McNamara v. . Eastman Kodak Co. , 232 N.Y. 18 ( 1921 )

Plaintiff's intestate was in the employ of a contractor who was engaged in the construction of a building for the appellant. While so engaged he received injuries which caused his death and which injuries are claimed to have been the result of neglect of duty on the part both of the contractor and of the appellant. On a former appeal (McNamara v. Eastman Kodak Company, 220 N.Y. 180) we upheld this view deciding that on the evidence then presented a jury could be permitted to say that appellant had been guilty of actionable negligence in respect of intestate. We do not think that there has been any such substantial change in the evidence upon the trial now under review in this respect as to lead us to change our views and for the purposes of this discussion we shall assume that the courts below were justified in holding that the appellant was guilty of negligence which contributed to the death of plaintiff's intestate. There are, however, other obstacles to plaintiff's recovery which we think are fatal to the present judgment.

On plaintiff's theory appellant and the contractor for whom intestate was working, one Mullen, were joint tort feasors and on perfectly well-settled principles a settlement with one would be a bar to an action against the other. The appellant insists that this is what has happened; that plaintiff in consideration of a sum of money made a settlement with the contractor and released him from any and all claims on account of the death of her intestate. In support of this claim it introduced in evidence together with other testimony a check for $300 stated upon its face to be in full settlement of plaintiff's claim against Mullen and indorsed by her, and also a general release by her to Mullen of all claims. It is conceded that these papers on their face do effect such a release and discharge of appellant's joint tort feasor, Mullen, as would be a bar to this action. It is insisted on the part of plaintiff, however, that the release and settlement evidenced thereby may be and have been avoided because of fraud perpetrated in behalf of Mullen in securing the same, and this brings us to the decisive query whether plaintiff did establish such fraud in respect of this release as to make it void or voidable and whether she has placed herself in a position where she can urge such fraud and claim such avoidance. Of course, it is manifest that if this purported settlement still remains effective as between plaintiff and Mullen it is effective as between plaintiff and this appellant in this action. It cannot be held in this action to have been avoided as to appellant if it still remains effective as to Mullen.

Plaintiff urges two lines of fraudulent conduct by which as she claims she was induced to execute the purported general release.

In the first place, as we understand it, she claims that she was induced to sign the paper proving to be a general release by statements in substance that the money which was being paid to her was a mere gratuity and that the paper which she was signing was a simple receipt. If this is true and she was induced by misrepresentation to sign a paper which was entirely different than the one which she was asked and expected to sign, it is conceded by appellant, and we shall assume, that the paper would be void and certain acts in the way of rescission rendered unnecessary. We think, however, that it is conclusively established against plaintiff for the purposes of this action that she understood that she was about to make a settlement of her claims against Mullen and was receiving a sum of money as a consideration for such settlement and not as a gratuity. The check which was delivered to her on its face recited that it was "in full settlement of claim of Irene McNamara administratrix, Estate of Edward B. McNamara, deceased, versus John L. Mullen," and on the back of the check directly above plaintiff's indorsement thereof were printed the words: "In full settlement of claim referred to on face of this draft." This draft was delivered to plaintiff and deliberately and at her own convenience she indorsed it and collected the money thereon. There is no suggestion that she did not understand the English language and, unless we are to exonerate her from any obligation to understand such language and from any responsibilities which may come from indorsing and collecting the money on a draft which so specifies the purpose for which it is given, we do not see how a jury can be permitted to say that this plaintiff thought that she was signing a receipt and not making a settlement. (Wagner v. Nat. Life Ins. Co., 90 Fed. Rep. 395.) But there is further evidence which in our judgment even more conclusively establishes, if that were possible, as against plaintiff the knowledge that she was making a settlement with Mullen and not receiving a gratuity. Upon a petition signed and verified by her setting out in substance the nature of her claim against Mullen and an offer by him to settle the same for $300 and expressing her desire to accept such settlement for certain reasons specified in the petition, an order was made by the Surrogate's Court approving the settlement and authorizing her to accept the money, as she subsequently did accept it by the draft which has been referred to, in settlement of her claim against Mullen. This petition and this order respectively asked and granted leave to make a settlement of a cause of action and in every aspect repudiated any idea of a gratuity. The order stands in full force and effect and so long as it thus stands it, in our opinion, conclusively establishes as between plaintiff and Mullen that she desired to make the settlement which was subsequently made and that she understood fully what she was doing in that respect. Mullen, or those acting in behalf of him, have paid plaintiff money on the strength of this order authorizing her to accept the settlement and in our opinion the order and proceedings in Surrogate's Court cannot be vacated or avoided, certainly without notice to Mullen, who had a right to act on the faith thereof, and so long as they thus stand they conclusively establish plaintiff's knowledge of what she was doing and exclude this phase of her claim of fraud.

The plaintiff's other claim of fraud is, we think, somewhat inconsistent with and contradictory of the one which we have just discussed. As we understand it, it is to the effect that plaintiff was induced to sign the release, indorse the check and accept the money in settlement of her claim against Mullen through false and fraudulent misrepresentations as to the validity and legal status and strength of her claim. Of course, if plaintiff signed the release on the representation that she was receiving a gratuity and that the paper was a mere receipt she was not induced to sign a release by false representations as to the merits of her claim, and conversely, if she was induced by false representations to sign a release, she was not induced to sign a mere receipt by false representations as to the character of the paper. Disregarding this inconsistency, however, we pass to a discussion of this phase of plaintiff's claim of fraud as it was presented by the evidence on the trial.

It is somewhat debatable whether the plaintiff gave sufficient evidence of material false representations of facts to enable her to avoid the release which she signed, even if the jury found in her favor. But again assuming for the purposes of this discussion that her evidence was sufficient to permit a jury to say that she was fraudulently induced by material misrepresentations to sign the release and that, therefore, she could avoid it, we come to the question whether she did take the necessary steps legally to repudiate her settlement and escape the consequences thereof.

The rule within which she has attempted to bring herself is the familiar one that a party who has been induced by fraud to enter into a contract may rescind the same if he acts promptly on discovery of the fraud and, under ordinary circumstances, returns or offers to return whatever he may have received under the alleged fraudulent contract.

Plaintiff has performed only two acts by which she claims to have accomplished a rescission of this alleged fraudulent contract. In this action by her supplemental reply she tendered repayment and on the trial offered to pay into court with interest the sum which had been paid to her in behalf of Mullen. Some time prior to the trial there had taken place between plaintiff's counsel and Mullen a correspondence consisting of a letter from the former and an answer by the latter. The letter of her counsel read as follows: "In order that it may not be claimed that Mrs. McNamara, as administratrix, has waived any of her rights, we hereby offer to pay you the sum paid to her with interest from the time of payment, and request that you advise us by return mail as to the depository at which you desire the money sent, or advise us as to any other method by which we may pay the money to you. We desire to make an effective and legal tender and do not wish to be met with the complaint that a legal tender was not made. We will be very grateful if you will advise us at once so we may place the money in your hands, or adopt any other method to effect payment that may be agreeable to you." Mullen's letter in reply read as follows:

"GENTLEMEN: I have your letter of the 4th inst., referring to settlement made with Mrs. McNamara. I am entirely satisfied that the settlement was made in the best of good faith with your client of which I have substantial conclusive proof. I see no reason why the matter need be discussed any further. Your client was unquestionably treated with proper consideration of which I am satisfied you will in due time be informed."

It seems obvious that the plea of repayment and offer to pay into court in this action were entirely ineffective to accomplish any rescission of her contract with Mullen. He was not a party to the action and so far as appears never had the slightest knowledge of her pleading or of her offer to deposit the money in court and, in our opinion, it was not in the remotest degree affected by these occurrences.

Neither do we think that the correspondence was effective to accomplish a rescission. It is the ordinary rule that in order to rescind a contract the party must restore or offer to restore any consideration received thereunder. Concededly the plaintiff has never restored to Mullen the moneys which she received and it is equally plain that she has never made any legal tender thereof. While conceding this she claims that the correspondence which has been referred to amounted to a waiver by Mullen of any tender and further that she was not obliged to make any tender because he was a non-resident of the state. We do not think that Mullen's letter operated as a waiver of a tender and we doubt very much whether the rule which relieves an ordinary debtor from making tender to a creditor who resides out of the state in order to protect himself from the consequences of an apparent default, applies to this case where plaintiff is seeking to put herself in a position to attack a settlement made with a creditor who then resided outside the state and as a condition precedent thereof is compelled to perform certain acts. We, however, pass this question and place our estimate of plaintiff's attempted rescission upon broader grounds.

It does not appear whether plaintiff acted promptly after discovery of the alleged fraud in her purported rescission. But certainly she could not accomplish a rescission by mere mental attitude. It was necessary that she should plainly and decisively take the position of rescinding and so indicate to Mullen either by notice or by her conduct. We do not find in her letter anything which indicates in the faintest manner the attitude that she had been led by fraud into the execution of a contract and, therefore, elected to repudiate and rescind it. There is not the slightest suggestion of any fraud or misrepresentation, which vitiated the contract, or of any claim of right to repudiate it on that ground. The most that appears is that she was afraid that she had waived some undisclosed rights and, therefore, desired to return the money. She was not insisting upon a right; she was seeking to escape from a possible embarrassment. We think that the fair interpretation and purpose of her letter are made evident by what is said by her counsel in his present argument in connection with the same. He states: "Immediately upon being informed by the attorneys for the Eastman Kodak Company after the reversal of the judgment of non-suit by the Court of Appeals, that the defendant claimed that plaintiff had released her cause of action, plaintiff's attorney wrote to Mullen" the letter in question. In other words, plaintiff attempted to get rid of a settlement because it threatened to embarrass her prosecution of the present action. But she did not accomplish this as we think. The law required her fairly to disclose her position to Mullen and insist upon her right to repudiate the contract with him by reason of his alleged fraudulent conduct. (Upton v. Tribilcock, 91 U.S. 45, 54;Grymes v. Sanders, 93 U.S. 55, 62; McGee v. Remmel,148 Cal. 539, 547; O'Shea v. Vaughn, 201 Mass. 412, 425;Cunningham v. Pettigrew, 169 Fed. Rep. 336, 340; Richardson v. Lowe, 149 Fed. Rep. 626; Blank v. Aronson, 187 Fed. Rep. 241, 245.)

But farther than this we think that again plaintiff's successful progress upon this claim of fraud and rescission is barred, as was her other claim of fraud already discussed, by the proceedings in Surrogate's Court. The order in those proceedings expressly held that the settlement outlined by plaintiff in her petition and subsequently made was a proper one and authorized it to be made. Subsequently and presumably upon the strength of this order and authority Mullen paid his money and acquired his release. Under such circumstances it seems to us that the order so long as it stands conclusively establishes between the plaintiff and Mullen that the settlement was a prudent and honest one and one which the wrongdoer as well as the administratrix might safely make. If it does have this effect, necessarily it excludes the idea that a settlement was induced by fraud.

For these reasons, therefore, we think the judgments appealed from should be reversed and a new trial granted, costs to abide event.