30 CONN 210 - Calhoun v. Richardson

Ellsworth, J.

¶1This being an action of trover by the plaintiff as general assignee of the Bridgeport Insurance Company, it became necessary for him to prove a title to the bonds in question in the assignors. This he attempted to do by introducing an admission in writing or certificate signed by the defendant, appended to a deposition or affidavit of one Green, the president of the company, prepared for Samuel B. Ruggles Esq., who was acting for the comptroller of the state of New York as a commissioner for the investigation of the affairs of this insurance company. The affidavit gives a minute and extended inventoiy of the assets of the company in February, 1858, and among other things these bonds are put down as belonging to the company. As the defendant certified to the correctness of the inventory it was certainly an admission that the company at that time were the owners of the bonds, and that they did not' belong to him, contrary to what he now claims. To meet the effect of this admission, the defendant claimed that the contents of the deposition were really unknown to him when he appended his certificate to it, that he could not read writing himself, and was misinformed by Green as to what he had stated in it, that in fact the whole pro*226ceeding was a fraud and imposition upon him, an advantage taken of his too great confidence in Green’s integrity, and that his supposed assent to the truth of the affidavit ought not really to operate to his disadvantage. This explanation was objected to as irrelevant, but the court admitted it, and it went to the jury for what it was worth upon the question in dispute; which in our judgment was the proper course to be pursued by the court. The defendant had a right to weaken the force of, and, if possible, explain away entirely the admission which he was said to have made.

¶2The defendant likewise offered himself as a witness, to testify that he was misinformed of the contents of the affidavit, as well as to explain how his signature came to be appended to the certificate. This too was objected to generally, but it was admitted, and we think lightly so, for the reason already assigned.

¶3The defendant next offered to prove that a few days after he had signed the certificate, and while it was in the hands of Mr. Ruggles, he learned for the first time what were the contents of the affidavit, and that he had been imposed upon and made to admit by his certificate what was entirely untrue— that the bonds belonged to the Bridgeport Insurance Company and were not his own property ; and that thereupon, in order to correct the error and prevent all persons from reposing confidence in the truth of the affidavit in this respect, he immediately informed Mr. Ruggles that he had been imposed upon by Green, that he never meant to certify to the truth of any such statement in the affidavit, and that the bonds were not and never were the property of the insurance company'; and requested that the certificate might be returned to him, or that he might be allowed to file a denial of its correctness. To the admission of this evidence the plaintiff objected. Now if the objection was founded on the rule of law that the defendant can not be allowed to weaken the force of what he admits one day by denying it the next or thereafter, it could not be answered, and the evidence should have been rejected. But was this the case ? "We think it was not. Had the plaintiff introduced Green’s affidavit with the defendant’s certificate and *227there stopped, the evidence might not have been admissible ; we are inclined to think it would not have been ; but the plaintiff did not stop there ; he introduced further and collateral proof to give character and stringency to the defendant’s admission. Ee claimed or might well have claimed to the jury that the affidavit and certificate were prepared in the most formal manner, and in their statement and verification of facts were entitled to very great weight—that it was a public document, intended for public use, and was left with Mr. Rugbies to continue to have the effect of an official verification of facts. The defendant might well believe that if he said and did nothing to disabuse the comptroller of New York, after the imposition had been brought to light, his certificate would operate against him with much greater stringency—that such delay or omission to make known the fraud practiced upon him, could with good reason be urged upon the jury as showing that in fact there was no error or imposition, and no truth in the defense set up by him. We do. not speak with great confidence of the correctness of the defendant’s claim, nor of the views we entertain and have expressed, but if we err therein it is not an error of law, but in the application of the law to the case.

¶4We see no objection to the defendant testifying that the receipt, which it was claimed he had given the company in January, 1858, purporting to be signed by him, acknowledging that the bonds were held by him for the benefit of the company, was unknown to him and a downright fraud practiced upon him. The jury doubtless gave such weight to his testimony as they saw that it deserved.

¶5There is another point which has given us more trouble, and which we are unable to dispose of without awarding a new trial; we mean an omission in the judge’s charge.

¶6The plaintiff had introduced a certified copy of a return by the company to the comptroller of this state, together with evidence that the return had been published in a newspaper as required by law; and that the company had continued to do business thereafter, on the credit which a return under the official oath of the secretary of the company, and its publicity *228through the newspaper, was calculated to inspire. The return was dated January, 1858, and declared specifically that these bonds were part of the assets of the company. Now, the plaintiff insisted, that as the defendant was a director of the company at that time, as well as before and after, and regularly attended the directors’ meetings, he must be held to have known the contents of this annual return, and to have assented to it as exhibiting the true situation and condition of the company’s assets, and that under all the circumstances of the case the defendant was guilty of fraudulent misconduct or gross negligence in permitting the return if it was false to be made and published, and the company to transact business upon the credit of it; and he requested the court to charge the jury that under the circumstances the defendant would be estopped from denying the statements of the return. This claim, as presenting a principle of law, we think unobjectionable, and so we presume the judge himself considered it; for he proceeded to instruct the jury as to the nature and effect of an estoppel, and correctly enough told them that to estop the defendant his action must have been understanding^ and intelligently had and his admissions understandingly and intelligently made, which is well enough as to the point of knowledge; but the judge says nothing about the effect of fraudulent conduct and gross negligence as estopping the defendant and subjecting him to damages. We think the defendant might have been unacquainted with the contents of the return to the comptroller, and yet possibly be liable on the ground claimed by the plaintiff. The plaintiff insisted that the defendant ought to have informed himself, and not to have given his sanction either directly or indirectly to the return, and afterwards set up a claim directly against it. We do not mean to say, as matter of law, that the defendant did sanction the return, or is liable under the circumstances for its false statements, but it was quite proper that the jury should pass upon the question whether the defendant had been guilty of misconduct or gross negligence, so that he' should not be allowed to shield himself under the plea of ignorance. It is the summing up in the charge of the court to which we most *229object, as to the effect of gross negligence when there is not actual knowledge. Probably the view of the case which the judge took in his own mind was correct. He doubtless intended to respond fully to the claim of the plaintiff and supposed he had done so ; but, we think he failed to do it, and left the jury to infer from the concluding part of his charge that the defendant could not be estopped unless he had positive knowledge of the contents of the return.

Note.—The question which was discussed in the case, whether the plaintiff, being a trustee for the creditors generally, while but a small part of them had become such after the return of the secretary had been filed in the office of the comptroller, could take advantage of the estoppel, seems not to have been expressly-decided by the court, though, as an opinion adverse to the plaintiff on the point would have disposed of the case and made a new trial of no advantage to him, it may be considered as fairly implied that the court held that the estoppel could be set up by him; and I have so stated in the head note of the case, though I feel it my duty to call attention to the fact that it is my inference front the general con; elusion of the court and not an express part of the opinion;

¶7 *229We forbear to say what degree of neglect and inattention in the directors and officers of incorporated companies, in the duties for which they are appointed and which they are understood to engage to perform to some reasonable extent towards the stockholders and the confiding public, will subject them in damages. That is a delicate point to settle, and not likely to be correctly determined-upon the common notions which seem to prevail too generally among certain classes in the community. Thousands of innocent and confiding stockholders, as well as strangers dealing with such corporations, have been utterly rained by the inattention and negligence of the directors and officers, not to say by their flagrant mismanagement and fraud. The officers in our public and private institutions are solemnly pledged by the acceptance of office to the exercise of integrity and vigilance in discharging their trust, and, while the pledge is so often left unredeemed, it will do the community no harm for judges to hold the reins of accountability somewhat more tightly than they have been held for years past. ,

¶8We advise a new trial.

¶9In this opinion the other judges concurred.

The question here presented is one of much interest and not without difficulty. It is not easy to see how, under any ordinary application of the principle of estoppel in pais, creditors can take the benefit of it who became such prior to the transaction out of which the estoppel grows, and who could not possibly in their deal; ings with the conipany have been influenced by the representations by which the party is sought to be bound. It is not altogether clear that, upon the ordinary rule as to estoppels in pais, creditors who became such after the representations were made, but who in fact never heard of them, can set up the estoppel; but it may not be an unreasonable presumption that all such creditors were influenced in trusting the company by the credit which it enjoyed with the public, and that these representations as to its assets had become in part the foundation of that credit, so that the party trusting the company had been indirectly influenced by the representations. This presumption is the more reasonable when it is considered that such representations are made less for their effect in detail and on particu; lar individuals than for their general effect in the community and for the purpose of building up a general credit. But as to the creditors in whose favor no such pre; sumption can possibly exist, it is difficult to see how the party making the representations can be estopped from denying their truth on the ordinary grounds of estoppel. It is a well settled principle with regard to estoppels in pais that the representations (or conduct operating as a representation) must have been designed or at least calculated to mislead the party dealt with, and that such party must have been actually misled and have acted upon the misapprehension to his injury. The vital part of this principle can have no application here.It is not enough to say that the trustee represents the particular creditors who have the right to set up the estoppel and may recover for them, and that the court of probate may marshall the assets, giving to a part of the creditors the proceeds of that portion of the assets to which they have a prior or exclusive equity, as in the case of Ashmead’s Appeal from Probate, 27 Conn., 241, because the bonds here in question would not become in any legal sense a part of the assets of the estate, which is essential to the application of the principle held in that case. If the bonds should not be exhausted in paying the particular creditors entitled to the benefit of them, the balance would not go to the rest of the creditors as assets. They would cease to be assets, and the original owner, no longer estopped from claiming them, would be entitled to a return of them. More than this, the particular creditors referred to would be entitled, not to the full benefit of the bonds, but to such a proportion of them as they would have received if the representation made had been in fact true, that is, to their pro rata share upon the basis of a division among all the creditors, which general division would have been made if they had been in fact the property of the company and a part of its assets.»All these difficulties grow out of the attempt to bring the case within the ordinary application of the principle of estoppels in pais. Is not the only solution of the difficulty to be found in taking the case out of that principle, and putting it on wholly other and higher ground 1 Does not the policy of the law, and not the principle of estoppel in pais, furnish the ground on which the case must rest ? An estoppel in pais is not, as I regard it, founded in any proper sense on any policy of the law, like that policy which forbids gaming contracts, or contracts founded on immoral considerations, or contracts to do that which the law forbids. This estoppel is founded purely on equitable principles, and on an equity existing be. tween the parties themselves. One party by his representations has induced another to adopt a certain course of oonduct. If no damage results to the latter the law does not forbid the former to show that the representation was not true, but if damage results to the latter from which he can be saved only by the assumption that the represensation is true, he has an equitable claim on the former that he abide by his representation. • The acting upon the faith of the representation by the latter party may be said to be the consideration, which gives legal effect to the representation of the other party as a contract; and there is hardly any case of estoppel in pais where the representation made is not substantially, and I am not sure that it is not legally, a warranty or promise, of which the change of conduct of the other party is the consideration. The conduct which estops a party must always be equivalent to a representation, and susceptible of being rendered into the formula of a promise or warranty.The case should therefore, I conceive, be taken out of this mere equitable principle and placed on the highest ground known to the law, that of its policy, founded on morality and the public good. The directors of corporations which are formed for the purpose of dealing with the public, and whose solvency and the good faith of whose transactions are of great importance to the public, should be held to the representations which they make to the public with regard to the condition of the corporations under their charge, whether the effect of such representations can be traced or not, and whether they have in fact produced any effect or have not. The directors are in a position to know the real fact, and ought to be presumed to know it. They are clothed with authority to speak for the corporation, and their representations made officially, and to a public officer of the state, and under the requirements of law, have an importance and a claim on the public confidence that ordinary representations would not have. Is it going too far to say, that if a corporation fails before another creditor has dealt with it, and if confessedly the representation has done no harm, the directors shall not be allowed to deny the truth of what they have affirmed ? The point is not free from difficulty, and it is not without hesitation that I make this slight contribution to the discussion of it. R.

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