Opinion ID: 678497
Heading Depth: 4
Heading Rank: 1

Heading: Definition of Bailee

Text: 27 Amoco argues that the district court erred in concluding that the holding certificates were documents of title under U.C.C. Sec. 1-201(15) because Amoco does not meet Article 7's definition of bailee and, therefore, the holding certificates cannot purport to be issued by or addressed to a bailee. To make this argument, Amoco observes that Article 7 defines bailee as the person who by a warehouse receipt, bill of lading or other document of title acknowledges possession of goods and contracts to deliver them. N.Y.U.C.C. Sec. 7-102(1)(a). Amoco then argues that [b]ecause 'bailee' is defined with reference to 'goods,' Amoco could not purport to be a bailee unless the platinum referenced in the certificate was 'goods.'  Amoco's Brief at 18. 28 Amoco argues that the definition of goods provided by Article 7 cannot encompass the platinum at issue in this litigation. The U.C.C. provides that  'Goods' means all things which are treated as movable for the purposes of a contract of storage or transportation. N.Y.U.C.C. Sec. 7-102(1)(f). Amoco argues that because there is nothing in the certificates to indicate that Amoco had possession of the platinum for 'the purposes of a contract of storage or transportation,'  the holding certificates do not purport to cover goods and, hence, cannot be documents of title. Amoco's Brief at 18 (Amoco's emphasis). 29 Amoco concedes that there are parallels between the issuance of the holding certificates in connection with the leases and the issuance of documents of title in connection [with] contracts of storage or transportation. Amoco's Brief at 20. But Amoco maintains that [p]arallels and similarities ... do not satisfy ... U.C.C. requirements. Essentially, Amoco argues that Article 7 of the U.C.C. does not apply to certificates issued by a lessee to a lessor that certify the lessor's ownership of the leased goods and promise to deliver the leased goods to the lessor/owner upon demand. 30 When Article 7 was drafted, its authors were concerned primarily with legal problems encountered in warehousing and shipping. This is evident from the very structure of Article 7. Article 7 devotes two parts to special provisions governing warehouse receipts and bills of lading. See N.Y.U.C.C. Secs. 7-201 to -211 and 7-301 to -309. It is also evident from the frequent references throughout the article to warehousemen and carriers or shippers. See, e.g., N.Y.U.C.C. Sec. 7-403. This primary concern perhaps explains the choice of words storage or transportation used in Article 7's definition of goods. N.Y.U.C.C. Sec. 7-102(1)(f). 31 At the same time, however, it is clear that the authors of the U.C.C. did not intend to limit its applicability solely to warehouse receipts and bills of lading. This is indicated by the very title of Article 7--Warehouse Receipts, Bills of Lading, and Other Documents of Title. (Emphasis added.) Further, the definition of document of title, clearly contemplates documents other than warehouse receipts and bills of lading. In addition to others, document of title includes any ... document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers. N.Y.U.C.C. Sec. 1-201(15). 32 Further, the drafters of the U.C.C. expressly stated that they could not anticipate fully the development of commercial practices. Nevertheless, they hoped that the U.C.C. would serve as a semi-permanent piece of legislation that will provide its own machinery for expansion of commercial practices. N.Y.U.C.C. Sec. 1-102, Official Comment 1. Accordingly, the U.C.C. provides that it shall be liberally construed and applied to promote its underlying purposes and policies. N.Y.U.C.C. Sec. 1-102. 33 In light of express indications that Article 7 is not limited only to warehouse receipts and bills of lading, Amoco's strict interpretation of Article 7's definition of goods is ill-founded. This strict interpretation seems especially ill-founded in light of the canon that the Code is to be construed liberally, to[, inter alia,] permit the continued expansion of commercial practices through custom, usage and agreement of the parties. N.Y.U.C.C. Sec. 1-102(2)(b). Further, the U.C.C. was originally promulgated at a time when the lease of commercial goods was relatively rare: 34 In part because commercial leasing of goods was not widespread, it was given only nominal coverage under Articles 2 and 9. Accordingly, the courts applied the Code to leases mainly by analogy. 35 1A James J. White & Robert S. Summers, Uniform Commercial Code at 2 (1991) (footnotes omitted). Thus, contrary to Amoco's argument, it is precisely by parallels and similarities that questions concerning the applicability of the U.C.C. to leases of commercial goods are to be resolved. 36 We find that a certificate issued by a lessee to a lessor evidencing the lessor's interest in the leased goods and promising to deliver the leased goods to the lessor upon demand accompanied by production of the certificate to be analogous to a document of title issued by a warehouseman to the owner of goods that have been entrusted to the warehouseman's care for storage. The only relevant difference between the two situations is that the warehouseman is paid for storing the goods for a time, while the lessee pays for the use of the goods for a time. This difference, however, should not exclude the certificate from coverage under Article 7. 37 For example, the owner of an old grey mare may well pay someone to stable the horse. The owner of a thorough-bred stallion, however, may well demand payment from a horsebreeder who stables the horse but uses the horse for stud. In both cases, the horse may be stabled for the same period of time and returned to the owner in much the same condition as when it entered the stables. Also, in both cases, the owner may demand a receipt from the warehouseman that certifies the owner's interest and in which the warehouseman promises to deliver the horse upon demand. The fact that the owner pays the stable-hand in the first instance but is paid by the horse-breeder in the second should not itself determine whether the certificate falls within the purview of Article 7. 38 In a less pastoral example, the owner of a fleet of airplanes may find that temporarily decreased travel demand in areas serviced by the fleet renders some planes temporarily superfluous. The owner of the planes could store the planes in hangars, renting storage space from the owner of the hangars. Alternatively, the owner of the planes could lease the planes to an operator of routes that are experiencing increased demand, demanding payment from the operator for the use of the planes. In both cases, the planes are entrusted to the care of another for a period of time. Also in both cases, the owner may demand from the hangar operator or the lessee a certificate evidencing the owner's interest in the planes and promising to return the planes on demand. The fact that the owner pays the hangar operator but demands payment from the lessee should not remove the lessee's certificate from the purview of Article 7. 39 If a document could be removed from the purview of Article 7 merely because the subject goods are rented rather than stored, owners of goods who wish to lease the goods rather than store them would have to discount the rents they expect to receive by the possibility that, in the absence of law recognizing the validity of a document of title in leased goods, they may not be able to recover their goods when they need them. At the margins, this uncertainty might force the owners of potentially productive assets to leave those assets idle in warehouses when they could be serving productive purposes to the benefit of both the owner/lessor and the lessee. 5 40 The U.C.C. should be construed to simplify, clarify and modernize the law governing commercial transactions and to permit the continued expansion of commercial practices through custom, usage and agreement of the parties. N.Y.U.C.C. Sec. 1-102(1)(a) and (b). The definition of goods, therefore, should not be interpreted to remove a document from the purview of Article 7 simply because the owner is able to command payment for lending the goods rather than required to make payment for storing the goods. On the contrary, Article 7 should afford parties a documentary device to facilitate the productive lease, rather than the idle storage, of goods too useful to be left idle but whose value is too volatile to commit the asset irretrievably for the term of the lease. We therefore find that the courts of New York would reject Amoco's arguments that the platinum was not goods under Article 7 and that Amoco was not a bailee for the purposes of Article 7 of the U.C.C. 6 41