97 Ky. 567 | Ky. Ct. App. | 1895
delivered the opixion of the court.
This. equitable action was brought by appellant to rescind a contract made with appellee, by which, as alleged, he was induced to accept, in satisfaction of a loss under
As grounds of rescission, the petition charges that appellant was ignorant of his legal rights under the policy and that, through fraud and imposition practiced upon him by appellee’s agents, and by wilful misrepresentation made by them, as to his rights under the contract of insurance, he was induced to accept, a part of his claim in satisfaction of the whole.
The chancellor sustained a general demurrer to the petition, and appellant declining to plead further, his petition was dismissed, from which ruling this appeal is prosecuted; so that the only question for consideration here is whether or not the facts alleged in the petition, and admitted by the demurrer, are sufficient in equity to entitle appellant to the relief sought.
The petition charges, in the fullest and strongest terms, appellant’s ignorance of the rights and obligations of the parties under the policy of insurance, and full knowledge on part of appellee, both as to the rights of the parties and as to appellant’s ignorance of them, as well as false and fraudulent misrepresentations made by appellee’s agents for the purpose of deceiving, and which did deceive, appellant as to the validity of his claim under the policy. It charges, among other things, that appellee fully understood its liability to appellant for the full amount of his loss, that he was ignorant of the law governing his right and appellee’s obligations, while appellee both knew his rights and knew that he was ignorant of them, and, with this knowledge and intending to deceive and defraud him, fraudulently represented to him that, by reason of an incumbrance on a part of the insured property, his entire claim under
These charges being admitted, it seems to us that the case presented involves something more than an effort to obtain relief purely on the ground of a mistake of law, or mere ignorance on part of appellant as to his legal rights under the contract of insurance. It becomes, in addition to this, a case of actual fraud, where by fraudulent misrepresentations made for the purpose and with the intent to. deceive, the known ignorance of one of the parties to the contract has been wilfully taken advantage of, and he has thereby been induced to surrender a valid, subsisting right without consideration. It is true that the ignorance relied upon is an ignorance of law rather than of fact, and that this is not always, or perhaps generally, and when standing alone, available as a ground of relief against an executed contract, no matter how inequitable it may be. On this point the decisions of the courts of this country, as well as the English courts, are by no means uniform, but, in our opinion, the weight of authority and the decisions of this court would now forbid that a party, who, with full knowledge of the ignorance of the other contracting party, has not only encouraged that ignorance, and made it the more dense by his own false and fraudulent misrepresentations, but has wilfully deceived and led that other into a mistaken conception of his legal rights, should shield himself behind the
This view seems to be. upheld by many, if not all, of the modern text writers, who are recognized as authority on the question.
Mr. Kerr, in his well-known work, in treating this subject says: “But if it appear that the mistake was induced or encouraged by the misrepresentation of the other party to the transaction, or was perceived by him and taken advantage of, the court will be more disposed to grant relief than in cases where it does not apear that he was aware of the mistake.” (Kerr on Fraud and Mistake, pp. 399, 400.)
And, in his work on Equity, Mr. Bispham lays down this doctrine, in even stronger and less uncertain terms. He says: “Where ignorance of the law exists on one side, and that ignorance is known and taken advantage of by the other party, the former will be relieved. More particularly will this be so if the mistake was encouraged or induced by misrepresentations of the other party.” (Bispham’s Principles of Equity, sec. 188.)
Under the admitted facts of this case and the circumstances surrounding and leading up to the mistake relied on here, it is clearly brought within the text above quoted; and many other authorities to the same effect, including reported cases in many of the States of this Union, might be cited, if it were deemed necessary.
We fully recognize the wisdom of that rule which always inclines the courts to uphold and enforce the validity of voluntary compromises and adjustments between parties of their legal differences, when fairly arrived at. Nor would any mere ignorance of or mistake in the law governing any doubtful and disputed legal proposition, on part of either of the parties to the compromise, in the absence of evidence
Upon the record before us, there may be some question as to how far there was a controversy between these parties over any doubtful legal question that might have been litigated in court, or exactly what was the nature and extent of the same.
It is alleged in the petition that appellee claimed that all rights of appellant under his policy of insurance were forfeited, by reason of the existence of an incumbrance upon a part of the insured property; but it is further alleged that appellee, at the time the contract of insurance was made, “had full knowledge of the same, and having such knowledge, made the contract and issued the policy aforesaid.” This allegation is admitted to be true, and, in the absence of anything further in the pleading, pertaining to this point, we are unable to see in this the basis of a doubtful disputed legal proposition which might have been litigated in the courts, or to. know exactly what controversy was settled by the parties.
But, waiving the question as to the nature and extent of the controversy between appellant and appellee, and reverting to the character-of the compromises which the courts will uphold, we now quote from another text writer who uses this language, to-wit: “Voluntary settlements are so
Under the authorities quoted it is manifest that the compromise contract sought to be rescinded here is within the control of a court of equity and may be set aside.
And) now, referring to the decisions of this court and to the doctrine established in this State, it seems to us still clearer that the contract complained of, and which was made under the circumstances set forth in the petition and admitted by appellee, can not be sustained.
In an exhaustive opinion in which the authorities were ably reviewed by Judge Robertson, after referring to the difficulty of determining, in every case, when a contract was, in fact, made under a mistake of law, it is said: “When it can be made perfectly evident, that the only consideration of a contract was a mistake as to the legal rights or obligations of the parties, and when there has been no fair compromise■ of bona fide and doubtful claims, we do not doubt that the-
In the case of Ray and Thornton v. Bank of Kentucky, 3 B. Mon., 510, this court referred to and approved the above case and said: “Upon the whole we would remark that, whenever, by a clear and palpable mistake of law or fact essentially bearing upon and affecting the contract,' money has been paid without cause or con. sideration, which in law, honor or conscience was not due and payable, andl which in honor or good conscience ought not to be retained, it was and ought to be recovered back.”
Both of these cases are cited with approval in the case of Louisville & Nashville R. Co. v. Hopkins County, 87 Ky., 613, and the doctrine laid down therein has not been departed from by this court.
It will be seen that the question of fraud did not enter into the decision of either of those cases, but that they are almost entirely based upon the fact that there was no good consideration to uphold the contracts, that it was not a fair compromise of bona fide and doubtful claims, and that. the money was not in law, honor or conscience payable, and ought not in honor or good conscience to be retained. If for these reasons a contract, made under a clear mistake of law, may be set aside, then how much stronger reason is there for annulling the contract under consideration. ' Not only was this contract, according to this record as .it comes before us, wholly without consideration, and not only was the money surrendered by appellant on his claim, not due in law, honor or conscience, and surrendered only under a clear mistake of law, but it is further admitted by the demurrer that this contract was obtained, and that appellant was induced to surrender one-half of his claim, by the actual
We are clearly of the opinion that the chancellor erred in sustaining the demurrer to the petition, and for the reasons indicated, his judgment dismissing appellant’s petition is reversed and the action is remanded, with directions to set aside that order and to overrule the demurrer and give appellee leave to file an answer.