German Savings Institution v. Jacoby
| Decision Date | 23 March 1889 |
| Parties | The German Savings Institution et al. v. Jacoby et al., Appellants |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. Daniel Dillon Judge.
Affirmed.
Louis Gottschalk and Noble & Orrick for appellants.
(1) The representations made to induce the promise of Samuel Jacoby and on which he relied were material, were false and were so known to be when made, by the officer making them. (2) The correspondence between Bain, president, and Jacoby shows the representations by Bain that were false, and that Jacoby relied upon these representations, as he also asserts in his testimony. (3) Fraud vitiates all contracts and entitles the injured party to rescind, in a reasonable time after finding out the fraud, by notifying the other party and returning or offering to return whatever of value he has gotten under the contract, placing him in statu quo. He need not go into a court of equity to have the contract cancelled. Grimes v Kimball, 3 Allen, 518; Gray v. Gray, 83 Mo 106; Hedden v. Griffin, 136 Mass. 229. (4) There is no estoppel against Samuel Jacoby's claim because Bain showed his letters to any one of the plaintiffs, or because of Bain's oral statement, or because of any acts of Jacoby. If the action of a party was not induced by the representations, no estoppel arises in his favor. Stanley v. Valentine, 79 Ill. 544; Gray v. Gray, 83 Mo. 106; Monks v. Belden, 80 Mo. 639; Grimes v. Kimball, 3 Allen, 518; Patterson v. Lytle, 11 Penn. St. 53. No one has a right to act upon representations contained in a private correspondence with another and not intended for any but him to whom they were addressed. Kiney v. Whiton, 44 Conn. 262; Rawlings v. Bean, 80 Mo. 614; Durant v. Pratt, 55 Vt. 270; Forsyth v. Day, 46 Maine, 176; Bank v. Todd, 47 Conn. 190; Meyenborg v. Haynes, 50 N.Y. 675; Lindsey v. Lindsey, 34 Miss. 432. If there is no intention, real or presumed, that the representations be acted upon there can be no estoppel. Burk v. Adams, 80 Mo. 504. It is only where there is agency, or the representations are intended to influence third parties, or are of a public nature, that third parties can rely and act upon them. Rawlings v. Bean, 80 Mo. 614; Kuhn v. Weil, 73 Mo. 213; Watson v. Crandall, 78 Mo. 583; Waterman v. Johnson, 49 Mo. 410; Mitchell v. Reed, 9 Cal. 204. No one can be estopped from relief against a fraud practiced upon him. Gray v. Gray, 83 Mo. 106; Railroad v. Schuyler, 34 N.Y. 30. Estoppel must be mutual and will not extend beyond the parties to the transaction. Griffin v. Richardson, 11 Ired. 439; Massure v. Noble, 11 Ill. 531; Wright v. Hazen, 24 Vermont, 143; Heane v. Rogers, 9 Barn. & C. 577. To bind defendant it must be shown that he was under some express duty toward plaintiffs. Swan v. Ins. Co., 2 H. & C. 175, 182; Bank v. Trustees, 5 H. L. 389; Nicolls Case, 3 D. & J. 387; Vandeleur v. Blagrave, 6 Beav. 565. (5) The one hundred thousand dollar bond and mortgage were illegal and void, and any promise based upon them, as a consideration, was not binding and cannot be enforced. The bonds were issued in violation of the constitution of Missouri and the statute law of the state. Const. Mo. art. 12, sec. 8.
F. N. Judson and G. A. Finkelnburg for respondents.
(1) The evidence shows that the agreement between the Atlantic Milling Company and Samuel Jacoby to exchange the old mortgage notes for new mortgage bonds of equal amount, was complete long before the Atlantic Milling Company became insolvent, and the evidence further shows that the attempted rescission after that event was an afterthought on the part of Samuel Jacoby prompted by a desire to gain a priority over other crediors. (2) Independent of the complete and binding agreement between the immediate parties to the exchange, defendant Samuel Jacoby by his conduct estopped himself from reversing his apparent position by re-asserting a priority as against these plaintiffs who took the new bonds upon the faith of his conduct in the premises and who relied upon his promised surrender of the old securities. Herman on Estoppel, sec. 342; Herman on Estoppel and Res. Jud. sec. 811; Broom's Leg. Max. 293; Mitchell v. Reed, 9 Cal. 204; Waterman v. Johnson, 49 Mo. 410; Kuhn v. Weil, 73 Mo. 213; Raley v. Williams, 73 Mo. 310; Pickard v. Sears, 6 A. & E. 469. (3) A party may be estopped by his own conduct, although there was no original intention to deceive anybody. Raley v. Williams, 73 Mo. 310; Bigelow on Estoppel, 473 et seq.; 2 Pom. Eq., par. 811. (4) General representations as to what will happen in the future, promises as to what a person will or expects to do, or what he expects to be able to do, or sanguine representations as to a person's expected success, none of these, though never realized, constitute fraudulent misrepresentations within the meaning of the law, unless coupled with an intent to cheat at the time they were made. The misrepresentation must be as to an existing fact. Miller v. Howell, 1 Scammon, 499; Gallagher v. Brunell, 6 Cowan, 346; Pike v. Fay, 101 Mass. 134; Mooney v. Miller, 102 Mass. 217; Sawyer v. Puchett, 19 Wallace, 146; Langdon v. Green, 49 Mo. 363; Hedges v. Torry, 28 Mo. 99. (5) It devolved upon defendant to prove the alleged fraudulent misrepresentations, on which he claimed the right to rescind his agreement to exchange. The record shows not merely that he failed to make this proof, but that his allegations were all positively disproved. (6) The attempted defense as to alleged invalidity of the $ 100,000 mortgage was not pleaded, and the evidence offered was properly ruled out. The evidence offered on this point, even if admissible under the pleadings, did not tend even to prove the invalidity of the bonds.
Black, J. Barclay, J., not sitting; Sherwood, J., absent.
The Atlantic Milling Company is a corporation doing business in St. Louis. George Bain is, and for years has been its president. The mill was destroyed by fire in 1881. In order to rebuild, the company made a deed of trust on the mill premises, dated the sixteenth of January, 1882, to secure notes to the amount of thirty thousand dollars, each note being for one thousand dollars, due in one year. The defendant, Samuel Jacoby, who was, and for many years had been the New York factor of Bain and his mill, took ten of these notes, and some of the plaintiffs and other St. Louis parties took the other twenty. The new mill was constructed on an enlarged scale, and at a cost of nearly one hundred and fifty thousand dollars. For the purpose of raising more money, and to retire the notes secured by the first or thirty thousand dollar deed of trust the company made a second deed of trust on the same and some additional property, including the new mill, to secure bonds to the amount of one hundred thousand dollars. This deed of trust bears date the eleventh of December, 1882. The bonds are of the denomination of one thousand dollars due in twenty years after date, with interest coupons attached.
The plaintiffs in this case are owners and holders of these twenty-year bonds, and by this suit they seek to enjoin the defendant from selling the mill property under the first deed of trust on the ground that defendant exchanged his ten notes for twenty-year bonds, and that the first deed of trust was satisfied by a surrender of all of the notes thereby secured. The defendant admits that he made an agreement to surrender the notes and take other security, including ten of the twenty-year bonds, but says the notes were never actually surrendered and that he was induced to make the agreement by the false and fraudulent representations of Bain. The charges are, that Bain fraudulently represented that the mill property, included in the one hundred thousand dollar deed of trust to secure the bonds, was of a value in excess of the bonds; that the property was free and clear of all incumbrances; that the notes secured by the first deed of trust had been taken up and paid; and that the Atlantic Milling Company was solvent.
The proof of the alleged fraudulent representations and of the agreement to surrender the ten notes for other security consists, for the most part, in correspondence between Bain and the defendant. On the twenty-seventh of November, 1882, Bain wrote the defendant saying that he had made the bonds payable to Samuel Jacoby or bearer and that they would have twenty years to run; and in respect of the value of the property in the deed of trust, he says: "We have signatures from the milling machinery men, architects, real estate appraisers, and the deeds will cover over two hundred thousand dollars worth of property." In another letter of the fourteenth of January, 1883, he says:
Jacoby agreed to take ten of these bonds in lieu of his ten notes and it is clear that he understood then that the first deed of trust was to be cancelled, and in the letter giving his consent to the arrangement he says: "Of course it is understood that the ten bonds are to be taken by me, provided all the others can be placed on equal terms." Bain then sent ten of the bonds to defendant and in a letter requested a return of the ten notes, saying: ...
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