Ruff v. Charter Behavioral Health System of Northwest Indiana, Inc.

Decision Date30 September 1998
Docket NumberNo. 45A03-9802-CV-53,45A03-9802-CV-53
Citation699 N.E.2d 1171
Parties14 IER Cases 746 Ronald RUFF, Appellant-Plaintiff, v. CHARTER BEHAVIORAL HEALTH SYSTEM OF NORTHWEST INDIANA, INC., Appellee-Defendant.
CourtIndiana Appellate Court
OPINION

KIRSCH, Judge.

Ronald Ruff (Ruff) appeals the trial court's grant of Charter Behavioral Health System of Northwest Indiana, Inc.'s (Charter's) motion for summary judgment in his suit against it. On appeal, he raises several issues, which we restate as follows:

I. Whether the trial court erred in concluding as a matter of law that Ruff was not entitled to reformation of his contract with Charter.

II. Whether the trial court erred in holding as a matter of law that Ruff was not entitled to any additional compensation under his contract with Charter.

We reverse.

FACTS AND PROCEDURAL HISTORY

Ruff has a Ph.D. in psychology and was employed as a clinical psychologist and clinical director at a Charter facility in Michigan City, Indiana. His employment contract with Charter provided that he receive a base salary of $90,000 annually, plus 70% commission on revenues from all psychological testing he performed in excess of $15,000 per year. The facility at Michigan City closed, and the facility's CEO, Michael Brown, offered Ruff the same position at a Charter facility in Hobart, Indiana.

Ruff began work at the Hobart facility in early August 1996 without knowing what the terms of his employment would be. Sometime later, Brown notified Ruff that his employment contract had been prepared by Charter's central office and that Ruff needed to sign it. Brown did not review the terms of the contract with Ruff. Ruff signed the contract without reading it. The contract provided that Ruff would receive a $90,000 base salary annually, plus a 70% commission on all psychological testing done in excess of $108,000 per year.

Ruff was terminated by Charter effective December 24, 1996. He then brought suit to reform the contract, claiming that he had been fraudulently induced to sign the contract without reading it by Brown's representation that it was identical to his previous contract. He also sought a pro rata share of his commission based on psychological testing he performed from August 1996 until his termination. Both he and Charter moved for summary judgment. The trial court denied Ruff's motion for summary judgment and granted Charter's motion for summary judgment, finding that Ruff had an opportunity to read the contract but chose not to, that he was not coerced or tricked into signing it, and that no fiduciary relationship existed between Charter and Ruff. Ruff now appeals.

DISCUSSION AND DECISION

Ruff appeals the grant of Charter's motion for summary judgment. Summary judgment is appropriate when the designated evidence demonstrates that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). When reviewing a motion for summary judgment, this court applies the same standard utilized by the trial court, and we resolve any doubt as to a fact, or an inference to be drawn therefrom, in favor of the party opposing summary judgment. Bamberger & Feibleman v. Indianapolis Power & Light Co., 665 N.E.2d 933, 936 (Ind.Ct.App.1996). We will affirm a trial court's grant of summary judgment if it is sustainable on any theory found in the evidence designated to the trial court. Id. Cross-motions for summary judgment do not alter our standard of review; rather, our inquiry remains whether a genuine issue of material fact exists which requires a trial on the merits. Id.

I. Reformation of the Contract

In his complaint, Ruff sought reformation of the employment contract based on his claim that he was fraudulently induced to sign it by Brown's representations. In Indiana, equity has jurisdiction to reform written documents in only two well-defined situations: 1) where there is a mutual mistake--that is, where both parties mistakenly execute a document which does not express the true terms of their agreement; or 2) where there has been a mistake by one party, accompanied by fraud or inequitable conduct by the remaining party with knowledge of the other's mistake. Ballew v. Town of Clarksville, 683 N.E.2d 636, 640 (Ind.Ct.App.1997), trans. denied (1998). A party seeking reformation on the grounds of fraud coupled with his unilateral mistake has the burden of proving the alleged fraud and his resultant mistake. Kruse, Kruse & Miklosko, Inc. v. Beedy, 170 Ind.App. 373, 397, 353 N.E.2d 514, 529 (1976).

To sustain an action for fraud, it must be proven that a material representation of a past or existing fact was made which was untrue and known to be untrue by the party making it or else recklessly made and that another party did in fact rely on the representation and was induced thereby to act to his detriment. Fleetwood Corp. v. Mirich, 404 N.E.2d 38, 42 (Ind.Ct.App.1980). Fraud need not be proven by direct or positive evidence; it may be proven by circumstantial evidence, provided there are facts from which the existence of all the elements can be reasonably inferred. Plymale v. Upright, 419 N.E.2d 756, 760 (Ind.Ct.App.1981).

A. Material misrepresentation of a past or existing fact

One of the elements of a cause of action for fraud is a material misrepresentation of a past or existing fact. Fleetwood Corp., 404 N.E.2d at 42. Whether certain statements were made as asserted is on conflicting evidence a question of fact for the jury. Plymale, 419 N.E.2d at 760. Charter claims that Brown's representations were not actionable because they were merely an expression of his opinion. It cites cases which state that when the form of the statements and the subject matter regarding which, or the circumstances in which they were made are such that the statements cannot be construed as anything but an expression of opinion or belief, or a representation of law, it is proper for the court to so find and refuse to submit the cause to a jury. Id. at 760-61.

Here, Ruff alleges that Brown misrepresented the contents of the employment contract. To knowingly misstate the contents of a writing and to purposely misstate facts which would cause the signing of a document is fraud. Fleetwood Corp., 404 N.E.2d at 45. This court has stated,

"if one knowingly misrepresents the contents of a writing or if the fact is established that the signee was lulled by fraud and deceit into omitting to read the document for himself a charge of fraud is maintainable in an action upon it in the hands of one who, or whose agent misrepresented the contents of the document."

Farm Bureau Mut. Ins. Co. v. Seal, 134 Ind.App. 269, 281, 179 N.E.2d 760, 765 (1962) (quoting 23 AM.JUR. Fraud & Deceit § 96). Ruff alleges that Brown stated that the Hobart contract was identical to the Michigan City contract. Brown testified that he and another individual were responsible for calculating the "floor" for Ruff's commission. Thus, Brown had actual knowledge of the contents of the contract. We cannot say that, if true, Brown's representation to Ruff that the contracts were "identical" was purely an expression of opinion or belief, or a representation of law.

Brown testified that in the course of discussing the contract for the new position, Ruff asked if the payment structure for the psychological testing was going to remain the same. He answered that Charter would need to make adjustments for the volume differences, but the schedule of charges for the individual tests would remain the same. Record at 111. Brown stated, "[Ruff]' § communications to me indicated a desire for his total compensation package to not decline based on the possibility of achievable calculations, meaning he didn't want to take a pay cut." Record at 111. He also testified, "there may have been times where we said that the base salary was the same. There may have been times where we said how we would calculate the reimbursement per psych test was the same .... there was some sameness." Record at 112. By contrast, Ruff testified, "Best of my recollection is I said, 'Mike, is it the same contract?' he said, 'It's identical to Michigan City.' " Record at 134. The testimony of Ruff and Brown conflicts with regard to the conversation the two men had with regard to the Hobart contract. This conversation is critical because it is these representations upon which Ruff bases his claim for fraud. This conflicting evidence creates a genuine issue of material fact which precludes summary judgment.

B. Ruff's reliance on Brown's statements

Other elements of actionable fraud include deception and reliance. Fleetwood Corp., 404 N.E.2d at 44. Both involve the state of mind of the victim. Id. at 44. Whether the plaintiff acted in reliance upon the defendant's representation and whether the plaintiff was justified in doing so are on conflicting evidence questions of fact for the jury. Plymale, 419 N.E.2d at 760-61. The element of reliance has two distinct parts: the fact of reliance and the right of reliance. Id.

Charter claims that Ruff had no right to rely on Brown's representations in lieu of reading the contract himself. The right of reliance is tightly bound up with the duty of a representee to be diligent in safeguarding his interests. Id. at 762. The legal obligation that a person exercise the common sense and judgment of which he is possessed is a practical limitation on the actionability of various representations. Id. Where persons stand mentally on equal footing, and in no fiduciary relation, the law will not protect one who fails to exercise common sense and judgment. Id. As our supreme court has stated,

"A man who can read and does not read an instrument which he signs is, as a general...

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