Methods of Acquisition of Personal Property

Personal property may be acquired for ownership in several different ways. For example, if you produce something, then you may own it, unless you are producing it in the capacity of your work for someone else. If you buy four yards of wool fabric and sew a coat out of it, then you own that coat by virtue of having produced it with your own materials. This is ownership by productionA method of acquisition of personal property ownership, which involves creating the property.. However, if you sew a coat as part of your job while working for your employer, then the employer will own the coat.

If you are in the business of producing coats to sell, then you may be a merchant, and the rules of the Uniform Commercial Code (UCC)A model statute that seeks to provide uniformity to contracts law among the different states. It is not a law until state legislatures adopt it as law. would govern transactions involving the sale of goods and the purchase of supplies from other merchants. Regardless of whether someone is a merchant or not, purchaseA method of acquisition of personal property for ownership, involving trade of valuable consideration. is a means of acquiring ownership. Indeed, in today’s world, purchase may be the most common method of acquiring property.

Property may also be gifted. A giftA voluntary transfer of property. is a voluntary transfer of property. Generally, the donorA person who gifts property. of the gift must intend to gift the property, the donor must deliver the gift, and the gift must be accepted by the intended recipient, known as the doneeA person who receives gifted property.. A conditional gift is a gift that requires a condition to be met before the gift will transfer. For example, if your parents said, “You can have a new car, if you graduate from school,” then that would be an example of a conditional gift. If you do not graduate from school, then you cannot have the gift of the car.

What if you find something? Dating at least to the Institutes of Justinian in Roman law, the concept of “finders keepers” is one known to every preschooler: finders keepers, losers weepers. However, in law, things are not quite so simple. Property that someone finds can be classified in several ways. A finder of personal property may claim ownership of the property if it is abandonedA category of personal property in which the owner has intentionally relinquished the property.. The owners of abandoned property must intend to relinquish ownership in it. For example, if you take your chair to the landfill, you have abandoned the chair. Someone may come along and take possession of it, which will place ownership of the chair in that person. If you change your mind later, that’s too bad. The chair now belongs to the new owner. However, if the property is simply lostA category of personal property where the property has been unintentionally relinquished by its owners. or mislaidA category of personal property where the property has been placed by the owner for the owner’s later retrieval, but the owner has forgotten where it is., then the finder must relinquish it once the rightful owner demands its return. If the finder refuses to return lost or mislaid property to its rightful owner, the owner can sue for conversionIntentional, substantial interference with the chattel of another., which is a tort. Conversion is intentional, substantial interference with the chattel of another. Another classification of personal property applicable to found property is treasure trove. A treasure troveA category of found property consisting of money or precious metals. is money or precious metals, like gold, for which the concept of “finders keepers” sometimes is applicable.

Imagine finding the next-generation iPhone just lying on a bar stool. It has not been released yet, but there you are with an actual prototype in your hands! This is valuable property because it embodies the cutting-edge intellectual property of Apple, both in utility and design. Brian Hogan found himself in this position. Apparently, an Apple software engineer had accidentally left the prototype on a bar stool one evening. Hogan decided to sell the prototype to Gizmodo, a tech site, which was willing to pay for it so that it could write an early and exclusive review of this soon-to-be hot item on the market. Gizmodo subsequently discovered that Apple had lost an iPhone prototype and wanted it returned. Regardless of that fact, Gizmodo dismantled the prototype and published photos on its Web site. Subsequently, it returned the property to Apple.Edward C. Baig, “Gizmodo: Lost Next-Gen iPhone Returned to Apple,” USA Today, April 21, 2010, http://www.usatoday.com/tech/products/2010-04-20-iphone_N.htm (accessed September 27, 2010).

Was the prototype of the next-generation iPhone abandoned, lost, mislaid, or a treasure trove? If Apple filed a civil lawsuit against Gizmodo, what would the claim be and who should win? Since we know that Apple wanted the property back, we know that it had no intention of relinquishing ownership of it. Therefore, the property was not abandoned. Since a next-generation iPhone is not money or precious metals—even though it is very valuable and worth a lot of money to Apple—the concept of treasure trove does not apply. A phone is not actual coin or cash. In this case, the property was either lost or mislaid, because it was unintentionally relinquished or set down for later retrieval, but the owner had forgotten where it was placed. In either case, if the phone had not been returned, Apple could have brought a suit for conversion. A successful conversion claim would have awarded damages to Apple. Just like any successful conversion claim, damages would not include a requirement to return the property itself. Incidentally, California has captured the duty to return lost or mislaid property in its criminal statutes, and the facts of this case are being investigated for possible theft charges. Check out Note 8.32 "Hyperlink: Finders Keepers?" for this story and two additional cautionary tales about claiming found property.

Bailment

Figure 8.3

Bailment: Can you hold my property?

© Thinkstock

Sometimes it is necessary to intentionally leave personal property with someone else. For example, imagine that you own a cat. If your cat, which is considered to be chattel, needs to have surgery, you will need to leave her at the veterinary hospital. Clearly, taking your cat to a veterinary hospital does not constitute abandonment. Likewise, you have not lost or mislaid your cat. And, precious though she may be, your cat is not subject to the concept of treasure trove. Instead, in this situation you will be known as bailorSomeone who is in the rightful possession of property who gives the property to someone else to hold., and you will be seeking a bailment with your veterinarian. A bailor is someone in the rightful possession of personal property who gives the property to someone else to hold. A bailmentAn arrangement in which the rightful possessor of personal property gives the property to someone who has agreed to hold the property and who has a duty to return it. is the arrangement in which when the rightful possessor (such as the owner) of personal property gives the property to someone else to hold. The holding party, known as the baileeSomeone who is in the possession of someone else’s property, and who agrees to accept the property and has a duty to return it., agrees to accept the property and has the duty to return it. The bailee is someone who is in possession of someone else’s property. In our example, you rightfully have possession of your cat because she is your personal property. You give your cat to the veterinarian to hold, who has agreed to accept the cat. You also rightfully expect that the cat will be returned to you on demand. Indeed, the veterinarian has a duty, by virtue of the bailment, to return the cat to you. Consider Note 8.36 "Hyperlink: Lost Dog", where Delta Airlines was the bailee of a dog, which it lost.

The bailee has certain duties to the bailor. For example, a bailee has a duty to take reasonable care of the property while the property is in his or her possession. This means different things for different types of bailment. If the bailee is the only party who benefits from the bailment, then the bailee must take extraordinary care with the personal property. A common example of a bailee being the only party who benefits is where the owner of the property loans the property to someone for his or her use. For instance, if you loan your neighbor a snow shovel without asking for something in return, then your neighbor receives the sole benefit of the bailment. His or her duty of care is that he or she must take extraordinary care with the snow shovel. However, when both parties receive benefit from the bailment, such as when you rent a DVD from Blockbuster, only the duty of ordinary care is imposed on the bailee. The bailee receives the DVD and Blockbuster receives a rental fee. When the benefit of the bailment exists for the benefit of the bailor only, then only minimum care is required. Gross negligenceReckless disregard of a duty (in bailment). will give rise to liability, but there is no great duty for the bailee to be as careful as he or she would be if he or she were receiving some benefit. If someone asks you to hold his or her books while he or she jumps into a swimming pool, you would have a minimum duty of care. If you lost the books, then you would not be liable. However, if you intentionally threw the books into the pool, then you would be grossly negligent and liable for damages.

An involuntary bailment is created when someone finds lost or mislaid property. The finder may not destroy the property, though the duties that he or she owes regarding the property may vary from state to state. A voluntary bailment is created when intention exists to create the bailment, as described in the previous paragraph.

As you can imagine, bailment is common in business. Examples of bailment in business include placing packages or goods with common carriers for delivery, warehousing goods with a third party prior to sale or delivery, or taking clients’ or customers’ automobiles in a valet service. Consider whether a business should be able to disclaimTo renounce. bailment (and the duties that go along with bailment). For example, if a hotel required its guests to sign a “no bailment created” clause on check-in, should that excuse the hotel from liability if the guests’ personal property is damaged while the property is left in the hotel?