Opinion ID: 2456652
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Heading: Champlin's Duty to Speak

Text: When Champlin made its discovery in 1958 that its plant formula was in violation of the Chastain contract it had a duty to speak by making a full and fair disclosure to Chastain who did not learn of the breach until three years later. He who is silent when he should speak must be silent when he would speak, if he cannot do so without a violation of law and injustice to others. Consolidated Fruit-Jar Co. v. Wright, 94 U.S. 92, 96, 24 L.Ed. 68 (1876). By ignoring this basic rule, the majority has permitted the ineligible party, not only to breach its contract, but also to breach its further duty to make a full and fair disclosure upon making its discovery. Despite these two Champlin wrongs, it has been permitted to gain a windfall of $118,076.25. The jury found, and the finding is not attacked, that Champlin had full knowledge as early as August of 1958 that it was not distributing products correctly and that Chastain did not learn of it until 1961. Ordinarily the one (Champlin) who asserts estoppel as a defense against another's (Chastain's) claim must be the one who is without knowledge of the material facts. Harrell v. City of Lufkin, (Tex.Com.App.), 280 S.W. 174, 177 (1926); Moore v. Carey Bros. Oil Co., 246 S.W. 1083 (Tex.Civ.App. 1922) aff'd (Tex.Com.App.), 269 S.W. 75, 39 A.L.R. 1247, on rehearing 272 S.W. 440, 39 A.L.R. 1247; Steed v. Petty, 65 Tex. 490 (1886); Blum v. Merchant, 58 Tex. 400 (1883); Hunt v. W.O.W. Life Ins. Co. Soc., Tex.Civ.App., 153 S.W.2d 857 (1941), writ ref.; Booth Fisheries Corp. v. Eardley, Tex.Civ.App., 233 S.W.2d 872 (1950), ref. n. r. e. Ordinarily the one (Chastain) against whom the estoppel operates is the one who is possessed of knowledge and who, by force of his knowledge, takes some advantage of him (Champlin) who does not have it. Hallmark v. United Fidelity Ins. Co., 155 Tex. 291, 286 S.W.2d 133 (1956); Humble Oil & Refining Co. v. Harrison, 146 Tex. 216, 205 S.W.2d 355 (1947); Burnett v. Atteberry, 105 Tex. 119, 145 S.W. 582 (1912); Moore v. Carey Bros. Oil Co., supra; 31 C.J.S. Estoppel § 70; 3 Pomeroy's Equity Jurisprudence, § 809 (5th ed). In this case, however, the majority has ruled that Champlin, possessed of full knowledge, may successfully invoke estoppel against Chastain who, the jury said was without knowledge. In Hallmark v. United Fidelity Life Ins. Co., 155 Tex. 291, 286 S.W.2d 133 (1956), this rule is expressed:    It is generally essential to the application of the doctrine of equitable estoppel that the person claimed to be estopped shall have had full knowledge of the real facts at the time of his representation, concealment or other conduct relating thereto and alleged to constitute the basis of the estoppel.    Richey v. Miller, 142 Tex. 274, 177 S.W.2d 255, 170 A.L.R. 832 (1944), held that an estoppel will not operate against a person who stands by and allows another to deal with his property when the person sought to be estopped has no knowledge of his interest in the property. In Colquitt v. Eureka Producing Co., (Tex.Com.App.), 63 S.W.2d 1018 (1933), Eureka asserted an estoppel against Colquitt. Eureka's agent in describing an oil assignment mistakenly included the gas also. The mistake was Eureka's since it was charged with its agent's knowledge. This knowledge by the one invoking estoppel defeated its defense of estoppel against Colquitt though he delayed in asserting his rights. In Fitch v. Lomax, (Tex.Com.App.), 16 S.W.2d 530, 66 A.L.R. 758 (1929), Lomax and another sued Fitch on a written contract to recover certain funds. Unknown to Fitch and contrary to the actual agreement, the contract required Fitch to make certain refunds to Lomax. Lomax requested an issue that Fitch was estopped to deny the terms of the contract as actually written, and the court refused to submit it. Lomax urged that Fitch remained silent after he discovered that the agreement contained the provision contrary to the true agreement and that during this silence Lomax made substantial payments of the consideration. The Court held that Fitch owed Lomax no duty to speak under these circumstances, saying:    The jury having accepted Fitch's version that no such agreement was made, leaves the matter in the attitude that Henson and Lomax caused a provision to be inserted as a part of the consideration of the deed to which Fitch had not agreed. Under such circumstances, no duty devolved upon Fitch to notify Lomax and Henson of a fact of which they already had actual knowledge. Harrell v. City of Lufkin (Tex.Com.App.) 280 S.W. [174] 175; Miller v. Babb (Tex.Com.App.) 263 S.W. 253. If Lomax and Henson deliberately caused this provision to be placed in the contract, knowing it had not been agreed to by Fitch, it would constitute actual fraud. If they caused it to be placed therein under the mistaken belief that it had been in fact agreed to by Fitch, it would constitute a constructive or legal fraud. It has been held that silence cannot be used as an estoppel to prevent a party from setting aside an instrument where its execution has been procured by fraud. Hallmark v. United Fidelity Life Ins. Co., supra, says that the one estopped must have full knowledge. Williams v. Texas Employers Ins. Ass'n, 135 S.W.2d 262 (Tex. Civ.App.1940, writ ref.) says the same. Moore v. Carey Bros. Oil Co., 272 S.W. 440 (Tex.Com.App.1925), says    it is indispensable that the party standing by and concealing his rights should be fully apprised of them. See Blum v. Merchant, 58 Tex. 400 (1883). No finding and no contention supports the idea that Champlin supplied that measure of knowledge to Chastain and until it did, there was no duty on Chastain to protest. The majority opinion omits discussion of these settled principles and Texas authorities. Instead it cites and relies solely upon In re Shoemaker, 277 Pa. 424, 121 A. 510 (1923). The case is one in which several owners agreed to an operation of a coal mining venture as a unit. The trustee in charge determined that a change in distribution of proceeds was essential. Champlin should have done in this case what the trustee did in that case. Aside from the fact that in Shoemaker all parties agreed to operate the lease as a unit and here there was a contract between only Champlin and Chastain, the trustees wrote a forthright and direct letter explaining precisely what the changes would be and operations continued thereafter for eighteen years. The case proves my contention because there was a full and fair disclosure as the law requires. See Stein Brothers and Boyce v. State Bank of Stearns, 255 Ky. 270, 73 S.W.2d 13 (1934); Alamitos Land Co. v. Texas Co., 11 Cal.App.2d 614, 54 P.2d 489 (1936); 29 A.L.R.2d 1034.