An ordinary bailee is not an insurer, and is only bound to use such care in keeping the goods as under the circumstances of the case amounts to reasonable care.
In some cases it has been said that the bailee's duty of care depended upon whether the bailment was for his benefit (in which case he must use great care), for the benefit of the bailor (in which case he need use but slight care), or for the benefit of both (in which case he must use ordinary care). But the better rule seems to be that in any case his duty of care arises out of the circumstances, and he must use the care that the circumstances demand in the exercise of good faith. Thus if being a banker he receives bonds for safe keeping, although he gets no reward, he must take all proper precaution to keep them safely.9
But the ordinary bailee is not an insurer. He is only responsible for the use of care ordinarily exercised under the same circumstances. He is, however, absolutely responsible for loss if
(1) He has omitted to obtain insurance if he has impliedly or expressly promised to insure;
9. Gray v. Merriam, 148 111. 179. In this case the court says that the test of the care demanded is decided by the dictate of good faith.
(2) He wrongfully uses the property and the loss results from such use (see next section).
The bailee must not use the property except in the manner contemplated by the bailment. If he does so, and loss results, the bailee is absolutely liable regardless of his use of care.
What use the bailee may put the property to, depends entirely upon the purpose of the bailment.
A bailment for mere safe keeping would not warrant any use by the bailee.
Example 7. A hired a horse to drive to a certain place. He loaned it to B to drive to another place. The horse is injured in a street car collision for which the driver is not to blame. A is responsible for the loss to the owner.10
An ordinary bailee has a lien upon the property bailed when, as in the case of a pledge, it is so understood, or where he rightfully spends money or puts services upon the property and thereby enhances its value, and where he is a warehouseman. An extraordinary bailee has a lien for his proper charges.
The charges that a bailee may make for his services or expenditures depends entirely on his contract. Assuming his charges are correctly made, does he have a lien?
The common law rule was that a bailee had a lien in the following cases:
(1) Where he enhanced the value of the thing bailed by putting expense or services upon it;
10. Palmer v. Mayo, 80 Conn. 353.
(2) Where he was given such lien by contract, as is case of a pledge;
(4) Extraordinary bailees (carriers and innkeepers). One who merely kept, or who performed services that did not enhance value, had no lien; but statutes have extended the lien quite generally to bailees who perform services and spend money on the thing bailed (if the bailee upon becoming such agreed to give credit, of course he would have no lien).
The bailee's lien is lost by his voluntarily parting with possession.
The common law lien of the bailee gave him no right to sell the article, but only to hold it against the claim of the bailor. Statutes have recognized right of sale to various extents and under varying circumstances.
A bailee's lien is not a general lien, that is, it extends only to the property bailed. By voluntarily parting with that specific property, he waives his lien, and in case he afterwards comes into possession of other property, his lien under the prior bailment will not attach to that property.
The pledge is a bailment in which the property is delivered to the bailee for the purposes of securing the payment of a debt.
In the bailment known as a pledge, the subject matter thereof is delivered to the pledgee for the purposes of security.11 The property delivered may be the goods themselves, or the tokens of the goods, as warehouse receipts, bills of lading, or may be choses in action, as negotiable paper.
11. The pledge is considered more fully in the volume on Debtor and Creditor in this Series.
Upon the non payment of the debt, the property may be sold, but the creditor need not make use of his security but may sue upon his debt.
If upon the sale, the security does not bring a sufficient amount to satisfy the debt, the balance is still owing by the debtor.
The sale must be made in the exercise of good faith to bring as much as possible. It should be at public sale, unless the contract permits private sale. The pledgee cannot buy at his own sale.12
The contract of pledge is generally contained in the promissory note given in connection therewith and generally referred to as a "collateral note." The provisions of that contract should be scrupulously observed in the enforcement of the pledge.
12. Wetherell v. Johnson, 208 111. 247. ("A pledge is trust property and the character of a pledge is that of trustee. The law does not permit a pledgee to purchase the pledge at his own sale, except upon an agreement with the pledgor, because he has a duty to perform in relation to the property inconsistent with the character of a purchaser.")