Safety Casualty Co. v. McGee

• Decision Date: 19 April 1939
• Docket Number: No. 1765-7140.,1765-7140.
• Citation: 127 S.W.2d 176
• Parties: SAFETY CASUALTY CO. v. McGEE.
• Court: Texas Supreme Court

Page 176

127 S.W.2d 176

SAFETY CASUALTY CO. v. McGEE.

No. 1765-7140.

Commission of Appeals of Texas, Section B.

April 19, 1939.

Error to Court of Civil Appeals of Sixth Supreme Judicial District.

Suit by Joel Robert McGee, Jr., against the Safety Casualty Company to set aside a compromise settlement of claim for compensation for injuries received by plaintiff in the course of his employment. To review a judgment of the Court of Civil Appeals, 93 S.W.2d 519, affirming a judgment in favor of the plaintiff, the defendant brings error.

Affirmed.

J. W. Hassell and J. W. Hassell, Jr., both of Dallas, and N. L. Dalby, of Texarkana, for plaintiff in error.

King, Mahaffey, Wheeler & Bryson, and Otto H. Atchley, all of Texarkana, and C. E. Bryson, of Houston, for defendant in error.

SMEDLEY, Commissioner.

The suit was filed by defendant in error, McGee, an employee of Magnolia Petroleum Company, against plaintiff in error, Safety Casualty Company, insurer under the Workmen's Compensation Law, Vernon's Ann.Civ.St. art. 8306 et seq., to set aside a compromise settlement agreement of McGee's claim for compensation for personal injuries received in the course of his employment, it being alleged that the agreement of compromise was induced by fraudulent representations made by the insurer's agent, Dr. Mann.

The facts found by the jury in answer to special issues are in substance as follows: Immediately before the signing of the compromise settlement agreement on May 31, 1933, Dr. Mann represented to McGee that he was entitled under the Workmen's Compensation Law to only the sum of $135 as full compensation for injuries received by him on January 30, 1933. Such representation was false and Dr. Mann knew it was false when he made it. Dr. Mann made the representation with the intention of inducing McGee to sign the compromise settlement agreement and the compromise settlement receipt. McGee believed that the representation was true, relied upon it and was induced by it and but for it would not have made the compromise settlement agreement. McGee was injured in the usual course of his employment with Magnolia Petroleum Company on January 30, 1933, which injury resulted in total incapacity. The total incapacity will not be permanent. Dr. Mann knew of such incapacity of McGee before the compromise settlement agreement and receipt were signed on May 31, 1933. The average weekly wages of McGee for one year prior to January 31, 1933, were $22.

The trial court's judgment setting aside and cancelling the compromise settlement agreement and receipt was affirmed by the Court of Civil Appeals, Associate Justice Hall dissenting. 93 S.W.2d 519.

The first point presented by plaintiff in error is that neither the pleadings of defendant in error nor the facts make a cause for rescission of the agreement and the release, because the statement made by Dr. Mann, the insurer's agent, to McGee was not a representation of fact but the expression of the agent's opinion as to McGee's legal rights, upon which representation McGee was not permitted to rely, when no confidential relation existed between the agent and McGee and the agent neither withheld nor attempted to withhold from McGee any material fact relative to the insurer's liability, McGee being fully informed as to the nature and extent of his injury and knowing that the adjuster in making the statement was acting in the interest of his principal.

The representation made by Dr. Mann to McGee was as to a matter of law, the amount of compensation to which McGee was entitled under the Workmen's Compensation Law. The general rule, often repeated, is that fraud cannot be predicated upon misrepresentations as to matters of law. The reason usually given for the rule is that everyone is presumed to know the law, and hence has no right to rely upon representations made to him by another, and that such representations are to be treated as mere statements of opinions and not of fact. Black on Rescission and Cancellation (2d Ed.) Vol. 1, pp. 186-188, Sec. 71; 12 R.C.L. pp. 295, 296, Sec. 59.

This rule, like most general rules, is subject to exceptions. As early as 1857 Associate Justice Wheeler said of it: "The general rule, it has been truly said, is justified by considerations of public policy; and yet so harsh a rule, founded upon a presumption so arbitrary, ought to be modified in its application by every exception which can be admitted without defeating its policy." Moreland v. Atchison, 19 Tex. 303, 310. He expressed the opinion that corruptly deceiving one as to matters of law amounts to fraud in a legal sense, where advantage is taken of the ignorance of a party.

One of the well established exceptions to the general rule is that relief may be granted on account of misrepresentation of law or of legal rights when there is a relation of trust and confidence between the parties. 12 R.C.L. pp. 296, 297, Sec. 60; Black on Rescission and Cancellation (2d Ed.) Vol. 1, pp. 188, 189, Sec. 71; 26 C.J. pp. 1207-1209, Sec. 106. There was no confidential relation between Dr. Mann and McGee when the agreement of compromise was made. The authorities, however, establish another exception to the general rule. The text of Ruling Case Law, immediately following the statement that relief may be granted because of representation of law where there is a relation of confidence, contains the following: "The same is true where one who himself knows the law deceives another by misrepresenting the law to him, or knowing him to be ignorant of it, takes advantage of him through such ignorance, or where the person to whom the representations are made relies upon the supposed superior knowledge and experience of the other party and on his statement that it is unnecessary or inadvisable for him to consult a lawyer". 12 R.C.L. p. 296, Sec. 60.

Similarly, Mr. Black says: "And again, aside from such relationship (that of trust or confidence), if one of the parties is ignorant of the law or of his legal position or rights, and the other is aware of this fact, and is also perfectly informed of the legal principles, rules, or statutes applicable to the existing state of affairs, and takes advantage of his superior knowledge and of the other's ignorance, and so misrepresents and misstates the law as to induce him to enter into an inequitable bargain, or to part with rights or property which he might have retained, it is considered such fraud as to justify a court of equity in giving relief." Black on Rescission and Cancellation (2d Ed.) Vol. 1, pp. 188, 189, Sec. 71.

In Ramey v. Allison, 64 Tex. 697, a woman was induced to execute a deed of trust by representations made by an attorney at law that the property was her homestead and could not be affected by the deed of trust. The Supreme Court affirmed the trial court's judgment granting her relief from foreclosure of the deed of trust, the jury having returned a verdict in her favor. There was no relation of special trust or confidence between the parties. The court held that under the circumstances the plaintiff was entitled to protection the same as if the representations had been as to matters of fact, saying in the opinion: "Her ignorance of the law, and his superior acquaintance with it, enabled him to induce her to sign an instrument having the reverse legal effect of that which he had asserted it to possess, and which she supposed it would have. A contract obtained in such a manner is fraudulently obtained, if the representations were fraudulently made and intended to deceive; if not thus fraudulently conceived and intended, they are not the less misleading and inducing a fatal mistake on the part of the party relying on their correctness. In either case, the contract is not that of a person giving consent to it under circumstances that will render it binding in equity."

The opinion by Associate Justice O'Quinn in Garsee v. Indemnity Insurance Company of North America, Tex.Civ.App., 47 S.W.2d 654, 656, 657, contains the following: "The general rule is that misrepresentation or concealment as to a matter of law cannot constitute remedial fraud, because everyone is presumed to know the law, and therefore cannot in legal contemplation be deceived by the erroneous statements of law, and such representations are ordinarily regarded as mere expressions of opinion, on which the hearer has no legal right to rely. 12 R.C.L. p. 295, § 59; 26 C. J. p. 1207, § 106(E). But it is equally well settled that misrepresentations involving a point of law will be held actionable misrepresentations of fact if it appears that they were so intended and understood. Likewise, redress may be had if one party possessed superior knowledge and took advantage of the other party's ignorance of the law to mislead him by studied concealment or by misrepresentation, and this is especially true where confidential relations obtained." (Our italics.)

In Towns v. Traders & General Insurance Company, Tex.Civ.App., 107 S.W.2d 460, 461, the allegations were, and the plaintiff's evidence tended to prove, that a compromise agreement was...