Fransen v. Regents of Education of South Dakota

HOOK, Circuit Judge,

after stating the case as above, delivered the opinion of the court.

The written contract between the plaintiffs and the defendant cast upon the latter the duty of procuring the insurance upon the building during the period of construction. The insurance protection was to be for their joint benefit, but at the cost of the former. The plaintiffs (now plaintiffs in error) rely upon a provision of the Civil Code of South Dakota that “a contract in writing may be altered by a contract in writing or by an executed oral agreement, and not otherwise” (section 1287; Mettel v. Gales, 12 S. D. 632, 82 N. W. 181 ; Barnard & Leas Mfg. Co. v. Galloway, 5 S. D. 205, 58 N. W. 565 ), and contend that the defendant is seeking to alter the contract and to escape its obligations thereunder by proof of oral declarations which do not meet the statutory requirements. In view of the acts and statements of one of the plaintiffs, which we have recited, and the effect of which is chargeable to both of them, the Circuit Court by appropriate instructions submitted to the jury the question whether the plaintiffs were not estopped from complaining that the defendant had failed to procure the insurance. The jury determined that question in favor of the defendant. The provision of the Code above quoted relative to the alteration or modification of a written contract does not preclude the application of the doctrine of equitable estoppel when sufficient cause therefor exists. More than this, the course of the Circuit Court in this particular was justified by another provision of the laws of that state confirmatory of the rule already existing, and which, so far as material to the matter in hand, is as follows:

“The want of performance of an obligation or of an offer of performance, in whole or in part, or any delay therein, is excused by the following causes, to the extent to which they operate: * * * When the debtor is induced not to make it, by an act of the creditor intended or naturally tending to have that effect, done at or before the time at which such performance or offer may be made, and not rescinded before that time.” Rev. Civ. Code, § 1173.

As to this the plaintiffs contend that a necessary and essential element in an equitable estoppel consists in an inducement extended by the conduct of the person to whom the estoppel is sought to be applied, and the reliance thereon by him who invokes the application of the doctrine; and that in the case at bar there is wholly lacking any evidence that the defendant, its officers or representatives, were led to refrain from procuring the insurance because of the conduct of the plaintiffs. There is thus presented in narrow compass the principal question in this case: Was there a reliance by the defendant, its officers or representatives, who were charged with the protection of its interests, upon a course of conduct of the plaintiffs which was intended to induce them not to obtain the in *27 surance or which naturally tended to that result? This question should be answered in the affirmative, and the requisite element of a complete estoppel is thereby supplied. That there was an intentional purpose of inducement in the repeated declarations of that one of the plaintiffs who had immediate charge of the work of construction is clearly shown by the record. He protested vigorously and continuously against the procurement of additional insurance, the cost of which, under the contract, was chargeable to his firm. He assigned a number of reasons for his position, which seemed at the time to be plausible. In so far as the insurance authorized by the contract was for the protection of the plaintiffs themselves, and that is the only phase of the matter with which we are now concerned, one of the plaintiffs declared that they did not need it, could not afford it, and did not want it. In the face of his persistent opposition it would have been an unusual and exceptional act had the defendant forced upon the plaintiffs, at their expense, a protection which they did not desire. It is equally clear that these declarations naturally tended to produce the result which was desired and sought by the plaintiffs, namely, that no more insurance be procured which they would have to pay for. And it is not perceived that it is material or important as affecting the conclusion that both parties acted upon the supposition that the mere duty of going to the office of an insurance agent and obtaining the policy or policies of insurance rested upon the plaintiffs rather than upon the defendant as provided by the contract.

The failure to keep the building adequately insured was due wholly to the conduct of the plaintiffs, and this necessarily signifies reliance on the part of the defendant upon such conduct. In order to create an estoppel in pais it is not necessary in every case that there be an affirmative declaration by one party that he relied upon the acts of the other. Such reliance may appear as an irresistible inference from established facts and circumstances. In the case before us the entire cost and expense of protection of the parties from loss or damage by fire was chargeable to the plaintiffs, and there could have been, in the very nature of the situation, no other motive on the part of the representatives of the defendant in refraining from procuring insurance upon the uncompleted building than that caused by the plaintiffs' expressed opposition thereto. Moreover, it may be observed that about three weeks before the fire the president of the defendant, after an inspection of the premises, inquired of one of the plaintiffs whether he had sufficient insurance upon the building, and the latter replied, “Yes, I am looking after that matter all right myself;” and the president testified that after that assurance he made no further inquiry, and relied on the statement. The verdict of the jur}r is conclusive as to the facts, and we are of the opinion that ample justification may be found in them for the enforcement of an equitable estoppel, the rules governing which were sufficiently expressed in the instructions given by the Circuit Court.

Criticism is made of a paragraph of the instructions relating to the requisite conditions of an estoppel. It is true that a few words were omitted — doubtless inadvertently — and that the omission *28 somewhat impaired the sense of that part of the instructions, but almost immediately thereafter the court accurately and correctly stated the converse of the proposition. We are of the opinion that, taking the charge as a whole, the jury could not have been misled as to the true rule by which they were to be guided. Complaint is also made of the admission of the testimony of the architect and superintendent of construction, of the local secretary, and of the president of the defendant as to the declarations of one of the plaintiffs regarding the insurance. These men sustained such a relation to the defendant that it was clearly their province and within the scope of their powers and duties to take up and discuss with the plaintiffs the matters connected with the performance by them of their contract, and to see to it that they complied with its stipulations. No debt or obligation of the defendant was to be created.

The matter of insurance was simply one of those details of the contract the burden of which was on the contractors. The architect and superintendent, the local secretary and the president, stood in the place of and represented the defendant corporation. What was said to them was in legal effect said to the defendant. Their reliance thereon was the reliance of their principal, and the protective effect of the resulting estoppel inured to its benefit.

The judgment of the Circuit Court will be affirmed.