Pacific Mut. Life Ins. Co. of Cal. v. Webb

• Decision Date: 06 November 1907
• Docket Number: 2,563.
• Citation: 157 F. 155
• Parties: PACIFIC MUT. LIFE INS. CO. OF CALIFORNIA v. WEBB.
• Court: U.S. Court of Appeals — Eighth Circuit

157 F. 155

PACIFIC MUT. LIFE INS. CO. OF CALIFORNIA v. WEBB.

No. 2,563.

United States Court of Appeals, Eighth Circuit.

November 6, 1907

James C. Jones (Jones, Jones, Hocker & Davis, on the brief), for plaintiff in error.

Frederick H. Bacon, for defendant in error.

Before VAN DEVANTER and ADAMS, Circuit Judges, and RINER, District judge.

ADAMS Circuit Judge.

This was an action at law on a policy insuring Margaret Webb, the plaintiff below, in the sum of $4,000 against death of her husband as a result of external, violent, and accidental means. Defendant company amongst other defenses pleaded accord and satisfaction, and in consideration thereof the execution by plaintiff of a written release of any and all claim against it by reason of the death of her husband. Plaintiff in her reply denied any knowledge or recollection of having executed the release, but pleaded hypothetically that if such release was executed by her it was procured by defendant's agent by 'fraud, deceit, and misrepresentation of facts, and was for that reason without consideration and void. ' On these pleadings the case went to trial. A paper consisting of the acknowledgment of receipt of $300 in full compromise and settlement of the demand sued for in this action and an unequivocal and formal release and discharge of defendant from any and all liability for that demand was shown in evidence to have been executed by plaintiff and delivered to the defendant in consideration of the payment by the latter to the former of the agreed consideration. In view of that proof, and at the close of all the evidence, defendant requested the court to instruct the jury that plaintiff could not recover. Upon a refusal to so instruct, and after exception had been saved thereto defendant moved the court to exclude from the consideration of the jury all evidence given in support of the replication. The court overruled that motion, and defendant duly excepted. Verdict and judgment in favor of the plaintiff followed, and the case is brought here by writ of error for review.

Whether the formal release was, until set aside by a proceeding in equity, a bar to the present action at law, is a question which underlies all others and which we will first dispose of. Our attention is called to many cases on the general subject that fraud vitiates all contracts and to some which hold that a release may be shown even in actions at law to have been procured by fraud and misrepresentation and its effect thereby avoided. But it is unnecessary and unprofitable to dwell long on those cases. The Supreme Court of the United States has authoritatively settled the matter. Hartshorn v. Day, 19 How. 211, 15 L.Ed. 605; George v. Tate. 102 U.S. 564, 26 L.Ed. 232; Union Pac. Ry. v. Harris, 158 U.S. 326, 15 Sup.Ct 843, 39 L.Ed. 1003; Texas & Pac. Ry. Co. v Dashiell, 198 U.S. 521, 25 Sup.Ct. 737, 49 L.Ed. 1150. In Hartshorn v. Day, Mr. Justice Nelson, speaking for the court, said:

'Fraud in the execution of the instrument has always been admitted in a court of law, as where it has been misread, or some other fraud or imposition has been practiced upon the party in procuring his signature and seal. The fraud in this aspect goes to the question whether or not the instrument ever had any legal existence. * * * '

In George v. Tate the Supreme Court, speaking by Mr. Justice Swayne, said:

'It is well settled that the only fraud permissible to be proved at law in these cases is fraud touching the execution of the instrument, such as misreading, the surreptitious substitution of one paper for another, or obtaining by some other trick or device an instrument which the party did not intend to give. * * * The remedy is by a direct proceeding to avoid the instrument.'

In Union Pac. Ry. v. Harris the question arose in connection with a lengthy and somewhat complicated charge to the jury. A clear distinction appears to have been made between the effect of misrepresenting what the release there in question was to embrace and misrepresentation of facts to procure the release as made. The contention of the plaintiff in that case was that the release was signed by him when ill and when he did not comprehend what he was doing, and that he was led to believe that he was signing a release of claims growing out of his illness only, such as outlays for doctors' services, and the like, and loss of time for two weeks. The contention of the defendant was that the release was intended to include a settlement of all matters of difference between plaintiff and defendant, including the liability of the defendant for the injuries received by plaintiff. The issue related exclusively to what was the subject-matter of the release. The Supreme Court did not discuss the question but was satisfied to say that the charge on the whole was correct. Texas & Pac. Ry. Co. v. Dashiell also dealt exclusively with what was the subject-matter of the release, and incidentally is important for elucidating the real issue in Union Pac. Ry. v. Harris.

Concerning the latter case the following observation is made:

'Several defenses were made to the release, among others, that the minds of the parties never met on the principal subject embraced in the release, namely, the damages for which the action was brought. This defense was complicated in the instructions of the court with the defenses of fraud and mental incompetency to understand the terms and extent of the release, and it is difficult to make satisfactory extracts from the charge of the trial court. Enough, however, appears to show that the court submitted to the jury the fact of mistake of injuries received, as bearing on the effect of the release, and this action was affirmed by this court.'

In view of the issues in the last two cases they do not declare, as claimed by plaintiff's counsel, any different rule than that declared in the Hartshorn and George Cases. The releases there in question did not embrace the injury sued for by the respective plaintiffs, and the replications to that effect were in the nature of pleas of non est factum. The conclusion from all the cases in the Supreme Court is that the only fraud which may be availed of in an action at law to avoid a formally executed release of the claim sued on is misrepresentation, deceit, or trickery practiced to induce the execution of a release which the signer never intended to execute, and upon which the minds of the contracting parties never met, and does not include any of those misrepresentations of fact which may be resorted to in order to persuade the claimant to agree to the release as actually made.

That the old rule of the Supreme Court still prevails is affirmed generally by the national courts. In Hill v. N. Pacific Ry. Co., 51 C.C.A. 544, 113 F. 914, the Circuit Court of Appeals for the Ninth Circuit recognized and enforced it. In like manner also the Circuit Courts have recognized and followed it. Shampeau v. Connecticut River Lumber Co. (C.C.) 42 F. 760; Vandervelden v. C. & N.W. Ry. Co. (C.C.) 61 F. 54; Kosztelnik v. Bethlehem Iron Co. (C.C.) 91 F. 606; Hill v. N. Pacific Ry. Co. (C.C.) 104 F. 754; Such v. Bank of the State of New York (C.C.) 127 F. 450; Stephenson v. Supreme Council (C.C.) 130 F. 491; Heck v. Missouri Pac. Ry. Co. (C.C.) 147 F. 775.

The Circuit Court of Appeals for the Sixth circuit, as evidenced by the cases of Lumley v. Railway Co., 22 C.C.A. 60, 76 F. 66, and Wagner v. National Life Ins. Co., 33 C.C.A. 121, 90 F. 395, differs from those just referred to. But in view of what we believe to be the doctrine of the Supreme Court as declared and followed in the cases supra, we are unable to adopt the conclusion reached by the learned and distinguished judges of that circuit.

Distinction is made by some courts between cases involving an informal receipt as distinguished from a formal release like Such v. Bank of the State of New York, supra, and between releases under seals and those not under seal. While there may be some ground for a distinction between cases involving a mere receipt, with no formal release, the consideration of which may always be inquired into and explained and cases involving formal deeds of release, as to which we express no opinion, we are unable to perceive any difference in principle between a formal release under seal and one not under seal. They may both alike be reformed, enforced or rescinded in equity. Certainly we cannot in this case give any consideration to the difference if there be such. The present release was not under seal, but was made in Missouri, and is subject to the law of Missouri. By that law the use of private seals in written contracts or other instruments theretofore required to be under seal is abolished, and a seal, if used, does not affect the force, validity, or character of the instrument or in any way change its significance or construction. Rev. St. Mo. 1899, Sec. 893 (Ann. St. 1906, p. 829).

Inspired doubtless by the varying and conflicting opinions of different judges of the Supreme Court of Missouri on the question now under consideration, as illustrated by Girard v. St. Louis Car Wheel Co., 123 Mo. 358, 27 S.W. 648, 25 L.R.A. 514, 45 Am.St.Rep. 556, and Och v. M., K. & T. Ry. Co., 130 Mo. 27, 31 S.W. 962, 36 L.R.A. 442, the Legislature of Missouri in 1899 enacted the following law:

'Whenever a release, composition, settlement or other discharge of the cause of action sued on shall be set up or pleaded in the answer in bar to plaintiff's cause of action sued on, it shall be permissible in the reply to allege any facts showing or tending to show that said release, composition,

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