Opinion ID: 2041464
Heading Depth: 1
Heading Rank: 2

Heading: False representation or concealment. As stated, Mr. Youell failed to advise defendants of plaintiff's security interest in the accounts receivable when he listed the encumbrances held by plaintiff. He did, however, refer to the subordination to Park Investment.

Text: At the outset, it is not necessary Youell intended to defraud anyone.    A fraudulent intention is not essential. It is enough if a fraudulent effect would follow, allowing a party to set up a claim inconsistent with its former declarations or conduct.    [citing authorities]. Dart v. Thompson, 261 Iowa 237, 243-244, 154 N.W.2d 82, 86. The false representation essential to the defense of equitable estoppel arises where a person, by his acts, representations, or admissions, or even by his silence when it is his duty to speak, intentionally or through culpable negligence induces another to believe that certain facts exist, and the other person rightfully relies and acts on such belief, and will be prejudiced if the former is permitted to deny the existence of such facts. Sanborn v. Maryland Casualty Co., 255 Iowa 1319, 1327, 125 N.W.2d 758, 763; Laverty v. Hawkeye Security Ins. Co., 258 Iowa 717, 726, 140 N.W.2d 83, 88. As stated, there is evidence that in the March 1970 conversation between Youell, Diamond, Wilson and others interested regarding the extent of encumbrances held by plaintiff against Continental Corporation Youell told these parties the Bank had a security interest in the furniture, fixtures, equipment and inventory of Continental; that on an earlier occasion the Bank had financed accounts receivable for this corporation but subordinated its rights to Park Investment due to the fact plaintiff could not get a rate sufficient to pay it to continue such financing. Youell also suggested in the course of this conversation that the parties contact Union Trust & Savings about financing the accounts receivable but remained completely silent about any claim of plaintiff to a security interest in the accounts receivable which it now asserts as a basis for recovery. It is our view the foregoing evidence would justify the trier of fact in finding Youell had a duty to inform Diamond and his associates when they inquired as to the extent of the encumbrances held by the Bank that it claimed a security interest in the accounts receivable; that Youell's silence in the face of this duty induced Diamond and the others to believe plaintiff did not have a security interest in these accounts. Thus, there is substantial evidence to support a finding defendants had established the first essential element of equitable estoppel.