Sainsbury v. Pennsylvania Greyhound Lines

Decision Date10 August 1950
Docket NumberNo. 6110.,6110.
PartiesSAINSBURY v. PENNSYLVANIA GREYHOUND LINES, Inc.
CourtU.S. Court of Appeals — Fourth Circuit

George B. Woelfel, Annapolis, Md., and Melvin J. Sykes, Baltimore, Md. (Paul Berman, Sigmund Levin, Baltimore, Md., and Thomas J. Curley, Jr., Annapolis, Md., on brief), for appellant.

F. Gray Goudy, Baltimore, Md. (H. Beale Rollins, Baltimore, Md. on brief), for appellee.

Before PARKER, Chief Judge, SOPER and DOBIE, Circuit Judges.

DOBIE, Circuit Judge.

This civil action was instituted in the Circuit Court for Baltimore County, Maryland, by Joseph C. Sainsbury, a boatswain's mate, third class, in the United States Navy. The case was properly removed on the ground of diversity of citizenship to the United States District Court for the District of Maryland by the defendant, Pennsylvania Greyhound Lines, Inc. The District Court, sitting without a jury, entered judgment for the defendant and plaintiff has duly appealed.

On June 24, 1949, plaintiff was injured, allegedly due to the negligence of defendant or its agent, when a bus, owned and operated by defendant and on which plaintiff was a passenger, ran off the road and struck an embankment. Plaintiff suffered serious injury as a result of the accident — eight broken ribs, a fracture of the leg and additional minor injuries.

After the accident, which occurred near White Marsh, Maryland, plaintiff was removed to the Johns Hopkins Hospital in Baltimore for first aid treatment, but because of crowded conditions there he had to be taken to a downtown hotel. After some hours at the hotel he went to the United States Marine Hospital and, less than a day later, he was transferred to the Naval Hospital at Annapolis, where he was confined for more than three months. Plaintiff was twenty-three years of age at the time of the accident and had received the equivalent of a high school education.

The claims adjuster for the defendant, T. Benjamin Weston, paid for the treatment given plaintiff at Johns Hopkins Hospital, for ambulance services and for the hotel accommodations which he had procured for the plaintiff. Weston visited the plaintiff once four or five days after the accident and again on July 16, 1949, when he was accompanied by his friend, a Mr. Smith. Weston was an attorney-at-law and this fact was known to the plaintiff.

We quote from the District Court's opinion, as follows:

"On this second visit this representative of defendant (Weston) asked plaintiff whether he had considered settling his claim for injuries with the defendant and what he would be willing to accept in full settlement. Plaintiff replied that he had not reached any conclusion in the matter, stating that he wanted to speak first to the legal representative of the Navy or to some other lawyer, but asked the claims adjuster what he thought would be a fair settlement, to which the latter replied that he thought $500.00 would be just and reasonable. Plaintiff thereupon said that he understood persons with similar injuries had obtained larger compensation, to which the claims adjuster rejoined that such was true but only in cases of non-service persons, stating that those in the service, like the plaintiff, were in a different situation in the eyes of the law because they obtained from the Government, free of charge, medical and hospital care and also were entitled to disability payments in the event of injury, so that in his present case, he would be entitled to recover from the defendant on account only of the pain that he may have suffered as a result of his injuries.

"After some further discussion, during which plaintiff explained — which the claims adjuster did not deny — that the Navy doctors had told him, the plaintiff, that full recovery from his knee injury was proble-matical and that an operation might be necessary, plaintiff agreed to accept the claims adjuster's proposal."

Plaintiff testified that Weston told him there was no need of seeing another lawyer or legal officer because that would not do any good for $500.00 was about the maximum he could hope to recover under the circumstances. Defendant, because of the testimony of Smith and Weston, argues that no discussion as to lawyers or permanent disability took place; but the previous quotation from the District Judge's opinion and his statement at the end of his opinion that he gave "more credence to plaintiff's than to Weston's version of the entire conversation leading up to the execution of the release" is a complete answer to defendant's contention.

Plaintiff executed a release of any claim for injuries received in the accident in reliance upon Weston's representations and in consideration therefor was presented with a check for $500. Plaintiff, after talking with various persons in the Naval Hospital, subsequently decided that he was entitled to more than $500 as compensation for his injuries. He returned the check without endorsement but defendant refused to accept it. After consultation with an attorney, the present suit for damages sustained in the accident was instituted by plaintiff. Defendant claims that the release executed by plaintiff precludes him from prosecuting this litigation. Plaintiff, however, contends that this release was obtained by fraud and is therefore invalid because Weston misrepresented plaintiff's legal rights.

The representation by Weston to plaintiff that because he was in the service he could recover only for pain and suffering was a false statement of the law. It is generally well settled that the fact that the plaintiff may receive compensation from a collateral source (or free medical care) is no defense to an action for damages against the person causing the injury. See Standard Oil Co. of California v. U. S., 9 Cir., 153 F.2d 958, 963, affirmed 332 U.S. 301, 67 S.Ct. 1604, 91 L.Ed. 2067, and the cases therein cited; note, 22 A. L.R. 1558; note, 18 A.L.R. 678-683; McCormick, Damages, 310 note 2, and 324 (1935); 15 American Jurisprudence, Damages, §§ 78, 200-201; Restatement, Torts, § 920, Comment e. It is inconceivable that any member of the bar could have made a statement such as the one made by Weston without knowledge of its falsity or without acting with a reckless disregard for the truth.

The rule is also well established that when a lawyer makes a misrepresentation of law to a layman relief may be afforded, even though the layman knows the lawyer represents an antagonistic interest. Any other rule would be unconscionable. See Rusch v. Wald, 202 Wis. 462, 464, 232 N.W. 875; Restatement, Torts, § 545, Comment d; 23 American Jurisprudence, Fraud and Deceit, § 48; Prosser, Torts, 761 note 81 (1941), 5 Williston, Contracts, §§ 1487, 1495 and note 4 (1937).

Nevertheless, the District Judge found for the defendant on the ground that the plaintiff had no right to rely on the statement made to him by Weston. The District Judge stated in his opinion: "* * the law does not provide protection to an individual against a contract that he has improvidently or carelessly made in settlement for injuries suffered if, being of adult age, with a reasonable amount of education and intelligence and in possession of his normal faculties, he sees fit, in the absence of duress or pressure, to accept statements made by or on behalf of the person by whom he has been injured, the falsity of which he nevertheless could, by reasonable inquiry, have ascertained."

We believe that the District Judge's conception of the law in this respect is erroneous and that the proper rule is in accord with the view expressed by this Court in Bishop v. E. A. Strout Realty Agency, 4 Cir., 182 F.2d 503, 505. That was an action for deceit based on the fraudulent representations of a real estate agent concerning the depth of water at a fishing camp. In that case, Judge Parker said:

"We do not think that plaintiffs are precluded of recovery because they accepted and relied upon the representations of Davis as to the depth of the water without making soundings or taking other steps to ascertain their truth or falsity. The depth of the water was not a matter that was apparent to ordinary observation; Davis professed to know whereof he was speaking; and there was nothing to put plaintiffs on notice that he was not speaking the truth. There is nothing in law or in reason which requires one to deal as though dealing with a liar or a scoundrel, or that denies the protection of the law to the trustful who have been victimized by fraud. The principle underlying the caveat emptor rule was more highly regarded in former times than it is today; but it was never any credit to the law to allow one who had defrauded another to defend on the ground that his own word should not have been believed. The modern and more sensible rule is that applied by the Court of Appeals of Maryland in Standard Motor Co. v. Peltzer, 147 Md. 509, 510, 128 A. 451, where it was held not to be negligence or folly for a buyer to rely on what had been told him. This is in accord with the modern trend in all jurisdictions which is summed up in A.L.I. Restatement of Torts, sec. 540 as follows:

"`The recipient in a business transaction of a fraudulent misrepresentation of fact is justified in relying upon its truth, although he might have ascertained the falsity of the representation had he made an investigation.'" (Italics ours.)

In McGrath v. Peterson, 127 Md. 412, 96 A. 551, 553, the Court of Appeals of Maryland set out an even more liberal rule in regard to avoiding contracts for fraud than obtains in the case of an action for deceit, stating...

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