Court Opinion

ID: 7061128
Source: CourtListenerOpinion
Date Created: 2022-07-24 07:20:56.757367+00
Date Added: 2024-06-11T16:12:10.778731
License: Public Domain

Dissenting Opinion.
Lotz, J.
The facts of this case as disclosed by the evidence are briefly as follows:
In August, 1885, the appellee, Jennie Klinsick, was a married woman, the wife of one William Klinsick. She was sole owner of about $1,300 in money which she had realized from property inherited by her. Her husband was a druggist by profession, and was desirous of engaging in that business. A stock of drugs and fixtures situate in a certain building in the city of Logansport, were for sale. Mrs. Klinsick gave her husband the said $1,300 for the purpose of purchasing said stock and fixtures, and with which he did purchase the same. He immediately took possession thereof and made arrangements to continue the business at the same place. He put a sign on the window in large letters in these words, “Klinsick’s Drug Store.” He had letter heads- and prescription blanks printed and relabeled the goods-in his own name. He conducted said business in his-own name from the time of the purchase until shortly before this action was commenced in January, 1892. *261He sold from said stock and from time to time as the business required he purchased'goods to replenish the same. All goods bought for the purpose of replenishing said stock were bought, billed and shipped in his name. All accounts pertaining to said business, including the bank account, were made out and kept in his own name. The stock of goods was listed for taxation in his name. His family, including the appellee, lived from the pro-needs of said business during all of said time. Mrs. Klinsick was frequently around and in said store. The appellants, Augustus Kiefer and William H. Schmidt, were wholesale druggists of Indianapolis, doing business in the name of “A. Kiefer & Go.,” and they employed traveling salesmen in the prosecution of their business. In a short time after William Klinsick took possession of said store, one of the traveling salesmen of A. Kiefer •& Co., called upon him for the purpose of making sale of their goods. The salesman made inquiry of William for the purpose of learning the style of the firm and said William gave the name of “William Klinsick.” The said A. Kiefer & Co., relying upon such information, sold goods to the said William, and their said salesman -called upon him every two weeks for a period of about six years and sold to him in said time large quantities of goods in his own name. In the month of November, 1891, the said William was indebted to A. Kiefer & Co., on account of such sales in the sum of $640, a part of which indebtedness was evidenced by accepted drafts and part by notes and open account. On the 12th day of November, 1891, A. Kiefer & Co., sent their attorney to see the said William Klinsick with instructions to obtain payment or security for their claim. The said attorney saw the said William, and on failure to secure payment he offered to divide the claim into a number of notes and give long time, on condition that the said *262William would give personal security or a mortgage on. the stock. The offer was not accepted at that time. On the 29th of December, 1891, William Klinsick executed to said A. Kiefer & Co., a chattel mortgage on the stock of drugs and fixtures to secure such indebtedness to them and, in consideration thereof, the time of payment was extended, the longest extension being for a period of eight months, and at the same time William Klinsick made an affidavit that he was the absolute owner of the stock of goods. The mortgage provided that if there were other liens or in case of levy of execution, the whole debt should become due. In point of fact there were then executions in the hands of a constable of which A. Kiefer & Co. had no knowledge. These executions were issued on judgments taken against Mrs. Klinsick. As soon as the constable learned of the existence of said mortgage, he levied the execution on the stock of goods and took possession thereof. The appellants, Nelson & Myers, at the request, and as the attorneys of A. Kiefer & Co., elected to treat the debt as due under the 'mortgage, and took possession of the goods subject to the execution levies; and afterwards A. Kiefer & Co. sold the same to third parties. The executions were paid in full before the commencement of this action.
During the time William Klinsick was engaged in said business, his wife, the appellee, gave him $600 or $700 in addition to the original purchase-price, to be used in said business, and which was used in the same. No note or other evidence of indebtedness was ever taken by Mrs. Klinsick on account of such moneys. Nor was there ever any settlement or statement of account between them. The appellants, A. Kiefer & Co., had no knowledge that Mrs. Klinsick had any interest in or made any claim to said store or goods until shortly before this *263action was instituted; and they made all sales of goods to William Klinsick upon the belief that he was the owner and upon the credit given him by reason of being the ostensible owner thereof. There was no evidence which tended to show that anything more than a retail drug business was ever done or contemplated by William Klinsick, or by his wife, the appellee, prior to the execution of the mortgage. Nor was there any evidence which tended to show that there was a secret agreement or trust between Mrs. Klinsick and her husband in relation to said goods. Nor was there any evidence which tended to show that Mrs. Klinsick had any knowledge of the execution of the mortgage by her husband at the time the same was done, or that she had ever authorized him to execute the same. Mrs. Klinsick testified that she was the owner of the goods at the time the mortgage was given and asserted such ownership by reason of the original purchase having been made with the said $1,300, and on account of her other money used in said business. There was evidence which tended to show that Mrs. Klinsick had full knowledge of the fact that said business was conducted in the name of her husband, and there was evidence which tended to show that on one occasion after' the debt to A. Kiefer & Co., had been incurred, said occasion being on the day before the mortgage was executed, she stated to said appellants’ attorney that the debt was her husband’s business and that the store was her husband’s store. It is proper to say that she denied that she had knowledge that the business was conducted in her husband’s name and that she also denied of having made the statement to said attorney that the debt and the store were her husband’s. For the purpose of this opinion we will treat both of these facts as proved by the evidence, that is, that she *264did have such knowledge and did make such statement to appellants’ attorney.
She brought this action to recover the value of the goods alleged to have been converted. The appellants answered the general denial and two special paragraphs in estoppel. The issues joined were tried by a jury which returned a verdict for appellee in the sum of $690, on which final judgment was rendered.
The only assignment of error discussed by appellants’ counsel is that of overruling the motion for a new trial. In their motion for a new trial the appellants charged that the trial court erred in excluding certain evidence offered by them, and in improperly instructing the jury and in refusing to instruct the jury as requested by them.
On the trial the appellants were permitted to give in evidence the declaration of William Klinsick concerning said business and the manner in which he conducted the samó. On one occasion, William Klinsick was at the business house of A. Kiefer & Oo., in Indianapolis. Pie was not there for the purpose of buying goods but simply made a social call. Appellants then propounded to their witness, one of the appellants then testifying, this question: ‘ ‘ State what, if anything, he ever said to you at any time before the commencement of this suit, during the time he was running the drug store here in Logansport about the ownership of the drug store ? ” The court sustained an obj ection to the question. Conceding that the declarations of William Klinsick while in the actual possession of the goods or while in the transaction of business pertaining to said store were competent, this question is too general, as it is not limited to the time when in possession or while in the transaction of business pertaining to the store. In view of the fact that the appellants were permitted to give in evidence the declarations and conduct of William Klinsick, and the manner in *265which, he conducted said business ad libitum, while in the actual possession, there was no error in’this ruling. The ownership of the goods at the time the mortgage was executed, was one of the important questions in the case. It was a question of fact to be determined by the jury under proper instructions by the court. One of the methods of acquiring the title to personal property is by gift. Tbe appellants contend tbat the court erred in refusing to give certain instructions as requested by them and in modifying other instructions relating to the subj ect of a gift of the money and of the property. After a careful examination of all the instructions given by the court bearing upon the gift of the property and money we are satisfied that this matter was fairly presented to the jury, and it is unnecessary to set out in this opinion the instructions given, refused and modified relating to a gift.
The court also of its own motion gave several instructions to the jury bearing upon other questions to which the appellants excepted. The appellants presented to and requested the court to instruct the jury on the subjects of agency and estoppel in pais. The court refused these requests. These instructions are very lengthy and we will not encumber this opinion by setting them out.
If upon the above facts, tbe law is with the appellee, then the ultimate judgment is right and no intervening error, if any there be, will avail the appellants in securing a reversal.
In this branch of the case, the appellants contend first, that the facts disclose that William Klinsick was the agent of the appellee, with full authority to mortgage the stock in his own name for her; second, that the facts establish an equitable estoppel against her.
The usual method of transacting business by an agent is to use the name of the principal, but if the agent *266transacts the business in his own name, but actually for an undisclosed principal, the person with whom the contract is made may, when he discovers the principal, elect to hold the principal for the contract; although he may have dealt with the agent, believing him to have been the principal and given him credit. Thomson v. Davenport, 9 B. & C. 78; Mechem on Agency, section 697; Story on Agency, sections 446, 449; Thomas v. Atkinson, 38 Ind. 248.
Conceding, without deciding that the facts of this case show that William Klinsick was the general agent of Mrs. Klinsick, in the management of the business and had the power of buying goods upon credit, and to retail them and to apply the proceeds to the payment of the debts contracted, it does not follow that he had authority to execute the mortgage. An agent, to sell either real or- personal property has no power to mortgage. Jeffrey v. Hursh, 49 Mich. 31; Wood v. Goodridge, 6 Cush. 117; Mechem on Agency, sections 323, 361.
In Switzer v. Wilvers, 24 Kas. 384, 36 Am. Rep. 269, the plaintiff left a colt with the defendant with authority to sell the animal. The defendant, without authority, executed a chattel mortgage in his own name to another party. It was held that the mortgage was void and that a power to sell does not authorize a mortgage. If the owner of the personal property place another in possession with full power to sell for cash or on credit, at wholesale or at retail, a sale made by such person will confer a valid title, whether the sale be made in the agent’s name or in the name of the principal. Or if the owner of personal property sell it upon credit and deliver the same to his vendee for the apparent or implied purpose of re-sale by such vendee, a condition in the contract that the title shall remain in the vendor until the purchase-price is paid, is void as against a purchaser from his *267vendee. Winchester Wagon Works, etc., v. Carman, 109 Ind. 31. Bnt if the sale he not for the purpose of consumption or re-sale, and be upon the condition that the title to such property shall remain in the vendor until the purchase-price is paid, the vendee cannot, prior to the payment of the purchase-price, sell or incumber the property in such a manner as to defeat the title of the original vendor. Thomas v. Winters, 12 Ind. 322; Bradshaw v. Warner, 54 Ind. 58; Baals v. Stewart, 109 Ind. 371.
A chattel mortgage is a conditional sale, and upon the breach of condition, the sale becomes absolute. If appellants’ mortgage be upheld it results in a sale at wholesale. The facts of this case, however, show that only a retail business was contemplated by the appellee. A power to sell at retail does not authorize a sale at wholesale.
The last contention that the appellee is estopped by her acts, declarations and conduct to assert a claim to the goods adverse to that of appellants is the most important question in the case. The estoppel soug’ht to be invoked against the appellee assumes or proceeds upon the theory that she was originally the owner of the goods, but that owing to her conduct she has lost her title thereto.
The vital principle of an equitable estoppel is that of fraud. He, who by his language or conduct, leads another to do what he would not otherwise have done, will not be permitted to subject such person to loss or injury, by disappointing the expectations upon which he acted. A change of position by the first party would involve both fraud and falsehood, and the law abhors both. The principles of estoppel in pais have been applied to a great variety of cases. The doctrine has no application where everything is equally known to both parties, or where the party sought to be estopped was ignorant of *268the facts out of which his rights sprung or where the other party was not influenced by. the acts asserted in estoppel. But if one stand by and see another purchase property without disclosing his interest to the .person about to purchase, he cannot afterwards set up a claim of which the purchaser had no notice. Nor is it necessary that the person sought to be estopped be present at the time the sale is consummated. If he have knowledge of the contemplated sale and of the fact that the purchaser is ignorant of his rights, it is his duty to disclose his interest to such purchaser. Nor is it necessary that there should exist a design to deceive or defraud on the part of the person sought to be estopped. It is enough if when he asserts his claim, it would be inequitable and unjust to allow it to prevail against the purchaser. The falsehood and moral wrong which the law denominates fraud, appears when the claim is asserted. And this is" true whether a party knowingly remains silent or so negligently conducts himself with reference to his rights as to mislead another; Duckwall v. Kisner, 136 Ind. 99; Anderson v. Hubble, 93 Ind. 570; Fletcher v. Holmes, 25 Ind. 458; Gatling v. Rodman, 6 Ind. 289.
The appellants claim title to the property through the mortgage. The facts of this case, however, show that the appellee had no knowledge of the execution of the mortgage and that she never authorized it. If she had no knowledge, the execution of the mortgage could not of itself work an estoppel against her. It is true that title may be created by an estoppel in pais. Pitcher v. Dove, 99 Ind. 175. But the person who invokes this principle must invoke it for himself and not in the interest of a third party.
The appellants contend that the appellee estopped herself by her conduct in permitting her husband to take and remain in possession of said goods for more than six *269years, buying and selling and conducting said business in Ms own name; that the fact that he was in possession and conducting said business in his own name and exercising the powers of ostensible ownership, induced the appellants, A. Kiefer & Co., to believe that he was the owner thereof, and that they gave him credit and sold goods to him upon the faith and credit of being the owner thereof.
It will be observed that this contention is not based upon the conduct of the appellee at the time of the execution of the mortgage, but upon her declarations and conduct prior to that time. The rights of A. Kiefer & Co. in the property in controversy, if any they had, prior to the execution of the mortgage,were only such rights as they acquired by reason of being creditors of either the appellee or of William Klinsick. The right that a general creditor has in the property of his debtor is extremely vague and uncertain; but as the right may ripen into something tangible, and as it is the duty of a debtor to apply his property in discharge of his debts, the law will protect the creditor against the fraudulent operations of the debtor and will aid the creditor in subjecting the debtor’s property to the payment of his debts.
If one person permit another to use his property, exercising all the powers of ownership over it for the purpose of giving such other person credit and financial standing, and such other person contract obligations upon the faith created by reason of such ostensible ownership, the real owner will be estopped to deny the right of such creditors to subject such property to the payment of their claims.
Again, if one knowingly or negligently permit another to use his property,- exercising all of the powers of disposition over it, and knows or might have known by reasonable diligence, that third parties were dealing *270with such person, creating obligations upon the faith and credit given such person by reason of such ostensible ownership, the real owner will be estopped to deny the right of such creditors to subject the property to the payment of their claims.
If A allows lands paid for by him to be taken in the name of B, and third persons deal with and give B credit, without knowledge of the rights of A, A will be estopped to assert an interest in the lands as against such creditors. Minnich v. Shaffer, 135 Ind. 634; Michener v. Bengel, 135 Ind. 138; Adams v. Curtis, 137 Ind. 175
A deed of conveyance is the highest evidence of title to real estate and when coupled with possession, the grantee has all the indicia of title. The statute, section 3335, R. S. 1891, requires all conveyances of land to be by deed in writing subscribed, sealed and duly acknowledged. When the debtor exhibits his deed, or the creditor learns of it through the- record, the creditor has the right to rely upon it for all it purports to be. The same rule holds good in reference to the transfer of certain kinds of personal property, such as shares of stock in corporations ; such transfer being regulated by statute.
In Hirsch v. Norton, Admr., 115 Ind. 341, it appeared that Hirsch assigned and transferred ten shares of bank stock to one Study, and caused a formal transfer to be made upon the books of the corporation; the bank issued a certificate for the ten shares to Study. At the time of the transfer, Hirsch and Study entered into a secret agreement to the effect that Hirsch should remain the owner of the stock. The court held that the creditors of Study whose claims were contracted- upon the faith of such ownership, would be protected against such secret agreement. That decision rests upon the fact that the shares of stock were a peculiar kind of personal property and *271assignable by a peculiar method, prescribed by statute. The court said: £ £ The cases which govern transfers of tangible personal property cannot control where the subject of the transfer is the capital stock of a corporation. ” In that case Study was clothed with all the legal indicia of title. “In appearance he was the sole and legal owner of the stock. The books of the bank showed this ownership and he was the holder of the certificate which was the highest and best evidence of ownership. Nothing was lacking in his evidence of title.”
In Moore v. Moore, 112 Ind. 149, it was held that where the holder of a promissory note is induced by fraud and without consideration to endorse and deliver to another who afterwards endorsed it to an innocent purchaser, the original holder was estopped to deny the title of the fraudulent endorsee as against the last purchaser. That decision rests primarily upon the fact that the statute, section 7515, R. S. 1894, provides that all promissory notes “ shall be negotiable by endorsement thereon so as to vest the property thereof in each endorsee successively. ” The first endorser clothed her endorsee with every indicia of title and put it in his power to transfer the note with all the evidence of ownership being in him. To permit the first endorser to question the title in the hands of the last holder would be a palpable fraud such as the law will not tolerate. 2 Herman Estop., section 978.
The case before us is distinguishable from the above cases cited and relied upon by the appellants. In those cases the effort was to obtain the judgment of the court affecting the status of particular property. And in those cases also the debtor' or the vendor was clothed with all the evidences of title. Here William Klinsick had possession of the goods which was only prima facie evidence of title in him. Such personal property as is here *272in controversy, is usually transferred by mere delivery unaccompanied by any other evidence of title. In the complexity of modern commercial transactions, it is no unusual thing for the person who has the possession of goods and chattels and empowered to sell the same to be but a mere agent or servant. Possession of such property unaccompanied by any other evidence raises but a bare presumption of title. The largest commercial transactions are frequently consummated through the medium of agents, factors and brokers, and in which the real owners’ names do not appear. The law will not permit a debtor to transfer and secrete his property fraudulently from his creditors, but will uncover it and subject it to the payment of his debts. But this is not an action to set aside a fraudulent conveyance, or to subject particular property to the payment of debts. Either the appellee or her husband was the owner of the stock of goods before the mortgage was executed. If the husband was the owner, that is an end° of the controversy. The jury found that he was not. If the appellee was the owner, and her husband was in possession as her agent, with power to conduct the business and contract debts, but without power to mortgage or sell at wholesale, then the rights of the appellant were only such as a general creditor has in the property of his debtor. The mere fact that a creditor may have an equitable interest in the property of his debtor does not give the creditor the right to convert it to his own use. The debtor has rights also and other creditors may have rights.
The appellants also assert that there is an element of estoppel in the declaration of the appellee when she stated to their attorney that the' debt and the store belonged to her husband. They claim that they were induced to extend the time of payment and to take a mortgage on the faith of this declaration. But the *273■undisputed evidence further shows that their claim had already been contracted when this statement was made and it also appears that their attorney when he called upon William Klinsick, in November, offered to extend the time of payment and give the said William all the time he wished on condition that he execute a mortgage upon the stock. All of this occurred long before such declaration was made by the appellee. This being true, it does not occur to us that they were misled into doing the very thing they were proposing to do before the declaration was made. Nor does it appear that the appellants took the mortgage relying upon such declaration.
The case of Preston v. Witherspoon, 109 Ind. 457, relied on in the majority opinion does not in my judgment support the position of the appellants. There “Runde & Wallace” were engaged in selling and shipping wheat and receiving wheat for storage for hire from farmers and on demand of the depositors they agreed “to return to them wheat of a like kind, quality and amount as that deposited, but not the identical tvheat.” There was a direct authority given by the depositors to Runcie & Wallace to sell their wheat in the very manner in which it was sold, and of course the depositors could not assert title to it after it had passed into the hands of innocent purchasers. The principles of that case have no application to the case at bar. Here the right to sell at retail is conceded, but the sale was not at retail. There is not a shadow of evidence that William Klinsick had any authority to mortgage the property or sell at wholesale, as the agent of appellee. Nor do I consider the cases to set aside fraudulent conveyances and to subject property to sale on execution in point. In such cases the effort is to reach specific property for a specific purpose.
*274The jury found that Willian Klinsick was not the owner of the property. This being true, the appellee was the owner prior to the execution of the mortgage. The title could only pass from her to appellants by some act of hers or of her authorized agent. There is no pretense that she made a sale or mortgage in person. Pier husband sold goods only at retail. On no other occasion did he mortgage or sell at wholesale. Appellants could not therefore be misled as to his power. I repeat a power to retail does not confer power to mortgage or sell at wholesale. As William Klinsick did not own the goods and as he had no authority to mortgage or sell at wholesale, the rights of the appellants were only such as a general creditor has in the property of his debtor. One general creditor has no right to convert the property of his creditor to his own use and then defend on the ground of the indebtedness. That is what this case is in a nutshell. The creditor has no absolute right to the property of his debtor even when levied on by an execution. The debtor is entitled to exemption. The indebtedness will not justify or excuse the tort in converting the property. Let it be conceded that the appellants sold goods to William Klinsick upon the faith and belief that he was the owner of the stock of drugs; this fact would give them no specific interest in the property, nor would they have any specific interest in it if William Klinsick were the actual owner. William Klinsick might have legitimately applied the property to other purposes than the payment of appellants’ claim. He might have taken it under the exemption laws; he might have used it to pay his other legitimate debts or assigned it for the benefit of all of his creditors. The same is true of Mrs. Klinsick, if she were the owner. The mere fact that the appellants may have been misled in giving credit cannot operate in conferring title in them to the property of the *275ostensible owner. Creating a debt and transferring title to property are two distinct and separate acts. When the appellants gave the credit and their claims came into existence, that was a completed transaction wholly independent of the mortgage, the mortgage at that time was not even in contemplation; and yet the estoppel sought to be invoked ties the giving of. the credit with the execution of the mortgage and makes them parts of the same transaction, ignoring all the rights of the debtor and the disposition which he might make in the interval between the two acts. The moment the two acts are separated the weakness of appellants’ position is apparent.
Filed June 22, 1894.
The case of McGrirr v. Sells, 60 Ind. 249, is a much stronger case in its facts than the one at bar, and as I think correct in principle. The appellee ought not be placed in a worse position or the appellants in a better position than if this were an action to set aside a fraudulent conveyance. And yet this will be the result if appellants prevail. The appellee will be stripped of her rights of exemption.