Gottsch v. Bank of Stapleton, 88-112

Citation458 N.W.2d 443,235 Neb. 816
Decision Date20 July 1990
Docket NumberNo. 88-112,88-112
Parties, 14 UCC Rep.Serv.2d 150 Robert G. GOTTSCH, doing business as Bob Gottsch Feedyards, Appellant and Cross-Appellee, v. BANK OF STAPLETON, a Corporation, Appellee, and First National Bank of Omaha, a Corporation, Appellee and Cross-Appellant.
CourtSupreme Court of Nebraska

Syllabus by the Court

1. Trusts: Property. A constructive trust is imposed when one has acquired legal title to property under such circumstances that he or she may not in good conscience retain the beneficial interest in the property.

2. Trusts: Fraud: Liability. As a fraud-rectifying remedy, a constructive trust, even in the absence of the trustee's participation in fraud, is available on the basis of the principle that one who accepts a product of fraud, knowing the means by which the fraud-caused product was achieved, is liable to the defrauded party, although the recipient of the product did not personally participate in the fraud.

3. Trusts: Proof. A party seeking the remedy of a constructive trust has the burden to establish the factual foundation, by evidence which is clear and convincing, required for a constructive trust.

4. Agency: Words and Phrases. An agency is a fiduciary relationship, resulting from one person's manifested consent that another may act on behalf and subject to the control of the person manifesting such consent, and, further, resulting from another's consent to so act.

5. Agency. Whether an agency exists depends on the facts underlying the relationship of the parties irrespective of the words or terminology used by the parties to characterize or describe their relationship.

6. Agency: Words and Phrases. An agent is one authorized by another to act on the other's account and under the other's control.

7. Uniform Commercial Code: Words and Phrases. A "holder in due course" is a holder who takes an instrument for value, in good faith, and without notice that the instrument is overdue or has been dishonored or of any defense or claim against or claim to the instrument on the part of any person. Neb.U.C.C. § 3-302 (Reissue 1980). A holder takes an instrument for value when the holder takes the instrument in payment of or as security for an antecedent claim against any person whether or not the claim is due. Neb.U.C.C. § 3-303 (Reissue 1980).

8. Summary Judgment. A summary judgment shall be rendered if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Neb.Rev.Stat. § 25-1332 (Reissue 1989).

9. Summary Judgment: Judicial Notice. A trial court may use appropriate judicial notice in resolving a motion for summary judgment.

10. Judicial Notice: Records: Rules of Evidence. As a subject for judicial notice, existence of court records and certain judicial action reflected in a court's record are, in accordance with Neb.Evid.R. 201(2)(b), Neb.Rev.Stat. § 27-201(2)(b) (Reissue 1989), facts which are capable of accurate and ready determination by 11. Judicial Notice: Records: Collateral Estoppel: Res Judicata. A court may judicially notice existence of its records and the records of another court, but judicial notice of facts reflected in a court's records is subject to the doctrine of collateral estoppel or of res judicata.

resort to sources whose accuracy cannot be reasonably questioned.

12. Judgments: Collateral Estoppel. Collateral estoppel may be applied where an identical issue was decided in a prior action, there was a judgment on the merits which was final, the party against whom the doctrine is to be applied is a party or is in privity with a party to the prior action, and there was an opportunity to fully and fairly litigate the issue in the prior litigation.

13. Due Process: Collateral Estoppel: Parties. Due process requires that the rule of collateral estoppel operate only against persons who have had their day in court either as a party to a prior suit or in privity with a party to the prior litigation.

14. Collateral Estoppel: Parties: Words and Phrases. Privity implies a relationship by succession or representation between the party to the second action and the party to the prior action in respect to the right adjudicated in the first action.

15. Collateral Estoppel: Parties: Words and Phrases. In its broadest sense, "privity" is defined as mutual or successive relationships to the same right of property, or such an identification of interest of one person with another as to represent the same legal right.

16. Collateral Estoppel: Parties: Words and Phrases. For the purpose of issue preclusion, the mere fact that litigants in different cases are interested in the same question or desire to prove or disprove the same fact or set of facts is not a basis for privity between the litigants.

Michael E. Sullivan and J. Patrick Deveny, for appellant.

Waldine H. Olson, of Schmid, Mooney & Frederick, P.C., for appellee First Nat. Bank.

No appearance for appellee Bank of Stapleton.

HASTINGS, C.J., BOSLAUGH, WHITE, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.

SHANAHAN, Justice.

GOTTSCH V. CHURCHILL

In March 1979, Leslie Churchill, acting under a power of attorney from his wife, Phyllis Churchill, acquired 200 cows in South Dakota. On May 31, 1979, Robert G. Gottsch, doing business as Bob Gottsch Feedyards, filed an action against Churchills in the district court for Lincoln County, Nebraska, and alleged that Churchills, by defrauding Gottsch, acquired funds for the 200 cattle purchased in March. In the Lincoln County fraud action, Gottsch did not claim any legal interest in the South Dakota cattle, but sought a money judgment on account of Churchills' fraud. Gottsch obtained a judgment for $190,350 on December 17, 1981, in Gottsch v. Churchill. Gottsch was unable to collect the Lincoln County judgment.

GOTTSCH'S SUITS AGAINST THE BANKS

Nature of Action.

When Gottsch was unable to satisfy his Lincoln County judgment against Churchills, he filed an action on January 19, 1984, against the Bank of Stapleton and First National Bank of Omaha B in the district court for Logan County, Nebraska, to impose a constructive trust on each of the banks.

Standard of Review.

An action to impose a constructive trust is an equity action. Lone Oak Farm Corp. v. Riverside Fertilizer, 229 Neb. 548, 428 N.W.2d 175 (1988); Ford v. Jordan, 220 Neb. 492, 370 N.W.2d 714 (1985).

In an appeal of an equity action, the Supreme Court tries factual questions de novo on the record and reaches a conclusion independent of the findings of the trial court, provided, where credible evidence Hughes v. Enterprise Irrigation Dist., 226 Neb. 230, 234, 410 N.W.2d 494, 497 (1987); Frenzen v. Taylor, 232 Neb. 41, 439 N.W.2d 473 (1989). See, also, Neb.Rev.Stat. § 25-1925 (Reissue 1989).

is in conflict on a material issue of fact, the Supreme Court considers and may give weight to the fact that the trial judge heard and observed the witnesses and accepted one version of the facts rather than another.

Pleadings.

In his second amended petition, Gottsch asserted in paragraphic form the fraud previously described in the Lincoln County action, namely, paragraph 4: Churchills defrauded Gottsch to acquire the 200 South Dakota cattle; paragraph 5: Churchills were joint venturers in the transaction with Gottsch; [235 Neb. 819] and paragraph 6: The Churchill joint venture was conducted under the name "P.M. Churchill." Gottsch then alleged that the 200 head of South Dakota cattle, which were related to his fraud action in Lincoln County (Gottsch v. Churchill ) and which had been acquired through Churchills' fraud on Gottsch, were later sold, with proceeds from the sales used by Phyllis Churchill to pay her indebtedness to the Bank of Stapleton and FNB. Gottsch further alleged that the Bank of Stapleton had notice that Gottsch "claimed an interest" in the fraudulently acquired cattle subsequently sold by Churchills. Also, Gottsch alleged that knowledge of the Bank of Stapleton was imputed to FNB. Therefore, Gottsch requested a constructive trust for the funds which came into the banks' possession on account of Phyllis Churchill's payments to the banks.

In its answer, FNB generally denied Gottsch's allegations and affirmatively raised the issue that FNB was a "bona fide purchaser for value and without notice" of fraud in reference to "payments received by B on the obligation owing from Phyllis Churchill...."

Summary Judgment.

Gottsch requested a "summary judgment on paragraphs 4, 5, and 6 of his second amended petition" and asked the court to take judicial notice of "the bill of exceptions, pleadings, judgment and memorandum" in Gottsch v. Churchill, the Lincoln County fraud case in which Gottsch had obtained the $190,350 judgment against Churchills. The district court took "judicial notice of the complete court file" in Gottsch v. Churchill and stated that "[s]ince all of the allegations contained in paragraphs 4, 5, and 6 of the Plaintiff's Second Amended Petition in the instant case have been previously judicially determined in the Lincoln County District Court proceeding, the ... Plaintiff's Motion for Summary Judgment is sustained."

Therefore, as a result of the summary judgment, Churchills' fraud on Gottsch was established in the proceedings against the banks.

Phyllis Churchill's Borrowing History.

To evaluate Gottsch's claim for a constructive trust, we must examine Phyllis Churchill's history of borrowing money from the Bank of Stapleton and explore the "correspondent bank" relationship between the Bank of Stapleton and FNB.

Since 1967, Phyllis Churchill had borrowed money from the Bank of Stapleton in connection with her family's cattle-raising operations. In 1974, Phyllis and Leslie Churchill married and conducted their own cattle operations. In April 1977, Phyllis Churchill, already indebted to the Bank...

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