Reliable Furniture Co. v. Fidelity & Guar. Ins. Underwriters Inc., 10182

• Court: Supreme Court of Utah
• Writing for the Court: CROCKETT; HENRIOD
• Citation: 398 P.2d 685,16 Utah 2d 211
• Parties: d 211 RELIABLE FURNITURE COMPANY, a Utah corporation, Plaintiff and Appellant, v. FIDELITY AND GUARANTY INSURANCE UNDERWRITERS, INC., a corporation, et al., Defendants and Respondents.
• Docket Number: No. 10182,10182
• Decision Date: 03 February 1965

Page 685

398 P.2d 685 16 Utah 2d 211 RELIABLE FURNITURE COMPANY, a Utah corporation, Plaintiff
and Appellant,
v.
FIDELITY AND GUARANTY INSURANCE UNDERWRITERS, INC., a
corporation, et al., Defendants and Respondents. No. 10182. Supreme Court of Utah. Feb. 3, 1965.

Page 686

[16 Utah 2d 213] Pete N. Vlahos, Ogden, for appellant.

Hanson & Baldwin, Merlin R. Lybbert, Salt Lake City, for respondents.

CROCKETT, Justice.

Plaintiff sues for losses covered by a business-interruption insurance policy issued by the defendant, American Home Assurance Company; and seeks to set aside a settlement and release on the ground that defendant procured it by fraud and economic duress. At pretrial conference the court granted summary judgment in favor of defendant, from which plaintiff appeals. ¹

During the night of March 31, 1961, a fire substantially destroyed plaintiff's retail furniture business located on Washington Boulevard, near the center of the business district of Ogden. The loss was covered by two insurance contracts, one for loss by fire, issued by Fidelity Guaranty Insurance Underwriters, Inc.; the other covering business-interruption loss, issued by defendant, American Home Assurance Company, both of which had been supplied to plaintiff by the defendant, Western General Agency. Fidelity Guaranty authorized the insurance adjusters to pay the full amount determined as the fire loss, $84,923.58. On June 15, 1961, Mr. Herscovitz, plaintiff's president and manager, herein called plaintiff, had submitted a claim of $48,386 on the business-interruption policy which would start running a 60-day period before the [16 Utah 2d 214] defendant American Home Assurance Company would be obligated to pay for that loss.

The claim adjusters representing said companies met with plaintiff and his bookkeeper on June 19th, and plaintiff's claims are based on the occurrences at that meeting. With respect thereto he makes these charges: That the meeting was for the sole purpose of considering the fire destruction claim, and that he was not advised that the business-interruption claim would be dealt with at that time; that he did not have his company records there and was never asked about them; that during a general discussion about the fire loss lasting about two hours, as a complete surprise to him, one of the agents 'shoved this paper in front of my face', stating that 'this is going to be a surprise to you' requiring settlement of the business-interruption loss for $12,000; that plaintiff objected to this and requested his check for $84,923.58 for the destruction loss which had been agreed upon; that the agents rejected this, representing that they couldn't deliver this check unless the business-interruption claim was settled at the same time.

Plaintiff's position is that inasmuch as that settlement had been agreed upon, and Fidelity Guaranty had authorized the payment, he was entitled to unconditional delivery of the check for the $84,923.58; further, that because his business had been closed down for several months, he desperately needed the $84,923.58, and without it he could not continue in business; that the defendants' agents knew this, that in order to take advantage of his plight, they falsely represented that they could not deliver that money, and wrongfully refused to deliver it, unless he would accept settlement of the business-interruption claim

Page 687

at the same time for the sum of $12,000; plaintiff further claims that it was because of the said false representation and the economic duress thus imposed upon him that he was forced to accept the $12,000 settlement on the latter claim, which was wholly insufficient to reimburse him for the loss covered in the business-interruption policy.

In determining whether the plaintiff is entitled to redress, it is not essential that his contentions of fraud and duress be considered separately. They can and should be considered on the basis that he contends they existed, intermingled together. ² It is to be conceded that ordinarily the fact that one is in financial need which is a factor in inducing him to accept a settlement will not of itself provide a basis for [16 Utah 2d 215] relief. ³ But that is not the entire picture here. If we accept the facts as plaintiff contends them to be, as we are obliged to do on this review, ⁴ we must assume not only that the plaintiff was in economic distress, but that the defendant knew this and took advantage of him by falsely representing that money belonging to the plaintiff could not be delivered to him, and wrongfully refusing to deliver it unless plaintiff would also accept the proffered settlement on defendant's policy, which resulted in compelling plaintiff to accept the latter settlement against his will. If found to be true, this false representation, coupled with the wrongful withholding of that which belonged to plaintiff, may well justify a finding of duress which would afford him relief from the settlement. ⁵

The defendants also raise the objection to plaintiff's suit that it should have returned or tendered the $12,609.39 as a condition precedent to seeking rescission of the settlement. One pertinent observation on this point is that it has been held, and properly so, that where a release of a claim has been obtained by fraud, a return or tender of the consideration paid therefor is not a necessary condition precedent to disaffirmance of the release and enforcement of the claim. ⁶ In any event, the matter of tender would...