On Appellants' Motion for Rehearing. I have considered all the assignments of error presented by the appellants, and except as herein stated, I concur with the disposition made thereof by Associate Justice RANDOLPH in his original opinion herein, and concur in the disposition made of this appeal in reversing the judgment and remanding the case for another trial, because of the error of the trial court in refusing to submit to the jury the issue of E. B. Johnson's negligence in surrendering the escrow notes without further inquiry, and by reason of the error of the trial court in placing upon Sugg the burden of proof to show that he was not guilty of negligence in surrendering the note and deed of trust to Ben Johnson.
The court having submitted to the jury the question of negligence or not, on the part of Sugg in delivering the note and release to Ben Johnson, then, as requested by the appellants, the court should have submitted the question of whether or not E. B. Johnson was negligent in delivering to Ben Johnson the three notes held in escrow without making further inquiry as to the payment of the $50,000 note. The note in question was payable at the Chickasha bank, where E. B. Johnson saw it in the hands of Ben Johnson, the managing officer of such bank, and E. B. Johnson knew of the relationship existing between Sugg and Ben Johnson, and knew of Ben Johnson's intention of procuring the money from Minneapolis parties with which to finance the purchase of the one-half interest in the ranch and discharge the Sugg note. In the light of these facts, it became material as to whether E. B. Johnson actually relied upon the note and release in the hands of Ben Johnson, and, if so, was he negligent in relying thereon without making further inquiry as to whether the note had actually been paid by Ben Johnson. Corpus Juris, vol. 21, § 175, pp. 1169, 1170; Herman on Estoppel, § 969, p. 1092.
I do not concur, however, in the holding, as stated by Justice RANDOLPH in the original opinion and opinion on motion for rehearing, that under the evidence Sugg was not, as a matter of law, estopped from denying, in so far as E. B. Johnson was concerned, that the $50,000 note had been paid and the lien released. The letter inclosing the note, deed of trust, and release, which was written by Kirkpatrick at the request of Sugg and as his agent, was addressed to Ben Johnson, although it is not clear as to whom the envelope containing same was directed. That the note, deed of trust, and release were in the possession of Ben Johnson, the principal obligor, and by him exhibited to E. B. Johnson, is not controverted. The case having been tried, apparently, upon the theory that if Sugg was estopped, it was estoppel in pais, or equitable estoppel in which the question of negligence on the part of Sugg became a material issue, and the issue of whether Sugg was guilty of negligence in sending the instrument to Ben Johnson having been submitted to the jury and having been answered in the affirmative, and the evidence being sufficient to support such finding, and such finding being equivalent to a finding that the instruments were sent to Ben Johnson, the assignment of error of appellants to the submission of the issue to the jury should be overruled, and this, although the evidence does not show that Sugg had any intention that Ben Johnson should exhibit such instrument to E. B. Johnson, or that E. B. Johnson should act thereon to his detriment.
Estoppel in pais, or equitable estoppel, may be based upon negligence, and it is not essential that the party estopped should have intended by his acts that the injured party should act thereon, nor is his bad faith or intentional moral wrong necessarily a matter of consequence. See Pomeroy's Equity *Page 716 Jurisprudence (2d Ed.) § 811, where the rule is stated as follows:
"It has frequently been said, in most general terms, that the conduct amounting to a misrepresentation, in order to constitute an estoppel, must be done with the intention, by the one who is estopped, that it shall be acted upon by the very person who claims the benefit of the estoppel, or, as is sometimes said, that it shall be acted upon by another person. In short, there must always be the intention that the conduct shall be acted upon either by some person, or by the very person who relies upon the estoppel. While such intention must sometimes exist, and while the proposition is therefore true in certain cases, it would be very misleading as a universal rule. In many familiar species of estoppel no intention can possibly exist. The requisite, as applicable to them, is well expressed by an eminent judge in a recent decision: It is not `necessary in equity, that the intention should be to deceive any particular individual or individuals. If the representations are such, and made under such circumstances, that all persons interested in the subject-matter have the right to rely on them as true, their truth cannot be denied by the party that has made them against any one who has trusted to them and acted on them. * * * Where a man makes a statement in a manner and under circumstances such as he must understand those who heard the statement would believe to be true, and if they had an interest in the subject-matter would act on as true; and one, using his own means of knowledge with due diligence, acts on the statement as true, the party who makes the statement cannot show that his representation was false, to the injury of the party who believed it to be true, and acted on it as such; that he will be liable for the natural consequences of his representation, and cannot be heard to say that the party actually injured was not the one he meant should act,' citing Horn v. Cole, 51 N.H. 287, 12 Am.Rep. 111, per Perley, C.J."
There is a theory which makes the essence of equitable estoppel to consist of fraud, and the language used by some courts in defining and describing the general doctrine has been so sweeping and positive that, taken literally, it does not admit the possibility of such an estoppel unless the party has been guilty of actual intentional fraud in law. This theory is not sustained by principle and cannot be made universal. In Pomeroy's Equity Jurisprudence (2d Ed.) § 803, it is stated:
"It is undoubtedly in accordance with the methods long pursued by the courts of equity to apply the term `fraudulent' to the party estopped, in the following manner: It is in strict agreement with equitable motions to say of such party that his repudiation of his own prior conduct which had amounted to an estoppel, and his assertion of claims notwithstanding his former acts or words would be fraudulent — would be a fraud upon the rights of the person benefited by the estoppel. It is accurate, therefore, to describe equitable estoppel, in general terms, as such conduct by a party that it would be fraudulent, or a fraud upon the rights of another, for him afterwards, to repudiate and to set up claims inconsistent with it. The use of the term has long been familiar to courts of equity, which have always treated the word `fraud' in a very elastic manner. The meaning here given to fraud or fraudulent is synonymous with `unconscientious' or `inequitable.'"
See, also, sections 710, 711, 804, 805, Pomeroy's Equity Jurisprudence (2d Ed.); Corpus Juris, vol. 21, p. 1120, § 124; also, section 175, p. 1169; Williston on Contracts, vol. 1, § 35, p. 53. In the case of Sessions v. Rice, 70 Iowa 306, 30 N.W. 735, the following comment is made with reference to intent:
It is "probably true, as the court found, that the appellee did not intend to release Mason. But such fact does not show that the appellee is not estopped. It probably seldom happens that a person who becomes estopped by his conduct intended to estop himself. Estoppel is a legal result, entirely independent of an intention to create an estoppel."
The note and release of deed of trust having been placed in the hands of Ben Johnson, the principal obligor, it cannot be said that it was in his hands as an escrow holder. The rule as announced in the case of Holt v. Gordon, 107 Tex. 137, 174 S.W. 1097, appears to have been uniformly followed by the courts in this state. In passing upon the question, it was held in the opinion of Chief Justice Phillips:
"It may be shown by parol testimony that an ordinary written instrument was executed under an agreement that it was not to become effective except upon certain conditions. * * * But that principle has never been recognized by this court as applicable to a deed to land, * * * where the delivery of the instrument was made to the grantee, and not to a third person. It has, upon the contrary, been distinctly held that a deed or deed of trust cannot be an escrow where it is delivered to the grantee in the instrument." Heffron v. Cunningham, 76 Tex. 313, 13 S.W. 260; Manton v. City of San Antonio (Tex.Civ.App.) 207 S.W. 951.
It would seem that one who signs and acknowledges a conveyance to be delivered only upon condition may be estopped as against innocent third parties to set up nondelivery, by negligently permitting it to pass into hands of the grantee. Steffian v. Milmo National Bank, 69 Tex. 513,6 S.W. 823; Link v. Page, 72 Tex. 592, 10 S.W. 699. The note and release of deed of trust having been sent by Sugg to Ben Johnson, the maker of the note and the grantee in the release, or negligently sent to the bank of which Ben Johnson was the managing officer, thereby permitting such note and release to come into the hands and possession of Ben Johnson, it would have the legal effect of an unconditional release of the deed of trust lien in so far as E. B. Johnson is concerned, provided he in good faith, and not through carelessness, relied upon the same and by reason thereof surrendered to Ben Johnson the three escrow notes. *Page 717
Appellants' motion for rehearing is overruled.