Vickers v. Gifford-Hill & Co., Inc.

• Decision Date: 07 June 1976
• Docket Number: No. 75-1377,GIFFORD-HILL,75-1377
• Citation: 534 F.2d 1311
• Parties: Faye Hendrix VICKERS, Individually and as Administratrix of the Estate of Arthur Ray Hendrix, Deceased, Appellee, v.& COMPANY, INC., Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1311

534 F.2d 1311

Faye Hendrix VICKERS, Individually and as Administratrix of

the Estate of Arthur Ray Hendrix, Deceased, Appellee, v. GIFFORD-HILL & COMPANY, INC., Appellant.

No. 75-1377.

United States Court of Appeals,

Eighth Circuit.

Submitted Jan. 13, 1976.

Decided May 4, 1976.

Rehearing Denied June 7, 1976.

Victor Hlavinka, Texarkana, Tex., for appellant; David E. Hightower, Texarkana, Tex., on brief.

Gene Harrelson, Texarkana, Ark., for appellee.

Before HEANEY, ROSS and WEBSTER, Circuit Judges.

HEANEY, Circuit Judge.

Arthur Ray Hendrix, age seventeen, was fatally injured when the motorcycle he was riding struck a cable-gate stretched across the private road of Gifford-Hill & Company, Inc. Subsequently, an action was commenced by Faye Hendrix Vickers, individually and as administratrix of the decedent's estate, pursuant to the Arkansas Wrongful Death Statute. Ark.Stat.Ann. 27-906 27-910 (Repl.1962). A jury returned a favorable verdict and fixed damages at $85,000, apportioned as follows: C. V. Hendrix, father, $32,000; Wilma Faye Hendrix, mother, $32,000; Sue Hendrix, sister, $5,000; Faye Hendrix Vickers, sister, $5,000; and Johnny Hendrix, brother, $10,000. Gifford-Hill appeals.

I.

Six days after the fatal accident, the appellant and the decedent's father and mother entered into an agreement purporting to release the appellant from all liability. The parents received as consideration $1,721.56, the cost of the funeral. Gifford-Hill contends that the claims of the parents are barred, as a matter of law, by the release. Specifically, it argues that: (1) the admitted failure of the parents to tender or return the consideration is nonperformance of a necessary condition precedent to the recission of the release; (2) the court erroneously instructed the jury on the burden of proof necessary to vitiate the release because of fraud or misrepresentation; and (3) the evidence was insufficient to permit the jury to find that the release was procured by fraud or misrepresentation.

A.

Whether tender or return of the consideration is a necessary condition precedent to the recission of a release must be determined, in this diversity suit, by the application of Arkansas law.

Both parties agree that tender or return of the consideration is unnecessary when a release is procured by fraud in the execution, i. e., when the releasor was incapable of making a contract or was ignorant of the contents and character of the instrument signed. The parties also agree that this release was not so procured. The dispute between the parties is whether tender or return of the consideration is necessary to the maintenance of an action at law when a release is procured by fraud in the inducement, i. e., when the releasor understood the nature and effect of the release and knew the contents of the instrument signed but was the victim of fraud or false representations. Each cites to decisions of the Arkansas Supreme Court to support its position.

The conflict in the decisional law of Arkansas is readily apparent upon the comparison of Pekin Cooperage Co. v. Gibbs, ¹ 114 Ark. 559, 170 S.W. 574 (1914), with St. Louis-San Francisco Ry. Co. v. Cox, ² 171 Ark. 103, 283 S.W. 31 (1926). The former is in accord with the contention of the appellant, and the latter supports the contention of the appellee. The latest Arkansas Supreme Court decision on the issue, Coddington v. Safeguard Ins. Co. of N. Y., 237 Ark. 457, 373 S.W.2d 413 (1963), follows the Pekin rule: tender or return of the consideration is a necessary condition precedent to the recission of a release and the maintenance of an action at law.

Pekin, however, recognized in dicta an exception to the rule. A release procured by fraud will be set aside, without tender or return of the consideration, when the releasor, because of conditions of poverty, is unable to meet the tender-or-return requirement and the fraud remained undiscovered until after the consideration had been expended or otherwise put beyond the releasor's control. Pekin Cooperage Co. v. Gibbs, supra at 577. The conditions to bring the exception into play are present here.

The after-tax income earned by the decedent's father was seventy-five to eighty dollars per week. Clearly, he was unable, after the consideration was expended in payment of the funeral expenses, to satisfy the tender-or-return requirement. Just as clearly, the fraud, as found by the jury remained undiscovered. The appellant's check, endorsed by the parents, was immediately given to the funeral home by Gifford-Hill.

The question remains whether the Supreme Court of Arkansas would follow the dicta of Pekin and adopt the exception if it was presented with an appropriate factual situation. We believe it would. The exception is recognized by other jurisdictions, ³ it was recognized by the District Court, ⁴ its adoption would tend to harmonize apparently conflicting Arkansas decisions and its application brings about a just result.

B.

The District Court charged the jury that the release was invalid if the proof established by a preponderance of the evidence that it was procured by fraud or misrepresentation. The burden of proof was placed upon the appellee. Gifford-Hill contends, however, that Arkansas law imposes a greater burden: the proof of fraud or misrepresentation must be established by clear, unequivocal and convincing evidence. Accordingly, it asserts that the instruction was error.

The appellant's objections to the instruction did not challenge the court's charge on the required burden of proof. The error, if any, was not preserved for appeal. Griggs v. Firestone Tire and Rubber Company, 513 F.2d 851, 857 (8th Cir.), cert. denied, 423 U.S. 865, 96 S.Ct. 124, 46 L.Ed.2d 93 (1975); Otten v. Stonewall Insurance Company, 511 F.2d 143, 146 (8th Cir. 1975); Federal Rule of Civil Procedure 51.

C.

Gifford-Hill's contention that the evidence was insufficient to support the jury's finding that the release was invalid because it was procured by fraud or misrepresentation is two-pronged. First, it argues that the evidence showed, as a matter of law, that the parents were not induced to sign the release because of the appellant's representations. Second, it argues that the representations of the appellant were merely expressions of opinion which cannot, as a matter of law, support a finding of fraud.

We look to federal law to determine whether the issue of inducement or reliance by the parents should have been submitted to the jury. ⁵ As stated in Giordano v. Lee, 434 F.2d 1227, 1231 (8th Cir. 1970), cert. denied, 403 U.S. 931, 91 S.Ct. 2250, 29 L.Ed.2d 709 (1971):

(A) motion for directed verdict is properly denied where the evidence presented allows reasonable men in a fair exercise of their judgment to draw different conclusions. A directed verdict is in order only where the evidence points all one way and is susceptible of no reasonable inferences sustaining the position of the nonmoving party. * * * In making this determination, the evidence, together with all reasonable inferences to be drawn therefrom, must be viewed in the light most favorable to the nonmoving party. (Emphasis original) (Citations omitted.)

The testimony at trial established that Gifford-Hill told the decedent's parents that it was not liable to them for the death of their son, that their son was a trespasser upon its property, that, indeed, they could be fined for the trespass and that they should not seek the advice of an attorney. Other testimony tended to show that the parents did not believe that they or their son were trespassers and that they signed the release to be rid of Gifford-Hill and to mourn in peace. The record further showed that the father was formally educated through the ninth grade and the mother through the eighth grade. Neither had prior experience in legal matters. ⁶

On this state of the record, the jury could have decided the reliance issue for or against the appellant. The issue was submitted to the jury under proper instructions and its determination is final. ⁷

Yet, even if there was reliance by the parents, Gifford-Hill contends that it was unjustified as a matter of law because the representations were expressions of opinion and not of fact. The general rule taken from Ryan v. Batchelor, 95 Ark. 375, 129 S.W. 787 (1910), was stated by the District Court in St. Paul Fire and Marine Insurance Company v. Hundley, 354 F.Supp. 655, 661 (E.D.Ark.1973):

"Now, before a representation will be considered fraudulent in law so as to give a right of action therefor, it must be made relative to a matter susceptible of accurate knowledge, and must be a statement imparting knowledge on the part of the person making the representation; and it must also be relied on as such. If the statement was made only as an expression of opinion, or if it was not made in a manner so as to induce the other to act in reliance thereon, then such representation, even though not true, would not be sufficient to base an action thereon for deceit."

But, a statement concerning a matter not susceptible of accurate knowledge, i. e., an expression of opinion, which is false and is known to be false when made is also actionable. The general rule does not apply in the absence of good faith. Anthony v. First National Bank of Magnolia, 244 Ark. 1015, 431 S.W.2d 267, 274 (1968).

The District Court instructed the jury that it must find that the fraudulent statements or false representations of the appellant were intentionally made before it could hold the release invalid. ⁸ The jury's holding thus necessarily included the finding that Gifford-Hill had acted in bad faith. ⁹ The appellant's argument premised upon the distinction between statements of fact and statements of opinion is rendered meritless.

Moreover, we do not agree that the appellant's statements to the parents were expressions of opinion under the law of Arkansas. Gifford-Hill's denial of liability was...