Shipman v. Horizon Corp.

• Decision Date: 21 May 1980
• Docket Number: No. 35607,35607
• Citation: 245 Ga. 808,267 S.E.2d 244
• Parties: SHIPMAN v. HORIZON CORPORATION.
• Court: Georgia Supreme Court

Page 244

267 S.E.2d 244

245 Ga. 808

SHIPMAN v. HORIZON CORPORATION.

No. 35607.

Supreme Court of Georgia.

Argued Jan. 14, 1980.

Decided May 21, 1980.

James L. Ford, Warren W. Wills, Jr., Robert U. Wright, Atlanta, for appellant.

Charles M. Kidd, Gwenn E. Dorb, Atlanta, for appellee.

UNDERCOFLER, Chief Justice.

When does fraud toll the statute of limitations? ¹ We granted certiorari on Division 5 of the Court of Appeals opinion to restate the law. Shipman v. Horizon Corp., 151 Ga.App. 242, 259 S.E.2d 221 (1979).

Initially, it must be recognized that within the meaning of Code Ann. § 3-807, only actual fraud tolls the statute of limitations. Actual fraud involves moral turpitude ² and has the effect of debarring and deterring the plaintiff from his action. Constructive fraud does not toll the statute. ³

Actual fraud which tolls the statute arises in two entirely different circumstances. These circumstances must be distinguished in order to properly apply the rules as to silence and the duty to disclose.

The first circumstance is where the actual fraud is the gravamen of the action. In such cases the statute of limitations is tolled until the fraud is discovered or by reasonable diligence should have been discovered. No other independent fraudulent act is required to toll the statute. Silence is treated as a continuation of the original actual fraud, 20 EGL 185, Lim. of Actions § 22. Failure to exercise reasonable diligence to discover the fraud may be excused where a relationship of trust and confidence exists between the parties. Kirkley v. Sharp, 98 Ga. 484, 25 S.E. 562 (1896); Bennett v. Bird, 139 Ga. 25, 76 S.E. 568 (1912).

The second circumstance is where the gravamen of the action is other than actual fraud, such as constructive fraud, negligence, breach of contract, etc. In such cases there must be a separate independent actual fraud involving moral turpitude which debars and deters the plaintiff from bringing his action. However, in these circumstances, silence concerning the underlying action cannot be a continuation of an original actual fraud because there is none. Thus, in this type case we find the statement that "mere silence" is not sufficient to toll the statute unless there is a duty to make a disclosure because of a relationship of trust and confidence between the parties. Again, the statute is tolled only until the fraud is discovered or should have been discovered, unless excused. Kirkley v. Sharp, supra; Bennett v. Bird, supra.

In our opinion, the rules are well stated in the headnotes of American Nat. Bank v. Fidelity & Deposit Co., 131 Ga. 854, 63 S.E. 622 (1908), "Where the basis of an action is actual fraud, the mere silence of the party committing it is treated as a continuation of the original fraud and as constituting a fraudulent concealment, and the statute of limitations does not begin to run against such right of action until such fraud is discovered, or could have been discovered by the exercise of ordinary care and diligence.

"(a) Where a right of action exists because of wrongful conduct which does not involve actual fraud, in order to prevent the statute of limitations from running by reason of the fraud of the party committing it, consisting in the concealment of such conduct, there must be...