82 A. 1068 | N.H. | 1912
This is an action of assumpsit upon a promissory note discounted by the plaintiff bank for one Charles, the maker, *322 and upon which the defendant's name appeared as indorser. The case was submitted to the jury upon three grounds: (1) That they might find the defendant liable if the indorsement was genuine; (2) that they might do so if the indorsement was made without authority, but was subsequently ratified and adopted by the defendant; and (3) that they might find him liable if his conduct worked an estoppel. Exceptions were taken by the defendant to the instructions given the jury and to a refusal to give requested instructions, which present the question whether the defendant was estopped to deny the genuineness of the indorsement by reason of his silent conduct.
It seems that after the plaintiffs discounted the note, their cashier heard that Charles, who was the postmaster at North Conway, had embezzled funds belonging to the government and put in circulation notes with forged signatures. Upon hearing this, the cashier saw the defendant and told him the bank had discounted a note of $500 for Charles with the defendant's indorsement upon it, and asked if it was all right. The defendant replied that he could not tell, as he had signed some notes with Charles. It was then arranged that the bank should send him a copy or abstract of the note, and an abstract was at once sent him. No reply was made to the bank until after a month and a half had elapsed, when the defendant wrote the bank that the indorsement was a forgery and that he was in no way liable on the note. What, if anything, the bank did in the meantime in the way of endeavoring to ascertain the true state of the indorsement does not appear. Upon the question whether the bank could have protected itself had the defendant notified it that the indorsement was a forgery at an earlier date than it was notified, the evidence was conflicting. There was evidence that the defendant was interested with others as a mortgagee of Charles' property, which mortgage had not matured at the time the defendant received the abstract of the note and would not mature as against the national bankruptcy act until about the time the defendant wrote the bank denying his signature. There was also evidence that two or three days after the cashier spoke to the defendant about the indorsement, Charles showed the defendant a cancelled note, which he thought was the note in suit and that Charles had taken care of it. These facts are narrated so that the portions of the charge objected to may be made intelligible and the discussion that is to follow more clearly understood. *323
The principle of equitable estoppel, or estoppel by misrepresentation, recognized and enforced in cases of this nature, had its origin in equity, but was taken over at quite an early day by courts of law and made adaptable to and applied in legal proceedings (1) to prevent circuity of action, or to obviate the necessity of bringing another proceeding to enforce rights growing out of the same transaction, and (2) to award relief by specific reparation, where specific reparation could equitably be had, and where it could not, to award restitution in money equivalent to the damages sustained, — and all for the promotion of justice and equity. Horn v. Cole,
The courts, both in this country and in England, in the early cases in which this doctrine is considered and in many of the later ones, would seem at times to have lost sight of the fact that a legal duty, the violation of which could be the basis of an estoppel, could have its origin in the law of negligence as well as in the law of deceit, and to have endeavored to satisfy their confusion by declaring that gross negligence is the equivalent of willful and intentional wrong, thereby rendering "confusion worse confounded." Stevens v. Dennett,
It is the legal duty of every man not to willfully injure his neighbor through his active intervention, whether that intervention be by word (Huskie v. Griffin,
This principle, as applied in the law of negligence, has been recently considered in the case of Hobbs v. Company,
In Horn v. Cole,
That the same legal principles are applicable in cases where it is sought to estop one who has actively assisted in lending credence to the misrepresentation of a third person, whether that active assistance or intervention be fraudulently or negligently put into operation, is readily appreciated. And that they have been applied in this state may be seen from an examination of the following cases: Runlet v. Otis,
We now come to those cases which Mr. Ewart classifies under the head of "misrepresentations by passive assistance," where the misrepresentation, if any, consists in silent conduct. See Ewart Est. 88-94. It is apparently the view of the author that silence cannot assume the character of a misrepresentation unless a fraudulent intent is present; that out of silence a legal duty to speak will not arise, there being no relationship of trust and confidence, if there is an absence of bad faith; and that for an imposition of *326
the duty, we must adopt the altruistic doctrine advanced by him in chapter 5 of his book. From a reading of his text it will be seen that he does not regard fraud as an essential ingredient of estoppel, but rather considers that silence, to become a misrepresentation or an assisted misrepresentation, from the nature of the thing must proceed from or be the result of a fraudulent intent. In the class of cases to which the author refers it will usually appear that the estoppel denier, knowing his right or interest in a given subject-matter and that another interested in the same subject-matter is acting or about to act to his injury in ignorance of that right, (1) remains silent intending the other shall act to his injury in ignorance of the right and in reliance upon the silent conduct, or (2) remains silent, not intentionally or in bad faith, but carelessly not thinking, when he knows or reasonably ought to know that another will act in ignorance of the right and in reliance upon his silence, and be damaged. In such a class of cases is there a legal duty, either in the law of deceit or the law of negligence, resting upon the party remaining silent and which he violates by such conduct? That a duty must be shown to exist and to have been violated before the principle of estoppel can be applied is pointed out in Allen v. Shaw,
The subject has been much discussed by courts and text-writers, and it seems to us that the obstacles encountered are due largely to an inability to discern between a question of law and a question of fact, and a failure to keep in mind the principle of active intervention. While it is true that mere silence, standing alone, is a colorless thing from which no conclusion of fact can be drawn and upon which no duty can be predicated, it certainly is not true that no circumstances can exist under which it may become misleading; for it is common knowledge that circumstances frequently arise in which silence becomes as operative and misleading as a positive statement or act could be, and where such is the case a jury would be warranted in finding that the silent conduct had ceased being passive and had become an active misrepresentation. It is also true that in the law of negligence a duty to speak or to become active for another's protection is not imposed on one because of his superior knowledge or condition. For the imposition of such a duty there must be active intervention, or some definite or previously existing fiduciary relation such as exists between trustee *327
and cestui que trust, guardian and ward, master and servant, principal and agent, and copartners, or it must appear that in the particular transaction some trust and confidence was expressly reposed. Smith v. Bank,
In Buch v. Company,
After a careful study of the question, it seems to us that as a positive representation, made under circumstances which one *328 knows or reasonably ought to know will induce another to act in reliance thereon to his damage, is to be regarded as active intervention imposing a duty to exercise care, so silent conduct, maintained under circumstances disclosing that one knows or reasonably ought to know that it is misleading and will induce another to act in reliance thereon to his damage, may be found to be active intervention and a representation calling for the imposition of a duty to exercise care. It is not the fraudulent intent or the careless conduct that the law recognizes as the basis for imposing the duty, but the silence which in the circumstances of the particular case warrants a finding that it was actively misleading and a positive misrepresentation. The fraudulent intent, or the careless conduct, as the case may be, is material only as establishing a breach of duty, and as determining the character of the reciprocal duty owed by the party injured to the party making the misrepresentation.
It is the duty of every one to use ordinary care to avoid being injured by another's negligence; but no duty to use such care is imposed on one to avoid being injured by another's intentional act or fraudulent misrepresentation. If a misrepresentation is negligently made, or negligently allowed to stand, the party injured by relying upon it must show that he acted as a reasonably prudent man in so doing (Moore v. Bowman,
If we examine the cases in deceit it will be found that silent conduct under certain circumstances may be found to be a positive representation from which a legal duty will arise to cease misleading. In Stewart v. Ranche Co.,
In Jordan v. Pickett,
In Hanson v. Edgerly,
That the cases in this state involving an application of the doctrine *330 of an equitable estoppel based on silent conduct may be readily understood when considered in the light of what has here been said, will be seen from a brief review of them.
In Allen v. Shaw,
In Odlin v. Gove,
In Stevens v. Dennett,
Is the law of equitable estoppel of a highly penal character in its application, as suggested in Odlin v. Gore? Doubtless many cases can be found where the sum awarded or the relief granted. would seem to highly penal. Some of these cases, as far as the question of relief is concerned, are to be sustained on the ground that the facts in the particular case authorized the award under the legal principles of ratification or adoption, and not of estoppel; and in the balance of the cases the penal character of the relief awarded is to be regarded as due to oversight or a failure to recognize the fundamental principles distinguishing equitable from legal estoppel. To illustrate: If I ratify or adopt my signature which has been placed upon a note without my authority, I become a party to the contract and am holden for the full amount of the note; but this is because by ratifying and adopting the transaction I have agreed to be holden as a party to the note. Forsyth v. Day,
The principle of assent which lies at the foundation of the law of contracts, and of ratification and adoption, plays no part in the law of equitable estoppel. There the relief granted or the damages awarded are not based upon a breach of contract, but upon the *332 equitable principle of restitution which charges one, even though he expressly dissents, by ordering him to make restitution, either by releasing his legal or equitable right in the specific thing with reference to which the damage arose, if that can equitably be done, or by awarding such a sum of money as justice and equity requires to reimburse the party damaged. It is analogous to the equitable principle applied in the law of quasi-contracts, to the existence of which assent is not necessary, and where restitution is ordered, based upon the amount which the defendant has unjustly enriched himself at the plaintiff's expense. Keener Quasi-Cont. 5.
The distinction between ratification and adoption, and equitable estoppel, is pointed out in Forsyth v. Day,
The best exposition of the origin and nature of equitable estoppel, as distinguished from legal estoppel, which we have seen is to be found in Horn v. Cole,
The decision in Fall River Bank v. Buffinton,
We are aware that a contrary view has been expressed in England in the case of Ogilvie v. Agency Corp., [1896] A.C. 259, 270, and that the supreme court of Canada, regarding itself bound by the dictum of the English court, has held, by a majority of three to two, that the measure of recovery should be the sum due on the notes, although the damages occasioned by the defendant's misrepresentation were not shown to be of that amount. Ewing v. Bank, 35 Can. S.C. Rep. 133; Dominion Bank v. Ewing, 7 Ont. L.R. 90. See, also, the apparently conflicting views expressed by the court of appeals in New York in Payne v. Burnham,
Although it may be doubtful whether the question of the amount of recovery is raised by the defendant's exceptions to the charge, it has nevertheless been considered for the reason that we are of the opinion that the instructions to the jury were erroneous and the case must be sent back for trial. It is unnecessary to analyze the charge. Its defects will be readily appreciated from what has already been said. The instructions should have included the following propositions:
(1) If the defendant knew his signature was a forgery, and knew, or as reasonable man should have known, that the plaintiffs had an interest in the note and were relying upon his silent conduct confirmatory of the genuineness of the signature, and as they would not have done had they known the truth, the jury might find that the defendant's conduct was under the circumstances a misrepresentation imposing a duty upon him to refrain from negligently or willfully making or continuing the misrepresentation.
(2) If the jury found the representation was negligently made or allowed to stand, and the plaintiffs were damaged in relying upon it, the plaintiffs to establish an estoppel must show that they were free from fault in relying upon it.
(3) If the jury found the representation was willfully made or persisted in with the intention that the plaintiffs should rely upon it, and the plaintiffs were damaged in relying upon it, to establish an estoppel and a right to recover the plaintiffs must further show that they relied upon it in the honest belief that it was true.
(4) If the jury found for the plaintiffs upon either of these *336 grounds, they could award them such a sum as the evidence showed they had been damaged by relying upon the defendant's misrepresentation, which might be equal to or less than the face of the note, as the evidence warranted.
Exceptions sustained: verdict set aside.
PARSONS, C.J., was in doubt: YOUNG, J., dissented: the others concurred.