MAHR v. UNION PAC. R. CO., 170 F. 699

MORROW, Circuit Judge (after stating the facts as above). The suit involves plaintiff’s claim of damages for personal injuries and the validity of the settlement and release of that claim. The claim for loss and damage to plaintiff’s property and the settlement and release of that claim is not a subject of controversy.

The objection to the release of the claim of damages for personal injuries is that there was evidence on the part of the plaintiff tending to show that the release was executed by the plaintiff at a time when by reason of his injuries his mental condition was such that he was incapable of understanding, and he did not understand, the nature, effect, or contents of the instrument. With respect to the settlement, payment, and release of the claim, no charge of fraud, mistake, misrepresentation, trick, artifice, or deceit on the párt of the defendant or any of its agents or employés was alleged or proven.

There was no evidence that plaintiff had brought suit in equity to set aside the release, nor was there any evidence offered in support of the allegation of plaintiff’s amended reply that he had offered to return the money he had received in settlement of his claim, or that he tendered the same in court. In Hartshorn v. Day, 19 How. 211, 222, 15 L.

Ed. 605, the Supreme Court said: “Evidence was given on the trial in the court below for the purpose of proving that the agreement of the 6th of September was procured from Chaffee by the fraudulent representations of Judson, which was objected to,- but admitted. “The general rule is that, in an action upon a sealed instrument in a court of law, failure of consideration, or fraud in the consideration, for the purpose of avoiding the obligation, is not admissible as between parties and privies to the deed; and, more especially, where there has been a part execution of the contract.

The difficulties are in adjusting the rights and equities of the parties in a court of law; and hence, in the states where the two systems of jurisprudence prevail, of equity and the common law, a court of law refuses to open the question of fraud in the consideration, or in the transaction out of which the consideration arises, in a suit upon the sealed instrument, but turns the party over to a court of equity, where the instrument can be set aside upon such terms as, under all the circumstances, may be equitable and just between the parties.

A court of law can hold no middle course; the question is limited to the validity or invalidity of the deed. “Fraud in the execution of the instrument has always been admitted in a court of law, as where it has been misread, or some other fraud or imposition has been practiced upon the party in procuring his signature and seal. The fraud in this aspect goes to the question whether or not the instrument ever had any legal existence. “It is said that fraud vitiates all contracts, and even records, which is doubtless true in a general sense.

But it must be reached in some regular and authoritative mode; and this may depend upon the forum in which it is presented, and also upon the parties to the litigation.” In George v. Tate, 102 U. S. 564, 570, 26 L. Ed. 232, the action was at law upon a bond. The defendants set up a defense that they were induced to sign the bond by false and fraudulent representations.

The Supreme Court said: “Proof of fraudulent representations by Myers & Green, beyond the recitals in the bond, to induce its execution by the plaintiff in error, was properly rejected. “It is well settled that the only fraud permissible to be proved at law in these cases is fraud touching the execution of the instrument, such as misreading, the surreptitious substitution of one paper for another, or obtaining by some other trick or device an instrument which the party did not intend to give. Hartshorn v. Day, 19 How. 211, 15 L. Ed. 605; Osterhout v. Shoemaker and Others, 3 Hill (N. Y.) 513; Belden v.

Davies, 2 Hall (N. Y.) 433; Franchot v. Leach, 5 Cow. (N. Y.) 506. The remedy is by a direct proceeding to avoid the instrument. Irving v. Humphrey, 1 Hopk. Ch. (N. Y.) 284.” In Union Pacific Railway Co. v. Harris, 158 U. S. 326, 15 Sup. Ct. 843, 39 L.

Ed. 1003, the action was brought by a passenger to recover damages from the railway company for injuries caused by a collision with a freight car which had escaped from the side track and' run upon the main track, so that when the train upon which plaintiff was a passenger came along on the main track it ran into the freight car and the injuries complained of were inflicted. The defendant in its answer denied all negligence, and in a supplemental answer set up a written release in bar of the action, executed four days after the accident.

To this supplemental answer a replication was filed averring, as ground of avoidance of such release, that plaintiff’s mind at the time of its execution was so enfeebled by opiates, shock, and pain that he was unable to enter into contractual relations; that the minds of the parties never met on the principal subject embraced in the release, namely, the damages for which the action was brought; and that the release was obtained through misrepresentation and fraud.

The defendant moved the court to instruct the jury that upon the evidence the release was a complete bar to the action, which instruction the court declined to give, and defendant excepted. With respect to this motion, the Supreme Court of the United States said: “As there was evidence tending to sustain plaintiff’s contention in relation to the validity of the release, the instruction was properly refused.” In Wagner v. National Ins. Co., 90 Fed. 395, 33 C. C.

A. 121, Judge Taft, speaking for the Circuit Court of Appeals for the Sixth Circuit, refers to this case as approving the practice that a release can be avoided in a suit at law by replication, in which plaintiff sets up fraud in the procurement of the release.

Judge Taft makes the further observation “that probably, on the evidence brought out in that case, a replication of non est factum might have been supported.” But the feature of that case to be noticed here is that plaintiff had set up in his replication that the release had been obtained through misrepresentation and fraud, and there was evidence tending to sustain the replication.

In the present case there was ho such issue, and no evidence tending to support such an issue, but plaintiff’s amended reply was in the nature of a plea of non est factum, possibly because of Judge Taft’s observation in the Wagner Case, and this plea was set up for the obvious purpose of avoiding a suit in equity to set aside the release.

Assuming that it had that effect, notwithstanding the absence of mistake, misrepresentation, or fraud, did it also have the effect of relieving the plaintiff of the necessity of repaying or tendering to the defendant the money received in the supposed settlement, and for which the release was executed? In the Harris Case the trial court charged the jury that if they made any allowance to the plaintiff they should deduct from it what he had received.

It is contended by the plaintiff in error that this instruction, which was approved by the affirmance of the judgment in the Supreme Court, is authority for the plaintiff’s right to maintain this action without returning or tendering the return of the money he received in settlement of his claim. But it appears from the Harris Case in the Circuit Court of Appeals as reported in 63 Fed. 800, 12 C. C. A. 598, and in the Supreme Court, 158 U. S. 326, 15 Sup. Ct. 843, 39 L. Ed. 1003, and in a subsequent reference to the case in Texas Ry. Co. v. Dashiell, 198 U. S. 521, 529, 25 Sup. Ct. 737, 49 L.

Ed. 1150, that the question of tender was not raised or considered in either of the appellate courts. In 158 U. S. 326, 330, 15 Sup. Ct. 843, 844, 39 L. Ed. 1003, the Chief Justice said, “Upon the issues joined the validity of the release was a matter to be left to the jury;” and on page 333, of 158 U. S., on page 845, of 15 Sup. Ct. (39 R.

Ed. 1003), the Chief Justice said further: “To various parts of the charge defendant excepted, but we deem it unnecessary to go over these exceptions in detail, as the charge as a whole was in accordance with the great weight of authority upon the subject, and was correct upon the issues joined and the evidence thereon.” In Texas & Pacific Ry. Co. v. Dashiell, 198 U. S. 521, 529, 25 Sup. Ct. 737, 740, 49 L. Ed. 1150, the court again refers to the Harris Case in the following language: “A written release was set up in bar of an action for damages against the railway company.

Several defenses were made to the release, among others, ‘that the minds of the parties never met on the principal subject embraced in the release, namely, the damages for which the action was brought.’ This defense was complicated in the instructions of the court with the defenses of fraud and mental incompeteney to-understand the terms and extent of the release, and it is difficult to make satisfactory extracts from the charge of the trial court.

Enough, however, appears to show that the court submitted to the jury the fact of mistake of injuries received as bearing on the effect of the release, and this action was affirmed by this court.” It is clear from these references that all the Supreme Court decided in the Harris Case was that upon the issues joined (which did not include the question of tender) the evidence was sufficient to go to the jury. In Hill v. Northern Pacific Railway Co., 113 Fed. 914, 51 C. C.

A. 544, this court held that it was unnecessary in that case to decide whether the question of fraud leading up to and inducing the execution of a release might be inquired into and determined in an action at law in a federal, court, for the reason that, -conceding that it might be, good faith and fair dealing would require the plaintiff, as a condition precedent to the presentation and maintenance of such an issue, to return or offer to return the money received in consideration of the release. In Price v. Connors, 146 Fed. 503, 77 C. C.

A. 17, the action was for damages for personal injury sustained as a result of a gunshot wound. The defendants to the action set up as an affirmative defense in their answer that the plaintiff, for and in consideration of the sum of $500 paid to him by them, had released and discharged them from all liability for the alleged cause of action.

In plaintiff’s reply he alleged that if such a release was in existence it was obtained by the defendants collusively acting together for the purpose of cheating and defrauding the plaintiff out of his rights, and by taking advantage of plaintiff while he was intoxicated to such an extent as to be wholly unfit for the transaction of any business.

In the trial court the jury was instructed, in effect, that, if a person who has been injured by the negligent act of another is fraudulently induced to sign a release for the damages sustained and accept a sum of money in settlement thereof, such release will not operate as a bar to the prosecution for damages to recover for such injury, and it would not be necessary that plaintiff should tender back the money so received or repay the sum to the defendant, but the jury should, in case they return a verdict for the plaintiff, deduct such sum from the damage assessed.

This latter instruction was held to be error by this court, reaffirming the doctrine of Hill v. Northern Pacific Railway Co., supra. We see no reason why the plaintiff would not be held to the same rule in the present case. Indeed, plaintiffs amended reply appears to have been framed under the impression that such was the law, but, failing in proof, he now seeks to justify his action upon the authority of cases that have noi been followed by this court.

There are numerous cases sustaining the rule that, where a person suing to recover damages seeks to ignore a previous settlement and release on the ground that the. settlement was affected and the release obtained by mistake, imposition, or fraud, he must return or tender a return of the money received before he can maintain an action at law. The following recent cases are in point: Lyons v. Allen, 11 App. Cas. (D. C.) 543; Drohan v. L. S. & M. S. Ry. Co., 162 Mass. 435, 38 N. E. 1116; Gibson v. Western New York & P. R. Co., 164 Pa. 142, 30 Atl. 308, 44 Am. St. Rep. 586; Strodder v.

Stone Mountain Granite Co., 94 Ga. 626, 19 S. E. 1022; Morris v. Great Northern Ry, Co., 67 Minn. 74, 69 N. W. 628; Och v. Mo., Kan. & Texas R. Co., 130 Mo. 27, 31 S. W. 962, 36 L. R. A. 442; Niederhauser v. Detroit Citizens’ St. Ry. Co., 131 Mich. 550, 91 N. W. 1028; Highlands v. Cumberland Valley Farmers’ Mut. Ins. Co., 203 Pa. 134, 52 Atl. 130; Louisville & N. R. Co. v. McElroy, 100 Ky. 153, 37 S. W. 844; Lomax v. Southwest Missouri Electric R. Co., 119 Mo. App. 192, 95 S. W. 945. The judgment of the Circuit Court is affirmed.