Conway Nat. Bank v. Pease

• Decision Date: 05 March 1912
• Citation: 82 A. 1068,76 N.H. 319
• Parties: CONWAY NAT. BANK v. PEASE.
• Court: New Hampshire Supreme Court

82 A. 1068

76 N.H. 319

CONWAY NAT. BANK

v. PEASE.

Supreme Court of New Hampshire. Carroll.

March 5, 1912.

Young, J., dissenting.

Exceptions from Superior Court, Carroll County; Chamberlin, Judge.

Action by the Conway National Bank against Nathan W. Pease. Verdict for plaintiff, and defendant brings exceptions. Exceptions sustained, and verdict set aside.

The instructions to the jury, so far as they pertain to the questions raised by the defendant's exceptions, were as follows: "When Mr. Pease received notice that the note bearing his signature was in the bank, it was his duty to inform the bank that his name had been forged, if that were the fact; and if he failed to do this, and the bank was thereby induced to make no effort to collect of Mr. Charles, Mr. Pease would be liable on the note. He would be estopped from setting up the defense of forgery. * * * When a person finds that another has committed a crime or done any act in his name whereby a third person may be misled and damaged, and it is brought to his attention, the law Imposes the duty upon him to immediately act, as a reasonable and prudent man would act under all the circumstances, to save the innocent party and to expose the guilty party, not only to save himself, but to give the party imposed upon—the innocent party—an opportunity to save himself as far as it is possible to do so. * * * When Mr. Pease got notice that a note bearing his signature was there [in the bank], if he knew any fact from his knowledge of Mr. Charles, or what was said to him by Mr. Brown, or the information given him by that letter, which the bank ought to have known to protect itself, it was his duty to state it to the bank, or inform them of it. This arises, perhaps, under what is known in law as the doctrine of estoppel. That is a name which is of no consequence, because the names of principles of law don't count for much. I can illustrate it better than I can name it. If one of you gentlemen has a herd of cows, and Mr. A. wants to buy one and goes to Mr. B. In your presence and says, 1 want to buy that cow,' and Mr. B. sells it to him, and A. gives his money to B., you standing by and seeing it done, knowing that he is selling your cow and taking that man's money for it, you are not allowed in law afterward to come and say that is your cow, and compel him to lose his money and give you back the cow. You are estopped, because you stood by and have seen a fraud perpetrated. The books define this principle of law in this way. I have illustrated it to you, but I will now state it to you as the books define it. 'When one by his words or conduct willfully causes another to believe in the existence of a certain state of things, and induces him to act on that belief or 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.' Now, if Mr. Pease knew that this was a forgery at the time he was notified of the existence of that note at that bank on the 25th day of April, or if he learned it afterward from Mr. Charles, it was his duty to notify the bank of that fact; and if he did not notify the bank of that fact, and their position was altered and they suffered loss in consequence of his failure to notify them, he is liable for the note. There are three grounds, any one of which, if proved in the case, entitles the plaintiffs to recover; and if they do not prove one or the other of the three, the defendant is entitled to your verdict: First, if the defendant signed that note, he is liable for it. If it was a forgery by Mr. Charles, and the defendant ratified it afterward he is liable for it. If it was a forgery by Mr. Charles, and the defendant knew it and neglected to inform the bank and give them all information he had about it, and they, by reason of his neglect to notify them, altered their position or refrained from pursuing Mr. Charles and lost in consequence of it, he is liable. Any one of those three propositions, if proved, entitles the plaintiffs to your verdict. If none of them is proved, the defendant is entitled to your verdict."

The defendant's exceptions to the charge were as follows: "(1) To all that part of the charge which refers to the defendant's negligence in not notifying the bank if he knew it was a forgery, allowing them to go on. (Exception is to the substance, not to the language.) (2) To the illustration made that the cow matter is applicable to this case as illustrating the principles of estoppel as applied in this case, in that there was no evidence that they could have secured themselves from any means available to Charles in any way. (3) To all that part of the charge whereby it is said that it was Pease's duty to notify the bank of what he knew regarding forgery, if he knew anything about it. (4) To all that part of the charge which generally treats of the principles of estoppel as applied to this case." The defendant also excepted to the refusal of the court to give the following instruction: "If Pease honestly believed that the note had been paid, his liability to the bank in all things ceased."

Sewall W. Abbott, of Wolfeboro, for plaintiff. Walter D. H. Hill and John B. Nash, both of Conway, for defendant.

BINGHAM, J. This is an action of assumpsit upon a promissory note discounted by the plaintiff bank for one Charles, the maker, 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 canceled 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.

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, 51 N. H. 287, 289, 290, 291, 292, 297, 12 Am. Rep. 111. It is submitted that upon proper investigation and analysis it will be found that the elements essential to its existence are: (1) A misrepresentation of a material fact with reference to a subject-matter in which the parties have an interest or are dealing; (2) the existence of a legal duty owed by the party sought to be estopped to the person asserting the estoppel, be that duty one recognized in the law of negligence or of deceit; and (3) a violation of the duty in such a manner that the estop, pel asserter could maintain an action for damages against the author of the misrepresentation. If these elements are found to exist, the estoppel denier is precluded from asserting his legal right in the subject-matter out of which, or with reference to which, the duty arose. 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, 51 N. H. 324,...