I am unable to concur in the conclusion reached by my associates in this case. I realize that ordinarily it is a waste of time and space to file an extended dissent. It is, however, a constitutional right of every member of this court to indicate the reasons why he is unable to agree with the majority. Sec. 101, State Const. This he perhaps should do to the end that his disagreement shall not be attributed to arbitrary caprice.
It seems to me that the decision of the majority is in the highest degree inequitable and unjust. It comes about, I think, partly because of a feeling that any other conclusion would set a dangerous *Page 825 precedent insofar as the rights of public corporations may become involved in litigation due to the conduct of their officers. It appears that the majority have refused to apply to the facts in this case well established principles of equity, deeming it unsafe to demand the same standards of fair dealing between a city and the citizen as are enforced in the ordinary business relations of private persons. I am wholly unable to appreciate a squeamishness in this regard which rests upon no more solid foundation than an imaginary danger that harm may result if we exact equitable and conscientious conduct from a municipal corporation when it is acting in a purely proprietary capacity, with the same strictness as we demand of an individual.
It is well to have clearly in mind — only by inference stated in the majority opinion — the full import of what the city is asking of a court of equity in this proceeding. The city of Williston is not exercising any attribute of sovereignty, as a branch of the state government, or in any sense acting in a governmental capacity. It comes into a court of equity asserting a purely proprietary right on the theory that its treasurer acquired an interest in real property in such circumstances that he now holds the title as trustee for the city. It is admitted that the city treasurer deposited its public funds in violation of specific statutes and took title to the property in suit in his own name for the purpose of securing such deposit. No question is made by any party to this action but that the treasurer must, under the facts disclosed, be deemed a trustee. The city, therefore, is in this court as it was in the trial court, enforcing a property right, and it must, in consequence, occupy the same position before the chancellor as a private suitor, were he attempting to assert a similar right. The city of Williston claims to be the real owner of the lien on the property in suit; it asks that a court of equity so decree to the end that the plaintiff may foreclose it. The city must submit to the jurisdiction of the court as if it were an individual seeking redress because of an infraction of ordinary property rights. Suppose a decree in favor of the city with foreclosure and ultimate title in the plaintiff. Suppose, further, that the city brought a suit in trespass as the owner of the property, or to recover the rents and profits for its use. Would anybody deny that in such a suit the city occupies precisely the same position as an individual vindicating identical rights? Most assuredly, no. There is no room for *Page 826 argument, and I do not understand that the proposition is contested, that the city of Williston is proceeding in a proprietary capacity and is not exercising any attribute of sovereignty. That being true, its right to the relief sought must be measured by the ordinary equitable principles. United States v. Bank of Metropolis, 15 Pet. 377, 392, 10 L. ed. 774, 779; United States v. Barker, 12 Wheat. 559, 6 L. ed. 728; Cooke v. United States, 91 U.S. 389, 23 L. ed. 237; Mountain Copper Co. v. United States, 73 C.C.A. 621, 142 Fed. 625; Denver R.G.R. Co. v. United States, 154 C.C.A. 372, 241 Fed. 614. In Walker v. United States (C.C.) 139 Fed. 409, it is said that it is the duty of the courts to withhold relief from the state when it comes into court as a party "except upon terms which do justice to the citizen or subject, as determined by the jurisprudence of the forum in like subject-matter between man and man." I take it that this principle is so well settled as not to require more extended discussion.
Much space is devoted in the majority opinion to a discussion of the question of estoppel. The conclusion is reached that in the circumstances no estoppel arose, and this holding is predicated largely, I believe, upon the fact that no formal resolution was adopted by the city commission approving the substitution of securities, notwithstanding the record, as I read it, indisputably shows that a majority of the members of the city commission approved of the substitution and knowingly permitted the Bank of North Dakota to believe that the exchange was acceptable to the city. The reluctance of the majority to apply the rules of equitable estoppel is, I think, based somewhat upon the feeling that it would be dangerous to enforce them against a municipal corporation. The law, however, is well settled that the state, and any of its branches, may be subject to the law of estoppel. As said by the circuit court of the seventh circuit in State v. Milk, 11 Biss. 197, 11 Fed. 397: "Resolute good faith should characterize the conduct of states in their dealings with individuals, and there is no reason in morals or law that will exempt them from the doctrine of estoppel." Denver R.G.R. Co. v. United States, supra; Folk v. United States, 147 C.C.A. 183, 233 Fed. 191. Estoppel is grounded on principles of universal justice; it commands, with an impartial voice, fair and honest dealing, with respect to property or proprietary interests, to all persons alike. United States v. Willamette Valley *Page 827 C.M. Wagon-Road Co. (C.C.) 54 Fed. 811; State ex rel. Douglas v. School Dist. 85 Minn. 230, 88 N.W. 751; St. Paul, S. T.F.R. Co. v. First Div. St. Paul P.R. Co. 26 Minn. 31, 1 N.W. 580, 49 N.W. 303; United States v. Midway Northern Oil Co. (C.C.) 232 Fed. 619; State v. Flint P.M.R. Co. 89 Mich. 481, 51 N.W. 103; and the principle of estoppel will be applied, as against the state, or its political subdivisions, where it is necessary to prevent injury or wrong. The state or the city, as such, has no right, merely because of the attribute of sovereignty with which it is invested, to inflict injury upon any person. I apprehend no danger from the application of these equitable principles against a public corporation in a proper case. Whether they shall be applied depends on the circumstances; and greater harm will result from rejecting than from enforcing them. Montevallo v. Village School Dist. 268 Mo. 217, 186 S.W. 1078; Quarles v. Appleton (C.C.A. 7th) 299 Fed. 508; Melin v. Community Consol. School Dist. 312 Ill. 376, 144 N.E. 13; Sullivan v. Tichenor,179 Ill. 97, 53 N.E. 561; Eau Claire Dells Improv. Co. v. Eau Claire,172 Wis. 240, 179 N.W. 2; Portland v. Inman-Poulsen Lumber Co.66 Or. 86, 46 L.R.A.(N.S.) 1211, 133 P. 829, Ann. Cas. 1915B, 400; State ex rel. Hunter v. Hesseville, 191 Ind. 251, 131 N.E. 46, 132 N.E. 588; Colorado Springs v. Colorado City, 42 Colo. 75, 94 P. 316; Otis Elevator Co. v. Chicago, 263 Ill. 419, 52 L.R.A.(N.S.) 192, 105 N.E. 338; Missouri River Teleph. Co. v. Mitchell, 22 S.D. 191, 116 N.W. 67; Washington Water Power Co. v. Spokane, 89 Wn. 149, 154 P. 329.
No question is made in the majority opinion with respect to the power of the city commission to agree to a substitution of "as good or better" security, had such approval been made by official action or resolution. The commission has "control of the property and finances of the corporation;" they may "purchase, hold or convey any estate, real or personal, for the use of the corporation." Comp. Laws 1913, §§ 3834, 3599, 3861, and 3818. The city commission clearly had the power to dispose of, "for the use of the city," any lien on or interest in real property in which the city acquired an interest by reason of the misconduct of its treasurer; and they had the power to convert it into money. When the commission believed, as the majority of the commissioners evidently believed in this case, that it would be to the *Page 828 advantage of the city to keep open and functioning a bank in which it had a large deposit, they had the power to agree that an equitable interest which the city had acquired in real property, through the unlawful acts of one of its minor officers, be converted into legal form and to accept other securities of equal or greater value, when so doing would, or was fairly calculated to, save the depositary from collapse, to render certain that which was doubtful or uncertain, and to avoid the costly embarrassments to the city and its citizens which ordinarily follow a bank failure. To hold otherwise would be to say that the city commission was powerless to take advantage of circumstances enabling the city to make an advantageous business deal with respect to a purely proprietary matter. No other body can act for the city but the commission.
Whatever interest in the city real estate vested in the plaintiff by reason of the unlawful deposit and the taking of the security by the treasurer in his own name, vested in it as an entity for the use of the corporation; it held such interest in its private or proprietary capacity; the city did not hold such interest for the "public use and benefit of its citizens." As to the former class of property "the power of the corporation to dispose of it is unquestioned." City Nat. Bank v. Kiowa,104 Okla. 161, 39 A.L.R. 206, 212, 230 P. 894. "Property held by a municipal corporation in its private or proprietary capacity, since such property is not subject to the control of the state to any greater extent than the property of a private corporation, may be alienated without the consent of the legislature, although in this connection the courts limit the private and proprietary powers of a municipality very closely." 19 R.C.L. 773.
"Municipal corporations possess the incidental or implied right to alienate or dispose of the property, real or personal, of the corporation, of a private nature, unless restrained by charter or statute." 3 Dill. Mun. Corp. § 991.
In the case at bar circumstances were of an exceptional nature. The interest of the city was equitable only; its value and extent might be open to controversy and doubt. By the agreement with the Williams County State Bank to accept a security of definite value, with the interest of the city therein clearly fixed in law, the city commission would be rendering certain that which was uncertain and indefinite. *Page 829 The situation is not one of mere barter, but a transaction which would be commended as proper and eminently sagacious in the ordinary business intercourse of men. There can be no doubt of the power of the city commission to make the substitution by formal action; nor do I understand that this claim of right is challenged by any member of this court. Certainly, the power is not contested in the opinion filed by the majority.
The majority of the governing board of the city of Williston were active in procuring the loan. This fact is established by undisputed evidence; and it is proved by the testimony of the city officers themselves.
The city had a deposit, in part lawfully, in part, unlawfully made, in the Williams County State Bank; it, and its officers, were properly interested in the solvency of that institution. Not only did the officers have the power, but it was their duty to protect the interests of the city by timely concern over the affairs of a depositary of its funds which they knew to be tottering on the verge of insolvency. Davidson, a member of the city commission, in February, 1923, sought a loan from the Bank of North Dakota, for the State Bank. Davidson and Craven, the latter, president of the city commission, went to Minot requesting a loan for the bank from the guaranty fund commission; and Davidson, on Saturday, May 19th, when he learned that the affairs of the State Bank had reached a crisis, telephoned C.R. Green, the Manager of the Bank of North Dakota, and asked him to come to Williston to confer with interested parties, with the view to saving the bank from collapse. Green came because of this call, and not otherwise. At the conference on Sunday, held in the office of the president of the city commission, following the arrival of Green, city commissioners Davidson and Craven were present. The situation was discussed from every angle, including the interest of the city as a depositor. Both Davidson and Craven, at the Sunday and Monday conferences, spoke as representatives of the city and as protectors of its interests; they and Ludowese, its treasurer, said, in substance, that they could not agree to any release of the city's claims against the treasurer, or his sureties, or any course that would detrimentally affect the interests of the city. They never said that the city would not agree to an arrangement fully protecting the interests of the city. *Page 830 This was thoroughly understood by all parties present. They did not intend to give up any rights the city had, to its detriment; nor did Green or Desmond suggest or expect that any such surrender or release be made. At the Monday conference, also held in the office of the president, which, it is conceded was a continuation of the Sunday meeting, Commissioners Craven, Davidson, and Bradley, were present. Again the matter was fully discussed; again the city's interests were represented and fully protected by a majority of its governing board. They refused, properly, and with a conscientious regard for the city's rights, to agree to any release that would result in loss to the city. At both meetings the treasurer was present and he says, without contradiction, that he stated at these conferences that there would be no release of the city's real property unless and until as good or better security was substituted. There never was an intimation, from any source, that the city would in no circumstances agree to release its equitable interest for legal security fully protecting its rights in the premises. Green was entirely justified in assuming that these officials took part in the preliminary conferences as representatives of the city of Williston, which was interested as a depositor in the continued operation of the Williams County State Bank, and as the beneficiary of a trust relation that arose because of the conduct of its treasurer; and certainly the record is devoid of evidence even hinting that these officials did not make it plain that they would consent to no arrangement which would adversely affect the city. Clearly, as far as Green could see, they represented the city while the negotiations were in progress. Moreover, the record contains no hint that the city was in fact damaged by the substitution effected.
It thus appears not only that the officers of the city of Williston were active in procuring the loan from the Bank of North Dakota to the Williams County State Bank, but that to some extent they directed the preliminary conferences and were, on the main question discussed, namely: that of making the city property available as security, the dominating figures therein.
It must not be forgotten that Green, as the manager of the Bank of North Dakota, came to Williston at the request of one of the members of the city commission; that he went to that city not as a suppliant for an opportunity to make a loan on doubtful security, but rather as *Page 831 one who was willing to help to the utmost extent consistent with the safety of the funds under his control. Neither must it be forgotten that Green, according to the undisputed testimony of the plaintiff's own witnesses, stated positively that the Bank of North Dakota would make no loan unless secured by the property in question. That was his ultimatum; that was the condition which in any event must be met. This was fully known to and understood by the majority of the commissioners, all of whom were anxious that the loan be made; and how this city property could be made available constituted the main, if not, the sole and only problem before the two meetings. Green, as Manager of the Bank of North Dakota, was custodian of public funds under circumstances requiring of him the most scrupulous regard for their safety; his duty in that regard was not different in quality or degree from that owed by the officers of the city of Williston with respect to its funds on deposit in the Williams County State Bank. Any loss resulting in either case must be met by the taxpayers, in the latter instance, by the taxpayers of the city of Williston, in the former, the taxpayers of the State of North Dakota. The decision of the majority robs Peter to pay Paul.
So far it clearly appears that the majority of the individual members of the governing board of the plaintiff city were actively engaged in inducing the Bank of North Dakota to make the loan, which the latter now claims was secured by a lien on the property in suit. I think, also, it has been demonstrated that the officers were acting infra vires in the performance of their official duties in resorting to all lawful means in order to prevent the closing of the Williams County State Bank, in which the public funds of the city were deposited, and in protecting it from loss due to the unlawful deposit. They wished to avoid the expensive complications resulting from such a catastrophe. I have also called attention to the fact that the city is in court in a proprietary character and must rest its right to judgment upon the same equitable principles as if the suit were between private citizens. The real question then is whether the governing officers of the city of Williston so conducted themselves with reference to the property in suit, as to justify the Bank of North Dakota in believing that a satisfactory agreement respecting the security had been effected, between the plaintiff and the Williams County State Bank, and that *Page 832 the city real estate would be made available if the loan were made. On this question of fact, no doubt can be entertained. Green had unequivocally stated the only condition on which the loan would be made; this was known to the majority of the city commissioners and to the treasurer of the city; conferences were held with the view to obtaining a satisfactory substitution of securities without loss or damage to the city; other securities were in fact substituted and accepted as satisfactory by the treasurer, as well as by Commissioners Bradley and Davidson, and apparently without dissent from if not with the actual consent of Commissioner Craven. City Commissioner Davidson, who attended all the conferences and had stated publicly, in the presence of Green, that nothing would be done to jeopardize the city's interests, on Monday, after the conference on that day was concluded, notified the latter that a satisfactory agreement had been reached and that a substitution had been or would be effected, whereupon Green authorized the making of the loan. These are facts testified to by the officers of the plaintiff and are entirely undisputed. I am unable to understand on what possible theory, were the parties to this lawsuit private corporations, it could be contended that the plaintiff had not, by the conduct of its officers, acting within the scope of their authority, misled the defendant into a course of conduct highly prejudicial if the plaintiff be now permitted to change front, abandon the position taken by its officers, and to repudiate completely everything they said and did while the preliminary negotiations were in progress. Obviously, upon the most elementary principles, equity would say to a private citizen: "you are estopped now from asserting the direct contrary of that which you represented and in reliance upon which the defendant changed its position to its detriment."
The trial court found as a fact, among other things, that Ludowese accepted the conveyance of the city real estate and the assignments of the rentals thereof "for the sole benefit of the city of Williston and the said property, together with the said deed of conveyance, as well as the assignment of rent thereof, were so taken and held in trust only by the said N.B. Ludowese, solely for the benefit, as aforesaid, of the city of Williston." Then, in finding four, the court found as a fact that the Bank of North Dakota and its manager, C.R. Green, "had full and actual notice and knowledge of all the facts aforesaid, including *Page 833 the facts of the wrongful and unlawful deposit of the said $17,580.23, of the public funds of said city of Williston, by N.B. Ludowese, as its treasurer, in said Williams County State Bank, and of the execution and delivery by said Bank to said Ludowese of the said warranty deed and the assignments of rents, . . . solely as security for the re-payment of the deposit to thecity." It is held in effect, in the majority opinion, that this finding has sufficient support in the evidence, and it is, in part at least, the basis of some of the conclusions therein reached.
Such being the facts, I am wholly unable to understand on what the suggestion can be based that the Bank of North Dakota was not concerned with the concurrence of the officers of the city in the proposed exchange of securities, but was satisfied if arrangements acceptable to treasurer Ludowese could be made. City Commissioners Davidson and Craven, as well as treasurer Ludowese, protest at different places in the record that they made known to Green their unshakable resolve that the city must in no event suffer loss and that they would agree to nothing detrimental to the city's interests. This attitude was clearly understood by Green, according to the findings of the trial court, which are made the basis of the prevailing opinion in this case. When, therefore, Green was assured by a member of the commission who had taken an active part in the meetings, and Desmond was assured by Ludowese, who also had taken an active part in the meetings, that satisfactory arrangements had been made, he was justified in supposing that the arrangements were satisfactory to the representatives of the city as well as to Ludowese. From the standpoint of equity, it is immaterial that a meeting of the commission was not suggested or requested by Green. Upon the face of the record, and in view of the explicit findings of the trial court, Green understood and knew that the city had a claim upon this property which the officers would not permit to be surrendered except in circumstances fully protecting the interests of the city; when he was informed by city officials that an agreement of exchange had been made, he understood, of course, that it was an agreement fully protecting the property rights of the city, and wholly satisfactory to the city officials who theretofore had avowed the utmost solicitude for the city's rights in the premises.
It is not open to question, as I have pointed out heretofore, that the *Page 834 officers of the city would have the power and the authority to take any necessary steps to protect the interests of the city when endangered by the act of its treasurer in depositing its funds contrary to law. The officers would have the power to take securities, or make any other reasonable arrangements with reference to the transaction which in their judgment seemed advantageous to the city in the circumstances. They were dealing with a proprietary matter, and would have the same power as the governing board of a private corporation in that regard, subject to the express or implied limitations of statutory provisions. Through no other body can the city act or deal with such an emergency. The officers have a certain discretion in such matters which must be exercised in the interest of the city.
The evidence indisputably shows that the value of the security substituted for the property in question was approximately $18,000; what the value of the property in suit was, does not appear. The inference is necessary from all the testimony, including that of Davidson, and Ludowese, that the city property was not worth more but might have been worth less, because these witnesses testified that no release would be permitted or sanctioned unless as good or better securities were substituted. They would agree to a release under no other circumstances; this is true of Davidson, Ludowese, and by necessary inference, of Commissioner Bradley. Commissioner Craven made no protest or objection. The presumption, therefore, is that the exchange of security did not result in damage to the city or in any way detrimentally affect its interests. Bradley was one of the signers of the guaranty given Ludowese, at the time the substitution was agreed to. He knew its purpose and thereby manifested his approval of the transaction. He attended the Monday conference when all the matters considered at the Sunday meeting were again discussed. He was fully informed of the situation in all its details. He approved of the substitution and his activity in the transaction is as clearly established as is that of Davidson, Craven and Ludowese. The record does not disclose or suggest that any damage whatever resulted to the city from the exchange.
It is true that the city commission did not pass a formal resolution authorizing the substitution of securities. In view of the undisputed evidence, this was not a necessary prerequisite to the right of the defendant *Page 835 to invoke against the plaintiff the principle of equitable estoppel. The very essence of estoppel is the obligation of man to do that which commends itself as just and fair to the conscience; it is the Golden Rule reduced to legal phrase. One may be estopped by word or deed; by non-action as well as by action. He who is silent when he should in good conscience, speak; or is indifferent when he should be active, may not afterwards, when another has relied upon his conduct, dispute to the latter's material detriment, the inferences which in morals that other was justified in drawing from such conduct. The conduct which thus may give rise to an estoppel in pais need not be garbed in any legal or technical formality. We are not aware that a formal action by the governing body of the municipality was deemed essential in any case where the doctrine of estoppel has been successfully invoked against the state, or any of its political subdivisions. In Quarles v. Appleton, 299 Fed. 508 (Circuit Court of Seventh Circuit) the estoppel was based upon the allegations of a complaint in another action brought by the city attorney.
Presumably he was authorized to bring that action, but there was no showing to that effect and no suggestion that such showing was necessary. In Bridges v. Grand View, 158 Iowa, 402, 139 N.W. 917, there had been no formal action taken by the public authorities. The basis of the estoppel in that case was "the conduct of the citizens and its officers." In Portland v. Inman-Poulsen Lumber Co. 66 Or. 86, 46 L.R.A.(N.S.) 1211, 133 P. 829, Ann. Cas. 1915B, 400, the basis of the estoppel against the city was a representation by the mayor that if streets through certain property existed "they were of no use and would never be claimed by the city." After a person had made improvements in reliance on this representation the court held the city estopped from opening a street through the property to the damage of the owner. This, of course, is a case much weaker on the facts than is the case at bar. See also St. Joseph v. St. Joseph Terminal R. Co. 268 Mo. 47, 186 S.W. 1080, and cases cited therein.
In Dillon's Mun. Corp. vol. 2, § 643, it is said: "Any positive acts (infra vires) by municipal officers which may have induced the action of the adverse party, and where it would be inequitable to permit the corporation to stultify itself, by retracting what its officers had done, will work an estoppel." (Emphasis is mine.) In Logan County v. *Page 836 Lincoln, 81 Ill. 159, the court says: "Before the doctrine of estoppel can be invoked, there must have been some positive acts by the municipal officers which may have induced the action of the adverse party, and where it would be inequitable to permit the corporation to stultify itself by retracting what its officers had done." No one questions that in the instant case the making of the loan was induced by the positive representation of the municipal officers that the city real estate had been made available as security because a satisfactory exchange or substitution had been effected.
I have found no case in the books where it would have been so grossly inequitable to refuse to apply the doctrine of estoppel, as it is in the case at bar. The city officers themselves testify that the city property was forthcoming as security; then one of them, the next day, informs him that a satisfactory substitution had been effected, and the loan is made. To now permit the city to retract that which its officers then did is to sanction an outrageous legal fraud on the defendant.
Attempt is made to bolster the decision of the majority by suggesting that the officers of the city who took an active part in the negotiations preliminary to the loan, were interested in keeping the local bank open. Doubtless these officers, all business men of the city of Williston, realized that the economic shock resulting from a bank failure would be detrimental to the community, and, hence, resorted to all legitimate methods within their power to prevent it. The record shows that such "interest" was shadowy and wholly indirect — merely such as any banker or business man might feel as a member of the body politic. There is, moreover, a complete answer to the dual aspect in which such suggested interest may be viewed. In the first place, the record is devoid of a scintilla of proof that the city was or would be damaged in any degree by the exchange of securities. From this standpoint the notion of adverse interest is far fetched and entirely fanciful. In the second place, if it be suggested that this adverse indirect interest should have called forth greater vigilance on the part of Green to satisfy himself that the municipal authorities had in fact formally agreed to the substitution, the answer is that the attitude of these officers had uniformly been — this was frequently and pointedly emphasized in the presence of Mr. Green — that they would consent to nothing detrimental to the city's interests; and that two of these very officers, whose solicitude *Page 837 for the city's interest had been often voiced in the presence of Mr. Green, gave him express notice that an agreement satisfactory to them had been reached. Green accepted at its face value the conduct and the representations of these officers, upon a matter infra vires, changed his position accordingly, and now this court says that the city may repudiate the entire transaction notwithstanding it does not show or suggest the slightest detriment or damage from permitting the transaction of exchange to stand. Such a conclusion, I respectfully submit, is indefensible on legal or moral grounds.
There is some discussion in the majority opinion in which it is intimated that there is no substantial difference between a time deposit and a loan. I do not believe it necessary to decide this point; nor am I prepared to concur in the suggestion that no difference exists. The entire course of legislation, since statehood, upon the subject of municipal funds and their safe keeping, indicates to my mind that the legislature had in view some distinction between a time deposit and a loan, notwithstanding that distinction may nowhere be expressly defined. The deposit of public funds on time has been consistently permitted, under statutory safeguards; while theloaning of public money, has been as consistently prohibited. Indeed, an official who loans public funds under his control is guilty of embezzlement. Comp. Laws 1913, § 9930. A distinction between a deposit and a loan is clearly implied in the Guaranty Fund Act where one is within and the other without the purview of the law. *Page 838