Court Opinion

ID: 9808170
Source: CourtListenerOpinion
Date Created: 2023-08-31 20:29:29.380793+00
Date Added: 2024-06-11T12:09:38.482898
License: Public Domain

Walker, J.,
dissenting. When this case was before us at a former term, we held that the findings of the jury were inconsistent and that we could not determine the rights of the parties without a more definite verdict. The jury found that the penalty was not inserted in the bond at the time the sureties signed it, and that they had not since authorized any one to insert the penalty of $13,000 which was in the bond when it was delivered to the clerk. The majority of the court now think that this finding does not exclude the idea of an implied authority to insert the penalty, in veiw of the answers of the jury to the other issues. There is no other answer from which an implied authority may be inferred that would not also and just as well warrant the inference of express authority. When the jury found that the sureties gave no authority, the law construes their verdict to include every kind of authority, for there is nothing to restrict it to one kind to the exclusion of another. It is presumed that the court instructed the jury as to what would be necessary to constitute authority to fill the blank in the bond, and also explained the law as to express and implied authority, and when the jury responded that no authority had been given, they could only mean that no authority of any kind known to the law had been given, and the finding therefore included both express and implied authority.
The plain meaning of the last issue and the answer thereto cannot be changed by drawing any inference from the answer to the first issue as to what the jury intended to find. It would be a more natural deduction that the jury intended by the first issue to say that a paper writing in the form of a bond was actually delivered by Ebbs to the clerk, and in *152view of tbe other issues submitted and the answers thereto, that is, I respectfully think, the only reasonable construction of the finding. The charge was not sent up and therefore we are not informed what instructions were given by the court on the first issue, but it is more than likely that the judge directed a verdict on that issue and then submitted the other special issues in order to ascertain the facts, so that the questions of law might be fairly presented and the liability of the defendants determined. I can account for the conflicting findings in no other way.
It is now held that there was an implied authority to insert the penalty and deliver the bond to the clerk in its completed form, and that if the latter accepted and acted upon it under these circumstances without any knowledge of the real facts, the sureties cannot be heard to question the validity of the bond under the doctrine of equitable estoppel. There cannot be any implied authority to do a thing in a way positively forbidden by the law. Authority to execute a bond in behalf of another or to perfect one in form when essential parts have been omitted and deliver it, must be given under seal. This is conceded. ITow then can an authority be implied to fill the blank in a manner contrary to this rule ? What is meant, I suppose, is that if the paper writing was entrusted to the principal obligor, E. 0. Ebbs, and he handed it to some one else who inserted the penalty and then delivered it in its completed form to the clerk, and the latter had no knowledge of the facts, but received and acted upon it as a perfect and valid bond, it being regular on its face, the doctrine of equitable estoppel applies and the defendants are bound although Ebbs abused the trust and confidence reposed in him. This is the ground upon which the court now rests its decision, but it is clear to me that the doctrine has no application to the case. Whether the validity of the bond is sustained upon the doctrine of equitable estoppel or upon that of agency, it is essential to the application of either doctrine that the party *153claiming tbe benefit of it should have been misled to his prejudice and he must have been free from negligence. Discussing this question in People v. Bostwick, 32 N. Y., 452, the court says: “The principle that where one of two innocent parties must suffer, he who has put it in the power of a third person to commit the fraud, must sustain the loss, is not one of universal application, if the language be taken in a proper sense. In such cases, the one who claims the benefit of the rule must not himself be guilty of negligence.” Leading text writers thus state the rule: “The party relying on the estoppel must show that he was ignorant of the facts and that such ignorance was not chargeable to his neglect.” Fetter’s Equity, 48 (c.) An equitable estoppel does not operate in favor of a person chargeable with, fraud, misconduct or negligence.” Eaton’s Eq. 177. See also Beach Mod. Eq. Jur. Sec. 1108; Pomeroy’s Eq. Jur. Sec. 810; Odlin v. Gove, 41 N. H. 465; Moore v. Bowman, 41 Ibid., 494. The same principle is recognized and stated in Dair v. U. S., 16 Wall 1, which is cited by the court. It is there said that the party claiming the benefit of the estoppel must not himself be at fault. If he neglects to make proper inquiry when such inquiry would have disclosed to him the exact condition of things, the estoppel will not avail him, as in that case he would not be an innocent party. In Baylies on Sur. & Guar. 212, the principle is stated in concrete form • as follows: “But while the courts recognize the principle that where a fraud has been perpetrated from which one of two innocent parties must suffer, he who put it in the power of a third person to commit the fraud must bear the loss; they require that the party invoking this principle must be without fault himself; that where the instrument upon which it is sought to charge the surety is an official bond, or a bond taken and approved in the course of judicial proceedings, the principle does not apply as against the surety, that the officer taking *154and. approving the bond does not exercise due diligence unless the bond is signed in bis presence and. delivered to him by all the obligors, or by some one having authority in writing properly attested, to bind them; that if such diligence is not observed, the officer must bear the consequences of his neglect ; and if the negligence of the officer involves loss' to individuals for which the officer is not able to respond, the loss ought not to be thrown on those who have not-consented to bear it.” This view of the law is cogently stated by Brickell, C. J., for the court in Guild v. Thomas, 54 Ala., 414, where, after approving the doctrine as laid down in Baylies, supra, it is said: “The principle that where a fraud has been perpetrated from which one of two innocent parties must suffer he who has put it into the power of a third person to commit the fraud must bear the loss, is admitted. If it has any just application in this case, as in all cases to which it is applied, the party invoking it must be without fault himself. The appellant was in fault in not inquiring into and ascertaining whether the principal was authorized to make an uncondi-tonal delivery of the bond. He trusted to the representations of the principal, and this misplaced trust is the immediate cause of the loss he must bear, if the principal cannot respond to his liability.” If it were not sustained by the highest authority, the doctrine, that no one who has himself been in fault, can avail himself of an equitable estoppel, is so plainly just and right that no authority would be needed in its support. If a party has been negligent in the. performance of his duty, neither he nor any other person whom he represented can claim that he is innocent of any wrong and thereby visit the consequences of that neglect upon another, although the latter, may have put it in the power of a third person to mislead him and he was actually misled, the consequent injury, if any, being the result of his own want of care or of the failure to perform the duties enjoined upon him by the law. Guild v. Thomas, supra. If these princi-*155pies are applied to the facts of this case, what will be the necessary conclusion? The penalty of a guardian bond is not fixed at a certain sum, but the statute provides (1) that it'shall be at least double the value of all the personal property and of the rents and profits issuing from the real estate of the infant, which value the clerk of the Superior Court shall ascertain by the examination of the applicant for letters of guardianship or of any other person; (2) the bond must be acknowledged before the clerk, and (3) it must be approved by him. Code Sec. 1574. These requirements have an important bearing upon the principle now brought into this case, and they show most clearly that it can have no proper weight or influence in its decision. -AVith reference to the first of these requirements it may be asked, how can any authority to fill the blank in the bond be implied when the holder of it could not under any circumstances have such a power, as it is given to the clerk alone to ascertain and fix the amount of the penalty, and for the very good reason of affording the infant adequate security as against the default of his guardian. The penalty could not be inserted in the bond until the clerk had first made the preliminary investigation and ascertained what the amount should be.
Notwithstanding this express provision of the statute, it is suggested that Ebbs could insert the penalty by virtue of implied authority to do so. In other words, that he could exercise an authority conferred by statute on some one else, or could exercise a statutory power in his private capacity. The very fact that he. brought the bond to the clerk in an apparently completed form was cogent proof to the latter, or should have been, that there was something wrong, as the clerk well knew that the penalty could not be inserted in the bond until the amount thereof had been ascertained in the manner prescribed by the statute, and this was enough to put him on his guard.
Before passing to the next point, it may be said also in *156regard to this requirement that if the defendants even placed the bond in the hands of F. C. Ebbs, their alleged principal, or in the possession of any one else, with the intent that it should become the guardian bond of Ebbs, the only authority that could be implied (if authority can be given in such a case otherwise than by an instrument under seal), was that the bond should be filled up according to the law, that is, by the clerk in the manner provided in the statute, and they had the right to suppose that this would be understood by everybody and especially by the clerk who is charged with the duty of ascertaining the amount of the penalty to be inserted. ITow can the clerk be termed an innocent third person who was deceived by appearances, when he must have known that nobody possessed the authority to fix the penalty but himself. In this respect our case differs materially from those cited in the opinion. They will be found on examination to be cases dealing with private bonds, or with official bonds where the penalty was fixed at a sum certain, or with official bonds signed with a blank space left for the name of the obligor which was afterwards filled by some third person. Those cases are manifestly different from ours, as there was nothing in them to_- excite inquiry on the part of the officer, and surely nothing of so pronounced a character as the assumption by another of authority which belonged solely to him, nor did it appear in them that the law required him to take the acknowledgement of the obligors. The decision in each one of those cases proceeded upon the idea that on its face the bond in question had every appearance of regularity and that, if there had been thereon any thing indicating irregularity, the principle of equitable estoppel would not have applied.
But this is not all that can be said in this connection. The statute further requires that the clerk shall himself take the acknowledgement of the bond. He had no right to receive, and certainly not to accept it as a perfect bond until he had *157done tbis. If lie bad performed bis duty in this respect, wliat would be have discovered ? Wby, of course, that the defendants bad signed the paper writing in blank and that it was not their bond, as I. N. Ebbs bad no authority to fill the blank. How apt are the authorities we have cited when considered in connection with these requirements of the statute. They bold that the officer should require acknowledgement, while our statute expressly provides for it. It is not contended that an omission to comply with directory provision^ will invalidate a bond, but my sole purpose now is to show that the clerk is not an innocent party and is not therefore within the protection of the doctrine of equitable estoppel. He was negligent at every turn and acted in open violation of the law.
The rule upon which the decision of the court is based has been thus formulated: “An obligee may properly accept, without inquiry, an instrument perfect in form and execution, which comes to him from the person who should have possession of the instrument for the purpose of such delivery; that the surety who executed the instrument and placed it in the usual channel for delivery cannot limit the general authority by a condition, of which the obligee has no notice; that if the condition is disregarded and a fraud accomplished, he who has clothed his principal with the semblance of a general authority to make the delivery, must stand the hazard he has incurred.” Spitler v. James, 32 Ind. 202. But can it be said that this instrument was “perfect in form and execution,” when the clerk was aware that he had not fixed the penalty and that sureties had not acknowledged it, two things which are made by the statute essentiál to its perfectness. Nor did the legislature have in view the delivery of an instrument of this kind by any third person, that is, such a delivery as is meant in the statement of the rule just quoted, and which would be sufficient in other cases to make a perfect bond — delivery being the final essential act or requisite *158in the making of a good bond. This is so for two reasons, first, because the bond could not be made complete until the clerk had fixed the penalty and, second, because the presence of the obligors themselves is contemplated by the statute, as they must be there to acknowledge the execution of the bond before the clerk. This requirement of the law was intended to prevent just such a controversy as in now presented. It was necessary for the obligors to be there and acknowledge the bond, because they could not know the extent of their liability until the clerk had ascertained the value of the property and fixed the amount of the penalty. It was a provision enacted for the benefit of the obligors and at the same time for the absolute security of the infant’s estate. Speaking of a common practice said to obtain for clerks to take bonds in a certain irregular way, the court in Gilbert v. Anthony, 1 Yerger 69, said: “If such a practice had generally prevailed and no injurious consequences were to bo apprehended from its continuance, it might perhaps be countenanced ; but it is not only an illegal but a dangerous practice, and there will not be a more favorable time to correct it than the present. All officers, and especially those concerned in the administration of justice, would do well to perform their duties in the manner which the law has prescribed instead of endeavoring to discover one more convenient and eligible in their opinion; by so doing much litigation would be prevented, much unnecessary consmnpton of the time of the courts avoided, and the officers themselves exempted from liabilities to which they will always be otherwise exposed."
The doctrine of equitable estoppel requires that both parties should be equally innocent, as where one against whom the estoppel is set up has by misplaced confidence made that to appear which did not in fact exist, and the other being' himself without fault, has been misled by what was thus made to appear. One of the essential elements of the es-toppel is that the party claiming the benefit of it should not *159be in fault, and when this is the case, the party who reposed the confidence is bound by what was done although he did not authorize it, because he relied upon the simple assurance that another will do an act which he knows may be defeated by various accidents, and he must therefore take the risk of such assurance being fulfilled. Barnes v. Lewis, 13 N. C., 138. While he may not have authorized the act, he has put it in his power to do the act, and for any abuse of the power which results in misleading an innocent party he must be held liable. But he will not be held responsible for any results which the other party could have prevented by the exercise of reasonable care, and especially by the performance of a duty positively imposed 'by statute. This would be an unreasonable and unwarranted extension of the doctrine and a departure from the reason upon which it is founded.
It was not necessary that the clerk should have had actual notice of the facts. If he omitted to do that which would have given him notice, it is in law the full equivalent of actual notice. This court has said that constructive notice arises from the means of knowledge,' and notice 'is presumed when the party to be affected by it has such means in his possession or they are available.. .Bunting v. Ricks, 22 N. C., 130; Hulbert v. Douglas, 94 N. C., 122; 2. Pomeroy Eq. Jur. Sec. 604 et seq. If the clerk had required the obligors to acknowledge the execution of the bond and had otherwise discharged his duty, the facts would have been fully disclosed to him, and having failed to do so, the law imputes to him knowledge of what he might thus have learned. 2 Pomeroy supra, 610. Another element necessary to create an equitable estoppel is that the party estopped must intend, or be in a position to reasonably anticipate, that his conduct or representation will be acted on by the party by or through whom the estoppel is asserted. Fetter Eq. 48 (d.) Iiow could this be the case when it was the duty of the clerk to fix the amount of the penalty and to take the acknowledgement of *160tbe obligors? How could the defendants foresee tbat the clerk would, do what he should not have done and what he was forbidden by the statute to do ?
It is not necessary that I should controvert the general principles stated in the opinion of the court, but only the conclusion drawn therefrom, which I have attelnpted to show is not warranted, in view of the special provisions of our statute (Code Sec. 1514) which take this case out of the operation of those principles. I must think that the majority were inadvertent to the statutory requirements, for nothing is better settled in the law than that the injury must be the proximate result of the conduct depended upon to create the estoppel, and that the party claiming the benefit of it must not himself have been in fault but in the exercise of reasonable care and due diligence under all the circumstances. Eaton Eq. Sec. 61, p. 173; Bank v. Hazard, 30 N. Y., 230. In Bank v. Morgan, 117 U. S., 109 it is said: “Jn respect to persons equally innocent, when one is bound to know and act upon his knowledge and the other has no means of knowledge, there seems to be no reason for burdening the latter with any loss in exoneration of the former.” In our case the clerk had at least the “means of knowledge.” It is also said in that case that negligence will deprive a party of the benefit of the estoppel, and in another part of the opinion the court uses this language “If the defendant’s officers, upon paying the returned checks, could by proper care and skill have detected the forgeries, then it cannot receive a credit for the amount of those checks, even if the depositor omitted an examination of his accounts.” In that case will be found an able exposition of the law relating to equitable estoppels where there has been mutual negligence. The requirement that the party wlio pleads the estoppel should be free from fault applies more strongly where the fault consists in the breach of an official 'duty than it does where there is merely negligence.
*161While I do not question the correctness of the principles stated by the court, it must be admitted the courts are not by any means agreed that the doctrine of equitable estoppel applies to the filling of blanks in bonds, some of those who hold that it does having either virtually adopted the principle of Texhira v. Evans, 1 Anstr. 228, which this court has repudiated, or having applied to bonds the rules concerning commercial paper. White v. Duggan, 140 Mass. 18. The subject is fully and ably discussed and the authorities cited and commented on in Walla Walla v. Ping, 1 Wash, (N. S.) 339.
I do not think it necessary to discuss the effect of section 1891 of The Code, as the court in its opinion does not rely on it or even refer to it, and it is apparent from its terms that it does not apply to a case like this, but to bonds wherein the amount of the penalty varies from that fixed by the law, being either more or less than that amount.
The plaintiff in my opinion has a perfectly plain and adequate remedy by which to recover what is alleged to be due to'his wards from their former guardian, without invoking the doctrine of equitable estoppel which can have no application to the case for reasons already stated. I do not see how he can be injured by a new finding of the facts, upon proper issues submitted which will not be open to' construction and will not require a resort to inference as to the meaning of the jury.
OoNNok, J. concurs in the dissenting opinion.