the tenant’s one-year written lease

expires?

(a) Tenancy at will

(b) Tenancy for years

(d) Tenancy at sufferance

3. Consider the following:

I. A house (value: $150,000)

II. A giant HD television in the house (value: $4,999)

III. The land that the house sits upon (value: $30,000)

IV. An old car in the house’s garage (value: $5,001)

How many of these items are personal property?

(a) All four of them

(b) 3 of them

(d) 1 of them

(e) None of them

4. Holding out an envelope, Alan says, “Ben, I’m giving you these opera tickets.” Without taking

the envelope, Ben replies, “Why would I want opera tickets? Loser.” Alan leaves, crestfallen.

Later that day, a girl whom Ben has liked for some time says, “I sure wish I were going to the

opera tonight.” Ben scrambles, calls Alan, and says, “Alan, old buddy, I accept your gift of the

opera tickets. I’m on my way over to pick them up.” Does Ben have a legal right to the tickets?

(a) Yes, because Alan intended to transfer ownership.

(b) Yes, because offers to give gifts cannot be revoked.

(d) No, because Ben did not accept the gift when offered.

5. A tenant renting an apartment under a three-year written lease that does not contain any

specific restrictions may be evicted for:

(a) Counterfeiting money in the apartment

(b) Keeping a dog in the apartment

(d) Making structural repairs to the apartment

Essay Questions

1. You Be the Judge: WRITING PROBLEM Frank Deluca and his son David owned

the Sportsman’s Pub on Fountain Street in Providence, Rhode Island. The Delucas applied to the

City for a license to employ topless dancers in the pub. Did the City have the power to deny the

Delucas’ request? Argument for the Delucas: Our pub is perfectly legal. Further, no law in Rhode

Island prohibits topless dancing. We are morally and legally entitled to present this entertainment.

The City should not use some phony moralizing to deny customers what they want. Argument for

Providence: This section of Providence is zoned to prohibit topless dancing, just as it is zoned to

bar manufacturing. There are other parts of town where the Delucas can open one of their sleazy

clubs if they want to, but we are entitled to deny a permit in this area.

Answer: Yes, the City could use its zoning powers to deny the license. Earlier zoning ordinances

had allowed topless dancing in the section of the City where the pub was located, but the current

2. Kenmart Realty sued to evict Mr. and Ms. Alghalabio for nonpayment of rent and sought the unpaid

monies, totaling several thousand dollars. In defense, the Alghalabios claimed that their apartment

was infested with rats. They testified that there were numerous rat holes in the walls of the living

room, bedroom, and kitchen, that there were rat droppings all over the apartment, and that on one

occasion they saw their toddler holding a live rat. They testified that the landlord had refused

numerous requests to exterminate. Please rule on the landlord’s suit.

Answer: The Alghalabio’s defense was breach of the implied warranty of habitability. The landlord

failed to maintain the premises in a livable condition, and the tenants are therefore entitled to an

abatement of rent. The amount of abatement depends upon the severity of the problems. In this

3. Lisa Preece rented an apartment from Turman Realty, paying a $300 security deposit. Georgia law

states: “Any landlord who fails to return any part of a security deposit which is required to be

returned to a tenant pursuant to this article shall be liable to the tenant in the amount of three times

the sum improperly withheld plus reasonable attorney’s fees.” When Preece moved out, Turman did

not return her security deposit, and she sued for triple damages plus attorney’s fees, totaling

$1,800. Turman offered evidence that its failure to return the deposit was inadvertent and that it had

procedures reasonably designed to avoid such errors. Is Preece entitled to triple damages?

Attorney’s fees?

Answer: The court held the defendant liable for $900 (treble damages) and an additional $900 in

attorney’s fees. The rationale for treble damages is that, historically, landlords often willfully

4. Ronald Armstead worked for First American Bank as a courier. His duties included making

deliveries between the bank’s branches in Washington, D.C. Armstead parked the bank’s station

wagon near the entrance of one branch in violation of a sign saying: “No Parking Rush Hour Zone.”

In the rear luggage section of the station wagon were four locked bank dispatch bags, containing

checks and other valuable documents. Armstead had received tickets for illegal parking at this spot

on five occasions. Shortly after Armstead entered the bank, a tow truck arrived and its operator

prepared to tow the station wagon. Transportation Management, Inc. operated the towing service

on behalf of the District of Columbia. Armstead ran out to the vehicle and told the tow truck

operator that he was prepared to drive the vehicle away immediately. But the operator drove away

with the station wagon in tow. One and one-half hours later, a bank employee paid for the car’s

release, but one dispatch bag, containing documents worth $107,000, was missing. First American

sued Transportation Management and the District of Columbia. The defendants sought summary

judgment, claiming they could not be liable. Were they correct?

Answer: The trial court held that this was a gratuitous bailment and that therefore the defendants

were liable only for gross negligence. Because there was no gross negligence, the court found for

the defendants. The appellate court reversed, holding that this bailment mutually benefitted the

5. You Be the Judge: WRITING PROBLEM Eileen Murphy often cared for her

elderly neighbor, Thomas Kenney. He paid her $25 per day for her help and once gave her a bank

certificate of deposit worth $25,000. She spent the money. Murphy alleged that shortly before his

death, Kenney gave her a large block of shares in three corporations. He called his broker,

intending to instruct him to transfer the shares to Murphy’s name, but the broker was ill and

unavailable. So Kenney told Murphy to write her name on the shares and keep them, which she did.

Two weeks later Kenney died. When Murphy presented the shares to Kenney’s broker to transfer

ownership to her, the broker refused because Kenney had never endorsed the shares, as the law

requires, that is, signed them over to Murphy. Was Murphy entitled to the $25,000? To the shares?

Argument for Murphy: The purpose of the law is to do what a donor intended, and it is obvious that

Kenney intended Murphy to have the $25,000 and the shares. Why else would he have given them

to her? A greedy estate should not be allowed to interfere with the deceased’s intention. Argument

for the Estate: Murphy is not entitled to the $25,000 because we have no way of knowing what

Kenney’s intentions were when he gave her the money. She is not entitled to the shares of stock

because Kenney’s failure to endorse them over to her meant he never delivered them, and that is an

essential element of a gift.

Answer: Murphy gets the $25,000. There was delivery, acceptance, and adequate evidence that

Kenney intended the items as gifts. Murphy is not entitled to the shares, though, because without

Discussion Questions

1. Is it sensible to distinguish between inter vivos gifts and gifts causa mortis? Should someone “on

his deathbed” be able to change his mind so easily?

2. Donny Delt and Sammy Sigma are students and roommates. They lease a house in a neighborhood

near campus. Few students live on the block.

The students do not have large parties, but they often have friends over at night. The friends

sometimes play high-volume music in their cars, and sometimes speak loudly when going to and

from their cars. Also, departing late night guests often leave beer cans and fast food wrappers in

the street.

Neighbors complain about being awakened in the wee hours of the morning. They are considering

filing a nuisance lawsuit against Donny and Sammy. Would such an action be reasonable? Do you

think Donny and Sammy are creating a nuisance? If so, why? If not, where is the line- what amount

of late night noise does amount to a nuisance?

3. Imagine that you sign a lease, and that you are to move into your new apartment on August 15.

When you arrive, the previous tenant has not moved out. In fact, he has no intention of moving out.

Compare the English and the American rules. Should the landlord be in charge of getting rid of the

old tenant, or should you have the obligation to evict him?

4. When landlords wrongfully withhold security deposits, they can often be sued for three times the

amount of the security deposit. Is this reasonable? Should a landlord have to pay $3000 for a $1000

debt? What if you fail to pay a rent on time? Should you have to pay three times the amount of

your normal rent? If your answers to these two questions are different, why is that?

5. In the case of a gratuitous bailment, the bailee is only liable if he is grossly negligent. Is this good

policy? If you agree to watch someone’s property, shouldn’t you be required to be careful even if

you are not being paid?