CARRUTH v. FRITCH (1949)

District Court of Appeal, Second District, Division 1, California.

CARRUTH v. FRITCH et al.

Civ. 16978.

Decided: October 11, 1949

Edward Raiden, Los Angeles, for appellant. Eugene S. Ives, Los Angeles, for respondents.

Plaintiff appeals from a judgment of dismissal entered after a demurrer was sustained to her second amended complaint, plaintiff declining to take advantage of the privilege of further amendment.

Plaintiff alleged in her second amended complaint that on May 17, 1946, she was riding in an automobile owned by defendant Robert Fritch and then being driven by Richard Fritch with the consent of Robert Fritch; that by reason of the wilful misconduct of the defendant Richard Fritch the automobile struck a stone wall, with the result that plaintiff was severely injured. She further alleged that she incurred medical expenses in excess of $2,000 and expected to incur further expense; that she suffered damage in loss of employment of approximately $4,000; that she was hospitalized for a long period, suffered great pain and shock, and some of her injuries will be permanent; that because of her injuries she was required to undergo a hysterectomy.

The instant action was not commenced until March 10, 1948. The applicable statute of limitations is one year from the date of the injury (Code Civ.Proc., sec. 340). In avoidance of the apparent bar of the statute, plaintiff pleaded the following facts:

‘That at the aforementioned time and place said Connecticut Indemnity Company had a contract * * * whereby (it) insured said other defendants (Richard and Robert Fritch) against suit, liability and loss resulting from the negligent operation of the automobile, * * * That in the Month of September, 1946 and prior thereto, the defendant Connecticut Indemnity Company by its agents, servants and employees, contacted the plaintiff herein with a view to adjusting and settling plaintiff's claim * * *.

‘That in the month of September, 1946, the defendant Robert Fritch, acting for himself, for Richard Fritch, and for the Connecticut Indemnity Company, with intent to deceive the plaintiff and to induce her to sign a release of settlement of her claim against these defendants, stated to the plaintiff that the defendant Connecticut Indemnity Company would pay her the sum of $2,000.00 on account of her medical expenses and he further stated that the defendants Robert Fritch and Richard Fritch would see that the plaintiff received of the defendant Connecticut Indemnity Company and of the defendants Robert Fritch and Richard Fritch all further and additional medical expenses and that plaintiff would also be compensated for all loss of salary.

‘That the defendant Robert Fritch, for himself and for the other defendants, told plaintiff as a friend of long standing that she had no claim at law because she was a guest in his car and that if she proceeded to sue she would not be able to recover.

‘That the defendant Robert Fritch, for himself and for the other defendants, represented to the plaintiff herein that the payment of $2,000.00 which she was to receive was payment arising and paid under and insurance policy maintained by said Connecticut Indemnity Company for liability of defendants Robert Fritch and Richard Fritch and that under such policy the plaintiff, being a guest, had no right to recover and that plaintiff could never succeed in an action at law.

‘That plaintiff was utterly ignorant of her rights, except as she was informed, to-wit: that because she had been a guest in the car she had no claim or rights against the defendants and that she should settle under the release; that while in this frame of mind, plaintiff signed the release to the defendants and that plaintiff was misled and induced to act under a misconception of her legal rights.’

It was further alleged on information and belief that defendant insurance company ‘had knowledge of the negotiations between plaintiff and defendants.’ Further, that the negotiations took place approximately four months after the accident and while plaintiff was still stuffering from the effects thereof; that she was induced and influenced further into executing the release by the pressing expenses of medical attention. That on December 29, 1947, plaintiff through her attorney notified the individual defendants of further medical expenses and loss and demanded further payment, and on January 7, 1948, was advised for the first time that defendants did not intend to pay her further medical expenses and loss of salary.

Further quoting from the second amended complaint, it was alleged that ‘at the time the defendants paid the monies over to the plaintiff herein, they knew that the plaintiff had incurred these medical expenses and that she would have to pay the money received to doctors and hospitals to whom she had become liable * * * that plaintiff had no funds * * *, plaintiff would be unable to raise the money necessary to tender back to the said defendants and each of them the amount of money which they had advanced * * * the defendants and each of them had no intention of keeping the agreement and making the further payments for medical expense and loss of salary * * * but * * * were seeking to place the plaintiff in such a position that she could not tender to them the money advanced in the course of their fraud, and relied upon such facts and their fraud to prevent plaintiff from rescinding because of her inability to repay the amount advanced by the defendants and used by plaintiff to pay some of her medical expenses.’

It was further charged that the defendants had no intention of keeping their agreement; that the representations were falsely and knowingly made, and induced plaintiff to execute the release.

It was then alleged: ‘That the plaintiff seeks in this cause of action to set aside the release secured from her by the fraud of the defendants and under all of the aforementioned conditions and circumstances and names the defendant Connecticut Indemnity Company as a defendant because said defendant paid out the money received by plaintiff and holds the releases signed by the plaintiff; and plaintiff seeks no money judgment against any of the defendants in this cause of action; and plaintiff names the defendant Connecticut Indemnity Company in this cause of action as said defendant may be liable ultimately under the policies issued by it to the other defendants.’

For a second cause of action plaintiff realleged all the allegations of her first cause of action except the last paragraph hereinabove quoted. The prayer asked that the release be set aside, and that plaintiff have judgment against Robert and Richard Fritch for her general and special damages, arising from the tort complained of.

The defendants' demurrer was based solely on the ground that neither cause of action stated facts sufficient to constitute a cause of action. The points and authorities in support of the demurrer related only to the failure of the complaint to allege a restoration of the amount received under the release (Civ.Code, sec. 1691), and the further point that ‘the measure of damages would be the further and additional medical expenses and loss of salary, if any, which were allegedly promised and not the general and other special damages pleaded.’

The trial court, in a memorandum of ruling, stated, in part:

‘The question before the court presently rests on a further question,—what is the gravamen of this action, the plaintiff's personal injuries or the fraud of the defendants? If the former, the one year statute applies (C.C.P. sec. 340). If the latter, then the three year statute applies (C.C.P. sec. 338, subd. 4).

‘A reading of the complaint indicates clearly that plaintiff seeks to recover for personal injuries. * * * (Discussion of authorities relied on by plaintiff.) * * *.’

The court concluded that plaintiff might be able to state a cause of action based upon fraud ‘where fraud is the gravamen of her action but that is not her pleading in the present case.’

Respondents' position, as well as that of the trial court, seems to be that appellant might bring an action based on fraud within three years after the discovery thereof (Code Civ.Proc., sec. 338, subd. 4), but that she cannot bring an action to set aside the release allegedly obtained by fraud and at the same time seek a recovery of damages sustained by her through the alleged negligence of respondent Richard Fritch unless her injuries were sustained within one year prior to the commencement of the action (Code Civ.Proc., sec. 340). Respondents concede that the cases hold that when an action for personal injuries is commenced within one year and plaintiff is met with a release pleaded as a defense, it is proper to proceed to trial and inquire into the claimed fraudulent representations allegedly made by the procurer of the release, and if fraud is proven plaintiff may recover for the personal injuries notwithstanding the release. O'Meara v. Haiden 204 Cal. 354, 268 P. 334, 60 A.L.R. 1381; Jordan v. Guerra, 23 Cal.2d 469, 144 P.2d 349. But, urge respondents, if a plaintiff institutes an action for personal injuries more than one year after the commission of the alleged tort, and to meet the objection of a demurrer based upon the statute of limitations pleads the release and asserts that it was procured by fraud which caused him to refrain from commencing the personal injury action for more than a year after the tort was committed, such plaintiff is not entitled to be heard. We are satisfied that this is not the law. If it were, then the age-old rule that in certain cases of fraud the statute of limitations is tolled would be completely emasculated and set aside. It is settled law in this state that if fraud enters into a cause of action, the provisions of subdivision 4 of section 338 of the Code of Civil Procedure will apply, and the cause of action will not be deemed to have accrued until the facts are discovered, regardless of the form or character of the action. Of what avail would it be to appellant herein to have the release set aside after discovery of the alleged fraud if the statute of limitations were not tolled on the original tort cause of action? If through fraudulent representations appellant was induced to refrain from taking such action as was then within her power, it must be held that until discovery of such fraud, the applicable statute of limitations was suspended. Otherwise, a defendant, by concealing his fraud, would be able successfully to block recovery by the plaintiff because of the intervention of the statute of limitations. Pashley v. Pacific Electric Co., 25 Cal.2d 226, 231, 232, 153 P.2d 325. In the instant case the second amended complaint alleged that the fraud was discovered in January, 1948. Appellant instituted the present action on March 10, 1948, well within the time limited.

We are further convinced that the facts alleged in appellant's second amended complaint clearly establish that respondents should be estopped to complain that the complaint was not filed within the one-year statutory period. It is unnecessary to here repeat the allegations contained in appellant's second amended complaint. Suffice it to say that the advice given her by respondents and the representations made to her had the effect of lulling her into a sense of security and persuading her not to avail herself of legal assistance in the protection and assertion of her rights. According to the allegations of her second amended complaint, appellant believed and relied upon the statements, representations and conduct of respondents, and as a result did not commence proceedings within the statutory time of one year. The rule is well established that when by his act or promise one person causes another, in reliance thereon, to do or forbear from doing a thing, to his detriment, which he would have otherwise performed, the person making the promise is estopped from taking advantage of the act or omission of the promisee. Calistoga Nat. Bank v. Calistoga Vineyard Co., 7 Cal.App.2d 65, 72, 46 P.2d 246; 37 C.J., pp. 725, 726; 53 C.J.S., Limitations of Actions, § 25.

It is fundamental that equity will assert itself in those situations where right and justice would be defeated but for its intervention. As was so pertinently said in Humboldt Sav. Bank v. McCleverty, 161 Cal. 285, 292, 119 P. 82, 85, citing Story's Eq.Jur., secs. 28, 439; 1 Pom.Eq.Jur., sec. 60: ‘It has always been the pride of courts of equity that they will so mould and adjust their decrees as to award substantial justice according to the requirements of the varying complications that may be presented to them for adjudication.’ We are persuaded that the facts alleged in the case at bar are such as to entitle appellant to a trial on the fraud alleged, to the end that the trier of facts may determine whether the release should be set aside as having been fraudulently procured, and that should there be an affirmative finding on that issue, appellant is entitled to a trial on the merits of her original tort action against respondents.

Respondents' contention that because there was no concealment of the facts on which the cause of action for personal injuries was based, the statute of limitations was not tolled, is without merit. Appellant alleged in her second amended complaint that respondents falsely represented to her that she had no cause of action, but in consideration of her signing a release they would pay her the sum of $2,000 on account of her medical expenses and ‘her further and additional medical expenses, and that plaintiff would also be compensated for all loss of salary.’ It was further alleged that she believed and relied upon such representations and promises, but that when on January 7, 1948, demand was made for such additional payments, she ‘was advised as aforesaid that defendants did not intend to pay her further medical expenses and loss of salary.’ Under section 1572 of the Civil Code, actual fraud may consist of ‘a promise made without any intention of performing it’ (subd. 4) or ‘any other act fitted to deceive’ (subd. 5). Section 1574 of the Civil Code provides that ‘actual fraud is always a question of fact.’ If the foregoing allegations be true, then manifestly appellant was thereby induced to refrain from utilizing such means or taking such action as lay within her power, and by which she might have saved herself from loss. This is sufficient to toll the statute of limitations.

Finally, respondents assert that appellant's cause of action is fatally defective because of her failure to comply with subdivision 2 of section 1691 of the Civil Code, which provides that rescission, when not effected by consent, may be accomplished only when the rescinding party makes restoration to the other party of ‘everything of value which he has received from him under the contract; or must offer to restore the same * * *’.

Concededly, appellant in the case at bar has not tendered or offered to restore the $2,000 received by her under the release. With reference thereto, in her second amended complaint, appellant alleged that at the time respondents paid the $2,000 to her ‘they knew that the plaintiff had incurred these medical expenses and that she would have to pay the money received to doctors and hospitals to whom she had become liable * * * that plaintiff had no funds * * *, plaintiff would be unable to raise the money necessary to tender back to the said defendants and each of them the amount of money which they had advanced * * *.’

There are recognized exceptions to the general rule that restoration or offer to restore is a prerequisite to the commencement of an action. We are impressed that the case at bar falls within one of the exceptions to the foregoing rule, that is, ‘where it clearly appears * * * without any fault of plaintiff, there have been peculiar complications which make it impossible for plaintiff to offer full restoration, although the circumstances are such that a court of chancery may by a final decree fully adjust the equities between the parties.’ California Farm & Fruit Co. v. Schiappa-Pietra, 151 Cal. 732, 739, 91 P. 593, 595; Lawrence v. Ducommun, 14 Cal.App.2d 396, 399, 400, 58 P.2d 407.

Under the circumstances alleged in the case at bar, we are satisfied that the necessity for restoration or an offer of restoration was dispensed with, as such an offer on the part of plaintiff would manifestly be a vain thing, impossible of fulfillment, for the reasons hereinbefore set forth in the quoted allegations of her second amended complaint, and the respective rights of the parties can be fully protected by the decree or judgment of the court.

Appellant herein had the choice of either suing to recover what she charged respondents promised as consideration for the release or of rescinding and suing on the original tort. She has chosen the latter alternative. Should the trier of facts determine that the release should be set aside for the reasons advanced in appellant's second amended complaint, and should she not prevail on the merits of the original alleged tort, respondents would be entitled to recover what they paid her. On the other hand, should appellant prevail on the merits of the original alleged tort, a credit on the verdict for the amount paid by respondents under the release could be made, and thereby the rights of the latter would be protected. O'Meara v. Haiden, supra, 204 Cal. at page 364, 268 P. 334, 60 A.L.R. 1381.

For the reasons herein stated, the judgment is reversed and the cause remanded with directions to the court below to overrule defendants' demurrer to plaintiff's second amended complaint and to allow defendants a reasonable time within which to answer said second amended complaint if they be so advised.

WHITE, Presiding Justice.

DORAN and DRAPEAU, JJ., concur.