CHAPTER XI.

CONDITION NO. 9.

The Estoppel-asserter Must, on the Faith of the Misrepresentation, Have Changed His Position Prejudicially.

"To create an estoppel in pais, the party in whose favor it operates must have altered his position through reliance on the words or conduct of the party estopped."Î

"Nobody ought to be estopped from averring the truth or asserting a just demand unless by his acts, or words, or neglect, his now averring the truth, or asserting the demand, would work some wrong to some other person who has been induced to do something, or to abstain from doing something, by reason of what he has said or done, or omitted to say or do." 2 Let us consider the matter under the following headings:

I. Change of position.

II. On the faith, etc.

III. Prejudicially.

IV. Purchaser for value without notice.

I. CHANGE OF POSITION.

Change of position to misrepresentation bears somewhat the same relation as consideration to contract. A misrepresentation without consequences must surely remain without consequences. But the point must be noted, and even dwelt upon, for it sometimes in practice escapes observation. Note its application in the following case. Defendant, having the plaintiff in custody, gave to him a statement of the causes of detention, in which he admitted having a warrant for plaintiff's discharge on a certain date. Plaintiff, believing this warrant to be insufficient (not acting upon the admission), applied for son (1878), 8 Ch. D. 817; 47 L. J. Bk. 103. And see Low v. Bouverie (1891), 3 Ch. 111; 60 L. J. Ch. 594; Conrad v. Fisher (1889), 37 Mo. App. 352; Dean v. Crall (1894), 98 Mich. 591; 57 N. W. R. 813; Barry v. Kirkland (1898), 52 Pac. R. 771 (Ariz.); Walls v. Ritter (1899), 180 Ill. 616; 54 N. E. R. 565; Oak Creek v. Helmer (1899, Neb.), 80 N. W. R. 891.

1

Lingonner v. Ambler (1895), 44 Neb. 316; 62 N. W. R. 486. And see Tower v. Hoslam (1891), 84 Me. 86; 24 Atl. R. 587; Stanton v. Estey (1892), 90 Mich. 12; 51 N. W. R. 101; Pearson v. Brown (1898), 105 Ga. 802; 31 S. E. R. 746; Shields v. McClure (1898), 75 Mo. App. 63; Jamison v. Miller (1884), 64 Iowa, 402; 20 N. W. R. 491.

2 Per James, L. J., in Ex parte Adam

an order for his discharge when the date should arrive, which order was refused. Having been detained three days beyond the date mentioned in the warrant, he sued for damages. In this action the defendant denied having the warrant, and it appeared that he had a copy of it only. Held, that he was not estopped by his previous admission or representation, for the plaintiff had in no way acted upon it.1

There can of course be no such change of position as will result in estoppel if it chronologically precedes the misrepresentation complained of. It is impossible, too, that any representation can be acted upon if its existence be unknown to the estoppel-asserter. In a case, therefore, in which it was said that a principal was estopped from denying that his agent had certain powers, because he, the agent, had been intrusted with certain general authority, from which the existence of these powers would naturally be inferred, it was held that the principal was not estopped as against a person who was not aware of the general authority, and who, therefore, could not have drawn the inference.

It has been held in jurisdictions in which registration of a transfer of shares is necessary to the passing of the property in them, that creditors of the transferrer can attach the shares prior to registration. If the creditors had advanced their money changed their position upon the faith of their debtor's ownership of the shares, something could be said for them; but the cases often ignore the necessity for change of position of any sort.

1 Howard v. Hudson (1853), 2 El. & (1879), 91 Ill. 459; Union Bank v. B. 1; 22 L. J. Q. B. 341.

2 Barnard v. Campbell (1874), 55 N. Y. 456; Ehrler v. Braun (1887), 120 Ill. 503; 22 Ill. App. 319; 12 N. E. R. 503; McManus v. Watkins (1893), 55 Mo. App. 92.

3 Miles v. McIlwraith (1883), 8 App. Cas. 120; 52 L. J. P. C. 17. And see Stewart v. Rounds (1882), 7 Ont. App. 515; Murphy v. Barnard (1894), 162 Mass. 72; 38 N. E. R. 29. But see Hanover Nat. Bank v. American (1896), 148 N. Y. 72; 43 N. E. R. 612. 4 Skowhegan v. Cutter (1860), 49 Me. 315; People's Bank v. Gridley

Laird (1887), 2 Wheat. 390; Hirsch v. Norton (1888), 115 Ind. 341: 17 N. E. R. 612; Pierce v. Horner (1895), 142 Ind. 626; 42 N. E. R. 223. See, however, Lightner's Appeal (1876), 82 Pa. St. 301; Moore v. Albro (1880), 129 Mass. 9; Sibley v. Quinsigamon (1882), 133 Mass. 515; Burgess v. Seligman (1882), 107 U. S. 20; Masury v. Arkansas (1899), 35 C. C. App. 476; 93 Fed. Rep. 603; Colebrook on Col. Sec. 252. In Massachusetts legislation was passed to correct the departure of the cases from principle. Newell v. Williston (1885), 138 Mass. 240.

"Lulled into Security."— It is frequently said that a misrepresentation must have been "acted upon " in order that it may produce estoppel. That is not quite accurate; for, if the misrepresentation arrested action, it would have the same effect. A change of position — relative position — is the requisite.

"It is not necessary that a party should act affirmatively upon a declaration to claim an estoppel. If he has not acted in reliance upon it, but has means in his power to retrieve his position, and, relying upon the statement and in consequence of it, he refrains from using these means, his claim will be upheld."1

There are many cases of estoppel in which a person has been "lulled into security" and has "rested satisfied"— cases in which he has not parted with money or property on the faith of the representation, but in which he has lost some chance of recovering it. A careful examination of one of these will enable us to pass the others more hurriedly. Some solicitors had a client (No. 1) possessed of a mortgage; they agreed for the sale of it to another client (No. 2) and received the purchase-money from him; they then procured No. 1 to execute an assignment of the mortgage to No. 2 by fraudulently misrepresenting its nature; the assignment was afterwards handed to No. 2. Both clients now thought that they owned the mortgage, and they remained for five years afterwards of that opinion, the mortgagor paying interest to one of them and the solicitors to the other.

Then the question arose, Who is to lose? No. 1 took the ground that although he might be bound by the assignment, yet that No. 2 had not paid the purchase-money; he (No. 1) had not received it, and the solicitors had no authority from him to do so. No. 2 had to admit that that position was valid; but he contended that No. 1 was estopped from asserting that the money had not gone to him, because, in the assignment of the mortgage, he had acknowledged the receipt of it. No. 1 replied that that also was true, but that No. 2 had not changed his position upon the faith of that misrepresentation, for he had paid over his money to the solicitor before the assignment

1 Continental Bank v. National Bank (1872), 50 N. Y. 575. And see London v. Suffield (1897), 2 Ch. 608; 66 L. J. Ch. 790; Tobin v. Allen (1876), 53 Miss. 563; Bank of U. S. v. Bank of Georgia (1825), 10 Wheat. 333; Farmers v. Orr (1899, Ind.), 55 N. E. R. 35.

2 Gordon v. James (1885), 30 Ch. D. 249. See also Herchmer v. Elliott (1887), 14 Ont. 714; Re Swinbanks (1879), 11 Ch. D. 525; 48 L. J. Bk. 120; Re Bellamy (1883), 24 Ch. D. 387; 52 L. J. Ch. 870; Re Hetling & Merton (1893), 3 Ch. 275; 62 L. J. Ch. 783.

was executed. Once more No. 2 had to admit the fact alleged, but he urged that after he parted with his money he received the deed; that it then appeared to him that the money had reached No. 1, and that he (No. 2) was, by such appearance, lulled into inactivity. The question then was narrowed to this: Had No. 2 acted upon the misrepresentation contained in the assignment? If he had, No. 1 would be estopped. The judges said as follows:

Cotton, L. J.:

"By putting that deed into the hands of their agent (the solicitors) they (No. 1) enabled him to represent to James (No. 2) that that money was really paid to them on the transfer of this security."

Lindley, L. J.:

"The plaintiffs, by their carelessness you may say, but I should rather say by their act, enabled Dodge (the solicitor) to deceive James (No. 2) and lull him into security, and prevent him having recourse to those who got his money from him by a trick."

Fry, L. J.:

"I think the result of that would naturally be that James (No. 2) would not make that inquiry and search after the money which he would have made if he had found that after paying it to Dodge & Phipps (the solicitors) it had not been invested. I think, therefore, that the defendant James (No. 2) has an equity which he may rightly set up in this case against the equal equity of the plaintiffs as unpaid vendors."

This reasoning is worth examination. It was admitted in the case that if No. 2 had paid his purchase-money to the solicitors at the time that he received the assignment he would have had no case. He would have had none, because he would have known that the misrepresentation contained in the assignment could not be true, and he could not, therefore, have acted upon it; he would have known that although the assignment represented that the money had been paid, it had not in fact been paid, for he had not then paid it; he would not have been misled, and so there could have been no estoppel. The only question in such case would have been whether the solicitors had authority to receive the purchase-money; and by hypothesis they had not. In such case, therefore, the purchasemoney not having been paid and No: 1 not being estopped from denying that it had, his right to payment would have been indisputable.

Putting the case more shortly: A purchaser receives through the vendor's solicitor a conveyance containing an acknowledg ment of receipt of the purchase-money, and simultaneously or subsequently pays the purchase-money to the solicitor; the solic

itor had no authority to receive the money and the vendor is entitled afterwards to enforce payment. On the other hand, a purchaser pays his purchase-money to the solicitor and afterwards receives a conveyance containing an acknowledgment of payment, and the vendor is not entitled to enforce payment. What is the distinction? It is this: In the former case the purchaser was not misled. In the latter he was. In both cases the deed represented that the vendor had received the purchase-money at the time of its execution. So far they are alike. But in the former case the purchaser was not deceived, for he knew the fact to be otherwise; whereas in the latter, having previously paid his money, he believed, when he received the deed, that the representation which it contained (that the vendor had received the money) was true. He was misled; he acted upon the misrepresentation to his disadvantage (by remaining quiescent), and the vendor was estopped.

Note the character of the disadvantage which the purchaser in the case just dealt with sustained. He did not lose property or money, but he lost an opportunity to recover his money he abstained from making "that inquiry and search after the money which he would have made" — that was enough.

Note, secondly, that the action of the man estopped was, in the two supposed cases, precisely similar; and yet in the one he is estopped and in the other he is not. In both cases he executed the assignment without receiving the money; in both the assignment, contrary to the fact, represented that he had received the money; in both he acted honestly; in both there is long delay; in both, therefore, there is the same degree of carelessness; and in both the same innocence of intentional misrepresentation. The difference in the cases lies in this: that misrepresentation does not necessarily result in estoppel; that it so results only when it is the cause of misleading another person to his disadvantage; and where that has happened the question of fraud or bad faith is immaterial.

Not Advising of Forgery.-The cases will now be easily understood which determine that if a man's name be forged, and after himself becoming aware of the fact he refrain from advising the holder of the document, and by reason of such in

1 He may have miscalculated as to the solicitor's authority to receive the moneys. But that is not the

point here. He ought to have made inquiries. There is no ground of estoppel in that connection.