Anderson v. Laws

• Decision Date: 29 May 1945
• Citation: 176 Or. 468,159 P.2d 201
• Parties: ANDERSON <I>v.</I> LAWS ET AL.
• Court: Oregon Supreme Court

176 Or. 468

159 P.2d 201

ANDERSONv.

LAWS ET AL.

Supreme Court of Oregon.

Argued March 8, 1945.

Affirmed May 29, 1945.

Fraud

1. Generally, where one induced by misrepresentations or fraud to deal or acquire, or to enter into a contract for acquisition or use of, property, with knowledge of the deception, receives from the party guilty of fraud some substantial concession or enters into a new contract in respect of the transaction, he thereby relinquishes all right to recover damages because of the misrepresentations.

Contracts

2. A waiver of the right to rescind contract on ground of fraud may be brought about by any delay on the defrauded party's part, especially by his remaining in possession of the property received by him under the contract and dealing with it as his own.

Fraud

3. The defrauded party, who does not discover the fraud until he has partly performed the contract alleged to have been obtained by fraud, may go forward with the contract, keep what he received under it, and still maintain his action for damages for fraud, although he thereby waived his right to rescind.

Fraud

4. Where plaintiff, claiming that he was defrauded by defendants in the sale to plaintiff of an interest in corporation, entered into contract with defendants whereby he agreed to continue to work for the corporation for a certain period, and, in event plaintiff's interest could not be sold during such period, the corporation was to be dissolved and proceeds of dissolution paid to plaintiff up to the amount he had originally paid in, plaintiff thereby relinquished for sufficient consideration all right to recover damages because of the alleged fraud.

Estoppel

5. Whether one intends to waive a known right is usually a question of fact, but where the facts are not in dispute, the law conclusively presumes the intent from the person's conduct and the question is one of law.

                  Waiver of fraud by subsequent dealings, note, 106 A.L.R. 172
                See, also, 24 Am. Jur. 42
                  37 C.J.S., Fraud, § 69
                

Before BELT, Chief Justice, and ROSSMAN, KELLY, BAILEY, LUSK, and HAY, Associate Justices.

Appeal from Circuit Court, Multnomah County.

LOUIS P. HEWITT, Judge.

Action by Carl O. Anderson against Roy D. Laws and Clarence A. Wicks for deceit. The defendant Laws moved for judgment on the pleadings and, from the judgment granting the motion, plaintiff appeals.

AFFIRMED.

Charles D. Dolph and Sylvanus Neil Smith, both of Portland, for Carl O. Anderson, appellant.

Hy Samuels, of Portland, for respondent Roy D. Laws.

LUSK, J.

This was an action for deceit against Roy D. Laws and Clarence A. Wicks. The defendant Laws moved for judgment on the pleadings, which was granted. From that judgment the plaintiff has appealed.

The complaint sets forth a cause of action based on fraudulent representations inducing the purchase by the plaintiff on March 28, 1944, for $8,000.00, of an interest in a business conducted by the defendants as a partnership under the names of Wicks & Slifman. The misrepresentations alleged related to the value of the business. The defendant Wicks filed a demurrer, which was confessed by the plaintiff, and the rights of that defendant are not now involved. The defendant Laws filed an answer in which he denied the allegations of fraud, and alleged affirmatively that the two defendants and the plaintiff associated themselves together for the purpose of forming a corporation to be known as Wicks Construction Company, which was to carry on the partnership business of Wicks & Slifman and to take over the assets of the partnership; that the plaintiff agreed to pay $8,000.00 for his interest in the corporation; that the parties thereafter filed articles of incorporation with the corporation commissioner of the State of Oregon, and agreed to divide the capital stock equally among themselves, and that, before the organization of the corporation, the plaintiff "complained of these defendants that there had been misrepresentations made to him in connection with the sale and purchase of his interest in said corporation."

The foregoing allegations are all admitted in a reply filed by the plaintiff.

The answer further alleges that, notwithstanding the complaints about such misrepresentations the plaintiff, together with the defendants, on April 7, 1944, completed the organization of the corporation, and that "pursuant to the terms of an agreement entered into between the stockholders, the plaintiff drew wages from the corporation in the sum of $300 per month" and "took an active part in the operation and management of the corporation" until about the time of filing the complaint in this action, and that by reason of these facts the plaintiff should be estopped from asserting his present claim. The answer then alleges that about April 7, 1944, plaintiff released his claim by entering into the following agreement with the defendants:

"THIS AGREEMENT, made and entered into by and between Clarence A. Wicks, Roy D. Laws, and Carl O. Anderson.

"WHEREAS, the parties to this agreement are the owners of all the capital stock of the Wicks Construction Co., an Oregon corporation, and whereas Carl O. Anderson claims that at the time he purchased his interest in said corporation, there were certain misstatements made in connection with the assets of said corporation. Now, therefore, in order to satisfy the claims of Carl O. Anderson, the parties mutually agree as follows:

"That steps will be taken immediately to sell and dispose of the capital stock owned by Carl O Anderson, for which he has paid the sum of $8,000. That for a period of three weeks from date hereof, Roy D. Laws and Clarence A. Wicks shall have the sole right to sell and dispose of said stock, provided, of course, that the price that Carl O. Anderson is to receive for said stock shall meet with his approval and that the terms and manner of payment thereof shall also meet with his approval. At the expiration of three weeks of the date hereof, in the event that Clarence A. Wicks and Roy D. Laws have not completed a sale of the stock belonging to Carl O. Anderson upon the terms and conditions above set forth, then, in that event, Carl O. Anderson shall have the right to sell and dispose of his stock in any manner and upon any terms and to whomsoever as he shall deem best. At the expiration of six weeks from the date hereof, if Carl O. Anderson's stock is not sold as herein provided, then, in that event, the parties hereto mutually agree that the corporation will be dissolved and the first moneys paid upon the liquidation of said corporation will be paid over to Carl O. Anderson, and no divisions will be made between Clarence A. Wicks and Roy D. Laws until Carl O. Anderson shall have received his full $8,000.00."

It is further alleged that the defendants took steps to sell plaintiff's stock, but were unable to do so in the time specified in the agreement; that thereafter the plaintiff attempted to sell his stock, but, as far as the defendants were able to determine, had not done so; and that on June 8, 1944, at a meeting of the corporation which the plaintiff did not attend, although he was advised thereof, a resolution was properly adopted to liquidate the corporation in order to fulfill the terms of the agreement of April 7, 1944.

The plaintiff in his reply admitted "that he earned a certain sum of wages for work performed for the defendants", and admitted that he signed the agreement of April 7, 1944, and that he did not attend the corporate meeting on June 8, 1944. Otherwise, the plaintiff denied all the allegations summarized in the preceding paragraph hereof.

LUSK, J.

The plaintiff admitted in his reply that he signed the agreement of April 7, 1944, which shows on its face that it was entered into after plaintiff learned that he had been deceived. The question for decision is whether by this conduct he waived his right to recover for the alleged fraud.

1. In 24 Am. Jur., Fraud and Deceit, 42, § 214, it is said to be the general rule that "if one induced by misrepresentations or fraud to deal or acquire, or to enter into a contract for the acquisition or use of property thereafter, with knowledge of the deception, receives from the party guilty of fraud some substantial concession or enters into a new contract in respect of the transaction, he thereby relinquishes all right to recover or recoup damages because of the misrepresentations." So far as we have been able to ascertain, the validity of this principle has never been questioned by any court. It may be found enunciated and applied in numerous cases cited in the foregoing text and in the annotation in 106 A.L.R. 172 to the case of Bonded Adjustment Co. v. Anderson, 186 Wash. 226, 57 P. (2d) 1046, 106 A.L.R. 166.

2, 3. It should be...