Brecht v. Hammons
In Brecht v. Hammons, 35 Ariz. 383, 278 P. 381 (1929), the Arizona Supreme Court considered the effect of the compromise of a void judgment. 35 Ariz. at 389, 278 P. at 383.
The court stated that "the settlement of a bona fide dispute, or a doubtful claim, if made fairly and in good faith, is a sufficient consideration for a compromise based thereon. . . . the real consideration which each party receives is not so much the sacrifice of the right, as the settlement of the dispute." Id.
The court noted that a settlement of a controversy is valid and binding, "not because it is the settlement of a valid claim, but because it is the settlement of a controversy." Id.
"And when such settlement is characterized by good faith, the court will not look into the question of law or fact in dispute between the parties, and determine which is right. All that it needs to know is, that there was a controversy between the parties, each claiming in good faith rights in himself against the other and that such controversy has been settled." Id.
However, the court limited its holding by stating:
Of course, the surrender of a claim which is known to be entirely without foundation either in law or at equity does not afford a sufficient consideration for a compromise. . . . It is sufficient to support a compromise that there be an actual controversy between the parties of which the issue fairly may be considered by both parties as doubtful, and that at the time of the compromise they in good faith so considered it. It is not essential that the question be in fact doubtful in legal contemplation. Id. at 390, 278 P. at 383.
The court held that "notwithstanding that at a later time in another suit it was determined that no liability on the part of defendant as a matter of fact existed, he cannot now claim that the compromise which he entered into in good faith should be set aside." Id. at 391, 278 P. at 384.