Fidelity & Casualty Co. of New York v. J.D. Pittman Tractor Co.

• Decision Date: 20 May 1943
• Docket Number: 6 Div. 899.
• Citation: 13 So.2d 669,244 Ala. 354
• Court: Alabama Supreme Court
• Parties: FIDELITY & CASUALTY CO. OF NEW YORK v. J.D. PITTMAN TRACTOR CO.

13 So.2d 669

244 Ala. 354

FIDELITY & CASUALTY CO. OF NEW YORK v. J.D. PITTMAN TRACTOR CO.

6 Div. 899.

Supreme Court of Alabama

May 20, 1943

Gerry Cabaniss and Cabaniss & Johnston, all of Birmingham, for appellant.

Lange Simpson, Brantley & Robinson, of Birmingham, for appellee.

LIVINGSTON Justice.

This is a suit at law by J.D. Pittman Tractor Company, a corporation against the Fidelity and Casualty Company of New York, a corporation.

The cause was submitted to the jury on special counts B and C counts in deceit, and common counts 1 and D for money paid. There were a verdict and judgment for plaintiff, and defendant appealed.

The judgment must be reversed, and the cause remanded for another trial because the trial court misdirected the jury as to plaintiff's right to recover under the common counts. We will write only to those questions likely to arise on another trial.

Appellee's evidence tended to establish the following facts: Appellee has been engaged in business in Birmingham, Alabama, since sometime prior to the year 1930 as sales agent for caterpillar tractors and other construction machinery. J.D Pittman is president of the corporation. Appellant is an insurance company engaged in the business of writing public liability, and other types of insurance. A.A. Adams and Company is the general agent for appellant, and Arthur Adams, Jr., is vice-president and treasurer of A.A. Adams and Company. Beginning in 1932 A.A. Adams and Company handled all of appellee's insurance business, including fire, workmen's compensation and other forms of insurance, and wrote for appellee a policy of liability insurance designed to protect appellee from liability which might arise out of its operations as a dealer in tractors. Some time thereafter appellee commenced renting equipment to United States Engineers, the Alabama State Highway Department and others. In some instances the rented equipment was manned by the employees of appellee, while in others it was not so manned.

These operations were explained to Mr. Arthur Adams, Jr., of A.A. Adams and Company for the purpose of securing insurance coverage against liability arising out of such operations. Mr. Adams advised appellee that appellee's policy already in force covered such operations. Still later, J.D. Pittman, at the suggestion of the Caterpillar Tractor Company, manufacturers of the equipment handled by appellee, acting in his own behalf as an individual, took over some of the rental contracts entered into by appellee and made other rental contracts. Mr. Pittman consulted Mr. Adams with reference to insurance coverage for himself as an individual against liability on account of these operations. For the purpose of protecting Mr. Pittman as an individual against liability on account of these operations, and for the purpose of including the individual protection in the policy covering the operations of appellee, Mr. Adams took from appellee its existing policy and carried it away. Mr. Adams returned the policy sometime later and advised Mr. Pittman that the policy then protected both the appellee and Pittman, individually, against all liability arising out of the rental contracts. Mr. Pittman relied on the representation of Mr. Adams as to the coverage of both parties, and did not read the insurance contract, and, in so far as the record discloses no other officer or employee of appellee read the contract. As a matter of fact the rental operations of both appellee and Pittman were expressly excluded from the coverage of the policy.

While the policy was in force one John Henry Chance was killed in the operation of machinery rented by appellee. Appellant denied liability under the policy and refused to defend a suit against appellee for the death of Chance, which suit resulted in a judgment against appellee for the sum of $2,150, and $166.05 costs of court; and which was paid by appellee. Appellee also paid $200 attorney's fee incurred in defense of the Chance suit.

Is appellee liable in an action of deceit under the foregoing facts? Section 8049, Code of 1923 (now section 108, Title 7, Code of 1940) is as follows: "Misrepresentations of a material fact, made willfully to deceive, or recklessly without knowledge, and acted on by the opposite party, or if made by mistake and innocently, and acted on by the opposite party, constitute legal fraud."

In this State, in actions for damages for false representations it is not necessary to allege or prove scienter, or that the representations were recklessly made in conscious ignorance of whether they were true or false, but it is sufficient if the representations were false in fact, and the representor may be liable for damages because of them, even though he did not know that they were untrue. Foster v. Kennedy's Adm'r, 38 Ala. 359, 81 Am.Dec. 56; Cartwright v. Braly, 218 Ala. 49, 117 So. 477.

The rule is the same in law and in equity, since an equitable cause of grievance in no way differs from a legal one unless a different remedy is needed. Cartwright v. Braly, supra.

Appellant insists that in this State a tort action for deceit may be maintained for a misrepresentation made without intent to deceive when, but only when, a benefit accrues to the party making the representation, and that no benefit accrued to appellant in the instant case.

Without deciding whether the principle insisted upon may find application under other circumstances, we do not hesitate to say that it has no application under the circumstances of this case. Most suits to recover damages arise from a contract. The plaintiff sues to recover damages because he has been fraudulently induced to make that contract. The defendant may be, and generally is, the other party to the contract. Sometimes, however, the defendant is a third party, either the agent of the other party, or perhaps some one having no legal relation to either party. There is a distinction between suits brought against a party to the contract and suits brought against those not parties to it. When one is fraudulently induced to enter into a contract, it is quite correct, in a general sense, to say that his loss inures to the profit of the other party to the contract. In a legal sense the other party is the beneficiary of the fraud.

True, in the instant case, the misrepresentation did not result in, nor induce the making of a contract, but it did result in, or induced inaction on the part of appellee to its injury. See 26 Corpus Juris, § 81, page 1173. Had the representation been true, the loss would have fallen on appellant, and its falsity inured to the benefit of appellant, in that, no liability was created under the policy. Einstein, Hirsch & Co. v. Marshall & Conley, 58 Ala. 153, 29 Am.Rep. 729; 12 R.C.L. section 102, pp. 347, 348; 23 Amer.Jur. section 120, pp. 908, 909; Aldrich v. Scribner, 154 Mich. 23, 117 N.W. 581, 18 L.R.A.,N.S., 379. See, also, Bethea-Starr Packing & Shipping Co. v. Mayben, 192 Ala. 542, 68 So. 814, 815, an action on a contract, where this court said: "Appellee may have an action against appellant firm for its declarations made after the agreement of storage, if they were such as to mislead appellee, and prevented her from taking insurance for her own protection against loss by fire. Code 1907, § 4298 [Code 1940, Tit. 7, § 108], Cozzins v. Whitaker, 3 Stew. & P. 322; Hafer v. Cole, [176 Ala. 242, 57 So. 757]."

It is further insisted that the evidence discloses no actionable fraud, no statement of an existing fact, and shows but an expression of opinion as to appellee's coverage under the existing policy contract.

Whether a given representation is an expression of opinion or a statement of fact depends upon all the circumstances of the particular case, such as the form and subject matter of the representation and the knowledge, intelligence and relation of the respective parties. The mere form of the representation as one of opinion or fact is not in itself conclusive, and in cases of doubt the question should be left to the jury. Foster v. Kennedy's Adm'r, supra; Moses v. Katzenberger, 84 Ala. 95, 4 So. 237; 26 Corpus Juris, § 21, pp. 1083, 1084, 12 R.C.L. section 15, page 247.

In the case of Commercial Casualty Ins. Co. v. Hosey et al., 238 Ala. 335, 191 So. 343, 344, it was said "It is a matter of common knowledge that insurance...