An Easy Case (in theory)

An 80 year old man who didn't trust banks (but was not part of the so-called "Occupy" movement) sewed his life savings of $13,000 in the lining of a suit that he then donated to Goodwill.  Now he wants the money back.  Of course!  He surely had no donative intent with respect to the money -- only the suit -- so there is no gift.  He cannot have abandoned the money because abandonment requires proof by the later possessor that the true owner has intentionally relinquished his claim of ownership, and the owner's immediate demand for return of the money is good evidence to rebut that argument.  After all, if the insurers of the gold on the shipwreck of the Central America could remain dormant for 137 years without abandoning their ownership, surely this guy is well ahead of the game.  This is more like mislaid property, where the true owner always prevails against a claim of a later possessor.  But there's a catch -- the suit appears to have already been sold. The news items are here and here.  

If the suit can be traced to its purchaser, does the purchaser have good title?  Under UCC 2-403 the entrusting of goods to a merchant who deals in such goods produces good title in the purchaser of the goods.  While Goodwill is surely such a merchant as to used suits, does it deal in used suits with a hidden cache of cash in the lining?  I need help from the UCC gods on this, as I am merely a Con Law and Property type.  

If the suit can't be traced to the purchaser and there is no good title in that purchaser (whoever it is), can Goodwill be liable as a bailee who has breached his duty of care?  Probably not; assuming that Goodwill never knew about the cash. 

The poor fellow's wife has Stage 4 cancer, so maybe the purchaser will learn about it, check the lining, and do the right, honorable, and moral thing. 

UPDATE:  Kudos to commenter James Grimmelmann, who supplied this answer to the UCC question: 

"Sometimes, life hands you a precedent that's so on point the coincidence is staggering. Kahr v. Markland, 543 N.E. 2d 579 (Ill. App. 1989) would suggest that the man can recover as against the purchaser. Kahr donates clothes to Goodwill, and mistaken[ly] includes bags of engraved sterling silver. Goodwill sells the silver to Markland. Held, no "entrusting" to Goodwill, so title does not pass to the purchaser. And this by an Illinois court."

Comments

[Patrick]

I once remarked to a friend while I was studying for the bar: If ever I encounter a genie who offers me three wishes, one of my requests will surely be for eternal status as a bona fide purchaser in good faith for fair value. I'm no UCC god but that's a difficult status to trump.

[James Grimmelmann]

Sometimes, life hands you a precedent that's so on point the coincidence is staggering. Kahr v. Markland, 543 N.E. 2d 579 (Ill. App. 1989) would suggest that the man can recover as against the purchaser. Kahr donates clothes to Goodwill, and mistaken includes bags of engraved sterling silver. Goodwill sells the silver to Markland. Held, no "entrusting" to Goodwill, so title does not pass to the purchaser. And this by an Illinois court.

[TJ]

I'm no commercial paper specialist, but why doesn't the special status of money distinguish the Kahr case? Traditionally, a recipient of money takes free of all prior claims absent explicit knowledge of the money's illicit source. See Merchants' Loan & Trust Co. v. Lamson, 90 Ill.App. 18, 21 (1899).

[James Grimmelmann]

One could argue that money sewn in the lining of a coat is not being transferred as money, so that the policies favoring extreme negotiability don't apply.

[TJ]

Right, but the original owner then has to thread a very fine needle. If the object being given to Goodwill is defined as "a suit with money," then it would seem that Goodwill is a merchant to suits that has been entrusted to it, and the purchaser takes free of prior claims under 2-403. If the objects being given to Goodwill are regarded separately as "a suit" and "money" (which is how I read Kahr as conceptualizing the silver), then intellectual consistency would demand that the money be considered transferred separately from the suit and be subject to the holder in due course rule.

What the original owner needs to argue is that the object being transferred is "a suit" and "money" when O gives to Goodwill (so no entrusting of the money portion), but then becomes "a suit with money" when Goodwill transfers to A (so the entire transaction is subject to the nemo dat rule). While I can certainly see a court buying the argument, there is a contradiction there.