Case ID: mo-app_193/html/0537-01.html
Source: Caselaw Access Project
Author: {"author": "ROBERTSON, P. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

BANK OF NEELYVILLE, a Corporation, Respondent, v. ALBERT LEE, S. E. FISHER, and W. R. BUSTER, Appellants.
    Springfield Court of Appeals,
    March 9, 1916.
    1. ESTOPPEL: Equitable Estoppel: Definition. Equitable estoppel or estoppel in pate, is that condition in which justice forbids that one speak the truth in his own behalf. ■
    2. -: -: Foundation of Doctrine. The doctrine of equitable estoppel rests upon the principle that where one of two innocent persons, each guiltless of intentional or moral wrong, must suffer a loss it must be borne by the one of them, who by his conduct, acts or omissions has rendered the injury possible.
    3. BILLS AND NOTES: Principal and Surety: Action Against Surety: Equitable Estoppel as a Defense. Action on a promissorry note, plaintiff being' the holder and defendants sureties, though signing as makers. Plaintiff bank assured -defendant sureties that it had in its possession sufficient funds of the principal debtor to satisfy all claims and extended the note without the consent of the sureties. Defendants by such assurances were prevented from paying the note and seeking redress against the principal debtor, who at that time was solvent. Such principal debtor, later having become insolvent, plaintiff ■ was estopped from asserting defendant’s liability.
    4. ESTOPPEL: Equitable Estoppel: Applicable in Courts of Law. Although the doctrine of equitable estoppel is preeminently the creature of equity, yet it has been incorporated into the law and is applied as well in courts of law as of equity.
    6. ACTIONS: Defenses: Equitable in Legal Actions. Since courts of law recognize estoppel in pate, such defense does not convert an action at law. on a note into one in equity.
    Appeal from Butler County Circuit Court. — Hon. J. P. Foard, Judge.
    REVERSED AND REMANDED.
    
      David W. Hill for respondent.
    
      Abington & Phillips for appellants.
   ROBERTSON, P. J.

A companion case to this was here and the opinion therein is reported in 182 Mo. App. 185, 168 S. W. 796. What we there suggested (p. 192) might have been involved, bnt was not, and that which we expressly stated we did not decide evidently lead to a' belief in behalf of plaintiff that if that question were involved it should be decided in its favor. We referred' in that opinion to the ques-' tion as to- whether if a note signed by more than one as maker, yet as a matter of fact some or one of-the parties signed as surety, under the Negotiablé Instrument Law (sections 10161 and 10089, Revised Statutes 1909) this latter fact constitutes a defense. Since then we have had that question before us (Long v. Shafer, 185 Mo. App. 641, 171 S. W. 690) which, by a divided court, was decided adversely to the-'contention now made by. the plaintiff in the case at bar.

As we learn the-facts in the case-now before us we will see that there is little difference between it and'the companion case, except now we must decide if the trial shall proceed according to the principles of law or be governed by the procedure applicable to courts of equity.

This-action is on a note for the principal sum of $400 dated December 16, 1910, payable to the' order of plaintiff ninety days after its date and signed by all of the defendants. The defendants other than Lee filed an answer, after which plaintiff filed a motion for judgment because of the alleged reason that it did not state facts sufficient to constitute ■ any defense to the note. The motion was sustained, judgment entered against these appealing defendants. Leé is not mentioned in the judgment.

The answer is as follows:

“Now come the above defendants S. E. Fisher and W. R. Buster, and for their answer to the petition filed herein say that they deny each and every allegation in said petition contained, except what is hereinafter specifically admitted, averred or denied.
“Defendants admit that on the day charged in plaintiff’s petition they made and executed, as sure- 1 ties for their co-defendant Albert Lee, and delivered to the plaintiff bank tbe note filed with plaintiff’s: petition and marked ‘Exhibit A.’
“Defendants, further answering, ■ state that they, had good reason to believe and did believe that npon the maturity of said note, to-wit, on March 16, 1911, that the same was paid off - and discharged by the: principal on said note, Albert Lee; defendants further state that upon the contrary, said note was not. paid on maturity, but was permitted by the plaintiff bank, its agents and officers, to be automatically renewed; defendants further state that knowledge' of. the fact that said note still remained in the hands of-the plaintiff bank, unpaid by its principal, Albert Lee,' •did not come to their possession until during the-month of January, 1912; that immediately upon acquiring such information, and while the said Albert Lee was solvent, being seized and possessed of real and personal property, aggregating in value many thousands of dollars above his exemptions and liabilities, defendants were proceeding to take such steps as might be necessary to protect themselves from loss as sureties of the said Albert Lee on said note as aforesaid, and communicated such intention to the officers, agents and employees of the plaintiff bank, who thereupon informed these defendants that the plaintiff bank had in its possession securities sufficient to cover all of Albert Lee’s indebtedness to the bank, including the note sued on herein, and stated, prom-. ised and agreed that the bank would look to said securities, and not these defendants, for the payment of the note sued on herein in the event the same was not paid by said Albert Lee; defendants state that,, relying upon said statements, agreements and promises of the plaintiff, through its officers, agents and employees, and being deceived thereby, refrained from proceeding to secure themselves from loss as sureties on said note of.the said Albert Lee; defendants fur-., tier state that afterward the plaintiff bank, through its officers, agents and employees, without the knowledge or consent of these defendants, carelssly, negligently and wrongfully allowed and permitted the said Albert Lee to dispose of by sale and otherwise the subject-matter of whatever security it had to insure the payment of all of the indebtedness, including the note in suit of the said Albert Lee to the plaintiff bank.
“Defendants further state that shortly after the statements, promises and agreements of the officers, lagents and employees of the plaintiff hereinabove referred to and while defendants were relying upon the Same, that the said Albert Lee, without the knowledge of defendants, became and still is hopelessly insolvent.
“Defendants further allege that but for the statements, agreements and promises of the officers, agents and employees of the plaintiff bank, made as aforesaid, while the said Albert Lee was solvent and responsible as aforesaid, that defendants could have, and would have proceeded to secure themselves against loss as sureties of said Albert Lee as aforesaid; but toy said acts, promises and agreements of plaintiff’s officers and agents they were lulled into a belief that they would not be proceeded against by plaintiff as sureties on said note until it was too late to protect themselves as sureties on said note and until said Albert Lee became hopelessly insolvent as aforesaid; and defendants now and here plead the statements, promises and agreements of the officers, agents and employees of the plaintiff bank as an estoppel prohibiting plaintiff from collecting the amount due on the note sued on herein for these defendants.
“Wherefore, defendants having fully answered, pray to be dismissed hence with their costs in the behalf expended.”

The defense of estoppel upon which these defendants rely will defeat plaintiff’s recovery, if proven, even if under our laws as now framed one signing a note as maker cannot by the mere showing of his real relation to the payee be treated as a surety. “Equitable estoppel, or estopped m pais, is that condition in which justice forbids that one speak the truth in his own behalf.” [De Lashmutt v. Teetor, 261 Mo. 412, 440, 169 S. W. 34.] “Equitable estoppel in the modern sense arises from the conduct of a party, using that word in its broadest meaning as including his spoken or written words, his positive acts, and his silence or negative omission to do anything. Its foundation is justice and good conscience. Its object is to prevent the unconscientious and inequitable assertion or enforcement of claims or rights which might have existed or been enforceable by other rules of the law, unless prevented by the estoppel; and its practical effect, is from motives of equity and fair dealing, to create and vest opposing rights in the party who obtains the benefit of the estoppel.” [2 Pomeroy’s Equity Jurisprudence (3 Ed.), 1416, paragraph 802.] ’“When all the varities of equitable estoppel are compared, it will be found, I think, that the doctrine rests upon the following general principle: “When one of two innocent persons- — that is, persons each guiltless of an intentional, moral wrong — must suffer a loss, it must be borne by that one of them who by his conduct — acts or omissions — has rendered the injury possible.” [Id. p. 1421.] On the same page and in the succeeding paragraph the author sums up and gives for the first time what he calls his definition, as follows: “Equitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded,' both at law and in equity, from asserting rights which might perhaps have otherwise existed, either of property, of contract, or' of remedy, as against another person, who has in good faith relied upon such conduct, and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right, either of property, of contract, or of remedy. ”

The appellants had as among themselves and against Lee certain rights concerning which they could legally protect themselves by obtaining security from Lee, and this would have been true even if they should be treated as co-makers with Lee, and since the plaintiff, according to the allegations of the answer, lulled the appellants into that sense of security which caused them to desist from doing that which would have prevented the loss plaintiff is now endeavoring to inflict upon them, justice unquestionably demands that we say that as to the parties so misled the note is paid. The rule announced in West v. Brison, 99 Mo. 684, 693, 13 S. W. 95, cited and quoted from in our previous opinion is equally applicable here. It matters not what the nature of the contract of appellant is with the plaintiff, the result must be the same. The answer we, therefore, hold constitutes a defense and the only other question we must decide, in view of a trial, is whether it shall be as at law or according to the course of courts of equity. This question will arise if either party demands a jury.

In Pitman v. 16 to 1 Mining Co., 78 Mo. App. 438, 440 gnd in Kansas City Star Publishing Co. v. Standard Warehouse Co., 123 Mo. App. 13, 18, 99 S. W. 765, it is held that estoppel in pais is applied .as well in courts of law as in courts of equity.

“The doctrine of equitable estoppel is preeminently the creature of equity. It has, however, ■been incorporated into -.the law, and is constantly employed by -courts of law at the present day in the decision of legal controversies.” [2 Pom. Eq. Jur. (3 Ed.), page 1417, paragraph 802.]

That an action at law may be converted into one in equity by an answer .setting up equitable matter in, pais is the law in .this State (Bouton v. Pippin, 192 Mo. 469, 473, 91 S. W. 149) but tbe answer must be one that alleges facts entitling tbe defendant to affirmative equitable relief and must ask for such relief (Pitts v. Pitts, 201 Mo. 356, 359, 100 S. W. 1047). In tbe case at bar tbe relief sought is not different from that granted upon proof of payment. Tbe defense is founded on a doctrine that may bave bad its origin in equity, but as sought, to be applied here requires no application of any of the principles peculiar to procedure in equity to make it effective. If we announced tbe law otherwise than that this case can be proceeded with as one at law we would be upholding a doctrine that would convert all actions at law into suits in equity whenever tbe doctrine of equitable estoppel becomes involved. Our conclusion is that tbe action remains one governed by tbe procedure applicable to actions at law. Tbe only objection made to tbe answer is that tbe defense of estoppel is not available, but as. we bold tbe contrary, tbe judgment must be reversed and tbe cause remanded. It is so ordered.

Farrington and Sturgis, JJ., concur.