Freeman v. Conover

The opinion of the court was delivered by GuMMEEJG, OTHER JusiiCB. The material facts found by the jury in this case are as follows: In March, 1906, one Isaac Williams was the owner of eighty shares of stock of the United Water Supply Company. At that time he delivered these certificate? to the defendant, Conover, as collateral security for a debt which he owed him. A year later Williams assigned this stock to George Freeman upon condition that the latter should pay the debt to secure which the defendant held the stock as collateral. Freeman paid this debt, and au — 90 — thorized the defendant to sell the stock for his (Freeman’s) account. Afterward, in January, 1910, Freeman assigned the stock to the plaintiffs. Prior to the making of this-assignment, however, and in 1908, the defendant sold the stock to one Plillery, receiving therefor $3,200, but concealed this fact from George Freeman during his lifetime and from the plaintiffs after the death of George, which occurred late in 1910. In February, 1911, the plaintiffs notified the defendant that they were the owners of the stock and requested him to turn over the possession of it. Instead of informing them of the sale he stated to them that the stock was in his safe, that he would hunt it up and return it to them. 'This, of course, he did not and could not do, and, in response to subsequent demands for the surrender of the stock, persisted in saying that the certificates were in his possession, although he had not been able to locate .them among his papers, but that he would soon do so and turn them'-over to the plaintiffs. At no time did he inform them that the stock had been sold, and the plaintiffs did not discover that fact until shortly before tins suit was instituted, which was in; September, 1916. By it the plaintiffs seek to recover from the defendant the amount of the purchase-money paid by Hillery for the stock, with interest thereon from the date of payment. The trial resulted in a verdict for the plaintiffs and the defendant appeals. Among the defences set up, as a bar to the plaintiffs’ right of action, was the statute of limitations. In dealing with this defence the court charged the jury that, although the action was not brought until 1916, eight years after the sale of the stock, if they should find (as they did) that the defendant represented to the plaintiffs that he had the stock in his possession, that the plaintiffs relied upon tliis representation, and that it induced them to refrain from bringing suit prior to the time when the statute normally became a bar, then the defendant was estopped from pleading the statute of limitations, and that they should disregard this defence. The principal ground upon which we are asked to reverse the judgment is rested upon this instruction to the jury which, it is insisted, is erroneous. — 91 — In the instruction complained of the trial judge followed the decision of the- Supreme Court in Crawfod v. Winterbottom, 88 N. J. L. 588. In that case the plaintiffs were induced to refrain from beginning suit within the time required by the statute by reason of the fact that the defendants induced them to enter into negotiations for a settlement, with the fraudulent and corrupt intent of inducing them to defer bi’inging their suit until the statutory time had expired. It was held that the defendants, were estopped by their false and fraudulent conduct from setting up the statute of limitations as a bar to the plaintiff’s action. But, in our view, Crawford v. Winterbottom was wrongly decided. It is in opposition to the doctrine declared in Freeholders of Somerset v. Veghte, 44 Id. 509, a case which has. frequently been cited with approval, which has never been, subjected to adverse criticism, and which, in our view, lays down correctly the principle applicable to cases like that now before us. In that case the freeholders sought to recover from Veghte moneys which had been, received by him as collector of the county, and fraudulently converted to his own use. Veghte pleaded the statute of limitations. The freeholders replied that he had fraudulently concealed the embezzlement, and that it had not been discovered until within six years next before the commencement of the action. The question for determination was whether the fraudulent concealment for a period of more than six years after the cause of action had accrued was a. bar to the defendant’s right to plead the statute. In discussing the question the court cites with approval the following statement of Chief Justice Hornblower in Thorpe v. Corwin, 20 Id. 311: “The statute of limitations makes the lapse of time a positive and legal bar. When once it has begun; to. run. against a person under no legal disability, it pursues its course uninterrupted by any subsequent events; and when the period prescribed by the statute has elapsed, the bar is complete, and its force can neither be strengthened nor impaired by anything that has happened in the meantime. * * * The statute leaves nothing for presumption. Time alone settles the rights of the parties by the giant force of the statute.” — 92 — The opinion then points out that the statute of limitations contains various express exceptions from the operation of its provisions, and declares that when the legislature itself has expressly provided what facts shall take a given ease out of a statute, courts of law are not permitted to engraft ujDon it other exceptions not contained therein, however inequitable the enforcement of the statute, without such exceptions, may be. It is to be noted that the court, after saying that the force of the statute could not be impaired by anything that has happened after once it began to run, and that courts of law could not read into it exceptions other than those expressed by the legislature in the statute itself, declared that the doctrine of estoppel had been applied to prevent a resort to the defence of the statute of limitations even at law, and referred to the case of Quick v. Corlies, 39 N. J. L. 11, in support of this declaration. As we read the cited cáse the court clearly misapprehended the basis of its decision. The suit there was upon a sealed bill wherein Corlies contracted to pay Quick the sum of $500, and the writing contained the provision that “It is not to outlaw by the statute of limitations, value received.” The qriestion for decision was whether this provision of the contract was a bar to the defendant’s right to plead the statute, the argument on the part of the defendant being that a private agreement which attempted to avoid the express terms of the statute was against the policy of the law. The court said: ‘The general rule is that no contract or agreement can modify a law, but the exception is, that where no principle of public policy is violated, parties are at liberty to forego the protection of the law. Statutory provisions designed for the benefit of individuals may be waived,’ but where the enactment is to secure general objects of policy or morals, no consent will render a non-compliance with the statute effective. This statute, limiting the time within which actions shall be brought, is for the benefit and -repose of individuals and not to secure general objects of policy or morals. Its protection maj, therefore, be waived by those who assent in legal form, and when acted on such waiver becomes an — 93 — estoppel to plead the statute.” The use of the word “estop-pel” at the end of this citation was unfortunate. What the ease really decides is, that when a defendant, for a valuable consideration, agrees to waive the protection of the statute, and the agreement is acted upon by his adversary, it will be recognized as valid in a court of law and will be considered as a complete answer to a plea setting up the bar of the statute. In other words, the estoppel spoken of is an “estop-pel by contract” (assuming that the law recognizes such an estoppel) and not an estoppel in pais. The writers both of text-books and of opinions frequently use the words “waiver” and “estoppel” as synonymous. But this is quite inaccurate. By “waiver” is meant the act of intentionally relinquishing or abandoning some known right, claim or privilege. For instance, a defendant may waive the protection of the statute of limitations by express agreement, as in the case of Quick v. Corlies, or he may do it by necessary implication, by failing to plead the statute as a defence. The doctrine of estoppel in pais rests upon the ground of fraud; in other nurds, upon the principle that where anyone has done an act, or made a statement, which it would be a fraud on his part to controvert or impair, because the other party has acted upon it in the belief that what was done or said was true, conscience and honest dealing require that he be not permitted to repudiate his act or gainsay his statement. In the Yeghte case the grounds upon which the doctrine of equitable estoppel rests were clearly present. His fraudulent act in concealing the fact that the plaintiff had a cause of action against him was the inducing cause of its failure to institute its action within the statutory period. The situation, in its legal aspect, did not differ from what it would have been if Yeghte had stated to the board in express terms that his accounts were straight, and that he did not owe the county a dollar, and the board had accepted that statement as true. The doctrine equally applies whether the fraud of the defendant consists of an act of concealment, or an actual misrepresentation of a fact. The basis upon which the decision was rested is that the legislature has not seen fit to ex — 94 — cept from the operation of the statute eases where the party against whom the statute normally runs has been induced by the fraudulent conduct of his adversary to postpone the bringing of his suit until after the statutory period has elapsed; and that courts of law are not justified in reading into the statute exceptions which are not contained in it. But, as was pointed out in tire Veghte case, although the fact that the fraudulent act or representation of the defendant which induces delay in the bringing of his suit by the plaintiff is no bar to the plea of the statute in an action at law, appropriate and adequate relief under such circumstances may be afforded the plaintiff by an application to the Court of Chancery. Under our s}stem of jurisprudence there exists in that court an inherent power to prevent one from exercising even his rights — whether existing at common law or created by statute — when by his fraudulent conduct he has made it inequitable that he should be permitted to exercise those rights. Lincoln v. Judd, 49 N. J. Eq. 387, and Holloway v. Appleget, 55 Id. 583, are cases where our Court of Chancery exercised that power bj restraining a defendant from using the statute of limitations as a defence under circumstances quite similar to those present in the case now before us; and the decision in the latter case was affirmed by this court. Other grounds of appeal were relied on as additional reasons for reversing this judgment. They do not seem to us to be of sufficient importance fa> require discussion. It is enough to say, in disposing of them, that we have examined them carefully and find them to be without merit. The judgment under review will be reversed.