DEWEY RICHARD FARLEY and wife, )
PAMELA FARLEY, and )
TOMMY WEST, )
)
Plaintiffs/Appellants, )
) Appeal No.
) 01-A-01-9510-CV-00429
VS. )
) Putnam Circuit
) No. J-5507 and J-5511
JAMES CLAYTON, Individually and )
d/b/a LUV HOMES, CLAYTON )
HOMES, INC., Individually and d/b/a )
LUV HOMES, and CH OF AL, INC.,
Individually and d/b/a LUV HOMES,
)
)
FILED
)
Defendants/Appellees. ) May 8, 1996
Cecil W. Crowson
COURT OF APPEALS OF TENNESSEE Appellate Court Clerk
MIDDLE SECTION AT NASHVILLE
APPEALED FROM THE CIRCUIT COURT OF PUTNAM COUNTY
AT COOKEVILLE, TENNESSEE
THE HONORABLE JOHN TURNBULL, JUDGE
DAVID DAY
ROBERT DURHAM
19 South Jefferson Avenue
Cookeville, Tennessee 38501
Attorneys for Plaintiffs/Appellants Dewey Richard Farley and Pamela Farley
MARTELIA T. CRAWFORD
310A East Broad Street
Cookeville, Tennessee 38501
Attorney for Plaintiff/Appellant Tommy West
TOM CORTS
Third Floor, Noel Place
200 Fourth Avenue, North
Nashville, Tennessee 37219-8985
Attorney for Defendants/Appellees
AFFIRMED AND REMANDED
BEN H. CANTRELL, JUDGE
CONCUR:
TODD, P.J., M.S.
LEWIS, J.
OPINION
This is an action for misrepresentations and inducement of breach of
contract relating to the trial and settlement of a personal injury case. The original
plaintiffs and a co-defendant have sued the other defendants for misrepresenting or
concealing material facts which (1) induced the plaintiffs to settle their original claim
for less than its worth, and (2) induced the defendants’ insurance company not to
represent the other defendant. The Circuit Court of Putnam County granted summary
judgment to the defendants. We affirm.
I.
In the summer of 1990 an entity known as Luv Homes operated a mobile
home sales lot in Cookeville. Tommy West managed the Cookeville operation. On
August 27, 1990, Dewey R. Farley, who worked for a contractor hired by Luv Homes
to deliver one of the trailers, was helping move the furniture out of the unit. Cheryl
West, Tommy West’s wife, was hauling the furniture in her El Camino which she
owned jointly with Tommy West. Mr. Farley was standing in the bed of the vehicle
holding some of the furniture upright when the truck lurched forward, throwing Mr.
Farley out and onto the ground. He suffered severe and permanent injuries.
Mr. Farley and his wife sued Tommy and Cheryl West, Luv Homes, and
the alleged owners of Luv Homes, including James Clayton individually. The
insurance company providing coverage for Luv Homes and its associated entities, but
did not provide coverage for Tommy West. Mr. West, after retaining his own private
attorney, left town and broke off communication with his attorney and the other
defendants. Consequently, the plaintiffs took a default judgment against him. After
the trial started in November of 1991, the Luv Homes/Clayton defendants settled their
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case with the Farleys for $125,000. The jury returned a verdict against the Wests for
$620,000.
Mr. West resurfaced, and in 1993 he and the Farleys sued the Luv
Homes/Clayton insurance carrier for failing to defend Mr. West in the original action.
In September of 1994, all the parties to that action compromised their claims and the
insurance carrier paid the Farleys $298,502.63 in return for their release of all claims
against the insurance company. Tommy West released his claims against the
insurance company and the Farleys released Tommy West from any further liability
arising out of the 1990 accident.
On November 4, 1994 the Farleys and Mr. West in separate actions
sued the Luv Homes/Clayton defendants, alleging that they misrepresented or
suppressed facts during the earlier litigation that caused the Farleys to settle their
case against the defendants for less that its worth and caused the defendants’
insurance company to breach its obligation to defend Mr. West. The complaint
specifically charged that the defendants negligently or intentionally (1) misrepresented
or withheld the facts pertaining to Cheryl West’s employment with the defendants, (2)
misrepresented the facts concerning the lease of the El Camino by the defendants,
(3) misrepresented facts concerning Cheryl West’s intoxication at the time of the
accident, and (4) misrepresented or suppressed the fact that Tommy West admitted
he and Cheryl West were negligent in causing the accident.
The defendants answered each complaint. They did not plead res
judicata but did plead the releases entered in the prior actions as affirmative defenses.
Subsequently, the defendants moved for summary judgment and raised the additional
defense of witness immunity. The plaintiffs joined issue on the defenses raised in the
motion. The trial judge granted summary judgment to all defendants.
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II.
Tommy West
We affirm the judgment in Tommy West’s case because he had specific
knowledge concerning the truth of all of the facts allegedly misrepresented or
suppressed, and by obtaining a judgment to enforce the insurance contract, he has
obtained all the relief to which he is entitled.
An essential requirement of any action for fraud, deceit, failure to
disclose or negligent or innocent misrepresentations is detrimental reliance on a false
premise. See Shwab v. Walters, 147 Tenn. 638, 251 S.W. 42 (1922); Tartera v.
Palumbo, 224 Tenn. 262, 453 S.W.2d 780 (1970); Williams v. Van Hersh, 578 S.W.2d
373 (Tenn. App. 1978); Dozier v. Hawthorne Development Co., 37 Tenn. App. 279,
262 S.W.2d 705 (1953). “Fraud involves deception and if one knows the truth, and
is not deceived, he is not defrauded.” Freeman v. Citizens National Bank, 167 Tenn.
399 at 409, 70 S.W.2d 25 at 29 (1934).
Mr. West was the agent of the Clayton defendants. He ran the operation
in Cookeville and was the person through whom the Clayton defendants were charged
with knowledge that Cheryl West was drunk, that she was an employee
of Luv Homes, or that the El Camino was leased to the Clayton defendants. He was
surely the best witness to the fact that he had admitted liability. Since Mr. West was
not deceived by any of the defendants, he cannot sue them for fraud and deceit.
We are also convinced that he cannot now sue the other defendants for
inducing the insurance company to deny coverage in the original action by the
Farleys. The undisputed facts show that Mr. West joined the Farleys in an action to
enforce the insurance contract. That action ended in an agreed judgment for the
Farleys and a complete release of any liability on the part of Mr. West.
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Although a party to a contract may successfully prosecute an action to
enforce it and still maintain an action against third parties for inducing the breach, the
law permits only one recovery, and any payments made by the one who breached the
contract must be credited to the one who induced the breach. TSC Industries, Inc.
v. Tomlin, 743 S.W.2d 169 (Tenn. App. 1987). In this case, Mr. West does not allege
how he has suffered any damages beyond the judgment awarded to the Farleys in the
original action. That judgment has now been completely discharged and Mr. West
has obtained a release from all liability. Therefore, the undisputed facts show that an
essential element of his cause of action is missing from this case. See Hart v. First
National Bank of Memphis, 690 S.W.2d 536 (Tenn. App. 1985).
III.
The Farleys
The Farleys allege that because the Clayton defendants misrepresented
or suppressed certain material facts in the original litigation, they (the Farleys) were
induced to settle their claims for far less than their actual worth. The defendants rely
on the release signed by the Farleys in the original action and argue in the alternative
that any separate cause of action was barred by the witness immunity doctrine.
a. The Release
In addition to language releasing the Clayton defendants from all liability
arising out of the accident on August 27, 1990, the release contained the following:
Releasors elect to and do assume all risks for
claims heretofore or hereafter arising, known or unknown,
asserted against Releasees in the above-described
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litigation and Releasors expressly include within the scope
of this Release all such claims.
Releasors warrant that no promise or inducement
has been offered or made except as herein set forth; that
this Release is executed without reliance on any
statement or representation by Releasees or by any
agents or representatives of Releasees, and Releasors
hereby acknowledge and assume all risk, chance, or
hazard that their injuries or damages may be or become
permanent, progressive, greater, or more extensive than
is now known or anticipated.
The only reference to the release in the Farleys’ initial brief is a
statement that the release is “ineffective in the face of misrepresentation.” We take
that as a statement of the familiar rule that a release may be set aside if it was
procured by fraudulent misrepresentations. Brundige v. Railroad, 112 Tenn. 526, 81
S.W. 1248 (1903); Crigger v. Mutual Benefit Health & Accident Association, 17 Tenn.
App. 636, 69 S.W.2d 907 (1933). The misrepresentations must relate to material
facts, Chattanooga Ry & Light Co. V. Glaze, 146 Tenn. 49, 239 S.W. 394 (1921), and
reliance on the misrepresentations must be justified. Evans v. Tillett Bros. Const. Co.,
Inc., 545 S.W.2d 8 (Tenn. App. 1976).
In this case the alleged misrepresentations relate to the very issues that
were being tried in the original action. We think, as a matter of law, that a release
executed under such circumstances cannot be set aside for fraud. Parties to a lawsuit
cannot justifiably rely on the representations of the adverse parties when success on
the merits requires proof that the representations were false. For the same reasons
that a judgment may not be set aside because of the “falsity of the internal evidence
on which it was procured,” see Thomas v. Dockery, 33 Tenn. App. 695 at 703, 232
S.W.2d 594 at 598 (1950), a release procured by that same internal evidence should
also be immune from an attack based on fraud.
b. The Separate Action for Fraud and Deceit
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The Farleys maintain that the release has nothing to do with their cause
of action for fraud and deceit; that they have alleged a separate and distinct cause of
action. But, even if we view the matter in that light, the same considerations dictate
that the cause of action does not exist. As a matter of law one party to a lawsuit
represented by counsel, cannot justifiably rely on the internal evidence presented by
the opposite parties.
c. Witness Immunity
What we have previously said in this section of the opinion is, perhaps,
just another way of stating the witness immunity doctrine. As we stated in Buckner
v. Carlton, 623 S.W.2d 102 at 108 (1981):
The general rule is that testimony given in a judicial
proceeding, if pertinent thereto, is protected by an
absolute privilege even though given maliciously and with
knowledge of its falsity. And accordingly, it is also the
general rule that no civil action for damages lies for false
testimony or for subornation of false testimony or for
conspiracy to give or procure false testimony.
See 31 A.L.R. 3d, False Testimony-Civil Conspiracy, § 1423 at § 2.
The Farleys argue, however, that the defendants’ representations were
either a part of a larger conspiracy or were made prior to the original action. As to the
larger conspiracy theory, we think this case is just like Buckner v. Carlton where the
plaintiff alleged that the defendant was out to “get” him and maliciously damage his
reputation in the community. Nevertheless, we held that the defendant “committed
no overt acts separate and apart from the false testimony, the false statements to
investigators and the conspiratorial conversations . . . .” 623 S.W.2d at 108. In this
case all of the allegations of misconduct relate to the defendants’ alleged purpose to
defeat the Farleys’ claims. Thus, the facts alleged do not bring this case within the
larger conspiracy exception to witness immunity.
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As to the assertion that at least some of the false statements made by
the defendants were prior to the original action, we think that all of the statements
come within the privilege. If they were not made in connection with the litigation over
the Farleys’ claims, they would be irrelevant. Otherwise, they come within the
privilege.
The judgment of the trial court is affirmed and the cause is remanded
to the Circuit Court of Putnam County for any further proceedings necessary. Tax the
costs on appeal to the appellants.
_______________________________
BEN H. CANTRELL, JUDGE
CONCUR:
_______________________________
HENRY F. TODD, PRESIDING JUDGE
MIDDLE SECTION
_______________________________
SAMUEL L. LEWIS, JUDGE