Chase's Appeal from Probate 57 Conn. 236

Augustus S. Chase and others’ Appeal from Probate.

New Haven Co.,

Dec. T., 1888.

Park, C. J., Carpenter, Pardee, Loomis and Beardsley, Js.

A manufacturing corporation being financially embarrassed, its stockholders applied to F, a man of means and business experience, to take, in consideration of a large amount of the stock to be transferred to him, the management of the business, securing the outstanding notes of the company by his personal indorsement. F, for the purpose of ascertaining the amount of the company debts with reference to his action, applied .to the different creditors for a statement of their claims, and among others to the S. & L. Bank, whose president stated its claim to be $17,000, which agreed with a statement previously furnished him by the company. The bank bad at the time notes amounting to $29,900, made by the president of the company in his own name and secured by certain collaterals, which notes had been protested. The president of the bank knew of these notes, but did not regard the company as liable upon them, and acted in good faith in the matter. F decided to undertake the management of the business of the company and procured an extension of all its liabilities upon his endorsement of the paper. The company however did not succeed and finally went into insolvency. The bank then presented the $29,900 claim against its estate, and the claim, after a trial, was allowed. F had known nothing of it until shortly before the company failed, and the discovery of the claim was a reason for the company’s going into insolvency. The estate was able to pay but a small dividend. The liabilities assumed by F for the company were about $200,000. He brought a petition to the court of probate asking for a decree that the claim of the bank for the $29,900 should be postponed to his own claim. The probate court denied the petition, and the, case was carried by appeal to the Superior Court. Held—

*2371. That the bank was equitably estopped, as against F, from presenting that part of its claim against the estate of the company.

2. That the probate court had power to enforce this equity in its order for the payment of the dividends upon the claims allowed.

3. That as the bank was entitled to a full dividend on this claim as against all the other creditors, the dividend was to be reckoned on a total indebtedness.including this claim, and then F was to receive whatever additional dividend his claim would have received if this claim had not been included, the amount so added to F’s dividend being taken from the bank’s dividend on this claim; the equity between F and the bank being thus settled without disturbing the dividends on the other claims allowed.

Where a person makes a representation to another with knowledge that the latter will act upon it and with intent that he should do so, and the latter acts upon it and is subjected thereby to loss, it is not enough that the person making the representation believed it to be true, if in due discharge of his duty he ought to have known or to have ascertained the fact.

[Argued February 1st

decided April 5th, 1889.]

Appeal from a decree of a probate court denying the petition of the appellants for such a marshaling of the claims allowed against the insolvent estate of Brown & Brothers, a corporation, as should give the claim of Franklin Farrel, one of the appellants, a precedence in the payment of the dividend on the estate overa certain claim of the National Shoe & Leather Bank, another creditor s the appeal was taken to the Superior Court in New Haven County. The appellants (original petitioners to the probate court) were Augustus S. Chase and Edward C. Lewis, trustees of the assigned estate of Brown & Brothers, and Farrel before named, a creditor. The matters averred in the petition and in the answer of the bank, sufficiently appear in the finding of facts and in the opinion of this court. The Superior Court made the following finding of facts.

About the year 1883 the corporation of Brown & Brothers, located at Waterbury, Conn., which had for about thirty years carried on a large and prosperous business, became financially embarrassed. Its real estate and machinery prior to that time had always been placed in its inventory and its annual statements at a valuation of $75,000. For the purpose of increasing the statement of the amount of its assets, *238and of procuring for the company credit; the president, Wm. H. Brown, and the bookkeeper, Mr. Clowes, in the winter of 1884, agreed to put the real estate and machinery in the inventory and annual statement at a valuation of $350,000, and it was so done. It did not appear that any appraisal of the real value of the property was made at the time by any other persons. Soon after this the president made a mortgage upon the real estate and machinery for the sum of $125,000. The embarrassments continued, and became so great that early in May, 1884, the president resigned, and the company substantially suspended business. Meetings of the stockholders were held, and efforts were made to secure some one to take the management of the company and raise or provide money to carry on its business. A committee of the stockholders applied to Franklin Farrel, who was a man of recognized financial credit and large means, to take the management of the company under his exclusive control, giving it the aid of his resources, credit and business ability. He at first declined, but negotiations continued through the summer until August, and resulted in the following contract between the stockholders of Brown & Brothers, and Farrel, made on the 24th of August, 1883.

“ Whereas, the corporation of Brown & Brothers of Waterbury, Conn., and sundry of the stockholders of said corporation, have caused and secured to be transferred to Franklin Farrel of Ansonia, Conn., the amount of one hundred thousand dollars (being four thousand shares) of stock in said corporation, for a certain consideration hereinafter mentioned; and whereas sundry of said stockholders have contributed from their stock pro rata to make up said amount to said Farrel, and it is believed that said corporation has a lien upon sundry shares of stock by virtue of sundry indebtedness to said corporation:—Now, therefore, I, the said Franklin Farrel, in consideration of the transfer to me of $100,000 of stock in said corporation, do hereby promise and agree to and with said corporation, and with the said stockholders therein who have contributed pro rata to make up the amount so transferred to me of $100,000 of stock, that *239any and all stock hereafter acquired or secured by said corporation after making up said amount to said Farrel, by virtue of any liens in favor of said corporation now existing upon any stock or against any stockholders, shall belong to and inure to the benefit of said stockholders who have so contributed pro rata according to their respective amounts of stock, and shall not be claimed on my part as belonging to the whole corporation, and no interest therein shall be claimed by me. And I further agree, for the consideration aforesaid, to loan and advance to said company, at six per cent interest, such sum or sums of money as may be necessary to provide for the payment of the present existing indebtedness of said company, except such indebtedness as may be assumed by me, or otherwise provided for in such manner as may be convenient for me, but in such way as shall relieve said company from claims thereon; and also to loan and advance such other sums of money as may be necessary to place said company upon a safe and reliable basis for the continuance of its business, and to provide stock, supplies and means for carrying on the same, and to make necessary repairs and improvements in the mills and machinery of said company, and to provide for the continuance of its business; which sums of money so loaned and advanced to said company shall not be withdrawn or repaid to him until the existing indebtedness now being against said company shall be paid or provided for or assumed by said Farrel, and said company relieved from liability thereon ; but the interest on all sums so loaned or advanced by said Farrel shall be payable to him annually. And it is further understood and agreed by said corporation and said Farrel for the considerations aforesaid, that no dividends shall be paid to the stockholders of said corporation until the indebtedness of said corporation shall be reduced to a sum not exceeding one hundred thousand dollars. Waterbury, August 23d, 1884.

“ Franklin Farrel.”

During the progress of the negotiations with Farrel, statements of the assets and a list of the liabilities of the company were made out at the meetings of the stockholders. *240The debt to the Shoe & Leather Bank was put in these lists at $17,300. The real estate and machinery were put in at $350,000. With this valuation the statements showed an excess of about $223,000 of assets over liabilities, inclusive of the capital stock. The statements were shown to Farrel.

Before completing the arrangement Farrel undertook to ascertain for himself the actual amount of the assets and liabilities, and through his agent verified the accuracy of such inventory by actual count and weighing of the manufactured stock on hand, except the stock of german-silver goods, of which there was a considerable quantity, with which his agent was not familiar, and he took the statement of the officers or clerks of the company as to the value of that part of the assets.

For the purpose of ascertaining the amount of the liabilities, and whether an extension could be obtained thereon with his indorsement, Farrel visited the different banks which held the bulk of the obligations of Brown & Brothers. He went to the Shoe & Leather Bank and asked Mr. Crane, the president of the bank, what the amount of the indebtedness of Brown & Brothers was to the bank, and whether the bank would extend them for one year upon his indorsement. Mr. Crane asked the discount clerk for the exact amount of Brown & Brothers’ notes, and gave the amount of the notes to Farrel as $17,300, and agreed to give the extension requested. Farrel then visited all the other banks holding Brown & Brothers’ paper, and found that the indebtedness of the company to those hanks corresponded in amount with the list of the indebtedness given him by the company, and that he could procure a like extension from them all. After he had ascertained these facts he decided to take the management of the company, and secure or indorse its liabilities, and to enter into the agreement before stated.

At the time of Farrel’s interview with the president of the Shoe & Leather Bank, the bank, in addition to the notes of Brown & Brothers for $17,300, which were unsecured, held three notes of Wm. H. Brown, indorsed “Wm. H. *241Brown, agent,” and secured by six hundred and ninety-six shares of the Norwalk Lock Co. stock, and six hundred and thirteen shares of Brown & Brothers, said notes being for $15,000, $12,500, and $2,400 respectively. Mr. Crane made' no mention of these notes to Farrel. At the time of the interview Crane believed these notes to be fully secured by the personal collaterals of Wm. H. Brown, and did not consider them to be obligations of Brown & Brothers, and the liability of the corporation on the notes did not become apparent to him until afterwards. I find that it was upon the understanding and belief by Farrel that the indebtedness of the company did not exceed the amount that had been so represented to him, and that the claim of the bank against the company did not exceed the amount of $17,300, that Farrel was induced to, and did, enter into the arrangement with the company, and make the contract mentioned. The amount of the indebtedness was a material question with him in deciding upon and afterwards making the contract with the stockholders, and he would not have made it if he had known or been informed that the bank held another claim of $29,900 against the company by reason of the notes given by Wm. H. Brown for that amount. The bank had full knowledge that Farrel was inquiring into the amount of the indebtedness for the purpose of deciding whether he would take the management of the company, and that he decided to do so with the belief and understanding that the claims of the bank against the company did not exceed $17,300. I also find that Mr. Crane acted in good faith in his statement to Farrel.

In carrying out the contract the bank transferred to Farrel its proportion of the stock of Brown & Brothers held by it. There has been transferred to him in all two thousand nine hundred and fifty-five shares of stock, one thousand shares of the stock of Wm. H. Brown being subject to an attachment and never transferred. I find however that Farrel accepted the stock thus transferred, and assumed the management and control of the company without objection.

Farrel became president and assumed control and man*242agement of the corporation August 25th, 1884, and indorsed the $17,300 notes held by the bank. The first extension was for one year, $15,000 of the same was then renewed for four months, the balance being paid. At the end of that time when Parrel sought a further extension, he was for the first time informed that a claim was made by the bank that the company was liable for the notes of $29,900. All the notes of $17,300 against the company, and also the notes for $29,900, had been protested, and were overdue and lying in the bank as protested paper at the time of Farrel’s first interview with the bank officers in August, 1884. It was for the interest of the bank that Farrel should take the management of the company and indorse or secure the $17,300 held by the bank as protested paper of the company, as the debts of the company were in excess of their assets, aside from their mortgaged real estate and machinery; and there could nothing have been realized from the equity in the mortgaged property.

After assuming control of the corporation, Farrel, in addition to indorsing the notes of the Shoe & Leather Bank as above stated, indorsed the notes of the company held by all the other banks. He also borrowed $35,000 upon a note of the company, secured by Ms indorsement and collateral stocks of his own, which was presented to the commissioners, and allowed by them, but Farrel has paid the same in full. This money was used in paying current bills and starting work in the factory. He has also paid a large amount of other indebtedness of the company, and is held as indorser upon the remaining bank notes of the company, so that what he has paid and what he is liable to pay will amount to about $200,000. I do not find however that Farrel advanced to the company any money of his own, except in small sums, repaid to him, or paid out of his own means any indebtedness of the company, until after the assignment. The only proof of debt filed by Farrel with the commissioners was a claim for $20,294.45, which was made up of three notes and interest thereon, one of $8,000, one of $3,500, paid by him January 22d, and April 2d, 1886, respectively, and a third *243note of $5,000 to Ruth E. Farrel, which latter represented a claim of said Ruth against Brown & Brothers which belonged to Farrel. The claim thus presented was allowed by the commissioners.

The business continued under the management of Farrel for about a year and four months, when it was found that the company was insolvent and that the capital stock could not be made of any value. Farrel undertook to settle up the business by paying or assuming all the claims against the company in full, whether secured or not, and disposing of the property to the best advantage. At this time the bank made the first claim to him that the company was liable for the three notes of $29,900, and soon after brought suit upon the same. And in consequence of that claim and suit the company made their assignment in insolvency.

The claim of the bank for the $29,900 was disallowed by the commissioners, and an appeal was taken by the bank from the disallowance. The Superior Court allowed the claim and the Supreme Court affirmed that judgment. The case is reported in 55 Conn., 469. A statement of the facts of that case will there be found, and will throw some further light upon the questions involved in the present case.

There had been large losses in the business after Farrel assumed the management, and there had been little or no profits. A considerable portion of this loss is accounted for by the disposition of the silver goods and business at a sum more than $30,000 less than they were inventoried for, and a fall in the price of copper. I do not find that the losses to the company were caused by the fault, neglect or mismanagement of Farrel or his agents. And I find the allegations of the defendant in the last half of the third paragraph and in the fourth paragraph of its answer untrue.

The corporation is hopelessly insolvent, much more so than in August, 1884, and only a small dividend will be paid out of its assets to its creditors. The claims upon paper indorsed by Farrel were presented to the commissioners by the various banks which held them, and were so allowed, but before the bringing of the petition to the pro*244bate court by the trustees and Farrel he had paid or assumed all these claims, except that of $29,900 allowed to the Shoe & Leather Bank, and was entitled to the dividend upon them.

Upon these facts the case was reserved for the advice of this court.

C. R. Ingersoll and S. W. Kellogg, for the appellants.

1. The court of probate has the power to pass the order marshaling the assets, and directing upon what claims the dividends should be paid. There can be no question as to this power. And the court in this case not only had the power, but it was its duty to pass the order prayed for, under the facts of the case. The statute, as it now exists, directs that the pajunent of dividends upon claims allowed against an insolvent estate shall be “ subject to such existing equities as maybe ascertained and decreed by the court.” General Statutes, § 532. This statute, was simply an affirmance of the common law of this state as to the power of courts of probate. This court had settled that doctrine long before. In Hotchkiss v. Beach, 10 Conn., 232, it was decided that the commissioners had sole jurisdiction under the statute of the allowance or disallowance of claims against the estate. In that case it was admitted by Church, J., in the opinion, that the judge of probate had power to marshal the assets of the deceased. In Waterman’s Appeal from Probate, 26 Conn., 96, which was an appeal from the action of the commissioners by the trustee of an insolvent estate, the court said that “the question of priority among creditors must be raised, if anywhere, in the court of probate, when the order for the distribution of the effects shall be obtained.” The court of probate afterwards passed an order marshaling the assets of the estate, and providing that a certain class of claims should be paid in full, to the exclusion of any dividends upon another class of claims until the former should be paid; precisely such an order as is prayed for in this case. From that order the creditors whose claims were excluded appealed; and this court con*245firmed the order, and asserted the power of courts of probate to discriminate between claims in the payment of dividends, by a unanimous decision. Ashmead’s Appeal from Probate, 27 Conn., 241. This doctrine was affirmed in Vail’s Appeal from Probate, 37 Conn., 185, and is the settled law of the state, aside from the statute.

2. Courts of probate have equity powers, ample in all cases to do justice between all. parties having interests in estates pending in settlement before them. The equities of course must be directly involved in the matters or estates of which the court has jurisdiction. There can be no question that an order for the payment of dividends to creditors is a matter directly involved in the settlement of an estate. This has long been settled law in this state. In Bailey v. Strong, 8 Conn., 278, 281, this court in speaking of probate courts says:—“ These courts are vested with chancery powers on all subjects within their jurisdiction, and can so mould and form their decrees as to do entire justice between all parties in interest.” In Beach v. Norton, 9 Conn., 198, the court says:—“These courts have all the powers of a court of chancery, and in some respects much greater, in relation to the trial of questions within their jurisdiction.” This principle has been recognized as settled law by a long series of decisions in this state. American Bible Society v. Wetmore, 17 Conn., 187; Ashmead’s Appeal from Probate, 27 id., 241; Mix’s Appeal from Probate, 35 id., 123; Vail’s Appeal from Probate, 37 id., 185; Hewitt’s Appeal from Probate, 53 id., 24.

3. The bank cannot claim that it had no knowledge that this debt of $29,900 was a liability against Brown & Brothers at the time of Crane’s interview with Farrel. It is estopped from this claim by the finding in the Shoe & Leather Bank’s appeal. The parties in that case were the same as in this. The bank was the party on one side, the trustees representing the body of the creditors and the estate on the other. Farrel was a party to that case by representation ; he had a right to appear and be heard in the case, and he did in fact appear. 1 Greenl. Ev., § 523; Chapin v. *246Curtis, 23 Conn., 388; Munson v. Munson, 30 id., 433. No-pleadings are necessary to make the other creditors parties in an appeal from commissioners; they are represented by the trustees, and are privies by representation. Tolles’s Appeal from Comrs., 54 Conn., 521. But whether the bank is bound by the finding in that case or not, it makes no difference in this case; for the bank, and Crane, its president, ought to have had knowledge of the claim, and Farrel had a right to assume that they had knowledge when the representations were made to him. The bank knew for what purpose he sought the information, and knew that he was induced to act upon that information in assuming the debts of the company, including its own unsecured claim of $17,300; and Farrel was in reliance upon that information saddled with a load of debt, resulting in a loss to him of more than $200,000, except what little he can get by way of dividends from the insolvent estate. It is no answer at all to say that Crane did not intend to deceive Farrel, or that he acted in good faith and the liability of the corporation was not apparent to him at the time. He did in fact deceive and mislead Farrel; his position was such that he ought to have had knowledge, and Farrel had a right to rely upon his having knowledge.

4. The law of estoppel, as laid down by Lord Denman in the leading case of Pickard v. Sears, 6 Ad. & E., 469, has been generally recognized by the courts of this country. But the same eminent authority in the later case of Gregg v. Wells, 10 Ad. & E., 90, said that the doctrine of the former case might he stated more broadly. A party, said Lord Denman in the latter case, who “negligently and culpably stands by, and allows another to contract on the faith and understanding of a fact which he can contradict,” will not afterwards he permitted fo dispute that fact against the person deceived, See Freeman v. Cooke, 2 Exch. Rep., 654. Pickard v. Sears was an action at law, and it has been called a leading case, because Lord Denman gives a definition of estoppel which has been generally adopted in the courts, in this, country. But courts of equity in England, *247long before the case of Pickard v. Sears, held that it was not necessary that there should be an intention to deceive or mislead, or even a knowledge that the representation was false, to create an equitable estoppel. 13 Viner’s Abr., 539; Hunsden v. Cheyney, 2 Vern., 150; Burrowes v. Lock, 10 Ves., 470. In some states in tbis country the courts have held that there must be an intention to deceive, or that the person making the false representations must have knowledge that they were false. That may be a general rule in a large class of cases at law, but the exceptions are so numerous that the weight of authority is altogether against this narrow construction of the law of estoppel. He who from his position ought to have knowledge, and who holds himself out to another as having knowledge, cannot set up his good faith, or his want of knowledge or intention to deceive, against one to whom he made the false representation that he had knowledge, and who had a right to believe the former had knowledge when he made the representation. If the other elements of an estoppel are found, as is conceded in this case, a party situated as the president of this bank was, cannot relieve the bank from the consequences of his false representation, by showing that he had no intention to deceive. This is a case of equitable estoppel, and an estoppel of this kind is not odious in the eye of the law as tending to shut out the truth. The higher spirit of the law of equity looks upon such an estoppel with favor, because it secures and establishes equity and good conscience and good faith in transactions between men. There is a host of well-considered decisions in this country since the law of Pickard v. Sears was enunciated, where the doctrine of equitable estoppel has been held to bind a party by bis representations, when there was no intention to mislead; and when the element of bad faith in making such representations is entirely wanting. And corporations, as well as individuals, are bound by the representations of their proper officers; and cannot hold up the want of knowledge, or the absence of an intent to mislead, on the part of such officers, as a defense against the effect of such representations. It is not *248necessary that there should be any design to mislead, to create an equitable estoppel. Hall v. Fisher, 9 Barb., 17; Welland Canal Co. v. Hathaway, 8 Wend., 480; Manufacturers’ & Traders’ Bank v. Hazard, 30 N. York, 230; Brown v. Bowen, id., 541; Erie Co. L. Bank v. Roop, 48 id., 292, 298; Isham v. Buckingham,, 49 id., 222; Continental National Bank v. Bank of the Commonwealth, 50 id., 575; Blair v. Wait, 69 id., 116; Hicks v. Cram, 17 Verm., 449; Strong v. Ellsworth, 26 id., 366; Louks v. Kenniston, 50 id., 116; Greene v. Smith, 57 id., 268; Simons v. Steele, 36 N. Hamp., 79; Davis v. Handy, 37 id., 65; Drew v. Kimball, 43 id., 282; Horn v. Cole, 51 id., 287; Guffey v. O’Reiley, 88 Mo., 418; Buchanan v. Moore, 13 S. & R., 306; Chapman v. Chapman, 59 Penn. St., 214; Miller’s Appeal, 84 id., 391; Belgian Glass Co. v. Pabst, 101 N. York., 621. In Massachusetts the courts for a long period were disposed to limit this doctrine of estoppel and to require evidence of an intent to mislead, or knowledge involving an element of bad faith, to create it. But the recent decisions of their highest court give it a much broader application. Commonwealth v. Reading Savings Bank, 137 Mass., 431; Holden v. Phelps, 141 id., 456; Tracy v. Lincoln, 145 id., 357. Horn v. Cole, above cited, is one of the best considered cases upon this subject in this country. Pekley, C. J., in an exhaustive opinion, in which the cases in England and in this country are analyzed and compared, points out the distinction between equitable estoppels, and other legal estoppels which are stigmatized as odious in shutting out the truth, with great clearness and force. He says that “the cases are numerous where the party who was estopped by his declarations or his conduct to set up his legal title, was ignorant of it at the time, and of course could have had no actual intention to defraud by concealing his title. Yet, if the circumstances were such that he ought to have informed himself, it has been held to be contrary to equity and good conscience to set up his title, though he was in fact ignorant of it when he made the representations.”

5. This court more than forty years ago adopted the.law *249of estoppel as laid down in Pickard v. Sears; and it has recognized the doctrine of equitable estoppel in its broadest sense. It has been settled law in this state since the case of Roe v. Jerome, 18 Conn., 153. See Middletown Bank v. Jerome, 18 Conn., 443; East Haddam Bank v. Shailor, 20 id., 21; Whitaker v. Williams, id., 103; Dyer v. Cady, id., 568; Preston v. Mann, 25 id., 128, 130; Collins v. Tillou, 26 id., 368; Calhoun v. Richardson, 30 id., 210; Main v. Brown, 56 id., 345. In Preston v. Mann, Storrs, J., says: "The doctrine of estoppel in pais, notwithstanding the great number of cases which have turned upon it, and are reported in the books, cannot be said even yet to rest upon any determinate legal test which will reconcile the decisions or will embrace all transactions to which the great principles of equitable necessity, wherein it originated, demand that it should be applied. In fact it is because it is so purely a doctrine of practical equity that its technical application is so difficult and its reduction to the form of abstract formulas is still unaccomplished.” Farther on, in referring to the case of Pickard v. Sears, he says the word 'willfully,’ as used in this connection, is not to be taken in the limited sense of the term maliciously or of the term fraudulently, nor does it of necessity imply an active desire to produce a particular impression, or to induce a particular line of conduct.” He says there are “cases where the excuse of ignorance cannot be permitted to avail, without defeating the very principle of justice upon which the doctrine of estoppel is founded.” In the very recent case of Main v. Brown, supra, in which the present chief justice gives the opinion, where silence of the party was held to estop him, it did not appear that at the time of that silence which induced the other party’s action, he had any intention to defraud him, or even that he remembered the limitation in the contract he afterwards undertook to set up.

J. W. Webster and J. C. Lay of New York, for the appellees.

1. The probate court has no power to discriminate be*250tween creditors of the same class, unless by the application of some well-settled doctrine of equity jurisprudence. Waterman's Appeal from Probate, 26 Conn., 96; Ashmead's Appeal from Probate, 27 id., 241; Vail's Appeal from Probate, 37 id., 185. Before discussing the authorities on the subject it should be observed that there is no difference between the claims of the bank and those of all other creditors. All are founded upon good consideration, stand upon an equal footing, are simple contract debts of the same class, and are entitled as matter of course to the dividend payable by the trustees. The interference of the court of probate to prevent the payment of a dividend to a creditor whose claim has been legally established, would be practically to nullify the decisions of the courts establishing the claim, and place in the probate courts a power superior even to that of the highest court of the state. It was decided in Waterman's Appeal and Ashmead's Appeal that these courts had authority to declare that one class of creditors had a priority over another class of creditors. Such decisions were based upon a general notion of justice and equity, not apparently springing from any known doctrine of equity jurisprudence. It is not surprising therefore that the conclusions of the court in Ashmead’s Appeal were severely criticised in Vail’s Appeal. In the latter case, it was held that a court of probate has power to go behind the report of commissioners upon insolvent estates and marshal the general claims reported by them according to such equities as may justly, upon settled principles of equity, give some claims or classes of claims a preference over others. In that case Butler, C. J., used the following language :—“ The judge of the court of probate is not a chancellor. He possesses chancery powers, but they are only such as are incidental, connected with the settlement of a particular estate and necessary for the adjustment of equitable rights, and not to find and enforce equities in the ordinary and loose sense in which that term has come to be used in the law. If there are trusts to be connected with the property, or liens upon it, or priorities enforceable in equity, if through fraud, accident or mistake, *251a class of creditors or beneficiaries are entitled of right to relief as against other creditors or beneficiaries, he may-marshal or distribute the assets so as to enforce or satisfy the right. But it must be a right, one which a court of equity would take cognizance of and enforce, if application could be made to such a court. * * * It is not easy to discover what right existed on which a priority in favor of one class of creditors against the Grove Car Works could be founded. The court of probate did not find any precise right, and seems to have been governed by a general sense of equity. The facts of the case, so far as they appear, do not show such right; nor is it easy to discover what precise right the Supreme Court found in Ashmead’s Appeal. * * * Judges of probate should understand that they are not to decree priorities between classes of creditors whose claims are allowed by commissioners, nor in any ease, on any loose impressions of .justice and equity, nor unless such priority is founded on a clear, definable and specific equitable right, recognized as such in equity jurisprudence, and one which a court of equity could and would protect and enforce, if application could be lawfully made to such court therefor.” We fail to find any authority for the proposition that one creditor of an insolvent estate can prevent another creditor of the same class from participating in the assets of the estate by reason of a pretended equity. The court of probate is not a tribunal to settle controversies between creditors of the same class. The court is asked here to determine that, as between the bank and Farrel, it is contrary to justice and equity that the bank should receive its dividend. It seems to us that the petitioners are relying upon that loose notion of justice and equity clearly referred to in Vail’s Appeal. Courts of probate have no jurisdiction to deprive a creditor of a dividend unless the claim to priority is founded upon a definable and specific equitable right which a court of equity would enforce. How can one creditor avail himself of this claim of estoppel, to the exclusion of, or to a greater extent than, any other creditor of the same class, in view of the facts found by the court in this *252case ? The trustees represent the corporation and the creditors as well. The claim upon which the bank seeks to recover its dividends, is for money advanced to and used by the corporation, and has gone into, and constitutes a part o'f, the very assets from which alone any dividend whatever can be paid. There is no pretense that the indebtedness of the corporation has been increased or its assets diminished a farthing by reason of any act of the bank, nor that its assets have been increased or its indebtedness diminished a farthing by reason of any moneys advanced or services rendered by Farrel. The finding shows that he paid nothing before the assignment which was not repaid to him, and that all that he paid after the assignment, and all the obligations he assumed and became responsible for in any way, have been proved and allowed against the estate, in his own name or that of some other claimant. We submit that the petitioners have shown no equitable right and are entitled to no equitable remedy.

2. Estoppel by conduct or equitable estoppel presupposes or implies fraud or deceit. It is impossible to discover fraud or culpable negligence in the finding. Bigelow on Estoppel (3d ed., 476) says:—“The estoppel to be considered might perhaps be appropriately designated estoppel arising from misconduct. In its most typical phase, it is founded upon deceit and has its jurisdiction in the justness of preventing the accomplishment of fraud. The origin of the estoppel is probably to be found in the doctrine of equity that if a representation be made to another, who deals upon the faith of it, the former shall make the representation good, if he knew it to be false.” Bigelow enumerates the elements which constitute estoppel by conduct, as follows:—“The cases when carefully analyzed show that all of the following elements must actually or presuinably be present in order to an estoppel by conduct:—1. There must have been a false representation or a concealment of material facts. 2. The representations must have been made with knowledge of the facts. 3. The party to whom it was made must have been ignorant of the truth of the matter. 4. It must have been *253made with the intention that the other party would act upon it. 5. The party must have been induced to act upon it.” The authorities in this state do not conflict with the above general principles. Roe v. Jerome, 18 Conn., 138; Whitaker v. Williams, 20 id., 98; Preston v. Mann, 25 id., 118; Taylor v. Ely, id., 250; Danforth v. Adams, 29 id., 107; Walker v. Vaughn, 33 id., 577; Winton v. Mart, 39 id., 16; Kinney v. Whiton, 44 id., 262. In Preston v. Mann the court uses this strong language:—“Whatever the motive may be, when one so acts or speaks that the natural consequence of his words and conduct will be to influence another to change his condition, he is legally chargeable with the intent or willful design to induce the other party to believe him and to act upon that belief, if such proves to be the actual result.” This language was criticised in Danforth v. Adams, as follows “The defendants were sued as partners and were found by the Superior Court to be liable as such, although it was found as a fact that they had not been in partnership. This result was arrived at on the ground that certain acts and declarations of the defendant Fuller, though not intended to induce a belief in the existence of the partnership, yet as they were well calculated to induce such a belief, and such was their natural consequence and effect upon persons generally, and the plaintiff was led by them to believe that the defendants were partners and to give them credit as such, estopped him from showing that he was not a partner. Under the circumstances of this case I think the court came to the wrong conclusion. * * * The court was governed undoubtedly by what was supposed to be the principle involved in the case of Preston v. Mann, in which it was said that where the natural consequence of the words or conduct of a party will be to influence another to change his conduct, he is legally chargeable with an intent or design to induce the other to believe him and to act upon that belief if such prove to be the actual result, whatever his motive may be. As applicable to that case the proposition was very correctly stated. But it was stated with the caution which becomes a statement of a principle liable to be *254misapplied, and the court commenced its discussion of that part of the case with the remark that, in sustaining the charge of the court below, it might be approaching the verge of the law.” See also remarks of Park, J., in Ives v. North Canaan, 33 Conn., 402. Attention is called to the language used in the above three cases, in order to point out clearly that an estoppel will not be raised in every case where conduct or silence was calculated to mislead. Estoppel does not exist in the absence of a willful or intentional design to mislead. The principle is also laid down in Danforth v. Adams, that where there is no willful deception or culpable negligence, and no intention that the representation should be acted on as true, the person making the declaration or doing the acts is not estopped from proving the truth. It is also well settled in Connecticut that, to render the principle of estoppel applicable, the person estopped must have knowledge of his rights and of all the facts bearing upon the subject. Whitaker v. Williams, 20 Conn., 98. Now let us examine the facts of this case in the light of the above familiar principles.—1st. The bank acted in good faith. The finding is that “Mr. Crane acted in good faith in his statement to Mr. Farrel.” It is also found that the liability of the corporation on the notes in question, not mentioned at that interview, did not become apparent to Mr. Crane until afterwards. In other words, Mr. Crane in this interview acted in entire good faith, honestly believing that the personal notes of Wm. H. Brown were not obligations of Brown & Bros. There is clearly an absence of that willful intention to deceive, or that gross negligence amounting to positive fraud, which is one of the essential elements of estoppel. Nor is there anything unreasonable or improbable in the facts. The bank had never asserted its claim upon the notes of Wm. H. Brown until the latter part of the year 1885, and shortly before the assignment in insolvency. It is an undeniable fact that the bank did not regard these notes as obligations of Brown & Brothers at the time of this interview with Farrel, nor did the directors of Brown & Brothers regard these notes as obligations of the *255corporation. It was not until a special investigation was made about the time of the insolvency of Brown & Brothers in the latter part of the year 1885, that it was discovered and known to the bank that these moneys had been used for the benefit of Brown & Brothers in the payment of its obligations.—2d. Mr. Barrel was induced to enter into this contract quite as much by the representations of Brown & Brothers that the amount of claims held by the bank was limited to $17,300. There was no willful concealment by either the bank or the committee of stockholders. If Mr. Barrel was misled, he was also influenced by statements of the company. The findings say:—“The statements (of assets and liabilities made out by the company, in which the debt to the bank was put in at $17,300,) were shown Mr. Barrel.” “He then visited all the other banks holding Brown & Brothers’ paper and found that the indebtedness of the company to these banks corresponded with the list of the indebtedness given him by the company.” The finding further says :—“ I find that it was upon the understanding and belief by Barrel that the indebtedness of the company did not exceed the amount that had been so represented to him, and that the defendant’s claim against the company did not exceed the amount of $17,300, that Barrel was induced to and did enter into the arrangement with the company and make the contract.” It is clear from the use of this language that the statements of liabilities furnished Barrel by the company induced him to enter into the contract, and the officers of the company and of the bank were equally mistaken as to the character and validity of the claim of the bank upon the notes in question. Can estoppel be raised from silence induced by such an honest mistake? Can a creditor be deprived of a valid claim because the liability of the corporation was not then known or established?—3d. The bank is not chargeable with negligence. There is no evidence to warrant the conclusion that the bank was equitably bound to know whether or not the corporation was liable upon the notes in question. Under the authorities, culpable or gross negligence is predicated upon knowledge by a party of his *256rights. In Winton v. Hart, 39 Conn., 16, Butler, C. J., states the rule as follows:—“ It is well settled that a man cannot lawfully keep silent when it is his duty to speak, to prevent a wrongful use of his property or credit to the injury of an innocent third person. He cannot therefore be permitted to keep silent when he knows that his property is being fraudulently sold by another as his own, without warning the innocent purchaser, of when he knows that his credit is being fraudulently used by an irresponsible person in the purchase of goods, without notifying the vendor of the fraud. To do so is culpable negligence and as much an element of estoppel as active misconduct or misrepresentation.” In Roe v. Jerome, 18 Conn., 138, the court uses language indicating that culpable negligence presupposes knowledge. Williams, C. J., said:—“And even if a party negligently or silently stands by and allows another to contract on the faith and understanding of a fact which he can contradict, he cannot afterwards contradict that fact as against the person who may be injured.” There are cases, however, where parties have been held to be guilty of such gross negligence that they cannot set up want of knowledge, as for example where a party to a promissory note stated that it was a good note and would be paid at maturity or. certifies that certain notes “are good, true, business notes,” or where misrepresentations are made by a party who is consciously ignorant of the matter to which they relate at the very time that he professes a full knowledge of it. Preston v. Mann, 25 Conn., 118; Roe v. Jerome, 18 id., 138. Apart, however, from a willful and deliberate assumption of knowledge, where the party is" realty ignorant, it may be broadly stated that knowledge of a party’s rights must be shown in order to make out a case of estoppel arising from suppression of the truth.

3. Mr. Farrel has no standing in a court of equity. 1st. He has no standing as a creditor. An insuperable objection to any relief asked for by or on behalf of Farrel is found in the fact that according to the terms of his contract he is not entitled to repayment of any money advanced until the *257indebtedness existing against the company on the 23d day of August, 1884, “ shall be paid or provided for or assumed by said Farrel and said company relieved from liability thereon.” The record shows that Farrel never advanced a dollar in payment of the obligations of the corporation or for any other purpose until after the assignment. The. finding on this subject is as follows:—“I do not find, however, that Farrel advanced to the company any money of his own. except in small sums repaid to him, or paid out of his own means any indebtedness of the company, until after the assignment. * * * He has paid (but since the assignment) a large amount of the indebtedness of the company, and is held as indorser upon the remaining bank notes of the company, so that what he has paid and what he is liable to pay will amount to about $200,000.” The petition signed by Farrel states that “claims were presented and allowed against said estate within said time to the amount of more than $300,000, unsecured by the corporation, of which claims Franklin Farrel was indorser or surety to the amount of more than $200,000, and is liable to pay the same in full.” It is therefore clear that Farrel has not only not paid the indebtedness of the company in full, but has not even yet paid the bank notes which he has indorsed. It is not stated and is not known how much Farrel has actually assumed and how much he has actually paid. There is certainly $100,000 still outstanding not yet indorsed by him. His rights as a creditor of the estate are fixed by the agreement under which he loaned the money. It is certain he could not have sued for his advances without meeting the objection now urged. If he could not sue, his proof of debts as a creditor would on proper application to the court of probate be expunged. At all events, we can attack his right and standing as a creditor as a defense to his proceeding to deprive us of our dividend.—2d. Farrel has failed to do equity. The finding that the allegations of the defendant in the last half of the third paragraph and in the fourth paragraph of its answer are untrue, relates only to charges of mismanagement and negligence of Farrel. The court thereby simply *258refused, to find that the losses to the stockholders were due to Farrel’s mismanagement and negligence, but there is no finding that Farrel performed his contract. Indeed, the evidence of non-performance of the contract by Farrel is overwhelming. He did not pretend to carry out the letter of the contract; he certainly never fulfilled its spirit. His policy, diametrically opposed to the terms and spirit of the agreement, was to renew and extend all paper of Brown & Bros, with his indorsement, and let the assets pay the debts. The effect of this policy was not to place the company upon a safe and reliable basis for the continuance of its business. Had Farrel actually advanced the money to pay off the indebtedness of the company, as he agreed in plain terms to do, or had he invested even $100,000 in cash in the business, there is no question but that the company would have sprung into life, and would to-day be solvent and prosecuting a successful business. The finding conclusively shows that Farrel’s connection with the corporation has been nothing but an unmitigated misfortune and injury to the’ corporation and its creditors. It would have been far better for the creditors if the corporation had made an assignment in 1884, instead of making this contract with Farrel, which only served to tie its hands, and prevent the possibility?' of making or accepting any other mode of relief from existing embarrassments, and which, by reason of Far-rel’s failure to perform his covenants, proved of no value whatever to the corporation or its creditors. It should be borne in mind that it was not at the solicitation of the bank that Farrel entered into this contract. The bank simply agreed with other stockholders to contribute its proportionate share of stock in consideration of the promisés and undertakings of Farrel. The bank fully performed its promise, according to the terms of the contract. In view of the fact that he has not performed his agreement, and has not been of the slightest advantage to the corporation or its creditors, but a great injury; in view of the fact that he has not added a farthing to the assets or diminished the indebtedness a farthing; in view of the fact that the bank *259transferred to Farrel its proportion of the stock as agreed in the contract; and in view of the fact that the bank, as found by the court, has acted in good faith throughout the entire transaction—is not the position of Farrel before this court entirely without precedent, justification or excuse ?