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Business Law Chapter 48 Homework Other Courts Conclude That When Engagement Ring

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9 pages
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5063 words
Book Title
Business Law: Text and Cases 14th Edition
Authors
Frank B. Cross, Kenneth W. Clarkson, Roger LeRoy Miller
1
Chapter 48
Personal Property and Bailments
INTRODUCTION
Property consists of the legally protected rights and interests a person has in anything with an ascertainable
value that is subject to ownership. Property would have little value if the law did not define the right to use it, to sell or
dispose of it, and to prevent trespassing on it. This chapter examines the basic attributes of personal property, how
ownership rights may be acquired, and the laws governing rights in mislaid, lost, or abandoned property.
This chapter also examines the law relating to bailments. Most bailments are created by agreement, although
in many bailments not all of the elements of a contract (such as mutual assent or consideration) are present. A
bailment may also be distinguished from a sale or a gift in that possession is transferred without passage of title or
intent to transfer title. In a sale or a gift, title is transferred from the seller or donor to the buyer or donee.
CHAPTER OUTLINE
I. Personal Property versus Real Property
Personal property is moveable. (Real property is immoveable.) When two or more persons own property,
concurrent ownership exists.
2 UNIT TEN: PROPERTY AND ITS PROTECTION
CASE SYNOPSIS
Case 48.1: Corbello v. DeVito
Rex Woodward contracted with Thomas DeVito, one of the original members of the Four Seasons, to
ghostwrite DeVito’s autobiography. Before it was published, Woodward died and his interest in the
manuscript’s copyright passed to his widow Donna Corbello. Later, DeVito agreed to grant former bandmates
Frankie Valli and Bob Gaudio the right to use aspects of his life, including “biographies,” to develop a musical
about the Four Seasons. On the success of “Jersey Boys,” actors and others involved with the show
attributed their inspiration in part to DeVito’s unpublished autobiography. Corbello filed a suit in a federal
district court against DeVito and his bandmates for an accounting of the profit earned from this use of the
work. The court issued a judgment in the defendants’ favor. Corbello appealed.
The U.S. Court of Appeals for the Ninth Circuit reversed. Woodward’s work qualified as a “biography, the
use of which DeVito granted to Valli and Gaudio to develop “Jersey Boys.” This grant constituted a transfer of
DeVito’s right in the work. As concurrent owner of the work’s copyright, Corbello was entitled to an
accounting.
..................................................................................................................................................
Notes and Questions
What type of personal property was at issue in this case? At the center of this case was a
“biography,” the copyright to which was held to be co-owned by the plaintiff and the defendant. A copyright is
intangible personal property. Did the type of property at issue affect the outcome? Noat least it does
not appear that the result in this case was influenced by the type of property at issue. But the type of property
at issue may have complicated the two courts’ construction of the rights to the property.
A. WHY IS THE DISTINCTION IMPORTANT?
1. Taxation
Taxation of types of property differsbusinesses may be taxed on personal property (when non-
business owners often are not).
2. Acquisition
Transfer of personal property can be less formal. Ownership of personal property can often be
proved by simple possession.
B. CONVERSION OF REAL PROPERTY TO PERSONAL PROPERTY
Trees and other vegetation severed, and minerals mined, from real property is personal property.
II. Acquiring Ownership of Personal Property
A. POSSESSION
Acquiring ownership of personal property by possession occurs with the capture of wild animals. Those
who find lost or abandoned property also can acquire ownership rights through possession.
CHAPTER 48: PERSONAL PROPERTY AND BAILMENTS 3
B. PRODUCTION
Writers, inventors, and manufacturers produce personal property and thereby acquire title.
ENHANCING YOUR LECTURE
  ARE CLAMS “WILD ANIMALS”?
 
Timothy Longshore was arrested and convicted for stealing clams from a private beach near Puget
Sound, Washington. On appeal to the Supreme Court of Washington, Longshore argued that he had not
committed theft because the landowner did not own the clams. He asserted that because clams are wild
animals, or ferae naturae, they are not owned by anyone until someone takes possession of them. The court,
however, viewed the matter differently. The court emphasized that clams “ordinarily live in the soil under the
waters” and belong with the land. “When taken, they must be wrenched from their beds, made well down in
the soil itself.” Therefore, said the court, it must follow that a private landowner “has the right to exercise
dominion [control] and ownership over what is upon the land, and especially over things so closely related to
the soil as clams.” The court also had the letter of Washington law on its side: the Washington legislature
had enacted a statute that, among other things, stated that the term wildlife “does not include . . . fish,
shellfish, and marine invertebrates classified as food fish or shellfish.”a
THE BOTTOM LINE
In the state of Washington, an individual who privately owns tidelands also owns any naturally occurring
clams embedded in the soil.
a. State v. Longshore, 141 Wash.2d 414, 5 P.3d 1256 (2000).
C. GIFT
A gift is a voluntary transfer of property ownership not supported by consideration. The three
requirements are
Donative intent.
Delivery.
Acceptance.
1. Donative Intent
Donative intent is determined from the language of the donor and the surrounding circumstances
(the text provides the example of a court challenge on the basis of fraud, of duress).
2. Delivery
Delivery can occur through an agent, or third party.
a. Constructive Delivery
4 UNIT TEN: PROPERTY AND ITS PROTECTION
Examples of actual delivery and constructive delivery include a key to a safe-deposit box (for
delivery of the contents of the box), stock, and contracts.
b. Relinquishing Dominion and Control
Effective delivery requires giving up complete dominion and control.
CASE SYNOPSIS
Case 48.2: In re Estate of Piper
For eight years preceding Gladys Piper’s death, Clara Kauffman took Piper to the doctor, beauty shop,
and grocery store; wrote her checks to pay her bills; and helped care for her home. Piper died intestate.
Among her property were two diamond rings. Kauffman filed a claim in a Missouri state court against the
estate, maintaining that Piper had promised the rings as a gift to her. The trial court awarded her the rings.
Piper’s heirs and the administrator of her estate appealed.
A state intermediate appellate court reversed, ruling that no effective gift of the rings had been made
because Piper had never delivered them to Kauffman. The expression of a desire to give does not constitute
a gift unless the intention is executed by a complete and unconditional delivery of the subject matter or deliv-
ery of a proper written instrument evidencing a gift.
..................................................................................................................................................
Notes and Questions
Might the court have found evidence of all three elements of a valid gift in the quoted testimony of
the two witnesses, if it had been so inclined? Explain. Perhaps. The estate did not offer any evidence to
rebut the testimony of either witness. Piper had said of the rings to one of the witnesses, “these are Clara’s.”
From this a court might have inferred (and the trial court appears to have actually inferred) that Piper had
delivered the rings, Kauffman had accepted them, and Kauffman had allowed to Piper to wear them until she
was “done with them.”
The total value of Piper’s estate, not including jewelry, was about $5,400. The appraised value of the
jewelry was $2,500. Was the court’s decision affected by the fact that the jewelry was of significant
value relative to the value of the entire estate? Why or why not? Probably not. When a person gives
away a large portion of his or her assets, the court will scrutinize the transaction to determine whether the gift
was valid. This scenario, however, more often applies when the value of the estate and the gift at issue are of
much greater value than those in this case. The court also held that there was no gift for other reasons apart
from any mental incompetence or fraud.
ADDITIONAL CASES ADDRESSING THIS ISSUE
Delivery
CHAPTER 48: PERSONAL PROPERTY AND BAILMENTS 5
Cases addressing the delivery element of a gift include the following.
Fontaine v. Colt’s Manufacturing Co., 74 Conn.App. 730, __ A.2d __ (2003) (an employer’s public
presentation of a revolver to a departing employee at a retirement dinner, and the immediate repossession of
the revolver for the purpose of making improvements that the employer intended to be a part of the gift,
constituted a constructive form of delivery sufficient to consummate the gift of the improved revolver).
Huskins v. Huskins, 134 N.C.App. 101, 517 S.E.2d 146 (1999) (a donor did not “deliver” the cash in a
safe to the donee, and thus there was no completed “gift” of the cash, even though the donor mailed his son a
letter with the safe’s combination and a note stating that the contents of the safe belonged to the donee in
light of other interpretations of these actions and other steps the donor might have taken to complete a gift of
the cash).
In re Estate of Estes, 1999 OK 59, 983 P.2d 438 (1999) (delivery to one acting in the capacity of the al-
leged donor’s agent is in effect no delivery at all and insufficient to effectuate a delivery for purposes of an
inter vivos gift).
ENHANCING YOUR LECTURE
  WHO OWNS THE ENGAGEMENT RING?
 
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 giventhe donee? Furthermore, does ownership of the ring depend
on who breaks the engagement? On these questions, the courts are widely divided.
AN ENGAGEMENT RING IS A CONDITIONAL GIFT
A number of courts have held that an engagement ring is a conditional gift with strings attachedthe gift
becomes absolute only on marriage. In a Michigan case, for example, Barry Meyer had given Robyn Mitnick
an engagement ring that cost $19,500. When Barry later asked Robyn to sign a prenuptial agreement and
she refused to do so, the wedding was called off. Robyn refused to return the ring, contending that it was an
unconditional gift. Barry claimed that it was a conditional gift given in contemplation of marriage. The court
held for Barry, ruling that the gift of an engagement ring is a conditional gift that becomes final only if the
marriage occurs.a
The Michigan decision echoed earlier rulings by courts in several other jurisdictions. For example, in a
Pennsylvania case a prospective husband gave his bride-to-be a diamond ring that he had purchased for
$17,400. A few months later, the man broke the engagement and demanded that the ring be returned. The
woman refused, and the case went to court. Ultimately, the Pennsylvania Supreme Court concluded that the
ring belonged to the man because an engagement ring is a temporary gift that becomes absolute only when
6 UNIT TEN: PROPERTY AND ITS PROTECTION
the marriage takes place.b
A few years earlier, the Kansas Supreme Court had reached a similar conclusion: an engagement ring,
by its very nature, is a “conditional gift” given in contemplation of marriage.c Courts in Ohio, New York, and
New Mexico have held likewise.
CHAPTER 48: PERSONAL PROPERTY AND BAILMENTS 7
FAULT VERSUS NO-FAULT RULES
When a court decides that an engagement ring is a conditional gift, the next question to be considered is
whether ownership rights in the ring depend on who breaks the engagement. In ancient Rome, the rule was
that a woman who called off the wedding had to return the ring and its value as a penalty, but a man who
called off the wedding faced no penalty. Over the ages, this rule changed. Today, etiquette authorities
routinely claim that if a woman breaks an engagement, she should return the ring; if the man breaks the
engagement, the woman is entitled to keep the ring.
But how do the courts approach this question? Again, there is a split in authority. Some jurisdictions
follow a fault-based rule. That is, if an engagement has been unjustifiably broken by the donor, the donor
cannot recover the ring. If, however, the engagement is broken by mutual agreement or unjustifiably by the
donee, then the ring should be returned to the donor. Other jurisdictions follow a no-fault rule. In the
Michigan case just discussed, for example, the court held that faultwhich party broke the engagementis
not an issue. Because marriage is an implied condition of the ring, the gift does not become absolute until the
marriage occurs. If the engagement is broken, the law requires that the ring be returned to the donor.
AN ENGAGEMENT RING IS FOREVER
Other courts, when deciding engagement-ring cases, avoid the fault/no-fault issue by applying the law
governing gifts. In these jurisdictions, an engagement ring, once delivered to and accepted by the donee, is
an effective gift belonging to the donee. For example, in one case Michael Albinger had given Michelle Harris
a $29,000 diamond engagement ring in contemplation of their marriage. When the couple decided not to go
through with the marriage, Michelle claimed that the ring was hers to keep. Michael wanted it back.
Ultimately, the Montana Supreme Court held for Michelle. The court stated that Montana law defined a gift as
a “transfer of personal property made voluntarily and without consideration.” The court was reluctant to carve
out an exception in the state’s gift law for engagement rings. Among other things, stated the court, to do so
would reflect a gender bias favoring men.
A dissenting judge was astonished by the majority’s decision. The judge noted that women are more
likely to be the subject of these actions simply because they are more likely to receive the rings. Does that
mean, queried the judge, that “we [should] just prohibit gifts in anticipation of marriage altogether because
men are more likely to have to pay for them?”d
FOR CRITICAL ANALYSIS
As noted, 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. Where do your students stand on this issue?
Why?
3. Acceptance
Courts generally assume acceptance unless shown otherwise.
8 UNIT TEN: PROPERTY AND ITS PROTECTION
4. Gifts Inter Vivos and Gifts Causa Mortis
Gifts causa mortis must meet the requirements for other types of gifts and, additionally, do not
become absolute until the donor dies from the contemplated illness or disease.
D. ACCESSION
Accession occurs when someone adds value to a piece of property by use of labor or materials.
Ownership can be in issue if (1) a party has wrongfully caused the accession or (2) the materials
added or labor expended greatly increase the value.
Depending on the degree of good or bad faith and the amount of the increase, ownership passes,
or ownership does not pass but the owner may compensate the improver.
E. CONFUSION
When confusion occurs by agreement, honest mistake, or the act of some third party, the owners all
share ownership in proportion to the amount each contributed.
If a person wrongfully and willfully mixes his or her goods with those of another to render them
indistinguishable, thereby causing confusion, the innocent party acquires title to the total.
III. Mislaid, Lost, or Abandoned Property
The rules governing the ownership of found property differ depending on whether it is categorized mislaid,
lost, or found.
A. MISLAID PROPERTY
If property has been mislaid, the ownernot the finderhas first claim to it, although the owner of the
place where the property was mislaid becomes the caretaker. If the owner does not assert this claim,
the owner of the premises on which it was discovered may claim it.
B. LOST PROPERTY
If property has been lost (involuntarily left), the finder has first claim to itafter its true owner.
1. Conversion of Lost Property
2. Estray Statutes
Estray statutes require finders to report their finds.
ENHANCING YOUR LECTURE
  THE LAW OF FINDERS
 
CHAPTER 48: PERSONAL PROPERTY AND BAILMENTS 9
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. An early English case, Armory v. Delamirie,a is considered a landmark in Anglo-American
jurisprudence concerning finders’ rights in property.
FINDERS RIGHTS
The plaintiff in the case was Armory, a chimney sweep who found a jewel in its setting during the course
of his work. He took the jewel to a goldsmith to have it appraised. The goldsmith refused to return the jewel to
Armory, claiming that Armory was not the rightful owner of the property. The court held that the finder, as prior
possessor of the item, had rights to the jewel superior to those of all others except the rightful owner. The
court stated, “The finder of a jewel, though he does not by such finding acquire an absolute property or
ownership, yet . . . has such a property as will enable him to keep it against all but the rightful owner.”
WHO HAS RIGHTS TO WRONGFULLY OBTAINED GOODS?
A curious situation arises when goods wrongfully obtained by one person are in turn wrongfully obtained
by another, and the two parties contest each other’s rights to possession. In such a situation, does the Armory
rule still applythat is, does the first (illegal) possessor have more rights in the property than the second
(illegal) possessor? In a case that came before the Minnesota Supreme Court in 1892, Anderson v.
Gouldberg,b the court said yes.
In the Anderson case, the plaintiffs had trespassed on another’s land and wrongfully cut timber. The
defendants later took the logs from the mill site, allegedly in the name of the owner of the property on which
the timber had been cut. The evidence at trial indicated that both parties had illegally acquired the property.
The court instructed the jury that even if the plaintiffs were trespassers when they cut the logs, they were
entitled to recover them from later possessorsexcept the true owner or an agent of the true owner. The jury
found for the plaintiffs, a decision affirmed later by the Minnesota Supreme Court. The latter court held that
the plaintiffs’ possession, “though wrongfully obtained,” justified an action to repossess the property from
another who took it from them.
APPLICATION TO TODAYS WORLD
Although the Armory case was decided nearly three hundred years ago, the principle enunciated by the
court in that case remains applicable today. Finders of lost property continue to acquire good title to the
property against all but the true owner.
a. 93 Eng.Rep. 664 (K.B. [King’s Bench] 1722).
b. 51 Minn. 294, 53 N.W. 636 (1892).
ADDITIONAL BACKGROUND
Estray Statutes
In an attempt to create certainty out of the judicial disorder of the rights of a finder of lost property at
common law, many states have enacted lost property statutes. Generally, these statutes give the finder
greater rights to property than a finder has at common law. The statutes differ widely, but typically, they
10 UNIT TEN: PROPERTY AND ITS PROTECTION
eliminate the distinction between lost, mislaid, and abandoned property and treasure trove, and award the
property to the finder in most circumstances. Frequently, the statutes require the finder to deposit found
property with local authorities and post a notice attempting to advise the true owner that the property has been
found. The statutes usually award ownership to the finder if the true owner does not claim the property after
some period of time. Whatever costs are involved are normally paid by the party who gets title to the
property.
For example, New York statutes define lost property to include lost or mislaid property, “[a]bandoned
property, waifs and treasure trove, and other property which is found.” A finder is “the person who first takes
possession of lost property.” Property includes “money, goods, chattels and tangible personal property,” with
some exceptions. Generally, the finder of property worth $20 or more must deposit it with police authoritiesa
(or with the owner of the premises on which the property is found) within ten days. Failing to do so is a
misdemeanor, subject to a fine of up to $100 and imprisonment for not more than six months. The police
have certain obligations regarding the property and notice of the find.b If the property is not returned to the
owner or is not the object of a written claim within a certain period,c the property is given to the finder, who
then gets title.d If the finder does not come for the property within ten days of the end of the period, the police
can sell it. The proceeds go into the abandoned property fund of the state (if the state police had custody) or
become the property of the city, county, town or village (if other police had custody). Whatever costs are
involved are taken from the property or proceeds before it is given to the finder, owner, or buyer, or he or she
must pay the costs before obtaining possession.
In Illinois, the finder of property worth less than $100 must advertise, at the circuit court of the county, the
property and its discovery, and if the owner does not claim it within six months, the finder gets it.e The finder
of property worth $100 or more must file in the court an affidavit describing the property and the time and
place it was found. The county clerk places notice of the find in a newspaper “printed in the county.” The
notice runs for three successive weeks. If the owner does not claim the property within a year after the notice,
the finder gets the property. Costs must be paid by the finder or owner. Failure to comply with the law may
result in a fine of $10 and a payment of double the value of the property to the owner.
In California, the finder of property worth $10 or more must deposit the property, and an affidavit
describing the property and the find, and attesting to other facts, with police authorities.f If the property is
worth less than $50, and the owner is not found or does not claim the property within ninety days, the finder
gets it.g If the property is worth more than $50, after ninety days the police must place a notice of the find at
least once in a newspaper of general circulation. If, after seven days following the first publication of the
notice, no owner appears, the finder gets the property (after paying costs).h Local governments can vary
these requirements, but any ordinance must require that the police or sheriff’s department hold onto the
property for at least three months, and if it is to be sold, notice must be published at least five days before the
sale.
a. The “police station or police headquarters of the city where the finding occurred or possession was acquired, but if the finding
occurred or possession was acquired in buildings or on grounds or premises under the control and supervision of the commissioner of
general services . . . , then the property may also be deposited in a station of the capital buildings police. If the finding occurred or
possession was acquired outside a city, then such property shall be deposited in a station or substation of the state police or in a police
station or police headquarters, including a sheriff’s office, of the county, town, or village where the finding occurred or possession was
acquired. If the finding occurred or possession was acquired in buildings or on grounds or premises constituting a state park, parkway,
recreational facility or historic site under the jurisdiction of the commissioner of parks, recreation and historic preservation, then such
property may also be deposited in a station of the regional state park police. If the finding occurred or possession was acquired in
buildings or on the grounds or premises of the state-operated institutions in the state university of New York, then such property may also
be deposited with a security officer or peace officer appointed by the state university.”
CHAPTER 48: PERSONAL PROPERTY AND BAILMENTS 11
b. Generally, the police hold onto the property and notify the occupant, or the person in charge, of the premises on which the property
was found. The police must also notify any other person whom they have reason to believe has an interest in the property. Perishable
goods can be sold. Any other property can be sold when the expenses of holding onto it exceed half its expected value.
c. “Property having a value of less than one hundred dollars or proceeds of property having such value, three months; property
having a value of one hundred dollars or more but less than five hundred dollars or proceeds of property having such value, six months;
property having a value of five hundred dollars or more but less than five thousand dollars or proceeds of property having such value, one
year; property having a value of five thousand dollars or more or proceeds of property having such value, three years.”
d. As usual, there are exceptions. An employer has rights to property found by an employee under a duty to give the property to the
employer (for example, property found by a public employee is subject to the rights of the agency for which the employee works).
Property found in the safe deposit area of a bank or safe deposit company is subject to different rules.
e. There are exceptions for perishable goods, which the court may order to be sold immediately, and watercraft worth less than $15.
The finder gets title to the watercraft after three months.
f. Outside a California city, “police authorities” would be a sheriff’s department.
g. Some property, such as perishable goods, may be sold at public auction immediately. The finder then gets the proceeds after the
required period. Animals are subject to an entirely different set of statutes.
h. “[U]nless the property was found in the course of employment by an employee of any public agency in which case the property
shall be sold at public auction.”
C. ABANDONED PROPERTY
If property has been intentionally abandoned, a finder’s possession entitles him or her to its title. A
trespasser who finds an item of abandoned property, however, does not acquire titlethe owner of the
real property on which it was found does.
ADDITIONAL BACKGROUND
Abandoned Property
In September 1857, the S.S. Central America, a luxury passenger ship making a voyage from Panama to
New York, sank in a hurricane in the Atlantic Ocean 160 miles east of Charleston, South Carolina. Many of
the 573 passengers on the ship were gold miners returning from California to the East to invest their findings.
Some of the 153 surviving passengers told stories of the estimated $2 million in California gold (now worth an
estimated $1 billion) that had been aboard the ship.
Using high-tech equipment and the services of numerous experts, the Columbus-America Discovery
Group (Columbus) began to search the ocean floor for the vessel in 1986. When Columbus succeeded in
locating what it was sure was the Central America, it sought to establish ownership rights in the gold, which
was estimated to be worth millions. Several insurance companies that had covered losses incurred by the
sinking of the Central America intervened, claiming that they were the true owners of the gold.
In Columbus-America Discovery Group, Inc. v. Unidentified, Wrecked and Abandoned Sailing Vessel, 742
F.Supp. 1327 (E.D. Va. 1990), a federal district court held that the Columbus group, as finders of abandoned
property, acquired ownership of the vessel and dismissed the claims of the insurance companies. The court
concluded that the destruction of all their records showed that none of the insurance companies believed that
the ship could be located or its treasure recovered. Moreover, none of the companies had ever undertaken
any exploratory activity once investigations had become scientifically feasible to ascertain the location of the
wreck.

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