Maryland Savings Institution v. Schroeder

StepheN, Judge, delivered the opinion of the court. In deciding upon the question presented by the appeal to , this court for adjudication, we do not deem it necessary to form or express an opinion relative to the power of the corporation under its charter to make the conversion of the appellee’s deposites into stock, because we think that the decision of the court below awarding the injunction is unsustainable upon other grounds, and is in conBict with the soundest principles of equity jurisprudence. ■ An application to a court of Chancery in a case like this, for the exercise of its prohibiting powers, or restrictive energies, must come recommended by the dictates of conscience and be sanctioned by the clearest principles of justice. We are told by Mr. Maddox, in his treatise on the principles and practice of the court of Chancery, in 1 vol. 104, that an injunction is a prohibitory writ, specially prayed for by a bill in which the plaintiff’s title is set forth, restraining a person from committing or doing an act, (other than criminal acts) which appears to be against equity or conscience. This being the character of the writ and the grounds upon which it ordinarily issues, it becomes necessary to inquire, whether the granting of it in this case was calculated to subserve the purposes of justice, and to prevent the commission or doing of an act against the principles of equity and conscience. We think that an attentive examination of the prominent features and circumstances of this case, will leave but little doubt as to the conclusion proper to be drawn as the result of such an inquiry. So far from the complainant having a right to the relief which he asked at the hands of the court of Chancery, we think that there is not any ground of equity in his case, and that his conscience is bound by an equitable estoppel, if not from questioning the right of the corporation to make the conversion of his weekly deposites into capital stock, as a fund for the pavment of its debts, at least it is so bound [107] from making any attempt, to shield the fund so created from a liability to the payment of debts contracted with the institution upon the faith of its responsibility; and more especially as it clearly appears, his interest has been essentially promoted in the shape of dividends by the credit attracted to the institution, in consequence of such conversion. It would no: certainly comport with the principles of equity and fair dealing, to permit the appellee to hold out false colours to the world, and by attracting the public confidence to the institution, to realize to himself large profits in the form of dividends on his stock, pledged as a security to the creditors of the corporation, and then to call in aid the powers of a court of equity to protect his interest in said stock from a liability, to which he had voluntarily subjected it, and by which liability he and his associates had been essentially benefitted. We say voluntarily subjected it, because the allegations of the bill to the contrary, are in this respect flatly and pointedly contradicted by the answer. It must be borne in mind, that the order for an injunction from which this appeal has been taken, was granted by the Chancellor, not upon the case alone as made by the bill, but upon the bill and answer as well of the corporation or body politic under its corporate seal, as of the president and directors in their private and individual capacities under oath. If therefore the injunction is to be sustained, it must be upon the case as made by the bill and answer, and not by the bill alone. The object of the injunction appears to have been, and its effect and operation, are to prevent the officers of the corporation from paying the special depositors, or receiving their certificates of deposites in payment of debts due to the institution. How far it is warranted by the principles of equity.and conscience in such its operation upon their rights and interest, it is the duty of this court now to examine and declare, and we think that in a court of conscience at least, but lidie doubt can be entertained upon the subject. It is an unyielding and inflexible principle of the court of Chancery, that he who seeks equity ought to be prepared to do equity. Before therefore, the [108] complainant can enlist the countenance of a court of equity in his favour, he must be prepared to render to these depositors, that full measure of justice which the principles of equity and conscience demand at his hand. Does his standing before this court, and the relief which he prays in his bill exhibit him in that character and attitude? We think it does not, and that the injunction which issued in this case ought not to have been granted. Numerous cases analogous in point of principle to the one now before this court, may be extracted from the books of equity decisions. They are all decided upon the ground of fraud and imposition, and are intended to uphold and enforce the principles of good faith and fair dealing in the transactions and intercourse of man with man. A striking and impressive illustration of this doctrine of the court of equity upon such subjects, may be found in 2 A tk. 72, where Lord Hardwick, that great luminary of the court of Chancery says, there are several instances where a man has suffered another to go on with building upon his ground, and not set up a right till afterwards, when he was all the time conusant of his rights, and the person building had no notice of the other’s rights, from which the court would oblige the owner of the ground to permit the person building to enjoy it quietly and without disturbance. Speaking of the same rule of equity, Chancellor Kent, in 6 John. Ch. R. 168, says, where one having title acquiesces knowingly and freely in the disposition of his property for a valuable consideration by a person pretending to title, and having colour of title he shall be bound by that disposition of the property, and especially if he encouraged the parties to deal with each other in such sale and purchase. It is deemed an act of fraud for a party conusant all the time of his own right to suffer another party ignorant of that right to go on under that ignorance, and purchase the property or expend money in making improvements upon it. In 1 John. Ch. R. 354, Chancellor Kent, speaking upon the same subject says, there is no principle better established in this court, nor one founded on more solid considerations [109] of equity and public utility, than that which declares, that if one man knowingly, though he does it passively by looking on, suffers another to purchase and expend money on land under an erroneous opinion of title, without making known his claim, he shall not afterwards be permitted to exercise his legal right against such persons. It would be an act of fraud and injustice, and his conscience is bound by this equitable estoppel. C We think that the principle established by these decisions has a considerable bearing upon the merits of this case. The appellee after having consented that his deposites should be converted into stock, as a fund or security for the debts of the institution, and after having encouraged their special depositors to deal with the institution upon the faith of such responsibility, now endeavours to withdraw the fund from the pledge and liability to which he had voluntarily subjected it: and claims to stand in a court of equity upon an equal footing with them in the teeth of such, his solemn engagement to the contrary. We think in the language of the authority just referred to, that it would be an act of fraud and injustice in him ; that his conscience is bound by an equitable estoppel. Whether the corporation had a right to make the conversion against his will and consent, under the powers derived from their charter, it is not necessary now to decide; nor do the merits of this controversy depend upon the solution of that question. The agreement to convert is to be received as a contract with each depositor, who trusted his money to the corporation upon the faith of it, that his stock should be liable to such depositor as a fund for the payment and satisfaction of his claim. To such purpose the stock of the appellee must be considered as voluntarily dedicated by him; and it would we think, be repugnant to the soundest principles of equity and justice to sanction the attempt which is now made, to wrest it from the destination and purpose for which it stands pledged by his own solemn engagement, and thereby inflict a most serious injury upon those whose only fault has been a misplaced confidence in the sincerity and inviolability [110] of his promises and professions. To such an attempt, we think that a court of Chancery in the exercise of its equity powers ought to lend no assistance; and that such a suitor should be turned from its doors to seek redress any where, rather than in a court of conscience. Why is it that a court of equity decrees the specific execution of a parol agreement on the ground of part performance, and notwithstanding the express provisions of the statute. It is on the ground of fraud in refusing to perform after performance by the other party, and to prevent the statute from being an engine of that fraud, which it was the object and policy of its enactment to prevent. Upon the whole we are clearly of opinion, that whether the corporation had the right to convert the weekly deposites into capital stock or not, still we think that the injunction under the circumstances of this case should not have been granted, and that the order granting the same ought to be reversed. We consider the fund arising from this conversion of the weekly deposites into stock by the depositors with their own consent, to be in the hands of the corporation as trustees for the special depositors as creditors of the institution, they having become such upon the faith of it, and that a court of equity ought not to interpose to withdraw it from the destination to which it has been thus solemnly pledged. ORDER REVERSED.