Kingsley v. Vernon — 6 N.Y. Super. Ct. 361

Majority

p. 361

Kingsley v. Vernon.

Headnote

Where the indorser of a hill, after the receipt of notice of protest, on going to take up the bill, was informed by the holder that it had been paid, and, by such information, the indorser was prevented from collecting it of the drawer, who subsequently became insolvent, (the acceptor being insolvent at the time,) held, that the indorser was discharged from liability, although such information proved to be erroneous, and was honestly given.

This was held upon the ground that the declarations of the holder operated as an equitable estoppel, or estoppel m pais, which concludes the party as evidence.

The estoppel applies, not upon the ground of fraud, or wilful misrepresentation, in making the statement, but upon the ground that it will be a fraud to show that it is untrue to the prejudice of one who has acted upon the faith of the statement.

(Before Oaklev, Ch. J., and Sandeord and Paine, J. J.)

Nov. 11,12 ;

Dec. 28, 1850.

This was an action against the defendant as indorser of a bill drawn by one Davis upon John Butler, and accepted by him, payable to the order of the defendant, and by him indorsed to the plaintiff.

The cause was tried before Sandford, J., on the 7th October, 1849. On the trial, the following facts were proved.

The bill matured on the 29th July, 1848,*and the acceptor residing in New Jersey, the plaintiff deposited it for collection in a bank in the city of New York, who sent it to their corresjpnding bank in New Jersey. The defendant was informed

p. 362

with what bank the draft was deposited by the plaintiff. The draft was not paid, and the plaintiff and defendant received due notice of the protest. The New York bank, not being advised of the non-payment, after the lapse of the ordinary period for the return of protested paper, presumed the draft to have been paid, and on the 31st July, 1848, passed the amount of the draft, less the expenses of collection, to the plaintiff’s credit, and entered the credit in his bank pass-book. The defendant, on receiving notice of protest, sent his clerk to the plaintiff for the purpose, of paying the draft, and the plaintiff informed the clerk that the bank had passed the bill to his credit, and he supposed it was paid, and at the same time showed him the bank-book with the note so credited. Shortly after the bill had been credited, and on the 2d August, it was returned with the protest to the New York bank, and at once re-charged to the plaintiff in the books of the bank, but it was not re-charged on his pass-book till September 20th, 1848, when his bank-book was sent for and balanced. This was the first intimation the plaintiff had that the bill had not been paid. The plaintiff immediately called on the defendant for payment, who declined paying it. It was proved that the acceptor was insolvent at the maturity of the bill, and so continued, and that it could have been collected of the drawer up to the 23d August, 1848, at which time he became, and since had been insolvent.

The judge left to the jury, as questions of fact: 1st. Whether the plaintiff gave the defendant the alleged information that the bill was paid? 2d. Whether the defendant, by such information, was prevented from collecting the bill? And he charged-them, as matter of law, that the defendant had a right to rely upon the information alleged to have been communicated to him by the plaintiff. The jury found a verdict for the defendant, on which judgment was rendered at the special term. From this judgment the plaintiff appealed.

J. K Burrill, Jr., for the plaintiff,

made the following points: — .

p. 363

1. That the liability of the indorser was fixed by the protest of the bill and notice, and the principle of estoppel in pais is inapplicable.

2. That an estoppel in pais only arises where the party estopped had peculiar knowledge of the matters out of which the estoppel arose, or was bound to know them.

3. That the defendant had the best legal evidence of the non-payment of the bill, in the notice of protest. He knew where it was deposited for collection, and had the same means of knowledge as the plaintiff; and that the plaintiff made no positive affirmations as to the draft, but merely stated his sources of information, and that the defendant had no right to rely on the correctness of the plaintiff’s conclusions, but should have drawn his own; citing Coke Litt. 352 (b.); Oomyn’s Digest, Estoppel, E. (4); Viner’s Ab., Estoppel, (A 2) § 7, 8.

4. That the defendant was not a surety. The draft was given for his own debt, and he was not surety on the bill or otherwise. (Beardsley v. Warren, 6 Wend. 610 ; Pitt v. Congdon, 2 Comstock, R. 353.)

It. B. Kimball, for the defendant,

argued the following points:—

1. That the defendant stood in the relation of surety, and that the creditor could not retain his claim against the surety, when he had deprived the surety of his remedy against his principal; citing Pitman on Prin. and Surety, p. 166.

2. That the bank was the agent of the plaintiff, and the defendant should not be prejudiced by its acts.

By the Court.

The jury have found, that when the defendant, immediately after the protest of the bill, sent his agent to pay it, the plaintiff informed the agent that the bill had been paid, and that this information prevented the defendant from taking up the bill and collecting it from Davis, the drawer. Was the judge right in instructing the jury that •these facts entitled the defendant to their verdict ?

p. 364

In the case of Pickard v. Sears, 6 Ad. & El. 469, tbe chief justice, in delivering the opinion of the Queen’s Bench, said, “ the rule of law is clear, that where one by his words or conduct wilfully causes another to believe the existence of a certain state of things, and induces him to act on that belief, so as to alter his own previous position, the former is concluded from averring against the latter a different state of things as existing at the same time.”

In Freeman v. Cooke, 2 Exch. R. 654, (S. C. 12 Lond. Rep. 777,) Parke, Baron, delivering the judgment of the court, said the rule thus laid down in Pickard v. Sears, must be considered as established; and he defines the term “ wilfully” as there expressed, to mean, not merely that .the party knows his representation to be untrue, but also that if made believing it to be true, he means his representation to be acted upon, and it is acted upon accordingly.

The principle was declared by Bronson, J., in Dezell v. Odell, 3 Hill, 219 , in his usual clear and forcible manner. He says, “ when a party, either by his declaration or conduct, has induced a third person to act in a particular manner, he will not after-wards be permitted to’ deny the truth of the admission, if tbe consequence would be to work an injury to such third person, or to some one claiming under him.”

Such declarations and admissions are regarded as equitable estoppels, or estoppels in pais. They conclude the party as evidence, and not as technical estoppels at common law.

The fact that the plaintiff acted in ignorance of the true state of the case, and without any bad faith, was relied upon to except this case from the principle to which we have referred. The authorities do not, however, sanction such an exception. The case of Petrie v. Feeter, 21 Wend. 172 , shows that where a declaration on which another has acted is made in entire ignorance that the fact is otherwise, it will nevertheless conclude the party making it from proving the mistake to the prejudice of him who acted on the faith of such declaration.

The estoppel is applied in these cases, not upon the ground of wilful misrepresentation or fraud in making the admission or

p. 365

declaration, but upon tbe ground tbat it will be a fraud to show tbat it is untrue to the'prejudice of one who has acted upon the faith of the statement. In this case, the plaintiff knowing that the defendant had come to pay the bill, informed him that it had been paid. He was bound to know that this statement would induce the defendant to omit taking any measures to collect the bill of the drawer. Thus, the erroneous information, though honestly given, caused the defendant to lose the opportunity of collecting the bill; and the law very justly precludes the plaintiff from proving in a suit against him upon the bill, that it was not paid. The plaintiff should have sought his remedy against the bank that acted as his agent, on which the loss at that time unquestionably rested, instead of suing the defendant.

The principle which we have stated applies to this case with the greater force, for the reason that the defendant, as the indorser of the bill, stood in the relation of surety for Davis, the drawer, to the plaintiff as the holder of the bill. Indeed, this relation of the parties would suffice to exonerate the defendant, on -the distinct ground that the creditor cannot retain his claim against the surety, while he prevents the latter from obtaining security or payment from the principal debtor.

In our opinion the charge of the judge was right, and there is no good reason for disturbing the verdict. The judgment at the special term must therefore be affirmed.

Smith v. The City of New York.

Cases cited

Beardsley v. Warner 6 Wend. 610 N.Y. Sup. Ct. p. 363
Petrie v. Feeter 21 Wend. 172 N.Y. Sup. Ct. p. 364