Court Opinion

ID: 9755839
Source: CourtListenerOpinion
Date Created: 2023-08-28 20:53:35.774288+00
Date Added: 2024-06-11T07:28:12.018605
License: Public Domain

MYERS, Associate Judge
(dissenting):
I respectfully dissent from the majority opinion, which is based upon a holding that Credit Corporation’s signature at the bottom of a proffered one-line acceptance form bars Credit Corporation from asserting a cause of action which it could otherwise assert against the bank. While under certain circumstances acceptance of an assignment may bar a debtor from asserting against an assignee claims which he has against an assignor, I do not believe those circumstances exist in the present case.
The cases quoted in the majority opinion employ two different theories to reach the conclusion that acceptance of an assignment will bar a debtor’s claim against an assignee. Although I am not sure which theory the majority has applied to the case at bar, I believe the present case does not contain a factual basis for the application of either.
In Kanawha Valley Bank v. Nello L. Teer Co., 128 F.Supp. 325 (S.D.W.Va. 1955), aff’d, 227 F.2d 306 (4th Cir.1955), the assignee did not loan any money to the assignor until after the debtor had accepted the assignment. Both the District Court and the United States Court of Appeals found all the elements of a separate contract between the debtor and the as-signee, including “ample consideration” flowing between the parties.
The majority decision cannot rest on a finding that a separate contract existed between Credit Corporation and the bank.1 The record does not reveal the exact date on which the bank made the loan to Le-Wood. It may well be that the loan was made before the written acceptance was received. If so, it would be difficult to argue that Credit Corporation signed the *925acceptance as ¿onsideration for the bank’s making a loan to Le-Wood. On the record before us there is no showing of any consideration received by Credit Corporation for signing the acceptance. Therefore, I am of the opinion that it is impossible to show the existence of a separate contract between Credit Corporation and the bank.
Neither do I think that an estoppel theory can be used to make the written acceptance in the case before us a bar to Credit Corporation’s assertion of a setoff. In Security State Bank of Great Bend v. Midwest Foundry, Inc., 177 Kan. 151, 277 P.2d 629 (1954), which the majority quotes at length, the Kansas supreme court relied on the rule stated in 47 Am.Jur. Setoff and Counterclaim § 19:
Where a debtor by his conduct induces an assignee of a claim against him to believe that the obligation will be met, and that there is no defense thereto, he will be held to have waived the right to avail himself of a setoff against the assignor in an action by the assignee.
The court then held that the debtor’s acceptance of the assignment did induce such a belief in the assignee. The limitation upon the rule used in that case is contained in the same paragraph of American Jurisprudence where the holding in another case is described:
[A] promise without consideration by the maker of a note to an assignee thereof after maturity after the assignment, to pay the demand which had in no way been made the basis of action or an occasion of prejudice to the assignee, does not estop or preclude the maker from setting up an equitable setoff against the assignee which existed against the assignor at the time of the assignment.
In other words, the acceptance of an assignment or the promise to pay an assignee must induce a belief in the assignee which in some way is “the basis of an action or an occasion of prejudice.” The assignee must in some way rely upon the acceptance or the promise to pay. The rule is not that a naked promise to pay will always be enforced, but that a statement or promise, upon which an assignee reasonably relies to his detriment, will be enforced.
The record here is clear that the bank did not claim reliance upon the formal written acceptance of the assignment, but claimed that it made the loan in reliance upon oral representations which an officer of Credit Corporation made in a telephone conversation. Both litigants and the trial judge understood the bank’s claim to be that Credit Corporation was estopped from asserting its counterclaim because of the representations which its officer made in the telephone conversation with the bank officer.2 Nevertheless, the majority opinion states that the telephone conversation is of little significance and that “in making the loan * * * the bank placed sole reliance on Credit Corporation’s assurances that the loan would be repaid.” Since, in the majority’s view, the telephone conversation is irrelevant, those assurances must be contained in the written acceptance of the assignment. The majority asserts that the bank relied upon the formal acceptance notwithstanding that the bank itself says it relied upon the telephone conversation. In *926saying that the bank relied upon the formal acceptance, the majority is not substituting a theory of law for the theory the trial judge used in directing a verdict in favor of the bank. It is substituting facts not in the record for facts actually in evidence.
The trial judge directed a verdict on the basis that the oral statements made in the December 16 telephone conversation es-topped Credit Corporation from asserting a counterclaim based on repurchase requests issued before that date and that any other claim was based on facts not in existence at the time of the assignment. This ruling was erroneous.
It is recognized in this jurisdiction that, as related to the party estopped, the essential elements of equitable estoppel are:
(1) conduct which amounts to a false representation or concealment of material facts, or, at least, conduct which is calculated to convey the impression that the facts are otherwise than, or inconsistent with, those which the party subsequently attempts to assert;
(2) intention, or, at least, expectation that such conduct shall be acted upon by the other party; and
(3) knowledge, actual or constructive, of the real facts. As to the party claiming es-toppel, the elements are:
(1) lack of knowledge and the means of knowledge of the truth as to the facts in question;
(2) reliance upon the conduct of the party estopped; and
(3) action based thereon of such character as to change his position prejudicially. Parker v. Sager, 85 U.S.App.D.C. 4, 8, 174 F.2d 657, 661 (1959), citing 19 Am.Jur. Es-toppel § 42.
If the jury believed Credit Corporation’s testimony, it could have found, first, that Credit Corporation had made the bank aware that Le-Wood owed Credit Corporation other obligations and had advised the bank that there was no objection to the assignment of the Bailey note provided Le-Wood honored its other obligations, and, under these circumstances, any further inquiry on the subject should have been made by the bank; second, that issuance of repurchase requests before the assignment was not material; third, that Credit Corporation, believing it not to be material, did not intend the bank to base any decision on whether requests had been issued; and, fourth, that the bank had, in fact, relied upon Le-Wood’s business reputation and not on Credit Corporation’s representations in this matter, as evidenced by the bank’s alleged affirmance of confidence in Le-Wood only.
“Unless only one inference can be drawn from the evidence, the existence of estop-pel is a question to be determined [by the trier of fact].” United Securities Corp. v. Verene, D.C.App., 193 A.2d 429, 431 (1963); Hardison v. Shirlington Trust Co., D.C.Mun.App., 148 A.2d 88, 90 (1959).
It was for the jury in the present case to decide what was said in the critical telephone conversation between representatives of the bank and Credit Corporation and to draw reasonable inferences from the statements made. By directing a verdict when factual issues remained unresolved, the trial judge erroneously assumed the role of trier qf fact.
At trial, Credit Corporation did not base its claim to a setoff entirely upon the repurchase requests outstanding on the date of the assignment. It also argued that a setoff should be allowed for claims arising out of repurchase requests issued subsequent to the assignment. The trial judge ruled that if Credit Corporation based its claim on Le-Wood’s failure to repurchase notes other than the Peyton Bailey note and the requests for repurchase were issued subsequent to the assignment, Credit Corporation’s claim could not be asserted against the assignee bank. In this jurisdiction, a claim asserted as a setoff against *927an assignee must be based upon facts exist-' ing at the time of the assignment. The general rule, as stated in the Restatement of Contracts § 167(1) (1932), is that
[a]n assignee’s right against the obligor is subject to all limitations of the obli-gee’s right, to all absolute and temporary defenses thereto, and to all set-offs and counterclaims of the obligor which would have been available against the obligee had there been no assignment, provided that such defenses and set-offs are based on facts existing at the time of the assignment. [Emphasis supplied.]
But as long as the claim urged as a setoff has matured by the time it is asserted, the law does not require that the claim be mature on the date of the assignment. Wil-liston on Contracts § 447; Corbin on Contracts § 896; Restatement of Contracts § 167. '
When Credit Corporation purchased the Peyton Bailey note from Le-Wood, it acquired the right to use the purchase price of that note to secure performance by Le-Wood on all the notes it had previously bought from Le-Wood. The potentiality of a default on any of these previous notes was an existing fact at the time of the assignment. Maryland Cooperative Milk Producers v. Bell, 206 Md. 168, 177, 110 A.2d 661, 665 (1955), and the bank’s rights were subject to claims arising out of that fact. Obviously Credit Corporation may assert its claim of setoff arising out of notes purchased prior to the assignment, but it is precluded from asserting as setoff claims arising out of notes purchased after the assignment date. Claims arising out of the later notes are based upon facts not in existence at the time of the assignment. Glassman Construction Co. v. Fidelity & Cas. Co., 123 U.S.App.D.C. 1, 356 F.2d 340 (1966).
I would therefore reverse the trial court’s ruling and remand this case for a new trial not inconsistent with this opinion.

. The bank never attempted to put forth this theory.

. On direct examination by Ms own counsel, the bank’s witness was asked:
Q And did you make that [loan] in reliance upon the assignment and the oral assurance you were given on the telephone?
A Yes; we did.
After the bank concluded its case in chief, Credit Corporation moved for a directed verdict. In ruling upon that motion, the trial judge summarized the bank’s allegations :
It seems to me that what they have said is that they have been assured in a telephone conversation that the Bailey account is in good order and there has not been any withdrawal of the purchase arrangement or the credit stature of Bailey, and that the assignment will be paid by General Electric Credit Corporation, and that based upon the reliance of that assurance over the telephone, they lent the money.