If one party to a contract intends to rescind it on the ground
of failure of performance by the other, a clear notice of such
intention must be given unless either the contract dispenses with
notice or it becomes unnecessary by reason of the conduct of the
parties.
A settlement of a disputed claim between parties dealing on
terms of equality and having no relations of trust or coufidence to
each other, each having knowledge, or the opportunity to acquire
knowledge, of every fact bearing upon the validity of their
respective claims, will be supported by a court of equity in the
absence of fraud or of the concealment of facts which the party
concealing was bound to disclose.
In equity. The case, as stated by the court, was as follows:
It was adjudged below, 35 F. 174, that the appellees, Bacon and
Rogers, each owned in fee an undivided one-fourth, and the
appellant, Hennessy, an undivided one-half, of certain lands in
Washington County, Minnesota, and that partition thereof be made
between them upon that basis. Of this decree the appellant
complains, his contention being that he holds the legal title to an
undivided half of the lands, and that the appellees should be
required to surrender to him the title to the other half.
It appears that the lands originally belonged to George N.
Chittenden, of Illinois, and that, by written contract of date
Page 137 U. S. 79
March 27, 1882, he sold them to Bacon, agreeing to convey to the
latter, his heirs and assigns, "by a good and sufficient deed of
warranty, on or before the 27th day of June, 1882," upon the
punctual payment of the consideration, $4,400 at such time as
Chittenden should execute a sufficient deed of general warranty.
The contract provided that if Bacon failed to pay the
consideration, then the contract should be void, "time being of the
essence of this agreement."
On the 27th of June, 1882, Bacon, his wife uniting with him, for
the consideration of five hundred dollars, of which one hundred
dollars was paid in cash, assigned and transferred to Hennessy all
his right, title, and interest in the agreement with Chittenden.
The contract of assignment provided that Hennessy should receive a
good, clear, and perfect title to the lands through a good warranty
deed, with usual covenants running from Chittenden and wife to
Hennessy or from Bacon and wife to Hennessy if it should be thought
proper to have Bacon and wife take title from Chittenden; also that
Hennessy should pay to Bacon the remainder of the five hundred
dollars upon receipt, and only upon receipt, "of such title through
such deed to said lands, or upon the said Hennessy accepting a deed
of warranty" from Chittenden or Bacon. If Hennessy did not receive
such title on account of an incurable defect in the title or other
cause, the deposit made by him was to be refunded.
On the day of the execution of the contract between Bacon and
Hennessy, the latter made a tender of $4,400 to Chittenden's agent
residing in St. Paul in fulfillment of the contract of March 27,
1882, and demanded a conveyance in accordance with its terms.
Hennessy was informed before making the tender that Chittenden had
not executed the required deed, and it was made then only to
preserve his rights under the contract. Shortly after the tender,
Chittenden left with his agent a deed, in proper form, to be
delivered upon the payment of the price of the land, and of this
fact notice was promptly given to Hennessy and Bacon. Hennessy
received in the meantime an abstract of the title, and, discovering
therefrom that the record did not show a clear, unencumbered title
in
Page 137 U. S. 80
Chittenden, he sent to the latter's agent a memorandum of the
defects therein appearing of record, and demanded that those
defects be remedied. The agent wrote twice to Hennessy at Dubuque,
Iowa, where he resided, urging him to give attention to the matter,
stating in a letter of date of November 6, 1882, that unless some
understanding was soon reached he would return the deed to
Chittenden, who would probably decline to carry out the sale. Under
date of November 16, 1882, he again wrote to Hennessy, as
follows:
"Yours of the 15th inst. received, in answer to a previous
letter. You instructed me to see Mr. Horn. I immediately saw him,
and satisfied him as to some of the objections, consulted him as to
others, and left the papers with him. He expressed the wish to see
you about the matter in order that he might inform me directly and
positively what further would be required to make the title good. I
have sought in every way since you went into this transaction to
obtain an interview with you, or someone authorized to act for you,
in order to arrive at something definite, and have found it
exceedingly difficult to do so. Although instructed to refer me to
Mr. Horn, Mr. Kavanagh did not do so until I wrote you, and now
that I have interviewed Mr. Horn, I find it difficult to reach any
result. I am not accustomed to that way of doing business, and
cannot say I particularly appreciate it. I would suggest that the
best and quickest way to come to some definite understanding about
the matter is for you to meet Mr. Horn and myself at such early
time as may be designated by you. Unless this is done by Monday
next (Nov. 20), I shall return the deed (which I hold ready for
delivery to you) to Mr. Chittenden, and it is doubtful whether he
will carry out the same. Allow me to suggest it is part of your
manifest duty not to interpose interminable delays to the
settlement of the matter, and that if you will appoint the above
meeting, or designate Mr. Horn or some other person who can act for
you in your absence, this transaction can speedily be
finished."
The evidence is conflicting as to what passed between the
parties after that date, but it is certain that the deed from
Chittenden remained in the hands of his agent for more than
Page 137 U. S. 81
three years and that Bacon repeatedly urged Hennessy to indicate
more distinctly than he had done the nature of his final objections
to the title, or give up his contract of purchase. Hennessy
contended not only that Chittenden's agent well understood the
defects in the title, but that they should be remedied. During all
that period, the land were appreciating in value, and by the fall
of 1885 were worth more than $30,000. Finally, at the suggestion of
Bacon, Rogers determined to buy them, the understanding being that
Rogers was to make the purchase, allow Bacon, as commissions, the
difference between $5,000 and the amount paid for the lands, and,
when Rogers got them, he was to give Bacon an interest of one-half
upon the latter's paying half the expenses necessary to clear the
title. There was an apparent cloud upon the title of record. It
arose out of a mortgage in which Sanborn claimed an interest.
Rogers, with knowledge of the contract between Bacon and Hennessy,
paid Sanborn $1,000 for that interest, and on the 4th day of
November, 1885, took a general warranty deed from Chittenden,
paying the latter the sum of $4,705.87. Chittenden took from Rogers
a bond to indemnify him against any claim and demand made, or that
might be made, by Bacon and Hennessy, or either of them, and
against any loss or damage by reason of the conveyance to
Rogers.
On the 16th of December, 1885, Rogers informed Hennessy by
letter that, Bacon having forfeited his contract, he had purchased
the lands from Chittenden, and put his deed on record. He sought,
by letters, a meeting with Hennessy, that the matter might be
settled between them. The latter for some time took no notice of
these letters, but at last he wrote to Rogers, under date of
January 21, 1886, saying that while he was fully assured of the
validity of his title to the lands, nevertheless, in the interests
of peace and for the sake of avoiding what might prove a long,
vexatious, and expensive litigation, to say nothing of the
bitterness of feeling usually resulting from such disputes, he was
willing to meet Rogers and see if some amicable adjustment of the
question between them could be reached. He said:
"I wish it, however, distinctly
Page 137 U. S. 82
understood that I do not, by this concession to peace and
harmony or good feeling or anything that may result therefrom, in
any way, shape, or manner waive any right or recognize or admit in
you or in anyone else any right, title, or interest, legal or
otherwise, in or to the lands in question or any part thereof, and
that I emphatically must oppose, and in the strongest terms,
forever any such right, title, and interest in you and any and
every existing person. With that understanding, I shall endeavor to
meet you for this purpose in the course of the coming week at such
time and place as we may hereafter agree upon."
Hennessy and Rogers finally held a conference which resulted
March 18, 1886, in a written agreement between them, which recited
their respective claims to the lands, and provided:
"Now, to settle the same, the said Edward G. Rogers hereby
agrees to make and execute to said David J. Hennessy a quitclaim
deed of an undivided one-half of said property, and the said
Hennessy agrees to execute and deliver to said Edward G. Rogers a
quitclaim deed of an undivided one-half of said property, and also,
in further consideration of said deed, to pay said Rogers the sum
of ($2,750) two thousand seven hundred and fifty dollars. This
settlement to be in full of all claims in favor of said D. J.
Hennessy, and against one George v. Bacon and one George N.
Chittenden, growing or arising out of any contracts in regard to
the sale or purchase of said land by said Hennessy from said Bacon
or said Chittenden. This agreement to be executed and carried out
as soon as possible, and at least within thirty days from this
date, if possible. Time is not of the essence of this
agreement."
Pursuant to this agreement, Rogers made a deed to Hennessy for
an undivided half of the lands, the latter paying therefor the sum
of $2,750, and Hennessy made a deed to Rogers for the other
undivided one-half. Subsequently Rogers conveyed one undivided
fourth interest to Bacon and at a later date conveyed to him the
remaining one-fourth of his original one-half interest for the
consideration of $10,000.
The present suit was brought by Bacon for partition between
Page 137 U. S. 83
himself and Hennessy upon the basis of the ownership by each of
an undivided one-half interest. Hennessy having alleged in his
answer that the settlement of March 18, 1886, was a fraud upon him,
Rogers at Bacon's request, repurchased, and took a conveyance for,
the one-fourth interest he had sold to Bacon, and, with leave of
the court, became a co-plaintiff in the suit with Bacon.
MR. JUSTICE HARLAN, after stating the facts in the foregoing
language, delivered the opinion of the Court.
It may be assumed for the purposes of the present case that upon
the tender to Chittenden's agent, on the 27th of June, 1882, of the
full amount Bacon had agreed to pay for the lands in controversy,
Hennessy, as the assignee of Bacon, became entitled to a sufficient
deed of general warranty from Chittenden, and that the conveyance
from Chittenden to Rogers was so far in derogation of Hennessy's
rights as such assignee that a court of equity, in view of the
relations between Bacon and Hennessy, and of the knowledge Rogers
had of the written agreement between them, would have compelled
Rogers at any time prior to March 18, 1886 (the date of the
settlement between him and Hennessy), to convey the title to
Hennessy upon the payment by the latter of the balance due Bacon
under the contract of June 27, 1882, as well as of the amount Bacon
had agreed to pay to Chittenden. As Hennessy rightfully demanded a
clear unencumbered title to the lands, and as Chittenden did not,
personally or by his agent, distinctly announce his purpose to
rescind altogether the contract of March 27, 1882, unless Hennessy,
within a given time, would take such title as appeared of record,
it may be that Chittenden was not at liberty, consistently with
Page 137 U. S. 84
Hennessy's rights, and without previous notice to him, to treat
that contract as abandoned and to make the sale to Rogers, the
general rule being that if a party means to rescind a contract
because of the failure of the other party to perform it, he should
give a clear notice of his intention to do so, unless the contract
itself dispenses with such notice or unless notice becomes
unnecessary by reason of the conduct of the parties. 1 Sugden on
Vendors, c. 5, ยง 5.
But Chittenden assumed to treat his contract with Bacon as
forfeited or annulled, and executed a deed to Rogers. Of these
facts Hennessy was informed. He knew that Rogers claimed the lands
absolutely as his property under the purchase from Chittenden, and
that the deed under which Rogers asserted title was recorded, and
he had accurate knowledge of the title to the lands so far as it
appeared of record. He also knew at the time of the agreement of
1886 of Rogers' contention that the contract of 1882 had been
forfeited by reason of Bacon's failure to comply with its
provisions. He nevertheless disputed Rogers' claim to the property.
But Rogers, with equal distinctness, disputed his claim, and this
dispute was settled by the agreement of March 18, 1886, under which
Hennessy consented to take an undivided interest of one-half at the
price of $2,750, and let Rogers have the other half.
He now contends that he was induced to make this settlement by
false representations upon the part of Rogers, and because of the
suppression of facts that ought to have been, but were not,
communicated to him by Rogers. The evidence upon this point is
quite conflicting, and does not justify the conclusion that Rogers
made any false representations whatever, or that he withheld any
facts he was under a legal obligation to disclose. Hennessy says
that if he had known when conferring with Rogers that the latter
had agreed to let Bacon have an interest in the lands, he would not
have made the settlement, for that fact, he contends, would have
indicated collusion between Rogers and Bacon. We do not see that
ignorance of such fact affects the validity of the settlement of
1886 or that it would have prevented its consummation.
Page 137 U. S. 85
If Hennessy had been informed of Rogers' promise to give Bacon
an interest in the lands, he would have known that such promise
could not, under the circumstances, have been enforced. The money
that Rogers paid Chittenden was his own, and in the title acquired
by him Bacon had no legal interest. Rogers moved in the matter of
the purchase from Chittenden entirely upon his own responsibility.
With full knowledge of the title that Rogers had acquired, Hennessy
deliberately chose to compromise the dispute between them, as shown
by the agreement of 1886 and by the deeds executed in pursuance of
its provisions. No fraud was practiced by Rogers. He was guilty of
no unfairness. He concealed nothing that he was under legal
obligation to state. His information in respect to the title was no
greater than Hennessy had, or than Hennessy could easily have,
obtained. It is the case of the compromise of a disputed claim, the
parties dealing with each other upon terms of perfect equality,
holding no relations of trust or confidence to each other, and each
having knowledge, or having the opportunity to acquire knowledge,
of every fact bearing upon the question of the validity of their
respective claims.
Cleaveland v. Richardson, 132 U.
S. 318,
132 U. S. 329.
Such a settlement ought not to be overthrown even if the Court
should now be of opinion that the party complaining of it
surrendered rights that the law, if appealed to, would have
sustained. After this settlement was made, Rogers was at liberty,
for any reasons deemed by him sufficient, to give Bacon an interest
in the one-half acquired by him under the settlement of 1886, and
the interest thus acquired by Bacon did not inure to Hennessy by
reason of the relations created between them by the original
contract of 1882. As between Rogers and Bacon, the lands became the
absolute property of the former under his purchase from Chittenden
and under the settlement of 1886, and, so far as Hennessy was
concerned, an undivided one-half interest was confirmed to Rogers,
as his property, to dispose of an he deemed best.
Decree affirmed.