Olston v. Oregon Water Power & Ry. Co.

Lead Opinion

MR. Justice Eakin

delivered the opinion of the court.

1. Thе second reply to the answer, namely, that the administrator cannot settle an unliquidated claim for damages without an order of the county court, involves the effect of our statute upon the common-law powers of the administrator. It is settled by Weider v. Osborn, 20 Or. 307 (25 Pac. 715), that Section 1168, B. & C. Comp., prohibiting the sale of personal property by an administrator, except upon an order of the county court or judge thereof, applies only to tangible property and has no application to choses in action.

2. At common - law the executor and administrator has an absolute power of disposal over the whole of the personal' effects of decedent (1 Williams, Executors, pp. 485, 545), with full power to compromise or accept any composition or otherwise settle any debt, claim, or thing whatsoever (Id. p. 713), and Section 1211, B. & C. Comp.,- authorizing certain debts to be compounded, applies only to those of insolvent debtors, and does not include the adjustment or settlement of an unliquidated claim for damages (Washington v. Louisville & N. R. Co., 34 Ill. App. 658; (136 Ill. 49: 26 N. E. 653) ; Moulton v. Holmes, 57 Cal. 337; Parker v. Providence & S. S. Co., 17 R. I. 376 (22 Atl. 284: 23 Atl. 102: 14 L. R. A. 414: 33 Am. Rep. 869). Therefore, as to an unliquidated claim for damages, the powers of an administrator remain in this State as at common law, and he may liquidate and accept settlеment of such a claim without special authority from the county court.

3. Plaintiff objected to the introduction of the release in evidence, for the reason that it is only his individual release and does not bind the estate. Although it states that “for myself, my heirs, executors, and administrators, hereby release,” etc., yet the circumstances under which it was given show that the payment which it acknowledges was to сover the whole liability of the defendant, not only in his own interests, but in the interest of his mother, brother, and .sisters, and that he was appointed' administrator of the estate because he could not individually receipt for it. It is a claim in which the individual heirs have no direct interest. The fund is the property of the estate.

4. By Sections 379, 381, B. & C. Comp., the heirs have no remedy for damages occasioned by an injury to the person оf the decedent. The release is signed by “John H. Olston, as administrator of the estate of William H. Olston, deceased,” which shows an intention to bind the estate, especially as it alone was entitled to receive the money. However, if the intention is ambiguous or doubtful, it is a question of fact for the jury to determine, and' the court was not in error in refusing to exclude the release on that ground.

5. Defendant cоntends that the release cannot be attacked at law for fraud in procuring the settlement upon which the release was executed. The general rule is that courts of equity and courts of law have concurrent jurisdiction of fraud. There are exceptions to this rule, however, based upon whether or not there is a remedy at law, and whether it is adequate. If there is a remedy at law, thе fraud 'may be established in that jurisdiction; but, if that remedy is not adequate, resort may be had to a court of equity. It is said that, where a court of law can get hold of the whole matter, it is as competent to try questions of fraud as a court of equity. Rust v. Larue, 3 Litt. (Ky.) 411 (14 Am. Dec. 172). The law relieves against fraud negatively by preventing either a recovery or a defense founded upon an instrument induced by fraud. Lamborn v. Watson, 6 Har. & John. (Md.) 252, 255 (14 Am. Dec. 275). Fraud may be pleaded at law when the relief sought in a ‍‌​​‌‌‌‌‌​‌‌‌‌‌‌‌‌​‌‌​‌​​‌​‌‌​​​‌‌​​‌‌‌‌​​​​​​​‌​‍particular care is such as can be effected by a judgment. Ankrim v. Woodworth, Harr. Mich. 355; Wheeler v. Clinton C. Bank, Harr. Mich. 449; Wing v. Sherrer, 77 Ill. 200; Slack v. McLagan, 15 Ill. 242; 14 Am. & Eng. Enc. Law, (2 ed.) 172, 174.

6. At common law there is an exception to this rule, in the case of sealed instruments; but it is general as to all contracts not under seal. 1 Bigelow, Law of Fraud, 174, 175; Sanford v. Royal Ins. Co., 11 Wash. 653 (40 Pac. 609) ; Railway Co. v. Hayes, 83 Ga. 558 (10 S. E. 350) ; Hoitt v. Holcomb, 23 N. H. 535.

7. A release at common law is required to be under seal, and therefore is a specialty in which a consideration is conclusively presumed. Leаke, Contracts, 653.

8. And therefore it cannot be questioned in a law action except for fraud or deceit affecting its execution —that is, upon a plea of non est factum—but for fraudulent representations inducing the settlement—that is, affecting the consideration—equity alone can relieve. Bigelow, Fraud, 326, says:

“At common law, it has generally been held incompetent to a defendant sued at lаw on a specialty to plead that the instrument was obtained by false representations, buch defense must be made in equity; but it is otherwise of the execution of the instrument, as where the bond is misread to the obligor, or where his signature is obtained to an instrument which he did not intend to sign. In such cases, fraud may be alleged at law. The ground of this rule seems 'to be that to admit evidence of fraud not relating to the exеcution of the deed would be to allow the obligor to disprove the presumption of consideration, whicii presumption in the case of a specialty is an absolute one, not to be rebutted. Some courts, however, admit the plea of fraud as to the consideration, as well as to the execution of the instrument, and in other courts it is allowed by statute.”

The court in Hartshorn v. Day, 19 How. (U. S.) 211, 222 (15 L. Ed. 605), which is the leading case on this quеstion, say: “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 equitiеs 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 upоn 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 sеal. The fraud in this aspect goes to the question whether or not the instrument ever had any legal existence.” To the same effect are: George v. Ttate, 102 U. S. 564 (26 L. Ed. 232) ; Papke v. Hammond Co., 192 Ill. 631 (61 N. E. 910) ; McArthur v. Johnson, 61 N. C. 317 (93 Am. Dec. 593) ; Saunders v. Stotts, 6 Ohio, 380 (27 Am. Dec. 263) ; Truman v. Lore’s Lessee, 14 Ohio 144, 155; State v. Jones, 131 Mo. 194 (33 S. W. 23) ; Vandervelden v. Railway Co. (C. C.), 61 Fed. 54; Wyche v. Macklin, 2 Rand. (Va.) 426; Phillips v. Potter, 7 R. I. 289 (82 Am. Dec. 598) ; Hartley v. Railway Co., 214 Ill. 78 (73 N. E. 398). In the case of Lumley v. Wabash R. Co., 76 Fed. 66. (22 C. C. A. 60), the release was a sealed instrument, and the proceeding was in equity to cancel it: The lower court dismissed the complaint because there was a remedy at law, and the decree was reversed because the release, being under sеal, could not be attacked at law for fraud; the court saying: “If the release had in fact been procured by fraud, he could have shown this at law; the fact that the release was under seal had been out of the way.” Hill V. Northern Pac. Ry., 113 Fed. 914 (51 C. C. A. 544, and Papke v. Hammond Co., 192 Ill. 631 (61 N. E. 910), also makes the distinction that it is the seal that excludes the proof of fraud at law, citing these United States cases. Judge Putnam, in Johnson v. M. M. G. Co. (C. C.) 53 Fed. 569, 572, in holding that the seal is the distinguishing feature that precludes proof of fraud in the consideration, that being at common law the effect of the seal, says:

“However, it must be admitted that, on account of want of careful discrimination in the various directions which I have suggested, late text-writers, and even courts of common law, have not always distinguished between the ‍‌​​‌‌‌‌‌​‌‌‌‌‌‌‌‌​‌‌​‌​​‌​‌‌​​​‌‌​​‌‌‌‌​​​​​​​‌​‍remedy in equity and that at common law, when fraud is alleged as an answer to a releasе under seal or other deed.”

Defendant criticises the opinion in the case of Wagner v. Nat. Life Ins. Co., 90 Fed. 395, 404 (33 C. C. A. 121), as being contrary to the holding of the other United States courts; but the final conclusion in that case is fully in accord with all the cases above cited on that question. The release in the Wagner case is but a receipt not under seal. Judge Taft, who wrote the opinion, says:

“We find no reason therefore to modify the remark made by this court, speaking through Judge Lurton in Lumley v. Railroad Co., 43 U. S. App. 476, 489: 22 C. C. A. 67, and 76 Fed. 73, whеre he said: ‘If the release had in fact been procured by fraud, he (the plaintiff) could have shown this at law, if the fact that the release was under seal had been out of the way.’ The remark was, perhaps, not necessary to the case then before the court; but' in this case, where the question calls for decision, we have no difficulty in confirming it.”

We find that the rule at common law permitted any writing not under seal to be attacked at law for fraud in the consideration in all cases where the relief sought could be obtained in that jurisdiction, and a bond or writing obligatory, namely, a specialy, can be attacked at law for fraud in the execution of it, but not for fraud in the consideration. In many of the states the seal has lost much of its significance by, the changes which the statute has made in the сommon law. In some the distinction between sealed and . unsealed instruments has been abolished. In 1893 Missouri dispensed with private seals entirely (Laws 1893, p. 117) ; also, Washington (Ballinger’s Ann. Codes & St., § 4523 [Pierce’s Code, § 4438]) ; also, Kansas and Nebraska; while others still recognize the seal as prima facie evidence of consideration, but permit defenses at law to sealed instruments the same as to unsealed. This was the Missouri statute of 1845 (Rev. St. 1845, c. 136, art. 7, § 20) ; also, Alabama (Giles v. Williams, 3 Ala. 316 (37 Am. Dec. 692) ; New York (Case v. Boughton, 11 Wend. 106) ; Michigan (Lumley v. Wabash R. Co., 76 Fed. 73: 22 C. C. A. 60) ; and Iowa, Indiana, and New Hampshire.

9. And our own statute modifies the common-law effect of the seal, making it prima facie evidence of a consideration. Section 765, B. & C. Comp., provides:

“The seal affixed to a writing is primary evidence of a consideration. In other respects there is no difference between sealed and unsealed writings, except as to the time of commencing actions or suits thereon. A writing under seal may therefore be modified or discharged by a writing not under seal or by an oral agreement otherwise valid.”

And “primary evidence” is defined by Section 686, B. & C. Comp.:

“Primary evidence, is that which suffices for me proof of a particular fact until contradicted and overcome by other evidence.”

Section 767, B. & C. Comp., relating to releases, provides:

“An agreement in writing, without a seal, for the compromise or settlement of a debt or controversy, is as obligatory as if a seal were affixed.”

The reason thát want of, or fraud in, the consideration of a specialty cannot be shown at lаw is that the seal conclusively imports a consideration. 1 Parsons, Contracts (9th ed.) *428; 4 Am. & Eng. Enc. Law (2d ed.), 664; 7 Am. & Eng. Enc. Law (2d ed.) 93; Ortman v. Dixon, 13 Cal. 33. And the effect of the seal by our statute, being only prima facie evidence of the consideration, gives to a sealed instrument no greater significance than to one ‍‌​​‌‌‌‌‌​‌‌‌‌‌‌‌‌​‌‌​‌​​‌​‌‌​​​‌‌​​‌‌‌‌​​​​​​​‌​‍unsealed which expresses the consideration on its face, and either may be attacked at law for fraud in the consideration as well as for fraud in the execution. The following additional cases are to that effect: Withers v. Greene, 9 How. (U. S. 213 (13 L. Ed. 109); Aller v. Aller, 40 N. J. Law, 446; Girard v. St. Louis, C. W. Co., 123 Mo. 358 (27 S. W. 648: 25 L. R. A. 514: 45 Am. Rep. 556; McCarty v. Beach, 10 Cal. 461; Northern K. T. Co. v. Oswald, 18 Kan. 336; Judy v. Louderman, 48 Ohio St. 562 (29 N. E. 181) ; Huston v. Williams, 3 Blackf. (Ind.) 170 (25 Am. Dec. 84). In Paddock v. Hume, 6 Or. 82, which was an action upon a bond, it is suggested that if want of consideration, or that it was obtained- by fraud, had been pleaded in the answer, it would have been a good defense; and to the same effect is Taylor v. Fleckenstein (C. C.) 30 Fed. 99, which is an action on a bond under our statute. Therefore the release in question, although under seal, may be attacked in a law action for fraud in the considеration.

10. It is further contended by the defendant that, even if the statements made by plaintiff which are alleged to have been false and fraudulent were so, yet they were only statements of opinions, and not representations of fact. The sufficiency of the allegations of the fraudulent conduct contained in the reply was not raised in the lower court, nor was the evidence objectеd to on the ground that it tended to prove statements of opinions and not facts, and seems to be raised here by the brief for the first time. The evidence offered at the trial tended directly to prove the allegations of fraud contained in the reply, and therefore the correctness of the court’s ruling in excluding the evidence depends upon whether those allegations are sufficient. They are in the following words:

“That it would be useless expense for said John H. Olston to get legal advice from any lawyer concerning the matter; that the attorney and legal adviser of the defendant company, as a person skilled in the law, had authorized tne defendant company, and its agents and officers, to tell said John H. Olston that there was no responsibility on the part of the defendant company for said accident, or death, and that it was not liable in damages in any amount because of said accident, or death of said deceased; that if said John H. Olston, or any of the heirs at law of the said deceased, brought any action at law against the Oregon Water Power & Railway Company, the company would keep such action in court for 10 years or more, and would make it cost John H. Olston or any heir or heirs of said deceased that might bring such action, all the money he or they might be worth, and would prevent him, or them, from recovering any damages whatever.”

Although the matter alleged and offered in proof as constituting the fraud is largely a matter of' opinion, yet sometimes a statement of an opinion is necessarily based upon a fact or carries with it such an infеrence of fact that it can be interpreted as a statement of fact, and where it is known to be false and made with intent to deceive, it may be actionable. It is said, in 20 Cyc. 18:

“An expression of opinion may be so blended with statements of fact as to become ^cself a statement of fact. Where one of the parties has superior knowledge on the subject, his expression of аn opinion which he knows he does not entertain because it is contrary to the facts may be actionable if made for the purpose of inducing another to act upon it, which he does to his injury.”

To the same effect is 14 Am. & Eng. Enc. Law (2d ed.), 35. In an English case (Smith v. Land & House Prop. Corp., 28 Ch. Div. 7, 15), in discussing this question, it is said: “It is material to observe that it is often fallaciously assumed that a statement of opinion cannot involve the statement of a fact. * * But if the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion.” In Stebbins v. Eddy, 4 Mason (U. S.) 414, 423, Fed. Cas. No. 13,342, the court say:

“It has been suggested at the bar that fraud cannot be predicated of belief, but only of facts; but this distinction is quite too subtle and refined. The affirmation of belief is an affirmation of a fact—that is, of the fact of belief—and if it is fraudulently made to mislead ‍‌​​‌‌‌‌‌​‌‌‌‌‌‌‌‌​‌‌​‌​​‌​‌‌​​​‌‌​​‌‌‌‌​​​​​​​‌​‍or cheat another, to abuse his confidence, or to blind his judgment, it is in law and morals just as reprehensible as if any other fact were affirmed for the like purpose. The law books, not to the nature of the fact averred, but to the object and design of the affirmation.”

In People v. Peckens, 153 N. Y. 576, 591, 47 N. E. 883, 887, Mr. Justice Martin says:

“It is insisted that many of the representations to the complainant аnd her husband, which induced the making and delivery of her deed, were expressions of opinion, and although false,'and known to be so, no liability resulted. As a general rule, the mere expression of an opinion, which is understood to be only an opinion, does not render a person expressing it liable for fraud; but where the statements are as to value or quality, and are made by a person knowing them tо be untrue, with an intent to deceive and mislead the one to whom they are made, and he is thus induced to forbear making inquiries which he otherwise would, they • may amount to an affirmation of fact rendering him liable therefor. In such a case, whether a representation is an expression of an opinion or an affirmation of a fact is a question for the jury. The rule that no one is liable for an exprеssion of an opinion is applicable only when the opinion stands by itself as a distinct thing.”

11. The allegations of fraudulent representations, and of which proof was offered and excluded by the court, are to the effect, among other things, that the defendant’s attorney, having full knowledge of the circumstances and cause of the accident, says that the company is not liable in damages fоr the death of the decedent, and that plaintiff need not go to the expense of looking up the facts or to seek advice, but urges the defendant to act upon these opinions, and this at least may be interpreted as a representation of fact, and the evidence should have been submitted to the jury upon these questions. Therefore the court erred in excluding the evidence offered by plaintiff to show fraud in the consideration for the release, and, as this necessitates the reversal of the judgment, it is unnecessary to consider the other assignments of error.

[97 Pac. 538.]

The judgment is reversed, and cause remanded.

Reversed.

---

Rehearing

Decided October 6, 1908.

On Petition for Rehearing.

Mr. Justice Eakin

delivered the opinion of the court.

12. The motion for rehearing is based largely upon the idea that the opinion in effect holds, that equitable defenses may be pleaded at law; but such is not the intent of the opinion. Counsel for defendant have attributed that effect to it upon their conclusion that the fraud relied on is “equitable fraud,” probably meaning fraud over which equity has exclusive jurisdiction. The opinion is to the effect that, even if this is an instrument under seal, yet by operation of our statute, it is deprived of the solemnity formerly ascribed to it by reason of the seal. Now the seal is primary evidence of a consideration, which means that the presumption thus arising may be overcome by evidence to the contrary, and is therefore subject to defenses at law, the same as a simple contract in which the consideration is expressed. If a simple contract is induced by fraud, the defrauded party may rescind it without the aid of equity, and may plead the fraud in defense of an action to enforce it or to recover damage for its breach. 24 Am. & Eng. Enc. Law (2d ed.), 343; 14 Am. & Eng. Enc. Law (2d ed.), 158; 9 Cyc. 433; Brown v. Freeman & Bynum, 79 Ala. 406; Strayhorn v. Giles, 22 Ark. 517; Milliken v. Thorndike, 103 Mass. 382; Irving v. Thomas, 18 Me. 418.

13. And our statute having reduced sealed instruments to the footing of simple contracts that express consideration, fraud in the consideration is recognized at law and is not exclusively an equitable defense. The only authority cited by defendant in the motion that seems to conflict with this view is Vandervelden v. Chicago & N. W. Ry. Co. (C. C.) 61 Fed. 54. This case recognizes the force of the Iowa statute abolishing the effect of the seal, but ignores that fact and hold that, because the instrument is sealed, the defense of fraud is cognizable only in equity. But in Williams v V. Haines, 27 Iowa, 251 (1 Am. Rep. 268), it is held that, by reason of the statute having abolished the distinction between sealed and unsealed instruments, defenses to sealed instruments going to the consideration may be pleaded at law.

Counsel seek to make a distinction between the effect of the Alabama statute, as construed in Withers v. Greene, 9 How. 213 (13 L. Ed. 109), and our own; but that statute only admits defenses to sealed instruments “as if the said writing had not been sealed.” Referring to that statute, Justice Daniel says: “By the enactment herein first cited it is obvious that specialties are divested of any force or solemnity at any time ascribed to them by reason of their having a seal annexed, and are placed with respect to all inquiries which may be instituted into the validity of their consideration precisely upon the footing of parol agreements.”

The same is true of the New Jersey statute (Rev. St. 1874, p. 380, § 16), which reads:

“In any action upon an instrument in writing, under seal, the defendant in such action may plead and set up as a defense therein, fraud in the consideration of the contract upon which recovery is sought, as fully and to all intents and purposes as if such instrument wеre not under seal” (see Aller v. Aller, 40 N. J. Law, 446).

Thus permitting such defenses of fraud, and only such, as are permissible to unsealed instruments, ‍‌​​‌‌‌‌‌​‌‌‌‌‌‌‌‌​‌‌​‌​​‌​‌‌​​​‌‌​​‌‌‌‌​​​​​​​‌​‍and placing sealed instruments on the footing of simple contracts in that particular.

14. By our statute, quoted in the opinion, the effect of the seal is eliminated, except as to the time of commencing actions or suits thereon, and that it shall be primary evidence of a consideration and is as comprehensive as that of either Alabama, New Jersey, or Iowa. Therefore we hold that the defense pleaded is not an equitable defense, but a legal one. This in no manner conflicts with, the decision in Fire Association v. Allesina, 45 Or. 154 (77 Pac. 123), or Cohn v. Wemme, 47 Or. 146 (81 Pac. 98) ; both of which cases relate to awards. The rule is that an award is a final judgment, both at law and in equity. It is said that an award is entitled to that respect which is due to the judgment of a court of last resort (2 Am. & Eng. Enc. Law (2d ed.), 794; 3 Cyc. 728), and therefore cannot be classed with contracts, sealed or unsealed.

The motion is denied.

Reversed: Rehearing Denied.

Case Details

Case Name: Olston v. Oregon Water Power & Ry. Co.

Court Name: Oregon Supreme Court

Date Published: Aug 11, 1908

Citation: 96 P. 1095

Court Abbreviation: Or.