Multnomah County v. Dekum , 51 Or. 83 ( 1908 )

Mr. Justice Moore

delivered the opinion of the court.

The complaint herein does not allege any fraud or misrepresentation as a basis for setting aside the compromise and settlement. Neither does it aver that such agreement was not made in good faith, unless concealment can be inferred from the statement that the trustee did not inform the county court that the decree rendered in the case of Dekum v. Multnomah County, 38 Or. 253 (63 Pac. 496) had been affirmed.

The doctrine once prevailed that the failure of a party to a contract to disclose every material fact of which he knew the adverse party was ignorant, although such actuality was equally within the observation or reach of both parties, would afford sufficient equitable grounds for rescinding an agreement that was consummated by means of the concealment: Pom. Eq. § 850. This precept is modified to some extent by a text-writer, who, discussing the question, says:

“As a general rule, each party is bound to communicate to the other his knowledge of material facts, provided he knows the other to be ignorant of them, and they be not open and naked, or equally within the reach of his observation”: 2 Kent, Com. *482.

In a note to this excerpt, appearing in Lacy’s edition to the works of this noted author, it is stated:

“The rule here laid down, though one undoubtedly of moral obligation, is perhaps too broadly stated to be sustained by the practical doctrine of the courts. The qualification of the rule is that the party in possession of the facts must be under some special obligation, by confidence reposed or otherwise to communicate them truly and fairly.”

1. The more modern rule is that when there is no relation of trust or confidence existing between the parties to a compromise and settlement, which would impose upon one an obligation to give full information, and no artifice for a fraudulent purpose is employed which would lull the other to repose, he cannot proceed blindly, omitting all inquiry and investigation, and then complain that the former did not volunteer to give the information which he possessed: 8 Cyc. 525; Dambmann v. Schulting, 75 N. Y. 55; Graham v. Meyer, 99 N. Y. 611 (1 N. E. 143); Cleveland v. Richardson, 132 U. S. 318 (10 Sup. Ct. 100: 33 L. Ed. 384). Tested by this rule, the complaint in the case at bar does not show that any fiduciary relation existed between the parties hereto at the time the compromise and settlement were reached, nor does 'that pleading negative in any manner a want of knowledge on the part of the county court that the decree rendered in the case of Dekum v. Multnomah County, 38 Or. 253 (63 Pac. 496) had been affirmed.

2. The county, however, was a party to that suit; and hence it knew what decree had been rendered therein, and was bound by the record.

3. The complaint was undoubtedly framed on the assumption that the officers of a municipal corporation were powerless to effect a valid compromise and settlement whereby any part of a burden, represented by certificates issued to a county on account of the sale of property for delinquent taxes, could be remitted.

4. This question having been settled adversely to shch theory (Multnomah County v. Title Guarantee & Trust Co. 46 Or. 523: 80 Pac. 409), the only ground, therefore, on which a decree for the plaintiff - could be based, is the alleged failure of the trustee to impart the information which he possessed, and that is insufficient.

It is unnecessary, in view of the conclusion reached, to consider whether or not the plaintiff can retain the ■money paid, which affords a valuable ■ consideration for the compromise and settlement, and seek a rescission.

An error having been committed by the trial court, the decree is reversed, and the cause remanded with directions to sustain the demurrer. Reversed.