Smith v. Farra

BeAN, J. The only question presented on this record is the validity of the agreement of compromise between plaintiff and defendant under the facts heretofore stated. The contention of defendant is, that for a breach of the covenant of title contained in his deed to plaintiff, the law fixes the measure of damages at the purchase price and interest, and that therefore the claim of plaintiff was a fixed and liquidated one, and in no sense such a doubtful claim as will support an agreement of compromise. Upon this record, it must be conceded that plaintiff had a valid cause of action against defendant for a breach of the covenants of the deed upon which he could have successfully maintained legal proceedings, and that both parties, in their negotiations for a settlement, believed in good faith that the measure of damages was the actual value of the property conveyed at the time the negotiations took place, and not the consideration and interest; and in order to avoid litigation, and compromise the matter in dispute between them, the agreement-sued on was made. Both parties were acting in the utmost good faith, with equal knowledge of the facts, and plaintiff had reasonable ground to think (for he had taken legal advice on the question) that his damages amounted to $800, and intended in good faith to assert his claim; but to avoid litigation he forebore to do so, on account of defendant’s promise to pay him $700, preferring to accept that amount rather than to go into litigation; and defendant preferred — 401 — to pay that sum rather than to suffer the consequences of a lawsuit. That there was an actual bona fide dispute between these parties as to the amount of plaintiff’s damages, which each in good faith believed to be doubtful, and that the settlement was intended in good faith, as a compromise of such dispute, is not open to question on this record. But it is now insisted that the dispute was about a matter, not in fact doubtful, although the parties so considered it, and therefore the agreement of compromise is without consideration. The law favors voluntary settlements of controversies between the parties, which are characterized by good faith and a full disclosure of all the facts. (Wells v. Neff, 14 Or. 66.) And such settlements will be upheld and enforced, although the disposition made by the parties in their agreement may not be what the court would have adjudged, had the controversy been brought before it for decision; nor need the dispute to have been about a claim or matter actually doubtful. If the parties bona fide, and on reasonable grounds, believed it to be doubtful, it is a sufficient consideration to support the compromise. “If the requisites of good faith exist,” says Mr. Pomeroy, “ it is not necessary that the dispute should be concerning a question really doubtful, if the parties bona fide consider it so; it is enough that there is a question between them to be settled by their compromise.” (Pom. Eq. § 850.) And “ no investigation into the character or value of the different claims submitted,” says Mr. Parsons, “will be entered into for the purpose of setting aside a compromise, it being sufficient, if the parties entering into the compromise, thought, at the time, that there was a dispute between them.” (1 Parsons Con. (7 Ed.) 439.) It is not every disputed claim, however, which will support a compromise, but it must be a claim honestly and in good faith asserted, concerning which the parties may bona fide, and upon reasonable grounds, disagree. The compromise of such a claim in good faith, is a good consideration to pay money — 402 — in settlement thereof; and when an action is brought upon such promise, it is no defense to say that the claim was not in fact a valid one, or that the parties were mistaken either as to the law or the facts. (Stewart v. Ahrenfeldt, 4 Denio, 189; Crans v. Hunter, 28 N. Y. 389; White v. Hoyt, 73 N. Y. 505; Griswold v. Wright, 61 Wis. 195; Brooks Hall, 36 Kan. 697; 14 Pac. Rep. 236; Flannagan v. Kilcome, 58 N. H. 443; Wehrum v. Kuhn, 61 N. Y. 623.) Nor is it a defense, that the claim could not have heen maintained if suit or action had been brought upon it or that the parties were mistaken as to the law; for if it is, then it would follow that contracts by the parties settling their own disputes, would at least be made to stand or fall, according to the opinion of the court as to how the law would have determined it. “If, therefore,” says LogaN, J., “the solemn compromise of the parties be made to depend on the question, whether the parties have so settled the dispute, as the law would have done, then it may be' truly said that a compromise is an unavailing idle act, which questions even the power of the parties to bind themselves.” (Fisher v. May, 2 Bibb, 448; 5 Am. Dec. 626.) The settlement of a controversy is valid and binding, not because it is the settlement of a valid claim, hut because it is the settlement of a controversy. And when such settlement is characterized by good faith, the court will not look into the question of law or fact in dispute between the parties, and determine which is right. All that it needs to know is, that there was a controversy between the parties, each claiming in good faith rights in himself against the other and that such controversy has been settled. In Cook v. Wright, 1 Best & Smith (101 E. C. L.), 559, it appeared from the evidence that defendant believed himself not liable on the demand of plaintiff, but he knew that plaintiff thought him liable, and would sue him if he did not pay; and in order to avoid the expense and trouble of legal proceedings against him, agreed to compromise, and gave his note for the amount agreed on in compromise; and the — 403 — question was whether a person who has given a note as a compromise of a claim honestly made upon him, and which but for that compromise would at once have been brought to a legal decision, can resist payment of the note on the ground that the original claim thus compromised might have been successfully resisted; and it was held he could not, Blackburk, J., saying: “The real consideration depends on the reality of the claim made and the bonafides of the compromise.” In Callisher v. Bischoffsheim, 5 Q. B. 449, the plaintiff claimed that certain moneys were due him from the government of Honduras, and was about to take proceedings to enforce payment; and in consideration that the plaintiff would forbear taking such proceedings for an agreed time, the defendant promised to deliver to him certain debentures. In an action for a breach of the contract, the plea was, that at the time of making the contract, no money was due the plaintiff from the government of Honduras. This plea was held bad on demurrer; CocKburN, C. J., saying: “No doubt it must be taken that there was in fact no claim by the plaintiff against the Honduras government which could be prosecuted to a successful issue by legal proceedings; but this does not vitiate the contract and destroy the validity of what is alleged as the consideration. The authorities clearly establish that if an agreement be made to compromise a disputed claim, forbearance to sue in respect of that claim is a good consideration; and whether proceedings to enforce the disputed claim have or have not been instituted, makes no difference.” In Grandin v. Grandin, 49 N. J. L. 508; 60 Am. Rep. 642, the plaintiff was an heir at law of the deceased and in good faith filed objections to the probate of the will; and in consideration of his withdrawing his objections and making no further opposition to the probate of the will, the defendant agreed to pay him three hundred dollars. In an action on this promise it was held that the compro — 404 — mise was valid and binding, although it ultimately appeared that the claim of the plaintiff was wholly unfounded. In Bellows v. Sowles, 55 Vt. 391; 45 Am. Rep. 621, the facts are as in the case last above cited, except that the plaintiff had not instituted proceedings to contest the will, but was making arrangements to do so, and defendant promised to pay him five thousand dollars if he would desist from such opposition to the will. In an action on a promise the court held, that plaintiff was nót bound to show that his ground of opposition to the will would have been sufficient to have defeated its probate. It was enough if he were able to show that he honestly thought he had good and reasonable ground for making the claim that the will, so far as it related to him, was the production of undue influence, and for that reason he honestly and in good faith intended to oppose its establishment. In some of the authorities it is said,’ that in order that a compromise may constitute a sufficient consideration to support an executory contract, the claim must be at least doubtful, and there must be colorable ground of dispute and some legal or equitable foundation for the claim. (Anthony v. Boyd, 15 R. I. 495; U. S. Mortg. Co. v. Henderson, 111 Ind. 24.) This statement must be construed with reference to the facts of the particular case, and when so read, will, we think, be found to mean nothing more than that the claim must be a serious one, honestly made, which the party asserting does not know is unsubstantial, but believes he has a fair chance of sustaining, or does not know facts, to his knowledge unknown to the other party, which show his claim a bad one. As a result from the authorities, we think a doubtful or disputed claim, sufficient to constitute a good consideration for an executory contract of compromise, is one honestly and in good faith asserted, arising from a state of facts upon which a cause of action can be predicated, with the reasonable belief on the part of the party asserting it that he has a fair chance of sustaining his claim, and concerning which — 405 — an honest controversy may arise, although in fact the claim may be wholly unfounded. In the case before us, plaintiff not only had a cause of action but an admitted right of action, growing out of the sale of the property and the execution and delivery of the deed, which he could have prosecuted to a successful issue, and upon the facts of which he honestly and in good faith believed his damages amounted to at least eight hundred dollars. This question he intended to submit to judicial decision. It was a question concerning which there could be and actually was an honest controversy. The proposition of settlement came from defendant, and the compromise was effected after weeks of negotiation, at his solicitation. He had as full and complete knowledge of all the facts as the plaintiff, and presumedly more so. By the compromise, and on the faith of defendant’s promise, plaintiff forbore to assert his claim in the courts, and gave up a portion of what he believed to be a valid claim; and defendant, instead of being annoyed with an action escaped the vexations incident thereto, although other motives may have prompted him to make the proposition of settlement, and this is a sufficient consideration to support defendant’s promise. This is so, although it may now be clear that plaintiff could only have recovered in an action the consideration by him paid for the property, and that his claim for eight hundred dollars was in law wholly unfounded. The defendant cannot escape liability on his solemn contract entered into at his request and solicitation, by now showing or claiming that he was mistaken as to the law. It is sufficient for us to know that there was a dispute between the parties, and that it .has been in the utmost good faith settled. Whether it was entirely the desire to avoid litigation, or what appeared to him some other sufficient consideration that induced the defendant to make the offer of settlement accepted by plaintiff, is unnecessary for us to inquire. It is enough, that with full knowledge of all the facts, and without any fraud or concealment on the part of — 406 — plaintiff, the offer was made and accepted. Nor is it necessary for plaintiff to stow that the law would have awarded him the damages claimed. It is enough, if he had an honest, reasonable ground to think his damages amounted to eight hundred dollars, and intended in good faith to assert it, and forbore to do so on account of defendant’s promise. Conceding, therefore, that the measure of damages growing out of the sale of the property and execution and delivery of the deed from defendant to plaintiff is the purchase price and interest — a question, however, we are not called upon to determine — the compromise between plaintiff and defendant was supported by a sufficient consideration, and is valid and binding. The judgment of the court below is affirmed. Strahan, C. J., being pecuniarily interested in the result of this action, did not sit in this case, and took no part in this decision.