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20. Donna drove an automobile into Terry’s garage and requested him to make repairs
for which the charge would be $125. Donna, however, never returned to get the
automobile. Two months later, Carla saw the automobile in Terry’s garage and claimed it
as her own, asserting that it had been stolen from her. Terry told Carla that she could
have the automobile if she paid for the repairs and storage, which Carla did. One week
later, Molly appeared and proved that the automobile was hers, that it had been stolen
from her, and that neither Donna nor Carla had any rights in it. Discuss whether Terry is
liable for conversion of the automobile.
Answer: Restoration of Possession to the Bailor. Molly will recover in the action against
Terry. The question is whether the bailee from a thief is liable for conversion for
delivering the car in good faith to one who is neither the bailor nor the true owner. If he
21. On June 1, Cain delivered his 2010 automobile to Barr, the operator of a repair
shop, for necessary repairs. Barr put the car in his lot on Main Street. The lot, which is
fenced on all sides except along Main Street, holds one hundred cars and is unguarded at
night, although the police make periodic checks. The lot is well lighted. The cars do not
have the keys in them when left out overnight. At some time during the night of June 4,
the hood, starter, alternator, and gearshift were stolen from Cain’s car. The car remained
on the lot, and during the evening of June 5, the transmission was stolen from the car.
Did Barr exercise due care in taking care of the automobile?
Answer: Bailee's Duty to Exercise Due Care. The situation created by the delivery of the
car by Cain to Barr was a bailment for hire. Under such circumstances, a bailee for hire
is bound only to use ordinary care, and it is neither an insurer of the chattel entrusted to
22. Seton in Phoenix, according to a contract with Rider in New York, ships to Rider
goods conforming to the contract and takes from the carrier a shipper’s order bill of
lading that Seton indorses in blank and forwards by mail to Clemson, his agent in New
York, with instructions to deliver the bill of lading to Rider on receipt of payment of the
price for the goods. Forest, a thief, steals the bill of lading from Clemson and transfers it
for value to Pace, a bona fide purchaser. Before the goods arrive in New York, Rider is
insolvent. What are the rights of the parties?
Answer: Negotiability of Documents of Title. When Seton indorsed in blank the shipper's
order bill of lading, namely, one to the order of himself, it became negotiable by delivery.
23. Scarola purchased an automobile for value and without knowledge that it was
stolen. After he insured the car with Insurance Company of North America (INA), the car
was stolen once again. When INA refused to reimburse Scarola for the loss, contending
that he did not have an insurable interest in the car, Scarola brought an action. Did
Scarola have an insurable interest in the automobile? Why?
24. Sears had sold to and installed in the Seven Palms Motor Inn a number of
furnishings, including drapes and bedspreads, in connection with the construction of a
motel on land Seven Palms owned. Sears did not receive payment in full for the materials
and labor and brought suit to recover $8,357.49, with interest, and to establish a
mechanic’s lien on the motel and land for the unpaid portion of the furnishings. Seven
Palms asserted that neither the drapes nor bedspreads were fixtures and that, thus, Sears
could not obtain a mechanic’s lien on them. Explain whether the drapes and bedspreads
are fixtures.
Answer: Fixtures. Judgment for Sears, granting a mechanic's lien for the draperies but not
the bedspreads. The characterization of an otherwise personal item as a fixture depends
on (1) the item's annexation to the realty, (2) adaptation of the item to the use to which
the realty is devoted, and (3) the annexor's intent that the object become a permanent
accession to the realty. Here, the draperies were hung from traverse rods that were
attached to the walls. The purpose of hanging the drapes was to grant the motel's guest
25. David E. Ross, his two brothers, and their families operated and owned the entire
stock of five businesses. Ross had three children: Rod, David II, and Betsy. David II and
Betsy were not involved in the operation of the companies, but Rod began working for
one of the firms, Equitable Life and Casualty Insurance Company, in 2007. Between
2009 and 2013, the elder Ross informed a number of persons of his desire to reward Rod
for his work with Equitable Life by giving him stock in addition to the stock he would
inherit. He subsequently executed several stock transfers to Rod, representing shares in
various family businesses, which were reflected by appropriate entries on the corporate
books. Certificates were issued in Rod’s name and placed in an envelope identified with
the name Rod Ross, but they were kept with the other family stock certificates in an office
safe to which Rod did not have access. In all, one-fourth of the stock holdings of David E.
Ross were transferred to Rod in this manner. This fact is consistent with the elder Ross’s
expressed intention that Rod should ultimately receive a total of one-half of the stock
upon his father’s death. David E. died in April 2013. His will divided the estate equally
among the three children and made no reference to prior gifts of stock to Rod. David II
and Betsy brought an action contesting the validity of the stock transfers. Are the inter
vivos gifts of the stock valid? Explain.
Answer: Delivery of Gift. Judgment for Rod Ross affirmed. A donee must prove the
existence of a gift by "clear and convincing" evidence. The three essential elements are a
clear intention on the part of the donor to pass immediate ownership, an irrevocable
26. Mrs. Laval was a patient of Dr. Leopold, a practicing psychiatrist. Dr. Leopold
shared an office with two associates practicing in the same field. No receptionist or other
employee attended the office. Mrs. Laval placed her coat in the clothes closet in the office
which was placed in the reception area for the use of the patients. Later, when she
returned to retrieve the coat to leave, she found it missing. Is Dr. Leopold liable to Mrs.
Laval for the value of her coat? Explain.
27. Mr. Sewall left his car in a parking lot owned by Fitz-Inn Auto Parks, Inc. The lot
was approximately 100 by 200 feet in size and had a chain link fence along the rear
boundary to separate the lot from a facility of the Massachusetts Bay Transportation
Authority. Although the normal entrance and exit were located at the front of the lot, it
was also possible to leave by way of small side streets on either side of the lot. Upon
entering the lot, the driver would pay the attendant on duty a fee of $5 to park. The
attendant’s duties were limited to collecting money from patrons and directing them to
parking spaces. Ordinarily, the attendant remained on duty until 11:00 A.M., after which
time the lot was left unattended. Furthermore, a patron could remove his car from the lot
at any time without interference by any employee of the parking lot.
On the morning of April 15, Sewall entered the lot, paid the $5 fee, parked his car in a
space designated by the attendant, locked it, and took the keys with him. This was a
routine he had followed for several years. When he returned to the unattended lot that
evening, however, he found that his car was gone, apparently having been stolen by an
unidentified third person. Is Fitz-Inn, the owner of the lot, liable for the value of the car?
Why?
Answer: Delivery of Possession. No, Fitz-Inn is not liable. The existence of a bailment is a
28. Mrs. Mieske delivered thirty-two 50-foot reels of developed movie film to the Bartell
Drug Company to be spliced together into four reels for viewing convenience. She placed
the films, which contained irreplaceable pictures of her family’s activities over a period
of years, into the order in which they were to be spliced and then delivered them to the
manager of Bartell. The manager placed a film processing packet on the bag of films and
gave Mrs. Mieske a receipt that stated, “We assume no responsibility beyond retail cost
of film unless otherwise agreed to in writing.” Although the disclaimer was not
discussed, Mrs. Mieske’s parting words to the store manager were, “Don’t lose these.
They are my life.”
Bartell sent the film to its processing agent, GAF Corporation, which intended to send
them to another processing lab for splicing. While at the GAF laboratory, however, the
film was accidentally placed in the garbage dumpster and was never recovered. Upon
learning of the loss of their film, the Mieskes brought action to recover damages from
Bartell and GAF. The defendants argued that their liability was limited to the cost of the
unexposed film. Are GAF or Bartell liable to the Mieskes? If so, for how much?
Answer: Bailee's Duty to Returned Bailed Property. Judgment for the Mieskes affirmed.
Because the negligence of both Bartell and GAF contributed to the loss of the film, both
are liable as bailees to the Mieskes. The real question, however, is the proper measure of
the Mieskes’ damages.
29. Plaintiff, Heath Benjamin (Benjamin), found more than $18,000 in currency inside
the wing of an airplane. At the time of this discovery, State Central Bank (State) owned
the plane and it was being serviced by Lindner Aviation, Inc. (Lindner). Benjamin at the
time was employed by Lindner and was conducting a routine annual inspection of the
plane.
As part of the inspection, Benjamin removed panels from the underside of the wings.
Although these panels were to be removed annually as part of the routine inspection, a
couple of the screws holding the panel on the left wing were so rusty that Benjamin had
to use a drill to remove them. Benjamin testified that the panel probably had not been
removed for several years. Inside the left wing Benjamin discovered two packets
approximately four inches high and wrapped in aluminum foil. He removed the packets
from the wing and took off the foil wrapping. Inside the foil was approximately $18,000,
tied in string and wrapped in handkerchiefs. The money was eventually turned over to the
Keokuk police department. No one came forward within twelve months thereafter
claiming to be the true owner of the money. Explain who is entitled to receive the money.
Answer: Mislaid Property. Judgment reversed on the bank's cross-appeal and affirmed on
the remainder of the judgment of the district court. Benjamin argues that lost property
statutes are intended "to encourage and facilitate the return of property to the true owner,
and then to reward a finder for his honesty if the property remains unclaimed."
30. Calvin Klein, Ltd. (Calvin Klein), a New York clothing company, had used the
services of Trylon Trucking Corporation (Trylon) for more than three years, involving
hundreds of shipments. After completing each carriage, Trylon would forward to Calvin
Klein an invoice that contained a limitation of liability provision. The provision stated,
“In consideration of the rate charged, the shipper agrees that the carrier shall not be
liable for more than $50.00 on any shipment accepted for delivery to one consignee
unless a greater value is declared, in writing, upon receipt at time of shipment and
charge for such greater value paid, or agreed to be paid, by shipper.”
On April 2, Trylon dispatched its driver Jamahl Jefferson to the J.F.K. International
Airport to pick up 2,833 blouses sent from Hong Kong, China, to Calvin Klein. The
driver disappeared, stealing both the truck and the blouses. Calvin Klein sued Trylon for
the full value of the blouses. Does the limitation of liability provision extend to the
shipment? Explain.
Answer: Lien of Carrier. Yes. According to the UCC, a shipper and a common carrier may
contract to limit the carrier's liability in cases of loss to an amount agreed to by the
parties, so long as the language of limitation is clear, the shipper is aware of the terms of
the limitation, and the shipper can change the terms by indicating the true value of the
ANSWERS TO “TAKING SIDES” PROBLEMS
The plaintiffs are public utilities providing telecommunications services in New Hampshire.
The plaintiffs commenced separate actions for abatement of real estate taxes against sixteen
municipalities. The plaintiffs disputed the defendants’ treatment of its communications
equipment as real estate, thereby challenging their authority to tax its equipment. The
communications equipment at issue involves two basic categories: (1) distribution plant,
which includes telephone poles, wires, and underground conduits; and (2) central office
equipment, consisting of frames, switches, and other power equipment.
The plaintiffs submitted affidavits setting forth the following facts. All of the plaintiffs’ poles,
wires, and underground conduits located in the municipalities are placed either on public
rights of way or on private property owned by third parties. Approximately 90 percent of the
poles are located on public rights of way pursuant to licenses issued by the state or the
municipalities. The remaining 10 percent of the poles are placed on private property either
by consent of the property owner or pursuant to an easement. The poles, wires, and
underground conduits are installed in a manner that permits and facilitates their removal
and relocation. Consequently, removal of that equipment is neither complicated nor time
consuming, and does not harm the underlying land or change its usefulness. The plaintiffs
remove and relocate their poles, wires, and underground conduits at the request of the state
or the applicable private landowner or municipality. In obtaining the licenses, consents, or
easements for their poles, wires, and underground conduits, the plaintiffs insist on
maintaining ownership of that equipment and refuse any requests to make the equipment a
permanent part of the realty. The plaintiffs’ central office equipment, most of which is
located in buildings owned by the plaintiffs, is both portable and designed to permit removal
and relocation. The plaintiffs’ practice and policy is to move pieces of central office
equipment among buildings in response to changes in technology or system use. Although
certain frames are bolted to the buildings, their removal is achieved without affecting the
usefulness of the buildings or the frames themselves. When the plaintiffs ultimately vacate a
building used as a central office, they remove all of their equipment and merely transfer the
building “as a shell.” The vacated building, though devoid of central office equipment,
retains utility for other commercial or professional uses. The defendants did not dispute the
specific facts set forth by the plaintiffs.
(a) What are the arguments that the property is not real property and therefore not
subject to taxation by the municipalities?
(b) What are the arguments that the property is real property and can be taxed by the
municipalities?
(c) Who is correct? Explain
ANSWER:
(a) The plaintiffs would argue that the property is personal property—that it can easily
be moved and used elsewhere. The parties did not intend the property to be fixtures
and their nature and use clearly indicated such.
(b) The argument that the property is real property is that it is placed in the ground and
placed in such a way as to be safe from storms and accident. The telephone poles and
related equipment have long useful lives and are fairly permanent. The exclusive use
