Durham v. New Amsterdam Cas. Co.

• Decision Date: 10 November 1953
• Docket Number: No. 6640.,6640.
• Parties: DURHAM et al. v. NEW AMSTERDAM CAS. CO.
• Court: U.S. Court of Appeals — Fourth Circuit

208 F.2d 342 (1953)

DURHAM et al. v. NEW AMSTERDAM CAS. CO.

No. 6640.

United States Court of Appeals Fourth Circuit.

Argued October 19, 1953.

Decided November 10, 1953.

McC. G. Finnigan, Richmond, Va. (R. Houston Brett, Richmond, Va., on brief), for appellants.

G. Kenneth Miller, Richmond, Va. (John G. May, Jr., Richmond, Va., on brief), for appellee.

Before PARKER, Chief Judge, SOPER, Circuit Judge, and WILKIN, District Judge.

WILKIN, District Judge.

This is an appeal from a summary judgment dismissing the complaint. The appeal also questions certain rulings of the District Court on the pleadings. The order dismissing the case, however, is the controlling and all-absorbing issue.

In July, 1951 the appellants instituted this action in the District Court alleging fraud and deceit against the appellee, and that, as a result of such fraud and deceit, the plaintiffs had been deprived of their right of action against the defendant's insured for the wrongful death of Cherry Betty Durham, the daughter of one of the plaintiffs, Mary Garner Durham, and sister of the other plaintiff, Elizabeth Jones. The complaint prayed for compensatory damages in the sum of $15,000.00, (the limit of legal liability and insurance) and for punitive damages in the sum of $15,000.00.

On September 1, 1950 Cherry Betty Durham was struck and killed by an automobile being operated by the appellee's insured, Edmond H. Ayers. The appellants, in the name of the administratrix of Cherry Betty Durham, instituted in the Hustings Court of the City of Richmond, an action against Edmond H. Ayers for wrongful death of their decedent. On September 7, 1950 judgment was entered for $1,050.00 and the court directed its distribution as follows: $245.00 to the mother, $245.00 to the sister and $560.00 to the undertaker for the funeral expenses of the decedent.

A few days thereafter the appellants, together with their counsel Mr. Brett, appeared before the Hustings Court and moved to set aside the judgment on the ground that it had been procured through fraud and deceit. On September 22, 1950 a hearing was had on the motion, and the Hustings Court entered an order vacating the judgment because "at the time the plaintiff appeared before the Court on September 7, 1950 without counsel and consented to the entry of the said judgment the said plaintiff was laboring under such distress resulting from the recent death of her daughter and the pressures incident to the coming burial of the said daughter as to deprive her of the volition necessary to consummate a valid consent to the judgment rendered in her favor" and ordered that the proceedings should revert to the pleading stage with leave to the parties to file additional pleadings. The court further ordered that the vacation of the judgment should be on condition that the plaintiffs on or before September 27, 1950 should deposit with the clerk the sum of $1200.00 or bond with corporate surety in the penalty of $1500.00 "to indemnify and reimburse the defendant in the sum of $1,050.00 with interest from September 7, 1950 in event the defendant elects not to rely upon release or payment as a defense to the claim of the plaintiff." No further pleadings were filed in that action by the parties and no further action was taken in any state court.

The appellants then filed in the United States District Court their complaint against the appellee, alleging that the settlement of their claim against Ayers had been induced by the fraud, deceit and misrepresentations of appellee and its representative while acting as agents for their insured, Edmond H. Ayers. The appellee answered and set forth the proceedings in the Hustings Court as a complete bar to the action in the United States District Court. Appellants (under Fed.Rules Civ.Proc. Rule 12(f), 28 U.S.C.A.) moved to strike the essential allegations of the answer, and appellee (pursuant to Rule 56) moved for summary judgment on the pleadings.

The appellee assigned three reasons why its motion for summary judgment should be sustained:

"(1) The plaintiffs had not been damaged. The action of the Hustings Court of the City of Richmond, Part II, referred to in paragraphs 5 and 6 of the defendant\'s answer, returned the plaintiffs to the position they occupied prior to the alleged fraud. Under these circumstances, the plaintiffs have suffered no damages.

"(2) The plaintiffs had a choice of remedies, that is to proceed to have the judgment in the Hustings Court of the City of Richmond, Part II, set aside upon the grounds of fraud or proceed by way of separate suit for damages therefor. The plaintiffs have elected to proceed against the said judgment and thereby waived recourse by way of separate suit.

"(3) The plaintiffs cannot recover punitive damages when it is apparent upon the face of the pleadings in this case that the plaintiffs are not entitled to actual damages."

The District Court sustained the motion for all three reasons. The reasoning in the opinion is sound and the authorities cited are controlling.

The law is well settled that one who complains of fraud and deceit has the right either to rescind what was done as a result of the fraud and deceit, or to affirm what had been done and sue for damages caused by such fraud. He can choose either course, but he cannot choose both. The two are inconsistent. Robb v. Voss, 155 U.S. 13, 15 S.Ct. 4, 39 L.Ed. 52; United States v. Oregon Lumber Co., 260 U.S. 290, 43 S.Ct. 100, 67 L.Ed. 261; Sylvania Industrial Corporation v. Lilienfeld's Estate, 4 Cir., 132 F.2d 887; Intertype Corporation v. Pulver, D.C., 2 F.Supp. 4, affirmed, 5 Cir., 65 F.2d 419, certiorari denied, 290 U.S. 660, 54 S.Ct. 75, 78 L.Ed. 571.

When the appellants filed their motion in the Hustings Court for vacation of the judgment on the grounds of fraud and deceit, and pressed their motion to hearing, they made a definite election to rescind what had been done and proceed as if the fraud had not been carried into effect. When the court...