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Business Law: Principles for Today's Commercial Environment 5th Edition

Business Law: Principles for Today's Commercial Environment (5th Edition)

Book Edition5th Edition
Author(s)Jennings, Twomey
ISBN9781305575158
PublisherCengage Learning
SubjectBusiness
Section 20-1: Personal Property
The King Is Dead! Who Gets the Unrefunded Ticket Proceeds?
Section 20-2: Bailments
Chapter 20, Section 20-2, QUESTIONS, Exercise 1
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Johnson v. North Carolina Department of Cultural Resources, 735 S.E.2d 595 (N.C. App. 2012)

 

Department of Cultural Resources: "Possession is nine tenths of the law."

 

The Johnsons: "Not the Law of Bailments!"

 

Colonel Charles E. Johnson ("Johnson") was a descendent of former United States Supreme Court Justice James Iredell, Sr. and former North Carolina Governor James Iredell, Jr. Johnson owned the Collection, which consisted of various manuscripts and documents that belonged to his ancestors. In 1910, Johnson loaned the Collection to the North Carolina Historical Commission. In a letter to R.D.W. Connor, Secretary of the Historical Commission, dated 21 December 1910, Johnson stated: "You will remember that my position in this is that I have loaned [the Collection] to the State with the right of recall and repossession at any time if I see fit." In a letter dated 23 December 1910, Connor replied to Johnson and stated that "[i]t is thoroughly understood by the North Carolina Historical Commission that the 'Charles E. Johnson Collection' of manuscripts deposited by you with the Commission, was deposited merely as a loan, subject to your recall at any time you may see fit."

 

In 2008, Harvey Johnson, a descendent of Johnson, discovered the 1910 correspondence and brought action for declaratory judgment under the law of bailment that he and others descendants were owners of the Collection. The state raised several defenses.

 

Johnson's transfer of the Collection to the Historical Commission created a bailment, which continued after his death. Ownership of the Collection, including the right to recall the Collection, properly passed to Johnson's descendants through his will, which bequeathed all of his property to Mrs. Johnson, and subsequently through the residuary clause included in Mrs. Johnson's will. Plaintiffs had no viable claim against the State until after the State refused to return the Collection upon Harvey Johnson's demand in 2008. Plaintiffs timely pursued this claim, and thus, the claim was not barred by either the statute of limitations or the doctrine of laches.

 

JUDICIAL OPINION

 

CALABRIA, Judge ...

 

Reasonableness of the Delay and Prejudice

 

... [T]he State asserts that plaintiffs' delay in demanding the return of the Collection has led to a loss of evidence which has prejudiced the State. Specifically, the State notes that the original individuals who were involved in the transfer of the Collection are no longer able to provide any evidence on the terms of the transfer or the manner in which the Collection would be treated upon Johnson's death....

 

... [T]here is clear documentary evidence to establish that Johnson loaned the Collection to the Historical Commission, which includes the terms Johnson stated were to apply to the loan. The correspondence between Johnson and Connor incontrovertibly demonstrates that Johnson was loaning the Collection to the Commission with the express right to recall and repossess the Collection at any time and that Connor understood the terms of the loan. Moreover, Johnson's will, also included in the record, plainly demonstrates that he intended for all of his property to be devised to his wife. These documents provided the State with ample evidence of the terms of the Collection's transfer and of Johnson's wishes on how the Collection should be treated upon his death.

 

The State also argues that it was prejudiced by spending "approximately $292,000 to conserve, restore, and publish the documents in the Collection."... The expenditure of $292,000, which the State attributes to the Collection, had no impact on the State's ability to defend against plaintiffs' claim. In addition, it is a bailee's duty "to exercise ordinary care to protect the property bailed against damage and to return it in as good condition as it was when he received it." Vincent v. Woody, 238 N.C. 118, 120, 76 S.E.2d 356, 358 (1953). The costs borne by the State are for actions which are consistent with this duty....

 

Knowledge of Grounds for Claim

 

Finally, the State argues that plaintiffs knew or should have known of their claim long before they brought their declara- tory judgment action. ... The State contends that Johnson's descendants had sufficient opportunity to discover evidence of their claim to the Collection and that, as a result, they should be charged with constructive knowledge of their claim. However, it is immaterial whether Johnson's heirs had actual or constructive knowledge of their ownership interest in the Collection, either immediately after Johnson's death or in the ensuing decades. As previously noted, a bailor has no claim against a bailee until a demand is made for the bailed goods and is refused. In the instant case, it is undisputed that Johnson's heirs did not demand the return of the Collection until 2008. Accordingly, the State had the right to continue to possess the Collection under the terms of the bailment until that time. Thus, Johnson's descendants could not have known that they had a claim against the State until it failed to honor its obligation as bailee to return the Collection after Harvey Johnson's demand. Once the State refused to return the Collection, plaintiffs pursued their claim in a timely manner....

 

Affirmed.

 

A bailment is created upon delivery of possession of personal property and the acceptance of the delivery. Did a bailment occur in this case? Explain, identifying the status of the individuals involved in this case.

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