In re the Judicial Settlement of the Intermediate Account of Saunders

Majority

p. 406

In the Matter of the Judicial Settlement of the Intermediate Account of Ebenezer M. Saunders, as Executor, etc., of Franklin E. Saunders, Deceased, Respondent. William H. Barnard, a Creditor, Appellant.

Second Department,

December 2, 1908.

Headnote

Estoppel by silence — surrogate — rehearing on issue of equitable estoppel.

Appeal from a decree of the surrogate overruling the objection of a creditor that the executor as against him was in equity estopped from asserting a personal claim against the.estate. It appeared that the executor, father of the decedent, and having a personal claim against him, had during the lifetime of the

p. 407

decedent and in his presence urged the creditor to forbear the enforcement of a claim against the son’s business, but kept silent as to his own claim when the creditor said that if the son’s statement as to the condition of his accounts were verified when his own secretary went over the books he might forbear. The accounts examined by the secretary and put in evidence before the surrogate did not show whether they listed the personal debts of the decedent in addition to those incurred in his business. Held, that a rehearing of the issue before the surrogate should be ordered.

An estoppel may arise from silence as well as words, as where there is a duty to speak and the party upon whom the duty rests has an opportunity to speak, and knowing the circumstances requiring him to speak, keeps silent.

Appeal by William H. Barnard, a creditor, from a decree of the Surrogate’s Court of the county of Kings, entered in said Surrogate’s Court on the 31st day of March, 1908.

Louis H. Hall [Edmonds Putney with him on the brief], for the appellant.

Luther G. Billings, Jr. [Morris U. Ely with him on the brief], for the respondent.

This is an appeal from a decree of a Surrogate’s Court after a trial whereon the objections of Barnard, a creditor, to an executor’s account were overruled and the account was settled. By stipulation the sole issue tried was whether a claim of the executor against the estate should be allowed as against Barnard’s debt. Barnard’s claim as allowed by the executor is for $38,000. The claim of the executor is for $8,900. The funds of the estate are insufficient to meet the claims proven and allowed. The objection of Barnard rests upon estoppel. The executor was the father of the decedent who was the head of a firm and the principal partner therein. Barnard had sold the firm merchandise, and the firm’s debt therefor to him on January 1, 1906, was about $10,000. In that month Barnard threatened to liquidate the debt. The father of the decedent was not interested in the business of the decedent, but at that time the decedent personally owed his father about $8,000. The affairs of the firm were in bad condition. In the said month of January the decedent and his father called to see Barnard. At the interview the decedent said to Barnard that it would be a hardship to

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ask liquidation; it was not necessary, he was solvent and he owned more merchandise and bills receivable than debts. His debts and the names of the creditors were gone over. No mention was made of the personal indebtedness of the decedent to his father then or afterwards. Thereafter Barnard forbore as to the existing claim, and sold additional merchandise to the decedent on credit. This transaction seems to have involved small partial payments on the old debt. The appellant, as I have said, contends that the father is now estopped as to Barnard from asserting his claim against the estate of the decedent. If the question of estoppel depended upon the interview alone, I think that the evidence sustains the contention. The contrary conclusion of the learned surrogate is drawn from the premises that the inquiry of Barnard related solely to the condition of the decedent’s firm; that the statements of the decedent in the presence of his father were limited to the firm’s affairs; that these representations were substantially correct; that such matters were not the concern of the father, and that his silence as to his son’s personal debt to him when such obligations were entirely without the scope of the inquiry and the statements could not be held as an estoppel. But the father knew that his son was substantially the firm ; that the interest of. the sole other partner was very slight, and that it counted but little in the matter of the extension of credit. He had been told by the decedent that his affairs were in a precarious condition, although he was solvent, which the father but hoped was the fact. He testifies that he was interested in having his son obtain further credit; that he knew that Barnard’s inquiry was to find out the likelihood of payment, and that he presumed that Barnard wished to know the condition of all his son’s affairs. He made to Barnard “ a strong plea not to push the boy, as he put it, but to give him a chance,” saying “ that he was good and would be able to pay us up,” “ not to push the account, but allow it to go on.” Perhaps he did not hear Barnard ask any specific question as to the personal indebtedness of the decedent. Perhaps Barnard did not put the precise question, but Barnard testifies and the father does not deny that after the son named the creditors of the firm Barnard asked the decedent “ if that included all he owed, and he said it did.” And Mcllroy, the secretary for Barnard, testifies without contradiction

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that the father sat silent when his son said “ that was all he owed and there was nothing outside of what was entered on his books.” It is not disputed that the decedent told Barnard at this time that he was about to buy out his sole partner. The business was not a large one. The balance sheet of January 1, 1906, shows transactions of about $70,000, and the total assets amount to but $71,000 as against nearly $68,000 indebtedness. Certainly the father could not have considered that a personal obligation of the head and front of the firm for $8,000, especially as the partner was about to go out, would not be material to the decision of Barnard as to whether he would forbear and extend further credit. An estoppel does not require the element of “ designed fraud.” It may arise “ from silence as well as words, * * * where there is duty to speak, and the party upon whom the duty rests has an opportunity to speak, and knowing the circumstances requiring him to speak, keeps silent.” (Thompson v. Simpson, 128 N. Y. 289 .) “ The equitable"] rule is that he who does not speak when conscience and a just regard to the rights and interests of others require him to speak, he^[1] shall not be permitted afterwards to assert his claim to their injury.” (L’Amoureux v. Vandenburgh, 7 Paige, 321, cited in Kingman v. Dunspaugh, 19 App. Div. 550 . See, too, Erie County Savings Bank v. Roop, 48 N. Y. 298 .)

But the vital question in this case has not been cleared up. For it appears that Barnard at the interview said to decedent in the presence of the father that if “ what lie told me was so regarding his accounts and merchandise and the debts were verified by having my secretary go over the books we might decide not to push the account,” and that he thereafter sent out his secretary and obtained a statement purporting to come from the books. The father then had no reason to suppose that Barnard proposed to shape his future course solely from the representations made at the interview, but he had the right to infer that the course would depend upon the condition of affairs disclosed by the books. If the father knew that the books would disclose that debt, then I think that he was not estopped by his conduct at the interview. How the statement taken from the books by Barnard’s secretary and read in evidence does not establish conclusively the scope of the entries in the books. For

* Sic.

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although this statement contains mainly the accounts of the copartnership business, yet it also contains memoranda of certain personal assets, and the proof is that the secretary of Barnard did not make any investigation outside of the books. We cannot infer then that the books did not contain a statement of the personal affairs of the members of the firm, and there is evidence that the father went over tiie books after the original indebtedness of his son to him had been incurred. For these reasons I think that there should be a rehearing before the surrogate.

The decree should be reversed and a rehearing ordered before the surrogate under the stipulation in the present record, with costs.

Woodward, Gaynor, Rich and Miller, JJ., concurred.

Decree of the Surrogate’s Court of Kings county reversed and a rehearing ordered before the surrogate under the stipulation in the present record, with costs.