Ayer v. Younker

Wilson, J., delivered the opinion of the court. In 1892 and prior thereto, Hyde & Yedder were the proprietors of a gambling house in the city of Denver. Younker, defendant and appellee, was a frequenter of such place and at various times lost money to the proprietors at games of chance, and borrowed money from them for the purpose of gambling. For the sum so lost and borrowed, defendant gave his checks at various times. On December 21, 1892, a settlement was had between the parties, Hyde & Vedder surrendered defendant’s checks and received from him in place thereof, two promissory notes, payable to themselves, each for the sum of $1,250, and due from one to two years after date. In April, 1898, Hyde & Yedder borrowed $320, from the plaintiffs, appellants in this case, gave their note therefor and, as collateral to secure this loan, assigned to — 29 — them the one year note of Younker. In September, 1893, the Hyde & Yedder note was renewed. When the Younker note became due, payment was demanded; and being refused, on March 22,1894, plaintiffs commenced suit thereon. Defendant answered setting up the fact that the sole consideration of said note was a gambling consideration and claiming that it was therefore null and void. Plaintiff replied alleging the fact that they were innocent holders for value and setting up certain acts of defendant which they claim should estop him from maintaining such a plea. Trial was had to the court, and judgment was in favor of defendant from which plaintiffs appeal. The evidence was sufficient to support the finding of the trial court that the consideration of the note came within the provision of sec. 860, Gen. Stats. This statute is very broad in its scope and unequivocal in its language. It has been in force in this state for many years and is similar in its character to statutes existing in nearly, if not entirely, all of the states in the union. By its terms all contracts, promises, agreements, conveyances, securities and notes made, given, granted, executed, drawn or entered into, where the whole or any part of the consideration thereof shall be for money or property won by gaming or money or property loaned for the purpose of gaming, “ shall be utterly void and of no effect.” And this is true although the instrument may be in the hands of an innocent purchaser for value. “ The language employed is open to no other construction. The protection which the law extends to an innocent holder, who, for value, in the usual course of trade, has received negotiable paper, is of no avail when the statute in terms or by unavoidable implication has pronounced the instrument absolutely void. Stricken with nullity at its birth, it can thereafter gain no validity.” Boughner v. Meyer, 5 Colo. 73. It appears from the evidence that at the time of the execution of the notes by defendant, Hyde & Yedder promised, that they would hold and not dispose of the notes, but upon their suggestion that they might wish to use them as collat — 30 — eral to secure loans, defendant assented to this, cautioning them, however, not to put them up for too much. There was also some evidence to the effect, that prior to the time when Hyde & Vedder secured a loan from plaintiff they informed defendant that they expected to secure such a loan, putting up his note as collateral therefor, and that he made no objection thereto. ' It is admitted that plaintiffs at the time of their loan to Hyde & Vedder, knew nothing of defendant’s consent that his note might be assigned as collateral-, and that neither Hyde nor Vedder said anything to them about it and it does not appear from the evidence that at such time plaintiffs had any knowledge of any fact affecting the validity of the note. Upon this statement of facts plaintiffs invoke the doctrine of estoppel and claim, that defendant having consented to the transfer of his note to an innocent purchaser for value, cannot now be heard to assert that it is invalid. This principle rests upon the broad ground that a party shall not be permitted to take advantage of his own wrong, that, if by his misrepresentations or concealment of a material fact or silence when he should speak, he induces another party to act, he shall not thereafter be allowed to assert a different state of things from that which he induced the other to believe existed. The intent is to restrain fraud and compel good faith and fair dealing. In order to constitute an estoppel by conduct, however, certain elements are essential and necessary. These have been clearly expressed and well settled by the law writers and by the highest judicial authority in the state. Patterson v. Hitchcock, 3 Colo. 536 ; Griffith v. Wright, 6 Colo. 250; Bigelow, Estoppel, p. 570; 2 Herman, Estoppel, § 1115; 2 Pomeroy, Eq. Jr. § 805. Of these essential requirements the only one necessary to be considered in tins case is that the innocent party must have been induced to act upon the representation or concealment. That this condition must exist, all the authorities agree, for the reason, that, if it did not, then the party was — 31 — not misled. It was said by this court in Colo. Fuel & Iron Co. v. Lenhart, 6 Colo. App. 516: “ But conduct alone does not create an estoppel. If no rights have been affected by the conduct, there is no one in whose behalf the doctrine of estoppel can be invoked. To create the estoppel some other person must have changed his position on the faith of the conduct. The foundation upon which the doctrine rests is that it would be a fraud for one, who by his conduct, has induced others to accept something as a fact, to deny that such was the fact, after they had acted upon their belief. But there can be no estoppel in favor of one who has not been misled.” The same doctrine was also enunciated in The Colo. Loan & Trust Co. v. Grand Valley Canal Co., 3 Colo. App. 73. The plaintiffs in this case expressly aver in their replication that they had no knowledge of the defendant’s consent to the hypothecation of his note until after the institution of this suit. It follows therefore that they were not influenced in the making of the loan to Hyde & Vedder by any statements made to them by defendant. The doctrine of equitable estoppel cannot then be invoked on this ground. It may be urged, however, that defendant is es-topped to deny his liability on the note by reason of his silence, when informed by Hyde & Yedder, that they intended to put it up with plaintiffs as collateral to secure a loan, and of his failure then to notify plaintiffs of its invalidity. The general rule is that one is estopped from alleging the truth, when his silence has been the inducement to action by another party, which would result in loss but for the estoppel. 2 Herman, Estoppel, § 995. There are many instances however, in which an estoppel does not arise from silence. The true test is whether or not the circumstances are such as to impose upon one in equity and good conscience the duty to speak. As to when this duty devolves there is not and, from the nature of the case cannot be any established or uniform rules. It depends, to a great extent, upon the circumstances attending each particular case and it is rare that two are alike. Generally — 32 — speaking if a person is present at the time of the transaction he must speak, or he will be estopped. If absent, his silence or other conduct must, at least, be of a nature to have an obvious and direct tendency to cause the omission or the step taken. Bigelow, Estoppel, p. 596. Again there are cases wherein it would be incumbent upon a person, being informed that a transaction was about to take place, to seek out the innocent party and speak. For instance the accommodation maker of a negotiable note would be estopped to plead want of consideration, as against the assignee, if it were shown that he had previous knowledge that it was to be negotiated and to whom, and had failed to notify the assignee prior to the transfer. In the application of the doctrine of equitable estoppel, we think there is very clearly a distinction between the cases in which the act or instrument sought to be avoided was one tainted with legal or moral turpitude and expressly declared by law to be “ utterly void and of no effect,” and one which, though voidable, was free from such taint or legal prohibition. In the former case it should certainly require stronger and more positive evidence to sustain a plea of estoppel than in the latter. In the latter case the party urging the plea is solely concerned, in the former, the state or public has an interest. Surely it cannot be claimed that the plain provisions of a public statute should be disregarded, set aside and nullified unless the facts, relied upon to take the act or thing in question without its inhibition should most clearly appear. In the case at bar, defendant executed a negotiable promissory note, perfect upon its face and with nothing in its contents to indicate in the slightest degree any taint of illegality or invalidity. He said thereby that he was legally bound to pay the sum of money specified, to whomsoever should be the lawful holder of the note at its maturity, without any offset or claim of defense. At the instant, however, of the execution of the note the statute applied and declared it to be “utterly void and of no effect,” whether in the — 33 — hands of an innocent purchaser for value or otherwise. This it did not do from any regard for the defendant or his rights but for the interests of the public. The consideration was, in the opinion of the lawmaking power, subversive of public morals and against public policy. Holding these views we do not think that the evidence as to the representations or conduct of defendant, discloses facts sufficient to estop him to plead the statute as a defense to this action. It does not appear that plaintiffs had any knowledge of his representations, and hence they were not misled by them nor were they acted upon at all. No statements of defendant, whether expressed verbally or implied from Ms silence, could have added to the force and effect of those, solemnly set forth in the note in writing. If he had been present and remained silent when the transfer of the note took place, or if plaintiffs had been informed prior to the time when they took the note, that defendant had been notified of the intended transfer and had consented thereto or acquiesced by his silence, then a different case might be presented — one from which the court might presume a new promise free from the taint of the statute. To hold that an estoppel would arise under the circumstances of this case as shown by the evidence would be to establish a rule, by which, it can be readily seen, the operation of the statute could be easily defeated in all cases. The only representations of defendant relied upon, whether express or implied, were made to the payee of the note, the beneficiaries of the gamblrng transaction and were never communicated to or acted upon by the plaintiffs. Under tMs view of the law, as applied to the facts of this case, we do not think that the authorities cited by counsel for appellants are in point. They are M cases arising upon accommodation paper, executed expressly for the purpose of enabling the payee to secure a loan, or where the representations relied upon, were made by the obligor directly to the assignee, or were communicated to him under such circumstances as to create the reasonable inference at least that they were acted upon. — 34 — The argument of counsel, that the consideration of the note was not affected with gaming, and hence not within the statute, is ingenious but not sound. The claim that the keeper of a gambling house may avoid the statute by a pretense, that “ chips ” only were redeemed or sold, cannot be entertained. It is too palpable and bald an attempt at evasion. The trial judge, before whom the witnesses testified in person, found that the note had a gambling consideration and in fact the plaintiffs do not appear to have seriously contested this. Under the usual rule, this alone would be sufficient for this court to sustain tins finding, but an inspection of the record shows that there was ample evidence to support it. In reference to the plea of estoppel by recital, based upon the fact that the note itself recites a valid consideration— “for value received” — it is only necessary to say that the statute, in plain and unmistakable terms declares such notes, if in fact affected with a gaming consideration, to be “ utterly void and of no effect.” Neither can it be successfully maintained that because checks were originally given for the gambling indebtedness, and thereafter these were taken up, and the note in suit given therefor, a new promise arose, whose consideration was free from taint attaching to that of the checks. The note was simply a substituted security for, or evidence of the same indebtedness, and partakes of the same infirmity and is open to the same defense as were the checks. Chapman v. Black, 2 B. & A. 591; Cutler v. Welsh, 43 N. H. 498; Holden v. Crosgrove, 12 Gray, 217. The transaction was between the same parties and no additional consideration appears. Counsel urge with great vigor and force that if this judgment be permitted to stand plaintiffs would suffer serious loss and injury without any fault or negligence on their part. The enforcement of the statute invalidating gaming contracts, and evidences of indebtedness, whose consideration was a gambling debt, declaring them to be, not voida — 35 — ble at the election of the mater, but utterly void, must, necessarily, in some instances entail hardship. Especially is this true when it destroys the validity of negotiable paper, which, according to commercial law and usage, should be unassailable, and declares that the innocence of an assignee for value shall not avail as a defense. It has been upon our statute books however, for thirty years, and it is to be presumed that the legislature, which enacted it, as well as each succeeding legislature, voicing the sentiments of the people whose representatives they were, considered that the harshness of the measure was justified by the object sought to be attained; the suppression of the vice at which it was aimed. Be this however, as it may, the duty of the courts is plain. The statute not being obnoxious to the constitution, being unequivocal in its terms, and susceptible of but one construction, they must uphold and enforce it. Their duty begins and ends there. They may be reluctant to obey the statutory command, as our supreme court has well said in Bank v. McClelland. 9 Colo. 611; especially in cases, where it is apparent, a hardship is inflicted upon an innocent party. This reluctance must not be carried, however, to the extent of deliberate evasion or violation of the plain letter of the law, however much the facts of isolated cases may appeal to their sentiments. An attempt by them to mold and bend the statute to suit individual cases according to their personal views of right and propriety would soon bring both courts and law into deserved disrepute and immeasurably greater evils would result. The judgment will be affirmed. Affirmed.