Schumann v. Crofoot, A7607-10020

• Decision Date: 05 November 1979
• Docket Number: No. A7607-10020,A7607-10020
• Citation: 43 Or.App. 53,602 P.2d 298
• Parties: Kenneth SCHUMANN, Respondent, v. Emory J. CROFOOT, Conservator of the Estate of B. Glade Birch, Appellant. ; CA 12578.
• Court: Oregon Court of Appeals

Page 298

602 P.2d 298

43 Or.App. 53

Kenneth SCHUMANN, Respondent, v. Emory J. CROFOOT, Conservator of the Estate of B. Glade Birch, Appellant.

No. A7607-10020; CA 12578.

Court of Appeals of Oregon.

Argued and Submitted July 18, 1979.

Decided Nov. 5, 1979.

Margaret H. Leek Leiberan, Portland, argued the cause for appellant. With her on the briefs were Lang, Klein, Wolf, Smith, Griffith & Hallmark, Portland.

Barry L. Adamson, Portland, argued the cause for respondent. With him on the brief was Richard A. Uffelman, Portland.

Before SCHWAB, C. J., and THORNTON, BUTTLER and JOSEPH, JJ.

BUTTLER, Judge.

Plaintiff brought this action against defendant, as Conservator of the estate of B. Glade Birch, alleging in two counts that Birch, who had been plaintiff's attorney, committed professional negligence and also fraud in connection with a transaction in which plaintiff transferred $12,000 to Birch on the understanding that the sum was to be loaned to a third party. Plaintiff sought compensatory damages of $12,000 in both his negligence and his fraud counts, and sought punitive damages for the alleged fraud. The jury found in favor of plaintiff on both counts, awarding him $12,000 general damages and $12,500 punitive damages. Defendant appeals from the judgment entered on the verdict. We reverse and remand.

There was evidence that Birch was suffering from a psychotic disorder at the time he made the false representations which are the basis for plaintiff's allegation of fraud. Defendant contends that, as a matter of law, an "insane" person cannot be held liable for his torts, either negligent or fraudulent, and may be not assessed punitive damages.

With respect to liability for negligence, we accept the rule as stated in the Restatement (Second) of Torts § 283B (1965), which provides:

"Unless the actor is a child, his insanity or other mental deficiency does not relieve the actor from liability for conduct which does not conform to the standard of a reasonable man under like circumstances."

Among the bases for the rule set forth in comment b to that section are:

"1. The difficulty of drawing any satisfactory line between mental deficiency and those variations of temperament, intellect, and emotional balance which cannot, as a practical matter, be taken into account in imposing liability for damage done.

"2. The unsatisfactory character of the evidence of mental deficiency in many cases, together with the ease with which it can be feigned, the difficulties which the triers of fact must encounter in determining its existence, nature, degree, and effect; and some fear of introducing into the law of torts the confusion which has surrounded such a defense in the criminal law. Although this factor may be of decreasing importance with the continued development of medical and psychiatric science, it remains at the present time a major obstacle to any allowance for mental deficiency.

"3. The feeling that if mental defectives are to live in the world they should pay for the damage they do, and that it is better that their wealth, if any, should be used to compensate innocent victims than that it should remain in their hands.

"4. The belief that their liability will mean that those who have charge of them or their estates will be stimulated to look after them, keep them in order, and see that they do not do harm."

See also comment c to § 283B; and Alexander and Szasz, Mental Illness as an Excuse for Civil Wrongs, 43 Notre Dame Lawyer 24 (1967). The trial court did not err in instructing the jury that Birch's mental state was not a defense to the negligence count.

Defendant's contention with respect to the fraud count is more substantial: Birch was incapable of forming the requisite intent because of his mental illness, and having shown that Birch was mentally ill at the time in question defendant appears to contend that ended the matter. He relies, in part, on the following statement in 41 Am.Jur.2d 646, Incompetent Persons, § 109:

"Generally, an insane person is incapable of having an intent to defraud to the same extent as he is incapable of giving his assent to a contract, and hence he cannot be held in an action for fraud based on intent. * * *"

Such a proposition is too pat, too unequivocal, to be an acceptable basis for decision. Not only is the authority cited in its support meager, ¹ but the use of the word "insanity" makes such a rule meaningless, at least under present day Oregon law. The fact that a conservator of Birch's estate was appointed shortly after the alleged wrongs to plaintiff occurred tells us only that Birch was an "incapacitated person" (ORS 126.003(4)) ² and that, as such, he was a "protected person" (ORS 126.003(9)). ³ However, neither status necessarily means that Birch was incompetent or suffered from such degree of mental illness that he was incapable of committing an intentional tort. In fact, ORS 126.223 ⁴ recognizes that a protected person may be mentally competent.

Furthermore, the statutes governing civil commitments of mentally ill persons (ORS ch. 426) do not use the word "insane," and define the term "mentally ill person" very broadly (ORS 426.005(2)). ⁵ Even though a person has been committed to a state hospital for treatment of a mental illness he is not automatically deemed to be incompetent; rather, a statutory procedure is provided to make that determination. ORS 426.295. ⁶

While the foregoing discussion is only peripheral to the issue here presented, it serves to make the point that authorities setting forth an unequivocal rule of nonliability based upon "insanity" of the defendant in a civil case are out of context in Oregon. The parties have cited no Oregon authorities, and we have found none, dealing with the question of whether a mentally ill person may be liable for an intentional tort such as fraud. However, Kirkpatrick v. U. S. National Bank, 264 Or. 1, 502 P.2d 579 (1972), stands for the general proposition that one under a legal disability (minority) may be held liable for a malicious tort; the Court indulged in the presumption that a minor who is 15 years old is capable of malice. 264 Or. at 7, 502 P.2d 579. It is fair to assume that the presumption could have been, but was not, rebutted in Kirkpatrick. In short, the disabled person's legal disability was not a defense as a matter of law; the question was one of fact.

We conclude that an evidential showing that Birch suffered from a mental illness at the time of the alleged tort does not, as a matter of law, preclude his being liable for the wrong. It is a question of fact whether his mental illness was such that he was incapable of committing fraud. Normally, it is up to the trier of fact to decide the question, although there may be cases where the evidence is such that the court may withdraw the issue from the jury because reasonable minds could not differ. The case at bar is not such a case.

The same thing may be said with respect to a mentally ill defendant's liability for punitive damages: it is a question of fact whether the defendant's mental state was such that punitive damages are appropriate. In McElwain v. Georgia-Pacific, 245 Or. 247, 249, 421 P.2d 957, 958 (1966), the Supreme Court said:

"Although this court has on occasion indulged in the dictum that punitive damages are not 'favored in the law,' it has, nevertheless, uniformly sanctioned the recovery of punitive damages whenever there was evidence of a wrongful act done intentionally, with knowledge that it would cause harm to a particular person or persons. * * * Malice is the term most frequently used in our decisions to define a state of mind that will justify the imposition of punitive damages. Malice, as a basis for punitive damages, signifies nothing more than a wrongful act done intentionally, without just cause or excuse. * * * The intentional disregard of the interest of another is the equivalent of legal malice, and justifies punitive damages for trespass. * * * Where there is proof of an intentional, unjustifiable infliction of harm with deliberate disregard of the social consequences, the question of award of punitive damages is for the jury. * * *." (Citations omitted.)

In Senn v. Bunick, 40 Or.App. 33, 41, 594 P.2d 837, 842-43 (1979), after quoting the foregoing language from McElwain, we said:

" * * * More succinctly, it has been stated that 'it is proper to use the sanction of punitive damages where there has been a particularly aggravated disregard' of the rights of others and 'where the violation of societal interests is sufficiently great and of a kind that sanctions would tend to prevent * * *.' Noe v. Kaiser Foundation Hosp., 248 Or. 420, 425, 435 P.2d 306 (1967), 27 A.L.R.3d 1268 (1969). The impact of punitive damages is supposed to be a 'civilizing influence.' Douglas v. Humble Oil, supra, 251 Or. 310 at 316, 445 P.2d 590.

"It is not necessary for plaintiffs to show actual malice or ill will on the part of defendants. It is enough if the evidence is sufficient to permit the jury to conclude the defendants' conduct amounted to an intentional disregard of the plaintiffs' rights. (Footnote omitted.) At the heart of all the punitive damages cases is the idea that in some instances deliberate or careless conduct is so much in disregard of the rights of another that it should lay the actor open to monetary punishment that would tend to deter that sort of conduct in the future. See Hodel, The Doctrine of Exemplary Damages in Oregon, 44 Or.L.Rev. 175, 183-86 (1965). The term 'smart money' is ancient and apt."

While we recognize that there is authority that "insanity" is an absolute defense to a claim for punitive damages, 41 Am.Jur.2d, Incompetent Persons, § 112, we reject that view for the same reasons we reject it with respect to "insanity" as a defense to a fraud action. In Kirkpatrick v. U. S. National Bank, supra, the Court said:

" * * * We have previously held that the legal justification for...