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Baehr v. Clark - 83 Iowa 313, 49 N.W. 840 (1891)

Rule:

When goods are obtained from their owner by fraud, and the facts show a sale to the party guilty of the fraud, an innocent purchaser of the goods from the fraudulent vendee for value, and without notice of the fraud, will take the title. But this rule has no application unless there is an actual sale of the property by the alleged vendor. If one delivers property to another as a mere bailee, a purchaser from the bailee acquires no title, however innocent he may be. He has no more right to assert title to the property than if it had been stolen, and his purchase had been from the thief. The principle upon which this distinction rests is that the vendor in the cases last supposed does not part with the title to the property, nor does he have any such intention, and the fraudulent possessor of the property can convey no title to any third person, however innocent; for no property has passed from himself to the true owner. 

Facts:

One J. J. Barker represented to Max Baehr, a dealer in diamonds in Omaha, NE, that he had a customer for a diamond ring and stud.  Baehr delivered a ring and stud to him to take and show to the potential purchaser. The sum of $450 was fixed as the price of the diamonds, and Barker was to return them, or return with the price, in an hour. Barker did not return. It was learned that Barker stopped at a gambling house, owned by Carrigg, and gave the diamonds to Carrigg as security for advanced money. When the advancements got too high, they sold the diamonds to Clark. Barker and Carrigg represented to Clark that they owned the diamonds. Baehr and Clark each claimed to be the owner of the property. The trial court found for Baehr, and Clark appealed.

Issue:

Was Clark entitled to the property as an innocent purchaser?

Answer:

No

Conclusion:

The court noted that if an individual delivered property to another as a mere bailee, a purchaser from the bailee acquired no title, however innocent he was. The transaction between the Baehr and Barker did not pass the title of the diamonds. Barker was entrusted with the possession of the diamonds merely as the agent. Clark, from a mere agent or bailee acquired no title, even though he paid value, had no notice of the embezzlement and was an innocent purchaser.

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