Casualty Reciprocal Exchange v. Bryan

LESLIE, Chief Justice. This- is a suit by H. N. Bryan, appellee, to set aside a written compromise agreement in a compensation case in which the Casualty Reciprocal Exchange was defendant below and is the appellant here. After the written release was executed and delivered and the consideration therefor received by the appeljee, H. N. Bryan, he filed, on May 28, 1935, in the district court of Jones county, his original petition for the dual purpose of setting aside the compromise agreement and a recovery of compensation in the same -suit. This suit was filed after the appellee had applied to the Industrial Accident Board for an order setting aside the compromise agreement, and this having been refused by the board, notice of appeal was duly given and the original suit was filed as an appeal from said order of the board. However, a plea to the jurisdiction of the court to hear both causes of action in one suit was filed by the appellant and sustained by the trial court. On the 25th day of September, 1935, the appellee filed his first amended original petition in which he abandoned any suit for compensation and sought only a decree setting aside the compromise settlement agreement. To rid himself of the release the appellee appears to have proceeded thereafter upon the theory of law clearly and succinctly stated in the recent opinion in Commercial Casualty Ins. Co. v. Hilton (Tex.Com.App.) 87 S.W.(2d) 1081. Briefly, and in substance, the appellee’s allegations in his first-amended original petition are: That while employed by the Alexander Gin Company he was injured, in the course of his employment, on February 2, 1933; that the employer carried Workmen’s Compensation Insurance with the appellant; that on receipt of the injury the employer and appellant placed him in the care of a physician who treated him for his injuries; that his condition appeared to improve and after' a time he consulted said physician on the advisability of his returning to work for the employer; that about the same time he advised' with said doctor as to the propriety of settling his claim for damages with the appellant; that the doctor stated in substance that appellee’s .neck or injuries [897] were sound and well and advised him to settle his claim. That no other doctor treated him; that he had long known said doctor and relied upon his representations and statements as to the extent of his recovery. That relying upon the doctor’s representations, he settled his claim with the appellant for “a sum” ($350) or “an amount much less than the amount” to which he would have been entitled, or which he would have recovered if the fraudulent statements had not been made to him by said doctor, and he had not been induced thereby to execute and deliver the compromise settlement agreement; that his injuries were not well or healed when said representations were made and that the doctor and appellant knew, or could have known, his true physical condition at the time of such statements and settlement; that these representations were material, false, and relied upon by him and by reason thereof he was overreached by the appellant “through its agents, employees and physicians and especially its doctor whom it had employed to treat plaintiff.” The appellee- further alleges that his injuries in fact resulted in his present total and permanent incapacity to labor, entitling him to weekly compensation at $20 per week for 401 weeks, etc. The appellant, defendant below, answered by general demurrer, special exceptions and general denial. All exceptions were overruled, as shown by the judgment. The trial was before the court and jury, and upon the jury’s answer to special issues, judgment was rendered in favor of the appellee setting aside the compromise agreement on the ground of fraud. The appellant attacks the judgment under three propositions of law. By the first proposition it is contended that the plaintiff’s petition is insufficient to state a cause of action; that “it is fundamental and necessary that the plaintiff show a right - in himself to the relief sought.” We have carefully read the petition in the light of the contention made, and have reached the conclusion that the record supports the contention, and, we, therefore, sustain the proposition. The appellee, in his petition, alleges that “the sum” or “amount” paid him in consideration of his signing and delivering the release agreement was much less than the amount he should have recovered for total and. permanent incapacity, etc., but nowhere in his pleadings does he allege that he has returned the amount so received by him, nor does he offer to return same, or otherwise proffer to do equity as a predicate for the cancellation of the compromise settlement agreement executed and delivered by him. In an equitable proceeding of this kind, it is well settled that any person demanding the rescission or cancellation of a contract to which he is a party, must restore or offer to restore to the other party whatever he may have received under the contract in the way of money, property or other consideration of benefit. The rule of law is stated thus in 9 C.J. § 169, p. 1241: “In nearly all jurisdictions a bill is demurrable in which complainant does not offer to return any consideration which it shows he has received, or otherwise place defendant in statu quo, or sufficiently excuse himself from that duty.” The state of Texas is one of such jurisdictions where the rule obtains. W. H. Stewart et al. v. H. & T. C. Ry. Co., 62 Tex. 246; DePerez v. DeEverett, 73 Tex. 431, 11 S.W. 388; Thomas v. Beaton, 25 Tex.Supp. 318; Donoho v. Hunter (Tex.Civ.App.) 242 S.W. 282, 288; Id. (Tex.Com.App.) 276 S.W. 174; McDonald v. Simons (Tex.Com.App.) 280 S.W. 571; Barton v. Farmers’ State Bank (Tex.Com.App.) 276 S.W. 177; 7 Tex.Jur. p. 985, § 62. It is the primary object in a suit for rescission or cancellation of a contract obtained by fraud to undo the original transaction and restore the former status of the parties. Hence, the complainant in a bill or petition must offer to restore to the defendant whatever property or valuable consideration he may have received under it, and the pleading without such averments is fatally bad. This is but the enforcement of the ancient rule of equity that he who seeks equity must do equity. Black on Rescission and Cancellation, vol. 2, p. 1414, § 616, et seq. The second proposition presents the contention that the misrepresentations of the doctor would not be sufficient predicate or basis for a charge of fraud if they were not “intentionally” made. The appellant’s point is that “it does not appear from either the pleadings or the evidence that the physician treating * * * employee made any intentional misrepresenta [898] tions as to his condition. * ⅜ *” That the doctor “was sincere in his statement” to the injured employee. We overrule this proposition. The law in such cases is stated in 36 Tex.Jur. p. 809, § 13, in the following language: “An innocent misrepresentation of a material fact, made by the releasee or his agent for the purpose of inducing a settlement, will justify the avoidance of a release induced thereby. The fact that the statement made was not intentionally false does not affect the right of the releasor to have the contract set aside if he was misled by the statement. ‘In such a case, innocent misrepresentations may as well be the basis of relief as where such statements are intentionally false.’ “A release of a claim for personal injuries may be avoided for innocent misrepresentations by the releasee’s physician as to the nature or extent of the injuries, provided that such statements were in fact false and not merely expressions of opinion, and were made for the purpose of inducing a settlement. The fact that such a representation was made in good faith, or that the claim agent, who knew of the misrepresentation, acted in good faith, is immaterial in so far as the right of the re-leasor to avoid the settlement is concerned.” See Cowan v. El Paso Elec. Ry. Co. (Tex.Com.App.) 271 S.W. 79, and numerous authorities cited by the text. Particularly is the above rule of law applicable to the instant case in that the jury’s verdict herein finds that the doctor made the alleged fraudulent statements ; that at the time he knew the plaintiff was contemplating a settlement; that the advice was false, believed, and acted upon by the appellee, and that the “representative of the defendant” who made the compromise settlement knew at the time of making the same that the doctor had made such statements and that the “appellee believed and relied on the same” in making the settlement. Regardless of what this court might think about these fact issues, the jury has taken the testimony and made definite findings which this court is without authority to disregard. By the third proposition the contention is made that the court erred in not giving the appellant’s specially requested charge No. 1 limiting certain testimony admitted on the trial. The testimony related to the appellee’s physical condition (claimed to be due to the accidental injury) “at time of the trial” and the point is made that it should have been limited “to its effect as tending to show what may have been the true facts and the belief of the. parties at the time the compromise was made.” We think the testimony was admissible on the issues generally. It had a bearing upon the question of fraud in that it tended to reflect either the truthfulness or the falsity of the doctor’s statement- that the plaintiff was well and had made a complete recovery except for needed exercise of'the injured parts. The doctor’s statement or representations were made concerning matters not equally open to both parties and were made in view of a pending settlement, as found by the jury. The testimony was admissible to show the injury suffered by appellee in consequence of the fraud. The trial court did not err in refusing the special charge. Since we have sustained the first proposition challenging the sufficiency of the plaintiff’s petition, and since the error dealt with is also fundamental in its nature, it becomes necessary to reverse the judgment of the trial court and remand the cause. It is so ordered.