May 242012

On May 23, the First District Court of Appeals in Ohio released its decision in the case of Lotspeich v. R.A. Hermes, Inc. It’s a nice case that combats some of those wacky West Coast cases in which it was held that when a self-storage operator places his lock on a unit after a tenant’s default, there’s some sort of bailment liability for the storage operator over the occupant’s property.

While the facts of the case are long and complicated, in a nutshell, Lotspeich stored property at an About Space location in Cincinnati (owned by Hermes).  Many years ago, Lotspeich fell behind on rent, and as is required in Ohio prior to a lien sale, the facility operator cut the lock on the unit to perform an inventory for the notice and advertisement.  He then placed an About Space lock on the unit.  Sometime before the sale, Lotspeich’s brother paid the full amount due on his behalf, thereby stopping the sale.  The facility manager did not ask the brother to put a new lock on the unit, which seems correct to me, because while you can accept a payment from anyone, you should not give unit access to someone just because they made a payment.

There is some dispute about how long About Space’s lock remained on the unit, but it might have been anywhere from one day to many years.  Eventually, Lotspeich or his brother accessed the unit and found it completely empty.  Lotspeich then sued About Space and Hermes on a theory of conversion.

Hermes won at trial and Lotspeich appealed, claiming that because About Space had its lock on the unit a bailment relationship was created, and About Space had a duty to provide care for the stored goods.  Had the Court of Appeals determined a bailment existed, the case would have proceeded to determine if About Space violated that duty of care.  However, it upheld the trial court’s decision saying in part, “Even assuming that the use of a company lock raised an inference that a constructive bailment had been created, the evidence submitted below established that Lotspeich had had(sic) the right to place a lock on his own storage unit. And it was uncontroverted that About Space did not know what Lotspeich had stored.  Therefore, there was no ‘delivery’ or ‘entrustment’ of Lotspeich’s goods in the typical sense of a bailment.”

First and foremost, I am happy to see a court recognize that simply by following the requirements of the Ohio Statute, you cannot impose a duty of care (bailment) on the self-storage owner. I wish some courts out west would follow this clear and correct logic. Courts, particularly in the west, seem to be holding that when you cut a lock off a unit, you’re accepting “delivery” of the stored property, calling it an election of a remedy. That’s the wrong way to look at it. If you have to cut a lock to perform an inventory for a sale, why should that be deemed to stop the lease and make the operator responsible for the goods? It shouldn’t, and Ohio got it right.

Second, the best way to make sure you don’t end up in this situation is to put a clause directly into your rental agreement stating that if you overlock or cut a lock, it is not an election of a remedy.

Finally, make sure you strictly enforce your policy on taking off your lock after a payment.  Many of my clients will not accept a payment on a unit in lien status unless someone shows up in person to pay and places a new lock on the unit.  This presents its own set of problems if it’s not your occupant paying, but you can allow the payer’s lock on the unit without removing yours until the occupant arrives and places his own lock. Again, a well-planned rental-agreement clause on this subject can really help to save the day.

I am so proud of our litigators at Katz, Greenberger & Norton, who represented About Space and won this very important case.

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