Court Opinion

ID: 6580954
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:38:14.379026+00
Date Added: 2024-06-11T15:57:16.947685
License: Public Domain

The opinion of the court was delivered by
Royce, J.
From the pleadings and proofs in this case we find that the agreement which was entered into on the 26th of December, 1874, between John Balis, John H. Balis, and Henry S. Howard of the one part, and their creditors of the other part, was made with the intention and understanding of all the parties to it, except the defendant Hammond, that thereby the expense and delay of proceedings in bankruptcy would be avoided, the property of the Balises be secured for the benefit of their creditors, and they be as fully protected by it from any further claim upon the part of their creditors as they would be by a discharge *214in bankruptcy. In all the negotiations preceding the execution of said agreement, and at the time of its execution, the debt due to the orator was recognized and understood by the parties to it, with the exception of Hammond, to be a secured claim that had preference over what were called the unsecured claims, and that must be paid in full, and that if it had not bee"n so understood, said agreement would not have been executed. The defendant Hammond at that time held a mortgage executed within four months preceding the date of said agreement from the Balises to him to secure a large indebtedness from them to him, and it was a matter of debate before and at the time of the execution of said agreement, by the parties to the same, whether said mortgage could be upheld, if proceedings in bankruptcy should be prosecuted by the Balises upon their petition, which had then been filled out for presentation, to the District Court. To remove all doubt upon that question, it was provided by that agreement that the Balises should convey an absolute title to the premises described in said mortgage to Hammond. The Balises fulfilled their part of the agreement by conveying such a title to Hammond. All this was done, we find, upon the part of the Balises and Howard and their unsecured creditors, upon the understanding and belief that Hammond was to pay the debt due to the orator. The consideration for the agreement upon the part of Hammond was the obtaining of a security for his debt that was fixed and certain, in place of one which was doubtful. Although there was no express promise made by Hammond, or those who acted for him in the matter, to pay the orator’s debt, their conduct was such as to induce the belief of all the others, parties to the agreement, that he was under obligation to pay it, and that he would be obliged to pay it before the security he was obtaining for his debt could be made available. If he then intended to contest that obligation, it was his duty to so inform the parties with whom he was dealing, in order that they might act with full knowledge of what his intentions were. We do not think the language made use of by his counsel was intended by them to give any such information. They understood that all the parties to that agreement, except Hammond, executed it under the supposition and belief that *215Hammond was to pay the orator’s debt, and they knew, or had good reason to believe, that they would not have executed it if it had not been for that supposition and belief. Hammond, by his silence when he should have spoken, is estopped from denying his obligation as he knew it was understood to be by those with whom he was dealing. The doctrine of equitable estoppel is founded upon the principle that a party has by his own voluntary act, or omission to act, placed himself in such a situation in regard to some fact, that he is precluded from denying it; and silence, where it is intended as an inducement to a course of action, may be as culpable as positive representations. In Wendell’s Exr. v. Van Rensselaer, 1 Johns. Ch. 344, it was said by Chancellor Kent that there is no principle better established, nor one founded on more solid considerations of equity and public utility, than that which declares that a man who knowingly, though he does it passively, looks on and suffers another to purchase or expend money on land under an erroneous opinion of title, without making known his claim, shall not be permitted to exercise his legal right against such person. That doctrine is peculiarly applicable in this case. Hammond by his passiveness induced the other parties to the agreement to give him a security for his debt that was better than the one he previously had, and one that they would not have given him, if they had known that his intention was to resist the payment of the orator’s debt. See also Dezell v. Odell, 3 Hill, 215; Watson’s Exrs. v. M’Laren, 19 Wend. 557. The contract having been partly executed, it would be inequitable to permit Hammond to retain and enjoy the benefits which have resulted to’him from such partial execution, and refuse a full execution of it as he knew it was understood by the other parties to it at the time it was entered into. It is one of the appropriate offices of a court of equity to compel a full execution of such contracts, or to compensate parties who have sustained damage as the result of a refusal to execute ; and it is no defence to a bill brought for such a purpose, to show that the party chargeable with bad faith in the matter of its execution has not reaped the full benefit from it that he anticipated at the time it was entered into.
*216We do not deem it necessary to pass upon the question of the validity of the mortgage given by the Balises and Howard to secure the orator’s debt, but base the orator’s right to relief wholly upon the contract of December 20, 1874, in connection with the agreement and understanding of the parties to it at the time it was made. It does not appear from the pleadings or proofs that there was any necessity for making the First National Bank of Orwell a party defendant.
The decree of the Court of Chancery is reversed, and cause remanded, with a mandate that the bill and cross-bill as to the First National Bank of Orwell be dismissed with costs; and that a decree be entered for the orator against the defendant John L. Hammond, and that it be referred to a master to ascertain and report the amount due on the note for $12,000 described in the orator’s bill, and that the. said John L. Hammond be decreed to pay to the orator the amount that shall be found to be due on said note, with the costs of this suit, by some day to be fixed by said court.