First National Bank of Bridgeport v. First National Bank of Hartington

• Decision Date: 31 December 1923
• Docket Number: 22612
• Parties: FIRST NATIONAL BANK OF BRIDGEPORT, APPELLANT, v. FIRST NATIONAL BANK OF HARTINGTON ET AL., APPELLEES
• Court: Nebraska Supreme Court

196 N.W. 691

111 Neb. 441

FIRST NATIONAL BANK OF BRIDGEPORT, APPELLANT, v. FIRST NATIONAL BANK OF HARTINGTON ET AL., APPELLEES

No. 22612

Supreme Court of Nebraska

December 31, 1923

APPEAL from the district court for Cedar county: GUY T. GRAVES JUDGE. Reversed.

REVERSED AND REMANDED.

Williams Hurd & Neighbors and H. E. Burkett, for appellant.

R. J Millard and J. C. Robinson, contra.

Heard before MORRISSEY, C. J., LETTON and DAY, JJ., SHEPHERD, District Judge.

OPINION

SHEPHERD, District Judge.

This is an action brought by the First National Bank of Bridgeport, the plaintiff below and appellant here, against the First National Bank of Hartington and the First National Bank of Coleridge, appellees here and defendants below. It is alleged in the petition that on the 20th day of January, 1921, and for a long time before that date, one Harry E. Dunlap was the sole owner of certain stock and farm machinery, and the half owner of certain grain and other personal property, all of the value of $ 3,053.81; that the defendants took possession of said property and wrongfully converted it to their own use; and that shortly thereafter Dunlap assigned his cause of action for said conversion to the plaintiff. Separately answering, the defendants generally deny the allegations of the petition, and further plead that said Dunlap held out to them and to the public generally that the property in question belonged to one J. H. Shaffer, by permitting the latter to have it in his possession and to manage it and to control it in all respects as if it were his own, etc. They further say that they lent money to Shaffer, supposing that he owned the property, and took mortgages thereon, which they afterward duly foreclosed, selling said property and properly applying and distributing the proceeds thereof. And they say that thereby said Dunlap was estopped to question said foreclosure and sale and to maintain this action. Replying, plaintiff avers that Shaffer was on Dunlap's farm, under an agreement to operate the same, by which the latter was to furnish all stock and equipment and the former was to receive as his remuneration a share of the crop and one-half of the increase of live stock. And it further avers in its replies that the operating of the farm was financed by Dunlap through it, the plaintiff bank, and that the money borrowed by Shaffer was used by him for his own benefit, and not for the common purpose or in any wise to the benefit of Dunlap. It also says that the First National Bank of Coleridge was informed before it took its mortgage, both by Dunlap and Shaffer, that the latter did not own the property and had no right to mortgage it.

Undoubtedly one may bail stock and personal property to another for the latter to use in running a farm or any other business without becoming liable to the loss of the same through its unauthorized conveyance by the bailee. McGinley v. Brechtel, 4 Neb. Unoff. 552, 95 N.W. 32; McClelland v. Scroggin, 35 Neb. 536, 53 N.W. 469. If there is no absolute or conditional sale feature involved, such a transaction does not come within the provision of section 2464, Comp. St. 1922. McClelland v. Scroggin, supra.

Such being the case, the defendants who took mortgages on the property described and afterward seized and sold it under such mortgages were required to prove, in order to successfully defend upon the doctrine of estoppel, the existence of facts in connection with the holding of Shaffer, other than that of mere possession, sufficient to mislead them in the exercise of ordinary care as to the true ownership, and also that they relied upon said facts. The mere giving over of the possession of the live stock and farm equipment to the lessee upon his farm was not enough to estop Dunlap from claiming the personalty when he learned that said lessee had fraudulently mortgaged the same to a third party, unless Dunlap did something or omitted to do something in connection therewith to mislead such third person as to its rightful ownership. No one can transfer a better title than he has. No presumption exists that a mortgagor owns the property covered by his mortgage, as between a party to the mortgage and a stranger. Booknau v. Clark, 58 Neb. 610, 79 N.W. 159; Rocky Mountain Fuel Co. v. Sparling Coal Co., 26 Colo.App. 260, 143 P. 815. The doctrine that that one of two innocent parties must suffer for the wrong of a third, who made the wrong possible by parting with the possession of a chattel, operates only to protect the person who exercises ordinary caution in taking a lien upon that chattel. The bank or the individual trusts as much or more in lending money upon chattels without careful investigation as to their title, as does the owner of such chattels in lending them to another for safe keeping or for mutual profit. Chism v. Woods, Hardin (Ky.) 531, 3 Am. Dec. 740.

It must be borne in mind, as the evidence discloses, that defendants well knew that farm owners and lessors were in the habit of furnishing stock and machinery to the tenant farmers who became their lessees. With this in view, and conceding for the purposes of argument that the personal property in question belonged to Dunlap and was lent to Shaffer for his use upon his landlord's farm, what did Dunlap do or omit to do to lead ...