UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY LECTURE AMERICAN CORRESPONDENCE SCHOOL OF LAW LAW OF BAILMENT BY ORVILLE W. COOLIDGE !'! Circuit Judge of the Second Judicial Circuit of Michigan AMERICAN CORRESPONDENCE SCHOOL OF LAW CHICAGO, U. S. A. COPYRIGHT 1908 BY AMERICAN CORRESPONDENCE SCHOOL OF LAW CHICAGO 1 1-17-67 rx \* I <N N U. BIOGRAPHICAL SKETCH OF ORVILLE W. COOLIDGE. Orville W. Coolidge was born in Edwardsburg, Cass County, Michigan, in 1839. After passing through the grammar schools, he entered Michi- gan University where he graduated in 1863, and later on in due course graduated from Harvard Law School in 1865 with the degree of LL.B. After graduating, he immediately entered upon the practice of law, locating at Niles, Michigan. His practice steadily grew and he participated in many important lawsuits, meeting with marked success. In 1893 he was singled out by his fellow prac- titioners and selected as Circuit Judge of the Second Judicial Circuit of Michigan. When his term of office expired, he was re-elected. Again, acknowledged by all to be one of the most efficient and popular udges, in 1905 he was re-elected, this time without opposition, and is now serving his third term. His career on the bench has been marked with distinction and his opinions have always been painstaking and respected. His service on the bench of nearly sixteen years has given him a distinction scarcely equalled by but few lawyers. His lecture on Bailments, delivered to the students of the American Correspondence School of Law, carries with it not only the expression of ripe experience, but also the thought of one who has throughout life maintained a high character for integrity and fidelity to the trust bestowed upon him. LAW OF BAILMENT I. Bailment, which, is derived from the French word> "bailler," "to deliver," is denned as a delivery of per- sonal property by one party 'to another, to be held ac- cording to the purpose or object of the delivery and to be returned when that purpose is accomplished, or other- wise dealt with according to the directions of the Bailor. The party delivering is called the "Bailor" and the party receiving, the "Bailee." The principles of the English Law of Bailment were first systematically and tersely expounded in the famous opinion of Chief Justice Holt, one of the most eminent and enlightened of the Eng- lish judges in the case of Coggs vs. Bernard two centuries ago. In Lord Campbell's Lives of the Chief Justices of England, the author says that "in a short compass Holt expounded the whole Law of Bailment with admirable clearness and accuracy." The fundamental doctrines of the Law of Bailment as laid down by Holt still remain to a large extent the law both in England and the United States, although the Law of Bailment has since been ap- plied to new conditions which did not exist in Holt 's time, and its general scope and field of operation have been greatly enlarged. The immense increase in the develop- ment of new methods and facilities of handling and trans- porting goods and chattels in recent years have made the Law of Bailment one of great importance. Questions requiring nice discrimination and clear in- vestigation are constantly arising, growing out of the complicated transactions involved in the transportation and management of personal property by transportation 5 6 American Correspondence School of Law companies, by land and by water, by express companies, wharfingers, warehousemen, banks and other classes of Bailees. The object of this Review of the Law of Bailment is to give simply a general view of the fundamental princi- ples of the common law governing the relation of Bailor and Bailee. These principles have to some extent been modified by statute in different states and the rights and liabilities of certain classes of Bailees have been lessened or ex- tended thereby. II. ESSENTIAL ELEMENTS OF A BAILMENT. The Contract may be oral or written, express or im- plied by law where no express agreement exists. It is essential to constitute a contract of Bailment that the title to the property delivered shall remain in the Bailor. In this respect a Bailment differs from a sale, for while the title to the property in the latter passes to the vendee, in the former it remains unchanged in the Bailor. The Bailee is under obligation to return the Article bailed to the Bailor, or to deliver it according to his directions at the termination of the Bailment. In a sale there is no obligation on the part of the vendee to return the specified article, but the party receiving it may return another thing of equal value in the form of money or otherwise. It is not always essential that the Bailee should return the identical article received by him to the Bailor. Thus when grain is deposited in a warehouse or elevator, to be commingled with other grain, the Bailee may, according to the custom of trade, return an equal amount of grain of the same kind and grade. So the article returned may not in certain cases be identical in form with that received. Thus materials may be sent to be manufactured into goods to be returned. So Law of Bailment 7 the delivery of milk to be manufactured into cheese and butter for the people constitutes a Bailment. When property is received by one person from another with the understanding that the former may purchase it on certain terms and conditions and that if he pays for it within a certain specific time he shall become the owner, but that if he does not pay for it within the specified time he shall pay for the use of the article, the contract is one of Bailment and not of sale. III. KINDS OF DEPOSIT. According to the most common classification there are five kinds of Bailment, viz. : Deposit, Mandate, Gratui- tous Loan, Pledge or Pawn, and Bailments for Hire. Deposit is generally defined as a naked Bailment of goods and chattels, which are to be kept for the depositor without reward, and to be returned whenever the deposi- tor demands it. Mandate occurs when it is agreed that the Bailee shall do some particular act with regard to the article deliv- ered to him without reward. Gratuitous Loan arises when it is agreed that the Bailee may use the article delivered to him for a certain time or until demand without paying for the use. Pledge or Pawn is a Bailment of personal property when the Bailee receives and holds the article delivered to him as a security for the payment of some debt or for the fulfillment of some obligation incurred by the Bailor to the Bailee. Bailments for Hire include those kinds of Bailments in which the Bailee hires the use of the bailed article or in which he is hired by the Bailor to perform or bestow some labor or services upon it. The latter class includes the keeping of goods by a warehouseman and 'the carriage of goods for hire. 8 American Correspondence School of Law IV. DUTIES OF BAILEE. DEGKEES OF DILIGENCE. In carrying out the trust involved in every contract of Bailment, a certain degree of diligence is required of the Bailee, the degree of diligence depending upon the nature of the Bailment to be hereafter referred 'to. Diligence in this connection is divided into three degrees, viz.: Ordinary Diligence, Extraordinary Diligence and Slight Diligence. Ordinary Diligence is that diligence which persons of common prudence exercise over their affairs in the com- munity and age in which they live. The correlative term often used in lieu of the phrase "want of ordinary dili- gence" is ordinary negligence. Extraordinary Diligence. This is that diligence which very prudent persons 'take of their own concerns. The correlative term^for the phrase "want of extraordinary diligence" is slight negligence. Slight Diligence is that diligence which persons of less than common prudence or of no prudence take of their own concerns. The correlative term for the phrase "want of slight diligence" is gross negligence. Several courts of high authority have criticized the use of words denoting comparative degrees of negligence as of doubtful use or application. See N. Y. R. R, Co. vs. Lockwood, 17 Wall (U. S.), 382; Steamboat New World vs. King, 16 How. (U. S.), 474. Whether the appropriate degree of diligence has been exercised in a given case depends upon the circumstances of each particular case. Whenever the facts are at all in controversy the question is one of fact for the jury. In determining this question the age, the country and the condition of society, in which the Bailee lives, the cus- toms and usages of trade, the nature and the value of the thing bailed and its liability to loss or injury must be considered. Law of Bailment 9 V. DEGREE OF DILIGENCE IMPOSED UPON DIFFERENT CLASSES OF BAILEES. (1) When the Bailment is solely for the benefit of the Bailor and the Bailee has no reward, the latter is only liable for the exercise of slight diligence and is therefore only responsible for losses occasioned by gross negli- gence. Thus if a person about to go away from home leaves an article for his own benefit and convenience with his neighbor without reward to the latter to be kept till the Bailee shall return home, the Bailee is only liable for the exercise of slight diligence and is responsible for loss of or injury to the article only in case of gross negli- gence on his part. (2) In case of gratuitous loan or when the Bailee bor- rows an article from the Bailor without hire or reward and for the sole benefit of the Bailee, the latter is respon- sible for the exercise of extraordinary diligence over the thing bailed, and is liable for losses occasioned by slight neglect ; thus if a person borrow a horse of another with- out compensation to go on a certain journey, and the Bailee travels in a different direction than agreed upon, or to a greater distance, the Bailee is liable for any in- jury which may occur to the horse though accidental. The borrower is not liable for inevitable accidents which could not have been foreseen and against which he could not guard, but he is answerable for the least neglect. (3) When 'the Bailment is for the mutual benefit of both parties the Bailee is required to exercise ordinary diligence and is answerable only for ordinary negligence. The Bailee in this class of cases in 'the absence of a special agreement is not generally an Insurer of the goods intrusted to his care. To this rule there are some exceptions as in the case of common carriers to which reference will be made hereafter. The Bailee is not liable for losses occasioned by dangers necessarily incident to 10 American Correspondence School of Law the use of the articles intrusted to his care, .nor for the losses occasioned by inevitable accident or irresistible force. By inevitable accident is meant every casualty pro- duced by physical causes which are irresistible in their nature, such as fire, storm, inundation, perils of 'the sea or sudden death. Irresistible force includes the confiscation of goods by military authority, the injuries from a hostile army and losses by robbery or burglary. Shop-keepers, inn-keepers, restaurant proprietors and bath-house keepers are obliged to exercise ordinary care in the protection of property entrusted to their keeping as an incident to their business. They are not liable how- ever for losses occasioned by accident or by some cas- ualty which occurred without their fault. The same prin- ciple applies to an artisan to whom is entrusted mate- rials to work up into manufactured articles for the Bailor. This principle applies in general to all cases of locatum or hired services in connection with a chattel. Locatum has been divided into four classes : (1) Hiring of a thing for use as hiring a horse and buggy at a livery stable. (2) Hiring of work to be done on a chattel as hiring a tailor to make a suit of clothes from cloth furnished. (3) Hiring of care and service to be rendered about a specific chattel to be kept by the Bailee for him as in the case of a warehouseman, inn-keeper and men who pasture cattle for hire. (4) Hiring of the carriage of goods. In all these classes ordinary care is required of the Bailee and he is liable for all losses occasioned by ordi- nary negligence on his part. VI. EIGHTS AND LIABILITIES OF BAILOR AND BAILEE GENEEALLY. If the article be lost or injured while in the possession of the Bailee the presumption, according to the weight of modern authority is that the loss or injury occurred Law of Bailment 11 through the default of the Bailee and the burden of proof falls on the Bailee to show that he exercised the degree of care required by the particular contract of Bailment, or that the loss occurred from some cause which prima facie excuses him. A Bailee may by special agreement, as a general rule, limit the extent of his liability but it seems to be estab- lished by the weight of authority that he cannot go so far as to prevent his liability for losses occasioned by his own negligence. So the Bailee may enlarge his liability by special agree- ment so far even as to become an insurer of the property. The Bailee is liable for the conversion of the property. This embraces an unauthorized use of the article, such as using it in a different way or for a longer time than that contemplated by the contract. Thus where one hires a horse to go for a specified distance, and he goes beyond that distance, he becomes liable for an unlawful conver- sion of the horse. So the Bailee cannot sell, pledge, mort- gage or exchange the property, and if he do so he is liable for a conversion. The Bailee has no right to use the property in any way not contemplated by the parties to the contract of Bailment. The Bailee, until the termination of the Bailment, has a special property or possessory right and interest in the article bailed, and may maintain replevin to recover -pos- session from a person wrongfully taking the property or maintain trespass or trover against any person interfer- ing with his possession. As a general rule the Bailee is estopped from denying the title of the Bailor in the prop- erty bailed. This rule however is subject to some quali- fication. Where a third person claims title to the prop- erty the Bailee may choose to have the title tried at law, but if he does so, he undertakes the defense at his peril. He can in no case, however, set up title himself or avail himself of the title for his own benefit; he is not liable however for conversion when a paramount title to that 12 American Correspondence School of Law of the Bailor has been established or when the property has been taken from him by due process of law. Either party may maintain an action against a third person for any wrong done to the property bailed, but a recovery by one is a bar to a recovery by the other. The Bailor may recover possession of the property if sold, pledged or mortgaged by the Bailee to a third person who has taken possession, unless the Bailor has done some act which estops him from claiming the prop- erty. This may occur when the Bailee has asserted his ownership to the property with the knowledge of a Bailor and without objection on the part of the latter. So it may occur when the Bailor has allowed the Bailee to so use and manage the property as to amount to a publication to the world that the Bailee is the owner. VII. COMPENSATION. If work and labor are bestowed by the Bailee upon the article bailed he is entitled to compensation unless the circumstances are such that it can be reasonably inferred that the services were to be rendered without compensa- tion. In the absence of an express agreement the law will imply a promise to pay what the services are reason- ably worth. LIEN OF BAILEE. The Common Law always recognized the right of a tradesman or an artisan to have a specific lien upon the particular article delivered to him for the purpose of having work done upon it, for the price or value of the work done. The right to this lien has however been ex- tended to all cases where value has been conferred upon the thing bailed by his skill and labor, when such lien was not inconsistent with the terms of the contract. This lien is confined to the particular demand which the Bailee has for work and labor done upon or about the Law of Bailment 13 article bailed. He has no lien as a general rule upon such articles for services rendered at another time or occa- sion for the Bailor. In a few exceptional cases a general lien has been allowed to secure the payment of a balance arising from mutual dealings. Thus Factors, Insurance Brokers andWharfingers have been allowed a lien for a balance arising from mutual dealings. A lien will not attach for services unless the parties to the Bailment contemplate compensation for services, although the law may imply a legal liability to pay the reasonable value of such service. The lien may be lost or waived by the voluntary sur- render of the property by the Bailee or by giving credit to the Bailor, or by accepting a third person as the payor. VIII. ENFORCEMENT OF A LIEN. At common law the lien could be enforced only by keeping possession of the property till payment was made and no sale could be made by the Bailee to secure the payment of his services unless a special agreement to that effect had been made. Courts of Equity have allowed rules to be made in order to enforce the lien in cases where a custom or usage had become well established with regard to a particular trade. Generally however statutes have been enacted in the different states providing a remedy to enforce a Hen by public sale. IX. EE-DELIVEEY BY BAILEE. It is the duty of the Bailee to return the property bailed to the Bailor at the time agreed upon for the termination of the Bailment. When the time is not regulated by agreement the re- delivery must be made within a reasonable time after de- V 14 American Correspondence School of Law mand. What is a reasonable time after demand must be determined by the circumstances of each particular case. Non-delivery is excusable in case the property has been destroyed without the fault of the Bailee or by some act over which he had no control, or when the property has been taken by due process of law, or by a person having paramount title or in case the title of the Bailor has terminated. It is the duty of the Bailee to give notice to the Bailor of seizure of the property by process. X. TERMINATION OF THE BAILMENT. The Bailment may be terminated by the following causes: (1) By the expiration of the time for which the article was bailed. (2) By the destruction of the article bailed or because it became unfit for the purpose for which it was bailed. (3) By the accomplishment of the object for which the article was bailed. (4) By a rescis- sion of the contract upon grounds recognized as valid by the law of contracts. (5) By an act of illegal conversion of the property by the Bailee. When the Bailment is for the benefit of both parties and the contract specifies no time for fulfillment, either party may terminate the Bailment by giving notice, the party receiving the notice having a reasonable time with- in which to comply. The same rule applies to a case of Bailment where it is made for the sole benefit of the Bailor. So the death of either party may terminate the Bail- ment. XI. SPECIAL CLASSES OF BAILEES. Finder of Lost Goods. The finder of lost goods be- comes a depositary. He can defend his rights as against all but the true owner." It is his duty to restore the goods Law of Bailment 15 to the true owner when discovered. He is not entitled to compensation unless he has been put to necessary ex- pense. Inn-keepers. An Inn-keeper is one who keeps his house open regularly and for reward for the lodging, refresh- ing and entertaining of travelers. Saloons, restaurants and boarding houses are not regarded at common law as inns. The common law was very rigid in requiring the inn- , keeper to keep the goods of his guests safely. He was liable for any loss of goods which was not occasioned by the act of God, the public enemy or the negligence of the guest or his servants. This rule has been modified by some authorities which have held that the Inn-keeper is not liable for losses occasioned by accidental casualties or riots. The common law liability has been modified in many states by statutes limiting his liability among other things to ordinary baggage necessary for the journey and suit- able to the guest's station in life. The Inn-keeper has a lien to secure the payment of his charges on the goods deposited by his guest. XII. COMMON CAERIEKS OF GOODS. A common carrier is one whose business it is to trans- port goods for hire and who holds himself ready to carry them for all persons who apply and pay the hire. The transportation may be by land or water. A private or special carrier is one who undertakes to carry goods for reward for special persons or on special occasions and who does not make hired transportation his general call- ing. Within the term "Common carriers" are embraced railroad companies, ferry-men, canal boatmen and owners of carrying vessels. The subject of common carriers is one of vast scope. 16 American Correspondence School of Law Our purpose in this Review is only to set forth briefly the general and underlying principles which govern the rights and liabilities of common carriers as Bailees of goods and chattels. xm. > GENERAL DUTIES. A common carrier is under obligation to carry all goods tendered to it for transportation, if it holds itself out as willing to carry such goods and is tendered proper charges. The goods must be transported promptly and within a reasonable time. If there is unreasonable de- lay in the transporting and the delivery of the goods the carrier is liable for whatever losses may result to the shipper as a proximate consequence of the delay. What is unreasonable delay is a question of fact which must be determined from the circumstances of each particular case, such as the* state of the weather, the mode of con- veyance, the character of the freight, the season of the year, the distance to be transported, and the ordinary facilities of transportation. It is the duty of a Railroad Company not only to accept goods tendered by individual or private shippers but also from connecting lines of transportation, providing that the goods are such as are ordinarily shipped by Railroad Companies and the trans poration is according to the usual course of business. The carrier may by public advertisement within proper and reasonable limits designate and fix the nature of the articles which it proposes to transport, and the kind of cars and conveyanees which must be used to transport certain classes of goods. He may refuse to carry danger- ous articles, such as dynamite, and also goods that are so defectively packed as to entail extra risk. The accept- ance of goods by the carrier however is a waiver of all rights to object on these grounds. Law of Bailment 17 XIV. LIABILITY FOR LOSS OK INJURY TO THE GOODS. A common carrier of goods is regarded as an insurer for the safe transportation and delivery of the goods en- trusted to it for carriage. In this respect the degree of liability of common carrier differs from that of Bailees in general. To this rule there are some exceptions. The common carrier is not liable for losses occasioned by the act of God or by the public enemy. The act of God or inevitable accident is such irresistible disaster as results at once from natural causes and which cannot be attributed to human agency. This will embrace damage by earthquakes*, tempests, floods, lightning, sudden frosts and similar occurrences. The act of God must be the prox- imate cause of the injury in order to excuse the carrier and the carrier must himself be free from contributory negligence. Accidents from fire, explosions and collisions are not regarded as an act of God. The carrier is not liable for losses occasioned by an armed force large enough to render resistance fruitless, nor for those occasioned by Indian tribes in a state of war, by pirates and privateers. By the weight of author- ity the common carrier is .not liable for losses occasioned by mobs when it has exercised reasonable care in taking precautionary measures. XV. LIMITATION OF LIABILITY BY AGREEMENT. The common carrier may limit his common law liability by special contract but it has been held by many courts that he cannot be allowed to prevent his liability for his negligence by stipulation. It is well established that he cannot exempt himself from liability for losses occasioned by his own gross negligence. The Supreme Court of the United States has held that the common carrier cannot 18 American Correspondence School of Law limit his liability by special contract so far as to release him from responsibility for losses occasioned by his own negligence, although the contract may be valid, in the state where made. A general public notice is not sufficient. The modifica- tion of the common law liability must be brought home to the notice of the shipper or approved by him before the shipment is made. What constitutes notice to the shipper has been the subject of some controversy in the Courts. It seems to be held by the weight of authority in the United States that when the shipper accepts a receipt or a Bill of Lading from the common carrier which contains a limi- tation of the common law liability such instrument is binding on the shipper, when it is not unreasonable or illegal. XVI. WAREHOUSEMEN. A warehouseman is one who receives and stores goods and chattels as a business for compensation and profit. The warehouseman is under obligation to provide a building for storage, reasonably safe and suitable for the purpose and safe against common and ordinary occur- rences. He must use ordinary care and diligence in the protection of the property entrusted to him. What con- stitutes ordinary care must be determined from the sur- rounding facts and circumstances. Local usage or custom may govern the degree of care required. The warehouseman is not liable for losses of goods by fire which are not the result of his own negligence. Nor is he liable for loss by theft when he has exercised ordi- nary care. When grain is deposited in a mass a warehouseman must deliver to the depositor an equal amount of the same quality deposited. Law of Bailment 19 EXPRESS COMPANIES. An express company is regarded as a common carrier and is therefore liable for all losses or damages done to goods intrusted to it for transportation unless such loss or damage was occasioned by the act of God or the public enemy. If the shipper fraudulently conceals the real nature or value of the goods and thereby misleads the express com- pany the company in any event is liable only for the ap- parent value of the goods. The express company how- ever, is generally bound to make inquiry as to the value of the goods and the shipper must make a true answer. The express company is under obligation to deliver the goods to the consignee or his duly authorized agent at his residence or place of business. This may be varied by custom or usage at small way stations when the business is small. In such cases the goods may be held at the sta- tion to be delivered there to the consignee upon prompt notice of the arrival of the goods. The custom however must be reasonable, of long continuance and notorious. If the consignee refuses to or neglects to receive the goods and pay the express charges when sent C. 0. D. the company then ceases to be a common carrier and assumes the obligations of a warehouseman. The company must however notify the consignor at once that the goods are held subject to his order.