Albachten v. Bradley

• Decision Date: 08 May 1942
• Docket Number: No. 33102.,33102.
• Citation: 3 N.W.2d 783,212 Minn. 359
• Parties: ALBACHTEN v. BRADLEY.
• Court: Minnesota Supreme Court

3 N.W.2d 783

212 Minn. 359

ALBACHTEN v. BRADLEY.

No. 33102.

Supreme Court of Minnesota.

May 8, 1942.

Appeal from District Court, St. Louis County; Bert Fesler, Judge.

Action on a note by H. A. Albachten against Edward L. Bradley. From an order granting plaintiff a new trial after directing a verdict for defendant, defendant appeals.

Affirmed.

Holmes, Mayall, Reavill & Neimeyer, of Duluth, for appellant.

Courtney & Courtney, of Duluth, for respondent.

PETERSON, Justice.

Plaintiff as the payee sues defendant as the maker of a promissory note for $8,000 dated August 22, 1932, and payable one year after date. Action was commenced on January 10, 1941, more than seven years after maturity of the note.

The defense was that the action was barred by the statute of limitations, Mason St.1927, § 9191, subd. 1, upon the ground that the action was not commenced within six years after the cause of action accrued.

Plaintiff sought to avoid the bar of the statute by an agreement of the parties extending the time of payment and by an estoppel on the part of defendant to set up the statute of limitations as a defense.

The evidence is conflicting, but, since the court below directed a verdict against plaintiff, we shall state the facts favorable to him which, if they had been so found, are sustained by the evidence.

For some time prior to August 22, 1939, the date when the bar of the statute otherwise would have become effective, plaintiff pressed defendant for payment. The Northern National Bank, with which plaintiff had pledged the note and certain collateral belonging to his wife and his father, was threatening to sell the collateral under foreclosure of the pledge. Defendant requested plaintiff to wait until Thanksgiving time, which was about three months after the statutory period of limitation would have run, and promised that he would then make a new arrangement or settle plaintiff's claim. Among other things, defendant told plaintiff that it was unnecessary for him to commence an action to enforce payment; that defendant expected to procure a return of his collateral from his bank about Thanksgiving time; that then plaintiff would be his only creditor; and that plaintiff would not lose anything by waiting. Plaintiff requested defendant to call on a Mr. Castle, an officer of the Northern National Bank, to inform him of their arrangement and to induce the bank to forbear from selling the collateral which was pledged to secure his loan. Thereupon plaintiff agreed to wait until Thanksgiving time as requested.

Defendant called on Mr. Castle, who testified that he inquired of defendant whether he was going to do anything about his obligation to plaintiff; that defendant asked the bank to forbear with respect to plaintiff's loan until after Thanksgiving day, and that defendant stated that at the expiration of the time mentioned "he would clarify his obligation" with plaintiff.

Plaintiff relied on defendant's promises and representations and performed his part of the agreement by waiting until after Thanksgiving day before he again pressed defendant for payment. When plaintiff then called on him, defendant's attitude had changed. He no longer entreated and requested forbearance. On the contrary, he laughed at plaintiff and told him that he had made arrangements so plaintiff could not collect a cent; that he and his wife had changed their wills so that the entire estate would go to their children and that plaintiff should "try and collect it." That is precisely what plaintiff did by bringing the present action.

There was some considerable confusion in the testimony as to whether or not plaintiff had been informed that all of the defendant's collateral had been sold before the agreement in question was made. We think that the reasonable construction of plaintiff's testimony is that he knew that some, but not all, of defendant's collateral had been sold under the pledge by his bank.

Defendant contended that the contract in question was void and of no effect under Mason St.1927, § 9204, because it was not in writing and that no estoppel could be predicated thereon.

At the close of the testimony the court below granted defendant's motion for a directed verdict upon the ground that the action was barred by the statute of limitations and that the agreement extending the time for payment or settlement was void under § 9204 and that no estoppel could be predicated thereon.

Subsequently, the court granted plaintiff's motion for a new trial exclusively upon error of law occurring at the trial in holding that the evidence did not sustain a finding of estoppel on the part of defendant to set up the statute of limitations as a defense. In its order the court said that "the testimony of the plaintiff's witnesses, if believed by the jury, would be sufficient to establish such an estoppel."

Defendant appeals from the order granting a new trial.

At the outset we deem it pertinent to say that the agreement to wait until after Thanksgiving day to make a new arrangement or settlement of plaintiff's claim clearly implied that plaintiff would not commence suit before that time. Likewise, it is not important that there was no express mention of the statute of limitations. McLearn v. Hill, 276 Mass. 519, 177 N.E. 617, 77 A.L.R. 1039. Cf. Russell & Co. v. Davis, 51 Minn. 482, 53 N.W. 766. The assurance that plaintiff would not lose anything by waiting was in effect an agreement that the statute of limitations would not be asserted as a defense by defendant. Webber v. Williams College, 23 Pick. 302, 40 Mass. 302, per Shaw, C. J. See Miles v. Bank of America, etc., Ass'n, 17 Cal.App.2d 389, pages 397, 398, 62 P.2d 177; Quanchi v. Ben Lomond Wine Co., 17 Cal.App. 565, 120 P. 427.

The question for decision is whether or not a party may be estopped to set up the statute of limitations as a defense by his oral agreement required to be in writing by Mason St.1927, § 9204, where the other party in reliance thereon has performed and changed his position to his prejudice. Section 9204 reads: "No acknowledgment or promise shall be evidence of a new or continuing contract sufficient to take the case out of the operation of this chapter, unless the same is contained in some writing signed by the party to be charged thereby; but this section shall not alter the effect of a payment of principal or interest."

An equitable estoppel is the effect of voluntary conduct whereby a party is precluded from asserting rights of property, contract or remedy which he might otherwise have as against a person, who in good faith has relied on such conduct and has been led thereby to change his position for the worse with respect to his rights concerning the matter to which such conduct relates. Because it protects the blameless and is a powerful means for the accomplishment of justice, equitable estoppel is a favorite of the law. Dimond v. Manheim, 61 Minn. 178, 63 N.W. 495. The basis of estoppel is fraud. Some courts hold that an estoppel, like deceit, must be based on a misrepresentation of a past or present fact and that there can be no estoppel based on a promise of future performance. We do not follow that rule. Estoppel may be promissory. An estoppel may be predicated on a promise of future action relating to the intended abandonment of existing rights. Thom v. Thom, 208 Minn. 461, 294 N.W. 461; In re Stack's Estate, 164 Minn. 57, 204 N.W. 546; 19 Am.Jur., Estoppel, § 53.

An estoppel may be based on an oral promise of the purchaser at a mortgage foreclosure or judicial sale that he will not insist on the statutory period of redemption. Ellingson v. State Bank of Hoffman, 182 Minn. 510, 234 N.W. 867; Tice v. Russell, 43 Minn. 66, 44 N.W. 886. In the Ellingson case [182 Minn. 510, 234 N.W. 868] we said: "The strongest equitable principle which gives relief is that the debtor is lulled into a false security to his prejudice." In Schroeder v. Young, 161 U.S. 334, 16 S. Ct. 512, 516, 40 L.Ed. 721, where property was sold on execution sale and the debtor failed to redeem within the statutory period because of the judgment creditor's oral promises that he would not insist upon the statutory time for redemption, the court said: "Under such circumstances the courts have held with great unanimity that the purchaser is estopped to insist upon the statutory period, notwithstanding the assurances were not in writing, and were made without consideration, upon the ground that the debtor was lulled into a false security."

Our decisions that an estoppel may be based on an oral promise by the purchaser at a mortgage foreclosure sale rest upon the same principles as those that an estoppel may be based on an oral promise not to set up the statute of limitations as a defense. Indeed, promises not to plead the statute of limitations and not to insist on the statutory period for redemption from a judicial or foreclosure sale are treated as controlled by the same equitable principles for the purpose of raising a promissory estoppel with respect to intended abandonment of existing rights. In 1 Williston Contracts (Rev.Ed.) § 139, the learned author says: "Promises of future action, it is generally held, if they can furnish the basis for an estoppel at all, can do so only where they relate to an intended abandonment of an existing right, and are made to influence others who in fact are induced thereby to act or to forbear. The commonest illustration of this doctrine is where one who has induced his creditor to forbear to bring action upon an enforceable claim by promise of payment or by a promise not to plead the Statute of Limitations as a defense, even though such forbearance was not requested as consideration for the promise, and though the new promise (because not in writing or for other reasons) was not binding as such, has not been allowed later to set up the Statute after the creditor relying upon the debtor's promise has refrained from bringing action until the...