Opinion
No. 32414
Decided March 28, 1951.
Release — Not void for fraud in factum, when — Execution by person of ordinary mind — Release not read before signing — Induced by fraud or mistake — Equitable relief from release prerequisite to enforcement of law claim — Whether induced by fraud or mistake a question for court — May submit issue to jury — Jury's finding not binding on court — Railroad employee's release of rights under Federal Employers' Liability Act — On same basis as other releases — Questions of rights under act do not arise, when — Law controlling rights in effort to avoid release — Effort to avoid relates to rights under release — Law governing legal effect and avoidance of release.
1. A complete release is not void because of fraud in the factum, where it was executed by a person of ordinary mind who could read and was not prevented from reading the release before signing it, even if, in reliance upon the false representations of the person to whom the release was given, he did not read the release and believed that such release was only a partial one.
2. Where it is claimed that a release was induced by fraud (other than fraud in the factum) or by mistake, it is necessary, before seeking to enforce a cause of action which such release purports to bar, that equitable relief from the release be secured.
3. In such an instance, the issue, as to whether the person who signed the release was induced to do so by fraud or by mistake, is an issue for determination by the court.
4. While the court, in its discretion, may submit that issue to the jury under proper instructions, the finding of the jury in respect thereto is not binding upon the court.
5. Releases by railroad employees of rights arising under the Federal Employers' Liability Act stand on the same basis as the releases of others. ( Callen v. Pennsylvania Rd. Co., 332 U.S. 625, followed.)
6. Where the forum is a court of the state where such a release was made, the law of that state may determine the rights of the parties with respect to an effort to avoid the release.
7. Such an effort to avoid a release relates to rights arising under the contract of release. ( Brown v. Western Ry. of Alabama, 338 U.S. 294, distinguished.)
8. Where a release which is not void is a release of rights of an employee under the Federal Employers' Liability Act, no question relating to rights under that act arises until the contract of release has been set aside.
9. Questions as to the legal effect upon a right under the Federal Employers' Liability Act of a release executed in this state and questions as to the avoidance of such a release are to be determined in the courts of this state by the law of this state.
APPEAL from the Court of Appeals for Summit county.
This was an action brought under the Federal Employers' Liability Act by an employee of a railroad to recover for injuries received during employment and claimed to have been caused by the negligence of the railroad.
By its answer, defendant denied any negligence and, as a separate defense, pleaded the execution by the plaintiff for a monetary consideration of a written release of all claims, demands and causes of action against the defendant, including any arising by reason of the injuries for which plaintiff sought recovery.
Plaintiff filed an amended reply stating that "when he reported back to work" an employee of the defendant "informed him that it would be necessary to sign a paper releasing the defendant company from all claims for loss of time and medical expenses up to that date before he could go back to work and that he relied on said promises and representations"; that he denied "that he knew at the time of the execution of the purported release set forth in defendant's answer [ sic] was a complete release in satisfaction of all claims, demands and causes of action that the plaintiff had against the defendant corporation"; that the employee of the defendant "represented * * * that said purported release was a release only for the wages lost by this plaintiff to the date thereof, by reason of his being unable to work by reason of the injuries he had sustained on or about May 29th, 1944, and that said representation was false, fraudulent and was relied on by the plaintiff"; that such representations were "made for the express purpose and with the intent of defrauding plaintiff, and that by reason thereof said release is null and void"; and that he had tendered back to defendant the money received under the terms of the release but that defendant had refused the tender.
When the case came on for trial, the defendant requested the trial court to determine the question as to the validity of the release before proceeding to trial of the other issues raised by the pleadings. This the court refused to do.
At the conclusion of all the evidence, the defendant requested the court to withdraw the evidence from consideration of the jury and instruct the jury to return a verdict for the defendant. The trial court refused to do this and submitted the case to the jury which returned a verdict for the plaintiff.
The undisputed evidence shows that the plaintiff was able to read. There was no evidence tending to indicate that anything was done to prevent the plaintiff from reading the release before he signed it. The evidence was in conflict with respect to the allegations of fraud and mistake set forth in the plaintiff's amended reply. The written release was admittedly signed by the plaintiff who also signed a certificate appended thereto stating that he fully understood its contents and that his signing was his free and voluntary act. There was also appended to the release a written receipt for the consideration provided therein stating that the amount paid was "in full satisfaction of the obligations of" defendant to plaintiff "under the provisions of the above contract." This receipt was also signed by plaintiff. The check given to plaintiff at the time of his execution of the release, certificate and receipt was payable to plaintiff and stated on its face, "in full settlement account injury received at Rushmore, Ohio, 10:08 a.m. on May 29th, 1944." This is the injury for which plaintiff seeks to recover. On the back of the check and above the endorsement of plaintiff there was the statement: "This voucher check is a payment in full of the within account, and it is agreed that the payee's endorsement hereon shall constitute an acknowledgment of such payment." Plaintiff had the check in his possession for about 24 hours before he cashed it. Admittedly, plaintiff received the consideration provided for in the release.
After the jury had returned its verdict for the plaintiff and before the court had rendered judgment thereon, the defendant filed a motion for judgment notwithstanding the verdict.
Thereafter, the trial judge made a finding wherein it was indicated that the questions of fraud and mistake had been submitted to the jury, pursuant to the theory laid down in Flynn v. Sharon Steel Corp., 142 Ohio St. 145, 50 N.E.2d 319; and that, in accordance with that case (paragraph five of the syllabus), he did not regard himself bound by the finding of the jury on those issues. This finding reads in part:
"Although the court thoroughly charged the jury upon the questions of fraud with reference to the release * * *, the jury seemed to have misapprehended the whole concept of fraud, and the case is now before the court on a motion for judgment notwithstanding the verdict.
"* * *
"* * * the facts do not sustain either in law or equity the allegations of fraud by clear, unequivocal and convincing evidence.
"* * * therefore * * * the motion for judgment notwithstanding the verdict should be sustained."
The motion was thereupon granted and judgment was rendered for the defendant.
Plaintiff thereupon appealed from the judgment to the Court of Appeals on questions of law only. Cf. Meyer v. Meyer, 153 Ohio St. 408, 91 N.E.2d 892, where appeal was on questions of law and fact.
The judgment of the trial court was reversed by the Court of Appeals and the cause was remanded to the trial court with instructions to render judgment for the plaintiff on the verdict of the jury.
The case is before this court on appeal, a motion to certify having been allowed.
Messrs. Gottwald, Hershey Hatch, for appellee.
Messrs. Wise, Roetzel, Maxon, Kelly Andress, for appellant.
The question to be decided is: May a trial court ordinarily determine the issue as to whether an employee of a railroad was induced by fraud (other than fraud in the factum) or by mistake to execute a release of his claim arising under the Federal Employers' Liability Act?
In considering the validity of releases and other contracts, this court has often called attention to the difference between fraud in the factum and fraud in the inducement. Meyer v. Meyer, supra; Picklesimer v. Baltimore Ohio Rd. Co., 151 Ohio St. 1, 84 N.E.2d 214; Flynn v. Sharon Steel Corp., supra; Perry v. M. O'Neil Co., 78 Ohio St. 200, 85 N.E. 41; DeCamp v. Hamma, Exr., 29 Ohio St. 467, 470. See Manhattan Life Ins. Co. v. Burke, 69 Ohio St. 294, 70 N.E. 74, 100 Am. St. Rep., 666.
It has been held that, where there has been fraud in the factum, the release or other contract is void and may be disregarded as a nullity. Flynn v. Sharon Steel Corp., supra; Perry v. M. O'Neil Co., supra; and DeCamp v. Hamma, Exr., supra.
Plaintiff does not seriously contend that there was any evidence in the instant case to justify a finding of fraud in the factum. He apparently recognizes that there could be no such fraud in the instant case. Even if, as alleged in the amended reply, defendant did misrepresent to plaintiff the contents of the release and plaintiff executed the release in reliance upon that misrepresentation and in the belief that it was something else, plaintiff could admittedly read the release and there was no evidence that anything was done to prevent him from reading it. Plaintiff testified that he was told by defendant's employee that he would not have to read the release. This was denied by defendant's employee. However, there was no evidence tending to prove that plaintiff was denied an opportunity to read the release.
A person of ordinary mind cannot say that he was misled into signing a paper which was different from what he intended to sign when he could have known the truth by merely looking when he signed. DeCamp v. Hamma, Exr., supra, 471, 472. If this were permitted, contracts would not be worth the paper on which they are written. If a person can read and is not prevented from reading what he signs, he alone is responsible for his omission to read what he signs. McAdams v. McAdams, 80 Ohio St. 232, 240, 241, 88 N.E. 542; Upton, Assignee, v. Tribilcock, 91 U.S. 45, 50, 23 L. Ed., 203. See Aetna Ins. Co. v. Reed, 33 Ohio St. 283, 292. If a person knows or has an opportunity to know the contents of a written contract or release which he signs, the facts, that such person does not comprehend its terms and that such failure to comprehend is due to fraudulent representations, may justify rescission of the contract or release on the ground of fraud in the inducement but will not justify a finding of fraud in the factum and treatment of such contract or release as void at law. See Cassilly v. Cassilly, 57 Ohio St. 582, 49 N.E. 795.
Where it is claimed that a release was induced by fraud (other than fraud in the factum) or by mistake, it is first necessary, before seeking to enforce a cause of action which such release purports to bar, that equitable relief from the release be secured. 45 American Jurisprudence, 711, Section 52. In such an instance, the issue, as to whether the person signing the release was induced to do so by fraud or by mistake, is an issue for determination by the court. Meyer v. Meyer, supra. See Perry v. M. O'Neil Co., supra. While the court, in its discretion, may submit that issue to the jury under proper instructions, the finding of the jury in respect thereto is not binding upon the court. Flynn v. Sharon Steel Corp., supra. This was apparently the procedure followed in Thompson v. Camp (C.C.A. 6, 1947), 163 F.2d 396, one of the cases relied upon by the plaintiff. See, also, Radio Corp. of America v. Raytheon Mfg. Co., 296 U.S. 459, 80 L. Ed., 327, 56 S. Ct., 297.
In the instant case, the trial court did submit to the jury the issue as to whether the plaintiff was induced by fraudulent representations of the defendant or by mistake to execute the release. After the verdict of the jury, the court recognized its responsibility to determine that issue. The court was not bound by the jury's finding on that issue for the plaintiff. There was substantial evidence to sustain the finding for the defendant made by the court on that issue.
However, plaintiff contends that the question, as to whether the release of an employee's claim under the Federal Employers' Liability Act should be set aside for fraud or mistake, must always be determined by the law as announced by the federal courts. In effect, this amounts to a contention that the law, with regard to releases of causes of action arising under the Federal Employers' Liability Act, differs from the law with regard to releases of other causes of action. In support of this contention, plaintiff relies upon certain decisions of the federal courts.
We believe that a careful examination of those decisions will clearly disclose that they were based upon a misinterpretation, made by two judges of the Second Circuit Court of Appeals in Ricketts v. Pennsylvania Rd. Co., 153 F.2d 757, 164 A.L.R., 387, of the decision by the Supreme Court of the United States in Garrett v. Moore-McCormack, 317 U.S. 239, 87 L. Ed., 239, 63 S. Ct., 246. This misinterpretation was subsequently rejected by the Supreme Court of the United States in Callen v. Pennsylvania Rd. Co., 332 U.S. 625, 92 L. Ed., 242, 68 S. Ct., 296.
Thus, in the opinion by Mr. Justice Jackson in that case it is said:
"Considerable reliance is placed upon a concurring opinion in the Court of Appeals for the Second Circuit in Ricketts v. Pennsylvania Rd. Co., 153 F.2d 757, 760. However persuasive the arguments there stated may be that inequality of bargaining power might well justify a change in the law, they are also a frank recognition that the Congress has made no such change. An amendment of this character is for the Congress to consider rather than for the courts to introduce. If the Congress were to adopt a policy depriving settlements of litigation of their prima facie validity, it might also make compensation for injuries more certain and the amounts thereof less speculative. But until the Congress changes the statutory plan, the releases of railroad employees stand on the same basis as the releases of others. One who attacks a settlement must bear the burden of showing that the contract he has made is tainted with invalidity, either by fraud practiced upon him or by a mutual mistake under which both parties acted.
"The plaintiff has also contended that this release violates Section 5 of the Federal Employers' Liability Act which provides that any contract to enable any common carrier to `exempt itself from any liability created by this chapter, shall to that extent be void.' 35 Stat., 66, 45 U.S. Code, Section 55. It is obvious that a release is not a device to exempt from liability but is a means of compromising a claimed liability, and to that extent recognizing its possibility. Where controversies exist as to whether there is liability, and if so for how much, Congress has not said that parties may not settle their claims without litigation." (Emphasis added.)
That the Callen case represents a definite rejection by the Supreme Court of the United States of the Ricketts decision is emphasized by the dissenting opinion, stating that the dissenting judges, "being of the view that releases under the Federal Employers' Liability Act should be governed by the same rule which applies to releases by seamen in admiralty (See the separate opinion of Judge Jerome Frank, Ricketts v. Pennsylvania Rd. Co. * * *), dissent from an affirmance of the judgment."
The basis for the decision in the Ricketts case appears in a statement by Circuit Judge L. Hand in his opinion and in a statement by Circuit Judge Frank in his concurring opinion. Thus, it was said by Judge Hand (page 759):
"The right of action here in suit was created by act of Congress, and it is abundantly settled that its interpretation is a matter of federal law and not governed by state decisions, even when it speaks in the words of the common law. Chesapeake Ohio Ry. Co. v. Kuhn, 284 U.S. 44, 52 S. Ct., 45, 76 L. Ed., 157. It would not inevitably follow that, after such a right had come into existence, the legal effect upon it of a transaction within a state — as here, of a release — was also to be treated as matter of federal law; conceivably, its fate might be left to the law of the state. However, as we read Garrett v. Moore-McCormack, supra, this is not so. The right of action was there under the Jones Act, but the action had been brought in a state court, which had held that the burden of proof of establishing a release was governed by the law of Pennsylvania. This the Supreme Court denied, holding that the admiralty rule controlled; and it would seem to follow that the validity of the release at bar is to be decided by the common law, to be gathered from the same sources which, before Erie Rd. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct., 817, 82 L. Ed., 1188, 114 A.L.R., 1487, we used to employ in cases depending on diversity of citizenship." (Emphasis added.)
It was said by Judge Frank (page 760):
"The Supreme Court recently, in a case * * * relating to a release by a seaman, Garrett v. Moore-McCormack, supra, at page 248, note 17, has broadly hinted that the courts should treat nonmaritime employees, with respect to releases of personal injury claims, just as they treat seamen. I think we should take that hint * * *."
In Garrett v. Moore-McCormack, supra, it was pointed out that, under admiralty law, the releases of seamen stand on a different basis from that of releases of others; and that, in enforcing a cause of action of such a seaman under a federal act which a state court is given jurisdiction by that act to entertain, the state court necessarily has to recognize "the substantial rights of the parties under controlling federal law."
As clearly pointed out in the Callen case, "the releases of railroad employees stand on the same basis as the releases of others." It would appear, therefore, that, so far as their releases are concerned, there are no substantial rights of railroad employees under controlling federal law. A release is merely a contract between the releasor and the releasee. As pointed out in the opinion of Mr. Justice Jackson in the Callen case, Congress has not undertaken to legislate with regard to the rights of railroad employees to make such a contract. Furthermore, as indicated by his opinion, there is no federal common law respecting the right of such an employee to make or avoid such a contract. Where the forum is the state where such a contract was made, there would appear to be no reason why the law of that state should not determine the rights of the parties with respect to an effort to avoid the contract.
Plaintiff apparently believes that the question, as to whether the issue of fraud in the making of a release shall be determined by a court or by a jury, involves a procedural problem. In support of his contention that such question should be answered by the federal law, he relies on the case of Brown v. Western Ry. of Alabama, 338 U.S. 294, 94 L. Ed., 100, 70 S. Ct., 105, holding that rights granted by the Federal Employers' Liability Act could not be interfered with by certain rules of practice and procedure of a state court.
However, the question here is one of whether rights arising under an Ohio contract of release should or should not be recognized. It is not a question, as in the Brown case, relating to enforcement of rights under the Federal Employers' Liability Act. The latter question will not arise until the contract of release has been set aside. While, to use the words of Mr. Justice Black in the Brown case, a right provided for by the federal act "cannot be defeated by the forms of local practice," the Callen case recognizes that such right may be barred by a release; and that the federal law has not, as in the case of seamen, put such a release of a railroad employee on a basis different from that of other releases. To use the words of Judge L. Hand in the Ricketts case, "it would not inevitably follow that, after such a right [under the Federal Employers' Liability Act] had come into existence, the legal effect upon it of a transaction within a state — as here, of a release — was also to be treated as matter of federal law; conceivably, its fate might be left to the law of the state." We believe that the Supreme Court in the Callen case clearly indicated that its fate has been left to the law of the state.
It has been suggested that the Callen case indicates that a jury must always be permitted to pass on all issues of fact in an action to enforce rights under the Federal Employers' Liability Act, apparently including those issues relating to the validity of a release of claims under that act. In that case, the trial judge, by what he said in his charge to the jury, took away from the jury any question as to the validity of the release, and his statements indicated that he did this on the ground that the burden was upon the railroad to prove the absence of mutual mistake or fraud with respect to the release. The employee in that case did not contend that the trial judge had the power to decide the question. Neither did the railroad. Probably the railroad ignored the question because the trial judge clearly indicated by what he said to the jury that any decision which he might have made would have been based upon his view that the burden of proof, with respect to the absence of fraud and mistake, was on the railroad.
Furthermore, a trial judge, who approached the decision of such a question with that view as to the burden of proof, could not make a decision, for which the employee could have argued, if, as it did, the Supreme Court placed upon the employee the burden of proof with respect to showing mistake or fraud.
In any event, the Supreme Court in the Callen case would certainly have said something to indicate any intention it had to announce that the rule of Erie Rd. Co. v. Tompkins, supra, did not apply to the trial of issues involving the validity of releases of claims arising under the Federal Employers' Liability Act. It said nothing to indicate such an intention but instead it stated that "releases of railroad employees stand on the same basis as the releases of others."
With respect to the burden of proof on this question in the federal courts, it may be observed that in the Callen case, the Circuit Court of Appeals, in reversing the District Court, stated that "evidence in order to void the release had to be clear, unequivocal and convincing." (162 F. [2d], 832-833.) This is the precise rule with respect to burden of proof adopted by the trial judge in his finding in the instant case. The decision of the Circuit Court of Appeals in the Callen case was affirmed by the Supreme Court of the United States.
Several of the other cases cited by plaintiff in support of his position, that the law with regard to releases of causes of action arising under the Federal Employers' Liability Act differs from the law with regard to releases of other causes of action, make no reference to the Callen case. Brown v. Pennsylvania Rd. Co. (C.C.A. 2, 1947), 158 F.2d 795; Thompson v. Camp, supra; Irish v. Central Vermont Ry., Inc. (C.C.A. 2, 1947), 164 F.2d 837. This is probably due to the fact that those cases were decided before or at about the time of the report of the Callen case. In all those cases, the conclusions, which tend to support this position of the plaintiff, were based upon the misinterpretation, made in the Ricketts case, supra, of the decision in Garrett v. Moore-McCormack, supra, which misinterpretation was rejected in the Callen case.
Those cases which support this position of the plaintiff and refer to the Callen case apparently fail to recognize the effect of the Callen case on their conclusion that the validity and avoidance of a release of rights arising under the Federal Employers' Liability Act are questions of federal law. See Graham v. Atchison, T. S. Ry. Co. (C.C.A. 9, 1949), 176 F.2d 819; Chicago N.W. Ry. Co. v. Curl (C.C.A. 8, 1950), 178 F.2d 497; Kirchgestner v. Denver R.G.W.R. Co. (Utah, 1950), 218 P.2d 685; Collett v. Louisville N.R. Co. (D.C. Illinois, 1948), 81 F. Supp., 428; Pacific Electric Ry. Co. v. Dewey (1949), 95 Cal.App.2d 69, 212 P.2d 255; Union Pacific Rd. Co. v. Zimmer (1948), 87 Cal.App.2d 524, 197 P.2d 363. We do not believe that those decisions represent a correct interpretation of the law, as announced by the Supreme Court of the United States in the Callen case.
Unless the Supreme Court of the United States announces a change in the law as announced in the Callen case, we are of the opinion, for the reasons hereinbefore stated, that, where the forum is a court of the state where a release of rights arising under the Federal Employers' Liability Act was made, the law of that state may determine the rights of the parties with respect to an effort to avoid the release. Our conclusion, therefore, is that questions as to the legal effect upon a right under the Federal Employers' Liability Act of a release executed in this state and questions as to the avoidance of such a release are to be determined in the courts of this state by the law of this state.
The judgment of the Court of Appeals is reversed and the cause is remanded to that court for further proceedings in accordance with this opinion.
Judgment reversed.
WEYGANDT, C.J., STEWART, MIDDLETON, MATTHIAS and HART, JJ., concur.
If I were satisfied that this case as to the release involved was governed by Ohio law, I would agree with the majority opinion. However, we are dealing here with an action brought under the Federal Employers' Liability Act and the Supreme Court of the United States has said that the rights and obligations of the parties in such an action depend upon that act and applicable principles of common law as interpreted by the federal courts. See Bevan v. New York, Chicago St. Louis Rd. Co., 132 Ohio St. 245, 6 N.E.2d 982, certiorari denied, 301 U.S. 695, 81 L. Ed., 1351, 57 S. Ct., 924.
In the instant controversy the defendant railroad company sought to defeat plaintiff's action by reliance upon a purportedly complete release which plaintiff had executed and delivered to it. Plaintiff countered by claiming his signature to such release was induced and obtained by false and fraudulent representations and that the release was without binding effect.
Was the issue as to the validity of the release for the determination of the trial court upon the application of equitable principles as held by the majority of this court, or was the question one to be left to the jury as the trier of the facts?
Federal courts, which have dealt with the problem, have taken the position that, in an action under the Federal Employers' Liability Act, the validity of a release given by an employee to his employer is a substantive matter controlled by federal law, and that, where the employee makes the claim supported by evidence that the release was procured by fraud and misrepresentation, that issue must be submitted to the jury along with the other issues in the case. See Brown v. Pennsylvania Rd. Co. (C.C.A. 2), 158 F.2d 795; Irish v. Central Vermont Ry., Inc. (C.C.A. 2), 164 F.2d 837; Graham v. Atchison, T. S.F. Ry. Co. (C.C.A. 9), 176 F.2d 819; Chicago N.W. Ry. Co. v. Curl (C.C.A. 8), 178 F.2d 497, and cases cited.
Unless and until the Supreme Court of the United States holds differently, my position is the same as that adopted by the Court of Appeals herein, and I would, therefore, vote to affirm the judgment of such court.