Ward v. Heath, 222 N.C. 470 (1943)

Jan. 8, 1943 · Supreme Court of North Carolina
222 N.C. 470


(Filed 8 January, 1943.)

1. Torts § 8a: Fraud § 9—

A release, executed by tbe injured party and based on a valuable consideration, is a complete defense to an action for damages for tbe injuries, and, where tbe execution of sucb release is admitted or established by the evidence, tbe burden is on tbe plaintiff to prove matters in avoidance, such as fraud.

2. Fraud § 1—

To establish actionable fraud, or deceit, it is generally recognized that tbe following essential facts must appear: (1) a false representation or concealment of a material fact; (2) reasonably calculated to deceive; (3) made with intent to deceive; (4) and which does, in fact, deceive; (5) to the hurt of the injured party. The essentials of fraud and deceit discussed.

3. Torts § 8a: Fraud § 11—

Where a literate plaintiff, five months after leaving tbe hospital where she was treated for injuries received in an automobile accident, signed and delivered with the advice and counsel of her husband, in consideration of a substantial sum, a full and complete release, after consulting her physicians and after many conferences with the insurance carriers of defendant, who represented to her and her husband that her injuries were temporary, the evidence is insufficient to establish fraud and deceit in the procurement of the release.

Appeal by plaintiff from Olive, Special Judge, at First June Term, 1942, of G-uilfomd.


*471Civil action in tort to recover damages for personal injuries resulting from an automobile collision and to vacate and annul a release alleged to have been procured by fraud.

On 28 January, 1940, about 4:30 p.m., 4 automobiles were proceeding westwardly on tbe Greensboro-Winston-Salem bigbway. Snow bad been removed from tbe bard surface portion of tbe bigbway and was banked on tbe shoulders of tbe road. Tbe bard surface or traveled portion of tbe road was covered by a tbin coating of ice wbicb was melting.

Tbe plaintiff and ber busband and child were riding on tbe back seat of tbe third car. Defendants Heath were on tbe fourth car, wbicb belonged to defendant Nona Heath. J. C. Heath, ber busband, was driving.

Tbe front car attempted to turn into a filling station. This caused tbe second car to stop suddenly. Tbe driver of tbe third car, seeing tbe situation, put on brakes and in order to prevent a collision cut tbe front of bis car into tbe snow bank. Tbe Heath car then skidded into tbe ear occupied by plaintiffs striking it with such force that she, ber bus-band and child were thrown to tbe foot of tbe automobile. As a result plaintiff’s sacroiliac joint was dislocated, ber pelvic bone was fractured, ber collar bone and one or more ribs were broken and other injuries were inflicted.

On 20 June, 1940, plaintiff and ber busband executed and delivered to agents of tbe corporate defendant, liability insurance carrier for tbe defendant Nona Heath, three releases. One in consideration of $1,975.00 released all claims of plaintiff; one in consideration of $25.00 released all claims for injuries to tbe child and tbe third was to cover medical and other expenses incurred to that date in tbe sum of $174.00.

On 12 July, 1941, plaintiff instituted this action. Tbe complaint states two causes of action. Tbe first is for damages proximately resulting from tbe alleged negligent manner in wbicb defendant J. C. Heath operated tbe automobile of tbe defendant Nona Heath. Tbe second is for damages for the wrongful conduct of defendants in procuring tbe execution of tbe release by plaintiff, wbicb conduct plaintiff alleges was pursuant to and in furtherance of a conspiracy entered into between defendants.

When tbe cause came on to be beard tbe court, on motion of defendants made at tbe conclusion of tbe evidence for plaintiff, entered judgment of nonsuit. Plaintiff excepted and appealed.

H. L. Koontz and G. L. Shuping for plaintiff, appellant.

Henderson <& Henderson for defendants, appellees.

*472Barnhill, J.

If tbe release is valid it is an effective bar and plaintiff may not proceed on either cause of action. Hence, we may pass tbe question of tb'e sufficiency of tbe evidence on tbe issue of negligence without decision and come directly to tbe vital and decisive questions presented. (1) Has plaintiff offered any evidence tending to show that she was induced to sign tbe release by tbe fraud of tbe defendants; and (2) if so, has she by her conduct, notwithstanding tbe fraud, ratified tbe same?

A release executed by tbe injured party and based on a valuable consideration is a complete defense to an action for damages for tbe injuries and where tbe execution of such release is admitted or established by tbe evidence it is necessary for tbe plaintiff to prove tbe matter in avoidance. Aderholt v. R. R., 152 N. C., 411, 67 S. E., 978; Butler v. Fertilizer Works, 193 N. C., 632, 137 S. E., 813; Sherrill v. Little, 193 N. C., 736, 138 S. E., 14. Hence, as plaintiff pleads the release and acknowledges its execution both in her pleadings and in her testimony, tbe burden is on her to establish tbe fraud alleged and relied on by her to invalidate tbe instrument.

What is fraud? No precise or all-inclusive definition has or can be given. Yet, to establish actionable fraud it is generally recognized that in all cases certain essential facts must appear. These are: (1) a false representation or concealment of a material fact; (2) reasonably calculated to deceive; (3) made with intent to deceive; (4) and which does, in fact, deceive; (5) to tbe hurt of tbe injured party. McIntosh, Cases on Contract (2d), XXXI.

Tbe material elements of fraud, a commission of which will justify tbe court in setting aside a contract or other transaction, are well settled. First, there must be a misrepresentation or concealment. Second, an intent to deceive or negligence in uttering falsehoods with intent to influence tbe acts of others. Third, tbe representations must be calculated to deceive and must actually deceive. And, fourth, tbe party complaining must have actually relied upon tbe representations. Pritchard v. Dailey, 168 N. C., 330, 84 S. E., 392; Bolich v. Ins. Co., 206 N. C., 144, 173 S. E., 320; McNair v. Finance Co., 191 N. C., 710, 133 S. E., 85; 12 R. C. L., 239, sec. 10.

Tbe conditions under which representations as to material facts in the course of a bargain may be made tbe basis of an action for deceit as a general proposition are well stated in Pollock on Torts (7d), 276, as follows: “To create a right of action for deceit there must be a statement made by the defendant, or for which he is answerable as principal, and with regard to that statement all the following conditions must concur:

“(a) It is untrue in fact.
*473“(b) The person making the statement, or the person responsible for it, either knows it to be untrue, or is culpably ignorant (that is, recklessly and consciously ignorant) whether it be true or not.
“(c) It is made to the intent that the plaintiff shall act upon it, or in a manner apparently fitting to induce him to act upon it.
“(d) The plaintiff does act in reliance on the statement in the manner contemplated or manifestly probable, and thereby suffers damage.”

It must be a false representation of fact materially affecting the value of the contract and which is peculiarly within the knowledge of the person making it and in respect to which the other person in the exercise of proper vigilance has not an equal opportunity of ascertaining the truth. Smith on Fraud, see. 3. See also Whitehurst v. Ins. Co., 149 N. C., 273; Cooper v. Schlesinger, 311 U. S., 148; 28 L. Ed., 382; Kerr on Fraud and Mistake, p. 68; 23 R. C. L., 395, sec. 24, 396, sec. 25.

It is not always necessary in order to establish actionable fraud that a false representation should be knowingly made. It is well recognized with us that under certain conditions and circumstances if a party to a bargain avers the existence of a material Tact recklessly or affirms its existence positively when he is consciously ignorant whether it be true or false he must be held responsible for a, falsehood. Plaintiff must establish either positive fraud or that she was deceived and thrown off her guard by false statements designedly made at the time and that such statements were reasonably relied upon by her. Butler v. Fertilizer Worles, supra. False assurances and statements of the other party may, of themselves, be sufficient to carry the issue to the jury when there has been nothing to arrest the attention or arouse suspicion concerning them. Butler v. Fertilizer Works, supra; McCall v. Tanning Co., 152 N. C., 648, 68 S. E., 136; Whitehurst v. Ins. Co., supra; Bank v. Yelverton, 185 N. C., 314, 117 S. E., 299.

Applying these generally recognized principles to the facts of this case we are constrained to hold that plaintiff has offered no sufficient evidence of fraud in the procurement of the release to justify the submission of an issue to the jury. It fails to induce the conclusion that the parties to the release did not deal at arm’s length.

Her only allegations of fraud are these: that defendant caused and procured her to accept the sum of $1,975.00 as compensation for the injuries sustained by her “representing to plaintiff and to her husband that her injuries were only temporary, and upon definite assurances by them that plaintiff was going to be all right. . . . The said Greene always insisting that plaintiff’s injuries, were of a temporary character. . . . And insisted that plaintiff’s injuries were only of a temporary character” which induced plaintiff “to believe that her injuries were of such nature that she would, in a reasonable time, fully recover therefrom *474without any serious and permanent results and without further hospitalization, medical or other expenses,” and that she accepted settlement and signed the release “on the assurance that her said injuries were temporary and not permanent and that she was soon going to be all right.”

The substance of plaintiff’s testimony in support of these allegations may be briefly stated.

One Chapman, an agent of the corporate defendant, called on her shortly after the accident. He was seeking a statement as to how the accident occurred. Its agent Greene next went sometime thereafter. He inquired as to her condition but neither made nor requested a proposition of settlement. Altogether he made six trips. On the third visit Greene inquired whether plaintiff and her husband had decided what they wanted to do. He received a negative answer. He asked about plaintiff’s condition and talked as if he thought her injuries were only temporary. On the fourth trip he wanted to talk settlement but plaintiff’s husband told him she was in no condition to talk settlement. On his sixth trip the releases were signed. On none of his visits, except the last, did he press for settlement. On one occasion he proposed a settlement for $800.00 and expenses and suggested that plaintiff consult Dr. Beg-ister, a bone specialist, to ascertain her condition. She went and the corporate defendant paid for this trip. Dr. Maness, plaintiff’s family physician, was along and then turned the case over to Dr. Begister who thereafter treated her, both before and after the releases were signed. Dr. Maness was also consulted and prescribed sedatives to relieve her pain. Greene, on his last several trips, “always assured me that my injuries were just temporary and that I would be all right ... he assured me that Dr. Begister said I would be all right; that it was just temporary . . . Mr. Greene said he represented the Lumbermen’s Casualty Company and said he felt sure his company would take care of the expenses.”

Some time in May plaintiff told Greene that she would take $2,500.00 if she was all right — would be all right. From that time on she was demanding this sum. She always said she would take this amount if she was all right. On June 18th or 19th Greene phoned and made an engagement to call and attempt to arrive at a settlement. He and one Young from the home office went on the afternoon of the 20th and remained two hours or more during which time they were talking settlement. They first offered $1,500.00 and the plaintiff countered with her offer to take $2,500.00 “if I am all right.” Greene and Young, during the course of the negotiations, told plaintiff she was stubborn or determined. They said: “My injuries were temporary and as time went on I would be all right; that the doctor said I would be all right . . . they did not see why my injuries would make me have to go back to the *475hospital any more . . . during that time we were discussing the matter of the settlement and that I would be all right. ... If we went through court it would be long-drawn-out, lot of expense, doctors and lawyers to pay.” She further testified: “I signed the papers because I thought I was going to be all right — they said I would be all right — that it was just temporary.” No copy of the release was left with her.

Plaintiff’s husband was present at the conference, participating in the negotiations and counseling and advising plaintiff. He testified that •during the negotiations the agents (Young doing most of the talking) told them “Dr. Eegister had released her — th.at she was all right — there would be no other expenses, that she was released from the doctor and would not have to go back to him . . . her condition was temporary and that there was nothing to even think of being uneasy about and there was no reason why she should not go right along and in a month or two be in perfect health.” He told them, “If you assure us that my wife is all right and Dr. Eegister has released her, which you say he has, we are willing to do what is right as far as anyone is concerned. ... I told him we would take $2,500.00 if she was all right.”

At the time of these negotiations plaintiff had not consulted an attorney. She was nervous and in considerable pain and was financially unable to engage in litigation. Due to her nervousness she could not wear a cast but was wearing a garment substituted therefor on the advice of Dr. Eegister.

Barring the lack of allegation in respect thereto, this evidence— particularly that of the husband' — standing alone and unrelated to other facts, might well be said to constitute more than mere “sales talk.” Positive representations were made. If untrue, it could be contended with force that they were calculated to deceive and did deceive plaintiff and threw her off her guard. Butler v. Fertilizer Works, supra.

But there are other pertinent facts appearing from the testimony of plaintiff which have their proper place in the picture and go to make up the whole story as delineated on this record.

Plaintiff is literate. It was her duty to read the instrument and it is presumed, in the absence of evidence contra, that she did so. Aderholt v. R. R., supra; Presnell v. Liner, 218 N. C. 152, 10 S. E. (2d), 639; Colt v. Kimball, 190 N. C., 169, 129 S. E., 406. She did, in fact, read it. It contained statements as follows:

“I/we hereby declare and represent that the injuries sustained may be permanent and progressive and that recovery therefrom is uncertain and indefinite, and in making this release and agreement it is understood and agreed that I/we rely wholly upon my/our own judgment, belief and knowledge of the nature, extent and duration of said injuries, and that *476I/we have not been influenced to any extent whatever in making this release by any representations or statements regarding said injuries, or regarding any other matters, made by the persons, firms or corporations who are hereby released, or by any person or persons representing him or them, or by any physician or surgeon by him or them employed.
“I/we understand that this settlement is the compromise of a doubtful and disputed claim, and that the payment is not to [be] construed as an admission of liability on the part of the persons, firms and corporations hereby released by whom liability is expressly denied.
“This release contains the Entire Agreement between the parties hereto, and the terms of this release are contractual and not a mere recital.
“I/we further state that I/we have carefully read the foregoing release and know the contents thereof, and I/we sign the same as my/our own free act.”

Furthermore, the settlement was made approximately 5 months after plaintiff left the hospital. The parties were negotiating over a period of time. There were propositions and counter propositions. Plaintiff’s husband was present counseling and advising her. “After we discussed the thing back and forth, they finally came up to our figure and paid us what we asked when they came out that day.” They knew that the instrument constituted a full and complete release. It was so stated in the instrument and the agents so advised them. The X-rays had been shown to her and the nature of her injuries explained. She was then suffering and was unable to walk unassisted. She was still wearing the garment substituted for the cast. On 19 June, after the appointment for the 20th had been made, she went to consult Dr. Register to ascertain what her condition was “to see whether or not he thought I was in such shape as to settle this case and to see what he said about it.” He examined her on that occasion. Significantly, she did not testify as to what he told her; she did not examine him as a witness and she did not tender him for cross-examination. She was content to say that she chose to rely on the statements of a layman as to her condition rather than on those of her physician.

In addition, when her husband asked the agent in the presence of the plaintiff “if your wife was in the condition my wife is in would you even think about making a settlement?” He frankly replied: “No, sir, I would not.”

If the representations relied on by plaintiff were true there is no element of fraud. If they were untrue she not only had adequate opportunity to ascertain the truth but she, in fact, availed herself of that opportunity. She went directly to the best source of information — the *477same quoted by tbe agents — Dr. Register.- She went for tbe specific purpose of ascertaining ber condition. When she signed she knew that her claim was “doubtful and disputed”; that ber injuries might be “permanent and progressive”; and that recovery therefrom was “uncertain and indefinite.” She acted voluntarily, relying on ber own knowledge and belief as to tbe extent and duration of ber injuries, without being influenced by any statement or representation made to ber. She so stated in writing at tbe time.

Under tbe circumstances here disclosed plaintiff is not in a position to contend successfully that she is tbe victim of fraud. Tbe evidence is insufficient to support an inference that tbe parties were not dealing at arms length .or that tbe agents of tbe corporate defendant, by false representations, misled and deceived plaintiff and induced ber to execute a contract she otherwise would not have signed.

As we conclude that tbe record fails to disclose any sufficient evidence of fraud to be submitted to a jury, it is unnecessary for us to discuss tbe question of ratification debated in tbe briefs.

That tbe defendants Heath assert in their answer that they bad no knowledge of tbe release prior to tbe institution of this action will not avail tbe plaintiff. She alleges that tbe corporate defendant was tbe liability insurance carrier for tbe Heaths and that tbe release was obtained for their protection. She was told at tbe time she signed that “it was to keep us from bringing suit, against Mr. and Mrs. Heath.” It inures to their benefit.

Tbe judgment below is