Court Opinion

ID: 8881832
Source: CourtListenerOpinion
Date Created: 2022-11-26 20:47:37.198352+00
Date Added: 2024-06-11T17:06:41.845144
License: Public Domain

GIBSON, Circuit Judge
(dissenting).
I respectfully dissent. While Rath, Kelley and the Bank were all found to be innocent parties, which finding is supported by the record, it was the affirmative action of concealment by Rath that enabled Blood to carry out his fraudulent conversion. Kelley and the Bank did everything reasonably possible to check on Blood’s operation and to give third parties notice of their interest in the lambs that were in the possession of Blood. Kelley checked on his lambs at frequent intervals and had also mortgaged them. The chattel mortgage was of record, constituting constructive notice to the public (including Rath) of Kelley’s and the mortgagee’s interest. The Bank likewise filed its chattel mortgage, which again constituted constructive notice to all of the Bank’s interest.
Kelley, in making a personal check on his lambs, was shown a sufficient number of lambs asserted by Blood to belong to Kelley and there remained a large number of other lambs that presumably belonged to Blood and were mortgaged to the Bank. If Rath had taken similar precautions of checking on its lambs and not concealing its interest, Blood’s fraudulent aspirations would have been much more difficult and would most likely have been uncovered sooner.
The effect of affirming the District Court’s decision gives judicial sanction to secret agreements covering concealed ownership of personal property. This places the wrongdoer or converter into a position to cause harm to innocent persons and serves to protect secret, silent *21or unknown principals. A false facade is thus set up to trap both the wary and the unwary.
I feel it is improper to clothe a person with all the indicia of ownership, including possession, of marketable personal property without taking reasonable precautionary steps to warn the public and those dealing with the possessor that the possessor does not hold clear legal title to the property. The principle of open and full disclosure in commercial transactions is deeply rooted in our jurisprudence. Filing and recording requirements give notice and prevent secret agreements and undisclosed ownerships from operating to the detriment of the public, while actual concealment of title or lien interests enforceable against innocent third parties gives impetus to and enables the fraudulent converter to carry out his criminal activities.
I think, therefore, that this is a classic case calling for application of the equitable principle that, “Whenever one of two innocent parties must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it.” Oleson v. Albers, 130 Neb. 823, 266 N.W. 632 (1936). This principle has long been recognized in Nebraska, commencing with Roy v. McPherson, 11 Neb. 197, 7 N.W. 873 (1881), and followed by Bauer v. Bauer, 136 Neb. 329, 285 N.W. 565 (1939), and Jordan v. Butler, 182 Neb. 626, 156 N.W. 2d 778 (1968). Rath in placing the lambs in Blood’s possession and actively and intentionally concealing its ownership made possible Blood’s conversions and a continued perpetration of Blood’s fraud on Kelley and the Bank.
To my mind the least that should be done in resolution of the rights and liabilities of the innocent parties would be to treat the lambs as fungible property and thus have the innocent parties bear their proportionate share of the loss. I can attach no greater integrity to Blood’s records than I would to his stewardship of other peoples’ property.
I would reverse and remand.