Title: International Motor Rebuilding v. United Motor Exchange
Citation: 193 Kan. 497, 393 P.2d 992
Docket Number: 43,776
State: Kansas
Issuer: Kansas Supreme Court
Date: July 14, 1964

193 Kan. 497 (1964)
393 P.2d 992
INTERNATIONAL MOTOR REBUILDING CO., a Corporation, Appellant,
v.
UNITED MOTOR EXCHANGE, INC., a Kansas Corporation, and JOHN TUTTLE and JERRY LIVINGSTON, Appellees.
No. 43,776

Supreme Court of Kansas.
Opinion filed July 14, 1964.
Orlin L. Wagner, of Wichita, argued the cause, and Wilbur D. Geeding, of Wichita, was with him on the briefs for the appellant.
Marvin J. Martin, of Wichita, argued the cause, and Donald G. McFerson, John B. Wooley, and Jimmie E. Grey, all of Wichita, were with him on the briefs for the appellees.
The opinion of the court was delivered by
HATCHER, C.:
This appeal stems from a controversy over a compromised settlement of accounts and suit on a note given as consideration therefor.
Plaintiff was in the business of purchasing and rebuilding old automobile motors for resale. The defendants were in the business of overhauling automobiles and replacing worn motors with rebuilt ones. The defendants sold worn motors to plaintiff and purchased rebuilt motors. During the period from July, 1958, to November 7, 1960, the transactions amounted to many thousands of dollars.
On May 3, 1961, some six months after the last transaction between the parties, Mr. James A. Barefield, plaintiff's secretary and treasurer, went to defendants' place of business in Wichita, Kansas and demanded a settlement of accounts. Plaintiff's records reflected *498 an amount of $9,500.00 due it. During the negotiations various adjustments and concessions were made on both sides and an agreed settlement was arrived at in the sum of $7,232.00.
On May 4, 1961, defendants gave plaintiff a check in the amount of $732.00 and a note in the sum of $6,500.00. The note was payable in twenty-six weekly installments of not less than $250.00 each. On the same day the plaintiff gave defendants a letter by which it agreed to accept 68 used motors and credit payment on the note in the amount of $2,350.00. The note was signed by United Motor Exchange, Inc., as principal, and John Tuttle and Jerry Livingston as guarantors.
The defendants made payments in the amount of $2,000.00 during the period from May 8, to September 7, 1961. No motors were shipped for credit on the note.
On September 22, 1961, the plaintiff served upon each of the defendants by registered mail notice that the note was in default and demanded payment in full.
On September 28, 1961, the plaintiff not having received satisfaction, this action was commenced. The petition alleged the execution of the note which was attached to the petition, default in payments, and prayed for judgment for the $4,500.00 due with interest.
On October 6, 1961, eight days after the action was commenced, defendants addressed a letter to plaintiff asking if it would accept used motors for credit on the note in accordance with the letter of May 4, 1961. The record discloses no reply.
On December 14, 1961, the defendants filed their answer. The execution of the note and the payment of $2,000.00 thereon was admitted. The answer alleged in part:
..............
It was alleged that the accounts submitted by plaintiff to the defendants were erroneously supposed by defendants to be true and correct and were relied on by defendants in making the settlement agreement. The true facts were not known by defendants until on or about October 20, 1961. The erroneous facts were the basis upon which the agreement was made.
The answer further alleged that the actual balance due plaintiff on the open account was $580.86. The prayer requested that the settlement agreement and the note be set aside and that the plaintiff have judgment in the amount of $580.86.
At the close of the evidence, which will be considered later in detail, the trial court found:
Plaintiff has appealed, contending that finding of the trial court was not supported by substantial evidence and that the court erred as a matter of law in setting aside the compromise and settlement agreement.
We are inclined to agree with appellant's contention, but before reviewing the evidence a discussion of the general principles of law covering the effect of a compromise and settlement may be helpful.
The law favors the amicable settlement of disputes. Compromise as a mode of adjusting claims should be encouraged by the courts. It would be against public policy to prevent compromise of claims by compelling all controversies to be adjusted by litigation. (Logdson v. Hudson, 83 Kan. 500, 112 Pac. 118; Schnack v. City of Larned, 106 Kan. 177, 186 Pac. 1012; Massey-Harris Co. v. Horn, 132 Kan. 206, 294 Pac. 666.)
A compromise does not anticipate that the rights of the parties have been settled with exact nicety. Courts should not be concerned with the exactness of the accounting between the parties in considering the validity of a compromise. A compromise may be valid although the amount agreed to be paid is much more or much less than the amount actually due. Inadequacy of consideration does not invalidate a compromise if fairly made. (Minor *500 v. Fike, 77 Kan. 806, 93 Pac. 264; Robinson v. Railway Co., 96 Kan. 137, 150 Pac. 636; Barton v. Oil Co., 112 Kan. 436, 211 Pac. 608.) In Sutherland v. Sutherland, 187 Kan. 599, 358 P.2d 776, it is said at page 605 of the opinion:
Forbearance to sue is the usual, and a valid consideration for a compromise settlement. A party has a right to sue where a claim is reasonably doubtful and the opposite party has a right to avoid litigation by a settlement of the doubtful claim. (Ralston v. Mathew, 173 Kan. 550, 250 P.2d 841.) In Reed v. Kansas Postal Telegraph &amp; Cable Co., 125 Kan. 603, 264 Pac. 1065, it was held:
Neither financial distress nor threat nor fear of litigation is sufficient to avoid a compromised settlement if otherwise made in good faith. (Rennolds v. Guthrie, 103 Kan. 829, 177 Pac. 359.) In Kiler v. Wohletz, 79 Kan. 716, 101 Pac. 474, it was held:
A compromise may be set aside where both parties are mistaken as to the facts which form the basis of the compromise. However, the fact that one of the parties made an error in calculating the items of his claim, which is accepted by both parties, is not enough to invalidate the compromise. (Bottom v. Harris, 108 Kan. 7, 193 Pac. 1058; Brooks v. Hall, 36 Kan. 697, 14 Pac. 236.)
*501 The conclusiveness of a compromised settlement was stated in Nauman v. Kenosha Auto Transport Co., 186 Kan. 305, 349 P.2d 931, as follows:
We will review the evidence submitted by appellees which they contend is sufficient to support the trial court's finding that the compromise settlement was based on mutual mistake of fact and should be set aside. In doing so we are mindful of the well established rule that where the trial court's findings are attacked because of insufficiency of the evidence this court should not weigh conflicting evidence. It may only review the record for the purpose of determining whether there is any substantial evidence to support the findings. If there is any substantial evidence the findings must stand. (White v. Rapid Transit Lines, Inc., 192 Kan. 802, 391 P.2d 148; Green v. Kensinger, 193 Kan. 33, 392 P.2d 122; Finnell v. Patrons Co-Operative Bank, 193 Kan. 354, 394 P.2d 116.) However, we are of the opinion that there is a basis in this case for the application of the rule that where there is no dispute in the testimony and it all points to but one conclusion, the question is one of law and not of fact. (Cain v. Grosshans &amp; Petersen, Inc., 192 Kan. 474, 389 P.2d 839.)
It will be understood that the appellant has never conceded a mistake of fact. It introduced as evidence the same records as were used in reaching the compromise settlement and contended they were correct.
The appellees presented three witnesses.
Mr. Livingston, part owner of the appellee corporation and one of the guarantors on the note in controversy, testified that he was called into a conference on the 3rd or 4th of May, 1961, in which Mr. Barefield and Mr. Tuttle were present. We quote from the record:
*502 "Q. What was that discussion?
It is clear that there was no mistake on the part of the appellee, Livingston. He did not know and made no effort to discover the actual balance due.
Mr. John S. Hoover, an accountant testified that he had audited the documents and records which appellee corporation had in its files  all available documents that were present, and from his examination and frequent conferences with Mr. Tuttle arrived at a balance due appellant by appellees in the sum of $1,193.37. He did not remember whether the auditing was done before or after the action was commenced. It is alleged in the answer that the claimed missing credits were not known to defendant until October 20, 1961. It would appear the audit was not made until after the petition was filed September 22, 1961.
Mr. John R. Tuttle, president in charge of books, records and transactions of the appellee corporation and a guarantor of the note in controversy, testified as the principal witness for appellees. His testimony will be presented in detail as follows:
"Q. Did Mr. Brooks show you any of their records?
"A. Yes we did.
..............
"Q. Did you agree with it?
"A. Yes he did.
"Q. What did he tell you?
The witness was given a copy of the appellant's work sheets and audit sheets. He worked the evening of May 3rd, trying to arrive at a figure. He stated:
The witness testified further:
"Q. Exactly $7,200.00?
It would serve no useful purpose to draw specific conclusions from the testimony of appellees. Credible conduct on their part would not be reflected. It will suffice to say that there was no mutual mistake of fact which determined the conduct of the parties. The appellees knew what they were doing and had a definite purpose for doing what they did. They entered into the compromised settlement for the purpose of delaying the payment on the amount due and avoiding litigation while attempting to get financial assistance from the federal government. They cannot now be heard to say that the agreement should be set aside because *504 they acted in bad faith or with negligence and indifference, intending to challenge the agreement after the purpose of their delaying tactics had been accomplished.
The general rule of law applicable to the facts before us is summarized in 11 Am. Jur., Compromise and Settlement, § 32, p. 280, as follows:
The mistake must be such that the parties are unintentionally caused to do something they did not intend to do. (Janicke v. Telephone Co., 96 Kan. 309, 311, 150 Pac. 633.)
We must conclude as a matter of law that there was no substantial evidence to support the trial court's finding that the compromise and settlement agreement, which formed the consideration for the promissory note and which was the basis for this action, was based upon mutual mistake of fact.
The conclusion reached renders unnecessary the consideration of appellant's contention that the agreement was ratified on numerous occasions. A valid agreement requires no ratification.
The judgment is reversed with instructions to enter judgment for the plaintiff for the balance due on the promissory note in the sum of $4,500.00 with appropriate interest.
APPROVED BY THE COURT.