563 F.2d 105 (6th Cir. 1977), 76-1382, Edwards v. Travelers Ins. of Hartford, Conn.

Docket Nº:76-1382, 76-1383 and 76-1504.
Citation:563 F.2d 105
Party Name:Linda Sue EDWARDS, Plaintiff-Appellee, v. TRAVELERS INSURANCE OF HARTFORD, CONNECTICUT, Defendant-Appellant. P. V. JACKSON, III, Plaintiff-Appellee, v. TRAVELERS INSURANCE OF HARTFORD, CONNECTICUT, Defendant-Appellant. P. V. JACKSON, III, Plaintiff-Appellant, v. TRAVELERS INSURANCE OF HARTFORD, CONNECTICUT, Defendant-Appellee.
Case Date:October 10, 1977
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 105

563 F.2d 105 (6th Cir. 1977)

Linda Sue EDWARDS, Plaintiff-Appellee,

v.

TRAVELERS INSURANCE OF HARTFORD, CONNECTICUT, Defendant-Appellant.

P. V. JACKSON, III, Plaintiff-Appellee,

v.

TRAVELERS INSURANCE OF HARTFORD, CONNECTICUT, Defendant-Appellant.

P. V. JACKSON, III, Plaintiff-Appellant,

v.

TRAVELERS INSURANCE OF HARTFORD, CONNECTICUT, Defendant-Appellee.

Nos. 76-1382, 76-1383 and 76-1504.

United States Court of Appeals, Sixth Circuit

October 10, 1977

Argued April 6, 1977.

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Douglas Fisher, Howell & Fisher, Nashville, Tenn., for defendants-appellants in Nos. 76-1382 and 76-1383 and defendant-appellee in No. 76-1504.

Joseph L. Lackey, Jr., Lackey, Alexander & Jackson, Nashville, Tenn., for plaintiffs-appellees in Nos. 76-1382 and 76-1383 and plaintiff-appellant in No. 76-1504.

Before PECK and LIVELY, Circuit Judges, and GUY, [*] District Judge.

JOHN W. PECK, Circuit Judge.

Plaintiff P. V. Jackson, III, an attorney licensed to practice in the State of Tennessee, brought suit against defendant Travelers Insurance Company of Hartford, Connecticut (Travelers), alleging that he was employed by plaintiff-appellee Linda Sue Edwards, who had been injured in an automobile accident, and charging that defendant Travelers had induced the breach of this contract to his damage. Plaintiff Edwards also brought suit, alleging that Travelers, through its agents, was guilty of fraud, misrepresentation, and deceit in the procuring of a settlement entered into by her and defendant Travelers.

The district court held that both plaintiffs in this consolidated diversity suit 1 were entitled to receive damages from Travelers. Jackson v. Travelers Ins. Co. of Hartford, Conn., 403 F.Supp. 986 (M.D.Tenn.1975). The district court awarded damages to Edwards in the amount of $284,974.35, but then gave Travelers a credit in the amount of $34,974.35, to leave a net award of $250,000. The district court awarded $1,000 damages to plaintiff Jackson. Travelers has appealed. Jackson also appealed, seeking a larger award of damages.

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We affirm the portion of the district court's judgment awarding $1,000 damages to plaintiff Jackson. We modify the portion of that judgment awarding damages to plaintiff-appellee Edwards to strike the credit given to defendant Travelers for $34,974.35, so as to give plaintiff Edwards the full award of $284,974.35. We affirm the judgment as so modified.

I

Senior United States District Judge Daniel H. Thomas, before whom this case was tried, made detailed findings of fact which appear in Jackson v. Travelers Ins. Co., supra, 403 F.Supp. at 995-998. Virtually all of the recitals of fact which appear hereinafter will find authentication in Judge Thomas's findings, which we hold to be supported by substantial evidence and not to be clearly erroneous, and to the limited extent that our statements may not be so authenticated, they have been taken directly from the transcript of trial in the record.

Preliminarily, suffice it to say that plaintiff Edwards, then a young and attractive woman, was injured in an automobile accident, in January, 1972, under circumstances which caused appellant Travelers to, in effect, concede liability under a $50,000 policy issued by it covering the car in which she was a passenger. Her injuries included brain-stem damage, a paralysis of her left arm and leg, and eye damage requiring corrective surgery. She is permanently disabled and unable to resume her former employment as a secretary. She employed plaintiff Jackson as her attorney, and he advised Travelers of such representation. Travelers responded that until Mrs. Edwards was divorced or had a legal guardian, it would not recognize Jackson as her attorney. Based upon the false representation that she could not have an attorney and have her bills paid on an "advance pay system," Mrs. Edwards, in March, 1972, signed a statement written by a Travelers' agent to the effect that she was not represented by counsel. Jackson was thereby led to believe that he had been discharged and did not participate in any way in the settlement which followed. That settlement, made in August, 1972, was for $25,000 plus special damages already paid for before the settlement for a total amount of $34,974.35. The settlement was preceded by representations by a Travelers' agent to the effect that the carrier could go no higher and that all medical expenses had been paid, neither of which was in fact a true statement.

As hereinabove indicated, plaintiffs Edwards and Jackson thereupon brought this action, in June, 1974, to recover damages for fraud in the procurement of the settlement and for improper interference with the attorney-client relationship.

II

Defendant Travelers makes three basic arguments against the award of damages to plaintiff Edwards. Travelers contends that it did not commit fraud, misrepresentation, and deceit in procuring the settlement with plaintiff Edwards. Defendant Travelers contends that the one year Tennessee statute of limitations, T.C.A. § 28-304, barred any claim plaintiff Edwards had. Travelers contends that the award of damages to plaintiff Edwards was not proper. We are not persuaded by any of these arguments.

The district court's determination that defendant Travelers was guilty of fraud, misrepresentation, and deceit is supported by the record and applicable law. The six elements of the tort of fraud, misrepresentation, and deceit were satisfied in the present case by evidence of the false representations made by defendant Travelers to plaintiff Edwards initially when defendant Travelers stripped her of counsel in March, 1972, and then when a settlement was reached in August, 1972, after direct negotiations with plaintiff Edwards.

First, there must be a representation of an existing or past fact and not an opinion or a conjecture as to future events. A. Landreth Co. v. Schevenel, 102 Tenn. 486, 52 S.W. 148 (1899); Haynes v. Cumberland

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Builders, Inc., 546 S.W.2d 228, 232 (Tenn.App.1976), cert. denied, (1977); Dozier v. Hawthorne Development Co., 37 Tenn.App. 279, 262 S.W.2d 705, 710, cert. denied, (1953); Georgia Marble Co. v. Standard Tile Co., 19 Tenn.App. 258, 86 S.W.2d 429, 432, cert. denied, (1935); Silvers v. TTC Industries, Inc., 484 F.2d 194, 198 (6th Cir. 1973); Butts v. Colonial Refrigerated Transportation, Inc., 290 F.2d 221, 222 (6th Cir. 1961); Cumberland Portland Cement Co. v. Reconstruction Finance Corp., 140 F.Supp. 739, 751 (E.D.Tenn.1953), aff'd 232 F.2d 930 (6th Cir. 1956). The representations made by Travelers through its claim representative Ray Davidson were ones of present fact. In March, 1972, Davidson told plaintiff Edwards that her bills could not be paid on the advance pay system if she retained an attorney. In August, 1972, Davidson told plaintiff Edwards that all her bills had been paid by Travelers and that $25,000 above what already had been paid was all she could receive from Travelers. These statements were not opinions or conjectures as to future events.

Second, the representation must be false. Tartera v. Palumbo, 224 Tenn. 262, 266-67, 453 S.W.2d 780, 782 (1970); Shwab v. Walters, 147 Tenn. 638, 643-44, 251 S.W. 42, 44 (Tenn.1922); Bevins v. Livesay, 32 Tenn.App. 1, 221 S.W.2d 106, 109, cert. denied, (1949); Butts v. Colonial Refrigerated Transportation, Inc., supra, 290 F.2d at 222. The district court found that the representations made to plaintiff Edwards in March, 1972, and August, 1972, by Travelers, through Davidson, were false. In March, 1972, it was not a requirement of the advance pay system that an injured claimant not have an attorney. In August, 1972, plaintiff Edwards' bills had not all been paid by defendant Travelers, and the insurance policy limit available to plaintiff Edwards was $50,000.

Third, the representation must be in regard to a material fact. Haynes v. Cumberland Builders, Inc., supra, 546 S.W.2d at 232; Dozier v. Hawthorne Development Co., supra, 37 Tenn.App. 279, 262 S.W.2d at 710; Bevins v. Livesay, supra, 32 Tenn.App. 1, 221 S.W.2d at 109; Crigger v. Mutual Ben. Health & Accident Ass'n, 17 Tenn.App. 636, 69 S.W.2d 907 (1933), cert. denied, (1934). Clearly, the false representations in the present case were material. Plaintiff Edwards would not have agreed to settle had she known that not all her bills had been paid and that more than $25,000 was available to her. The March, 1972, statement to plaintiff Edwards that she could not have her bills paid if she retained an attorney was the inducement to plaintiff Edwards to acquiesce in the release of her attorney (plaintiff Jackson), and without an attorney for plaintiff Edwards involved in the case, Travelers could deal directly with plaintiff Edwards to reach the August, 1972, agreement.

Fourth, "there must be proof of fraud," and "fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false." Tartera v. Palumbo, supra, 224 Tenn. at 266-67, 453 S.W.2d at 782; Jasper Aviation, Inc. v. McCollum Aviation, Inc., 497 S.W.2d 240, 243 (Tenn.1972); Shwab v. Walters, supra, 147 Tenn. at 644, 251 S.W.2d at 44; Crouch v. Gray, 154 Tenn. 521, 290 S.W. 391 (1926); Derry v. Peek, 14 App.Cas. 337, 58 L.J.Ch. 864 (1889); Haynes v. Cumberland Builders, Inc., supra, 546 S.W.2d at 232; Butts v. Colonial Refrigerated Transportation, Inc., supra, 290 F.2d at 222; Cumberland Portland Cement Co. v. Reconstruction Finance Corp., supra, 140 F.Supp. at 751. The district court recognized this scienter element of the Tennessee law of fraud...

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