Court Opinion

ID: 3542149
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:53:42.882095+00
Date Added: 2024-06-11T14:21:53.872273
License: Public Domain

(Submitted October 2, 1928. Decided December 4, 1928.)                          ON REHEARING.
After motion for rehearing had been made and filed in this case, Messrs. Belden  DeKalb appeared and asked leave to file a brief in support of the motion as amici curiae, which was accorded them. They presented and argued the question of whether the doctrine of account stated is properly applicable to a mistake of law in interpreting the provisions of a *Page 364 
contract in writing, by which the rights of the parties are established. In consequence whereof, a rehearing was granted, and the appeal was re-argued by all counsel, solely as to the correctness of our original views expressed as above set forth on the second phase of the decision on appeal, namely, the application of the doctrine of an account stated.
After carefully considering all arguments on rehearing, both oral and written, and the authorities cited by counsel, we are constrained to adhere to our opinion on the subject as originally expressed. This case, like all others, must be finally decided upon its own peculiar facts, which, in our opinion, clearly distinguish it from the numerous authorities cited and relied upon by learned amici curiae.
Here we have an oil lease, by virtue of which the operator is by the owner given the right to enter upon and occupy the land in the exploration and development of oil, and to market the oil produced therefrom; the lessor reserving to himself a stipulated royalty which the operator agrees to yield or pay. Monthly statements have been made and rendered by the operator to the lessor, all showing a deduction of two per cent on account of the state tax, and settlements were made with him by the operator each and every month for two and a half years in accordance with such statements of account, without objection or complaint, although it appears that he knew of such deduction and the reason therefor, and at the commencement of oil production from the land, as well as subsequently, asserted to the defendant Sunburst Oil  Refining Company his right to the royalty oil or its market value without the deduction of two per cent or any other amount, on account of the state occupation tax, or otherwise. Furthermore, he appears to have been advised by a representative of the latter company that he would not be paid the amount of such deductions made to cover the tax unless the supreme court so held. Notwithstanding, upon the basis of such statements, he accepted the settlements thereby shown, without objection or protest. There is *Page 365 
no suggestion of fraud in the making or rendition of the monthly statements, or in the settlements made in accordance therewith, or, in fact, as to any of the dealings between the parties. Each statement rendered and settlement made, in accordance therewith, constituted a complete adjustment between the parties for the month preceding, unless the contentions of the amici curiae
were to be upheld.
It is argued earnestly that, since the rights of the parties are fixed by contract, there was a mistake of law in the settlements made with the plaintiff, and the accounts rendered upon which the settlements were made do not constitute accounts stated, sufficient to prevent the plaintiff from surcharging the accounts by this action.
In approaching decision of the question presented, it will be noted from the facts that this case does not present a mutual mistake of all of the parties by reason of a misapprehension of the law, all supposing they knew and understood it, and all making substantially the same mistake, constituting a mistake in law (sec. 7486, Rev. Codes, 1921; Brundy v. Canby, 50 Mont. 454,148 P. 315) affecting their consent, but rather a mistake of law made by one party to the contract, without objection or protest by the party to be benefited and with his full knowledge and silent acquiescence. Johnson v. Gallatin Valley MillingCo., 38 Mont. 83, 16 Ann. Cas. 974, 98 P. 883, is a case somewhat analogous. There it appears that the plaintiff, by written contract, sold grain to the defendant and accepted payment in installments therefor, according to the contract, on the basis of the defendant's scale weights. Later the plaintiff, believing that he had been short-weighted by the defendant, sought to surcharge the defendant, and sued to recover the difference between the value of the grain according to the weights shown by the defendant's statements and the correct weight thereof. This court, speaking through the late Chief Justice Brantly, held the doctrine of account stated applicable, and in connection therewith said: "In Chappedelaine v.Dechenaux, supra *Page 366 
[4 Cranch, 306, 2 L. Ed. 629], it was said: `No practice could be more dangerous than that of opening accounts which the parties themselves have adjusted, on suggestion supported by doubtful or by only probable testimony.' In Klauber v. Wright,52 Wis. 303, 8 N.W. 893, the court, after stating that the evidence to surcharge an account should be clear and satisfactory, quoted with approval from the earlier case of Martin v. Beckwith,4 Wis. 220, as follows: `Principle and public policy alike require that, when parties, after a full and fair opportunity of examining and deciding upon their mutual accounts, have adjusted and settled them, the settlement should be conclusive. Any other rule would be dangerous and oppressive, and often work the greatest injustice.' In Linville v. State, 130 Ind. 210,29 N.E. 1129, it was said: `The law favors the settlement of business transactions by the parties, and when they have made such settlements they will be held bound thereby, in the absence of fraud, mistake or other illegality. A voluntary settlement of accounts between parties affords a presumption that all items properly chargeable at the time were included. The presumption is not conclusive, but clear and convincing proof that such items were unintentionally omitted is necessary to sustain a subsequent claim to recover them.' Indeed, the rule has application to all contracts. The party who claims that he should not be bound by his engagements may not avoid them, except upon appropriate allegations setting forth the facts showing the fraud or mistake upon which he relies, and supporting his allegations by evidence sufficiently substantial and definite to overcome the prima facie case made against him by the admission that he made the engagements. (Power  Bro. v. Turner, 37 Mont. 521,97 P. 950.) If, at the time of stating the account and making the settlement, the adverse party knew of the error, mistake, or fraud upon which he relies, or, with ample means of knowledge at hand, he failed to take advantage of such means of knowledge, there is still less reason that the account should be reopened, and it will not *Page 367 
be permitted except upon proof of fraud or imposition. (1 Cyc. 464; Gage v. Parmelee, 87 Ill. 329; Farnam v. Brooks, 9 Pick. (Mass.) 212; Swayze v. Swayze, 37 N.J. Eq. 180.)"
The doctrine is settled that, in general, a mistake of law,[7]  pure and simple, is not adequate ground for relief. Where a party, with knowledge of all the material facts, and without any other special circumstances giving rise to an equity in his behalf, enters into a transaction affecting his interests, rights, and liabilities, under a misapprehension of the law, courts will not relieve him from the consequence of his own mistake. And more especially should a party be denied relief from alleged mistake of law, where, as here, the party relying on a mistake of law, not only knew of his legal rights, but asserted them, before accepting monthly settlements on a disputed basis. (Pomeroy's Equity Jurisprudence, 4th ed., sec. 842; Johnson v.Gallatin Valley Milling Co., supra.)
The case of Bank of United States v. Daniel, 12 Pet. (U.S.) 32, 9 L. Ed. 989, illustrates the principle. There a bill in equity was filed to recover money paid as damages for the nonpayment of a bill of exchange, as provided by a statute of Kentucky, which had not at the date of payment received judicial interpretation. Subsequently, in other cases, it was held that, the bill being payable without the state of Kentucky, the statute did not apply. Respecting the settlement made, the court said: "The main question on which relief was sought by the bill, that on which the decree below proceeded, and on which the appellees relied in this court for its affirmance, is: Can a court of chancery relieve against a mistake of law? * * * Vexed as the question formerly was, and delicate as it now is, from the confusion in which numerous and conflicting decisions have involved it, no discussion of cases can be gone into without hazarding the introduction of exceptions that will be likely to sap the direct principle we intend to apply; indeed, the remedial power claimed by courts of chancery to relieve against mistakes of law, is a *Page 368 
doctrine rather grounded upon exceptions than upon established rules. To this course of adjudication we are unwilling to yield. That mere mistakes of law are not remediable, is well established, as was declared by this court in Hunt v.Rousmaniere, 1 Peters, 15 [7 L. Ed. 27], and we can only repeat, what was there said, `that whatever exceptions there may be to the rule, they will be found few in number, and to have something peculiar in their character,' and to involve other elements of decision. (1 Storey's Ch. 129.) * * * Testing the case by the principle `that a mistake or ignorance of the law forms no ground of relief from contracts fairly entered into with a full knowledge of the facts,' and under circumstances repelling all presumptions of fraud, imposition, or undue advantage having been taken of the party, none of which are chargeable upon the appellants in this case, the question then is, were the complainants entitled to relief? To which we respond decidedly in the negative."
The case of Heath  Milligan Mfg. Co. v. National LinseedOil Co., 197 Ill. 632, 64 N.E. 732, is quite similar to the case before us. There it appears that Heath  Milligan had for a period of over five years been purchasing linseed oil from the National Linseed Oil Company, under the terms of written contracts. Deliveries were made and bills were rendered to the purchaser, charging it for the oil on the basis of 7.50 pounds of oil per gallon, which were paid without question, until it was discovered by the purchaser that a statutory gallon of oil weighed 7.761 pounds, after which it declined to pay for any further deliveries upon the basis of 7.50 pounds of oil per gallon. At the time of the deliveries of oil made under the contracts it was the custom among oil manufacturers to charge 7.50 pounds as a gallon of linseed oil on deliveries made, and the purchaser knew of such custom and, also, that in the various deliveries made to it, charge was made on the basis of 7.50 pounds to the gallon. The action was instituted to recover the overpayments made, and it was held that recovery could not be had. *Page 369 
Chancellor Kent says: "The courts do not undertake to relieve[8]  parties from their acts and deeds fairly done on a full knowledge of facts, though under a mistake of the law. Every man is to be charged at his peril with a knowledge of the law. There is no other principle which is safe and practicable in the common intercourse of mankind. And, to permit a subsequent judicial decision in any one given case, on a point of law, to open or annul everything that has been done in other cases of the like kind, for years before, under a different understanding of the law, would lead to the most mischievous consequences. Fortunately for the peace and happiness of society, there is no such pernicious precedent to be found. This case, therefore, is to be decided according to the existing state of things when the settlement in question took place." (Lyon v. Richmond, 2 Johns. Ch. (N.Y.) 51.) And all of the later adjudications appear to be in accord with the doctrine so forcibly stated by the learned chancellor.
The law favors the settlement of business transactions by the parties, and when they have made such settlements they will be held bound thereby, in the absence of fraud or mistake. And, as is made clearly to appear in this case, there was no mistake made by the plaintiff in acceptance of the monthly settlements. He was fully conversant with his rights under the law, as well as the terms of the contract, by reason whereof, under our own previous holding in Johnson v. Gallatin Valley Milling Co., supra, the plaintiff will not be permitted to surcharge the accounts and recover the difference.
On every principle of justice and fair dealing, it was the plaintiff's duty, on receipt of the monthly statements, and before accepting and retaining remittances made in settlement in accordance with such statements, to have made examination of the accounts (and the presumption is that he did so), and, if dissatisfied with the computation made, to have raised objection thereto and refused the remittance as a settlement in full of his rights. (Long-Bell Lumber Co. v. Stump (C.C.A.), 86 Fed. 574.) *Page 370 
It would be as mischievous as an ex post facto law to permit a subsequent decision to overturn the fair compromises and contracts of individuals made under a different, though incorrect, view of the law. The community would be in a miserable condition, if at every change of opinion upon questions of law, all previous contracts and settlements were to be overturned. Men could never know the end of their controversies were such rule to prevail. (Cooley v. County of Calaveras, 121 Cal. 482,53 P. 1075.)
The correct principles of law having been applied to the facts, we are satisfied with the result reached in our previous holding, and find no reason to recede therefrom.
MR. CHIEF JUSTICE CALLAWAY and ASSOCIATE JUSTICES MYERS, STARK and MATTHEWS concur.