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Docket Number

42995.

Attorney(S)

Conyers, Fendig, Dickey Harris, Albert Fendig, Jr., for appellant. Leon A. Wilson, II, Benjamin Smith, Jr., for appellee.

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Smart Summary

Cotton States Mutual Insurance Company v. Booth (Court of Appeals of Georgia, Sept. 29, 1967)

Factual and Procedural Background

Cotton States Mutual Insurance Company ("plaintiff") sued H. A. Booth, Jr. ("defendant") in Ware Superior Court seeking recovery of $1,815 under a loan receipt. The plaintiff had issued a family combination automobile policy insuring the defendant's 1961 Dodge with $50 deductible collision coverage. On July 19, 1962, the defendant submitted a sworn proof of loss for $1,865 less the $50 deductible arising from a collision on June 4, 1962. The plaintiff advanced the defendant $1,815 and took a loan receipt.

The loan receipt stated the amount was repayable only to the extent of any net recovery made by the defendant and provided that the defendant agreed to prosecute a suit for the loss "with all due diligence, at the expense and under the exclusive direction and control of said insurance company." The defendant subsequently sued the alleged tortfeasor and settled that suit without repaying the loan.

In his answer the defendant admitted executing the proof of loss but alleged it had been prepared by the plaintiff's agent, that he relied on that agent's representations and did not read or know the documents' contents, and that the agent represented the matter was "fully and finally settled" between them and that the plaintiff would recover the loss through its own efforts — assertions on which the defendant relied and which, he claimed, estopped the plaintiff from asserting the loan receipt.

The plaintiff moved for summary judgment, asserting no material issue of fact because the defendant's settlement released adverse parties and deprived the plaintiff of its subrogation rights; the motion relied on the petition exhibits (the sworn proof of loss and loan receipt), the insurance policy, and the defendant's deposition. The trial court denied the plaintiff's motion for summary judgment, and the plaintiff appealed to the Court of Appeals of Georgia.

Legal Issues Presented

Whether oral representations by the plaintiff's agents prior to or contemporaneous with execution of the written instruments merged into the written agreement and therefore cannot be used to contradict or vary the explicit provisions of that instrument.
Whether alleged misrepresentations by the plaintiff's agents about the legal effect of the documents can constitute actionable fraud, or a waiver or estoppel, sufficient to defeat enforcement of the loan receipt.
Whether, as argued by the plaintiff, the defendant's settlement of the underlying litigation released adverse parties and thereby deprived the plaintiff of its subrogation rights (as a basis for summary judgment).

Arguments of the Parties

Appellant (Plaintiff) — Cotton States Mutual Insurance Company

Moved for summary judgment on the ground there was no material issue of fact because the defendant's settlement released the adverse parties and deprived the plaintiff of its subrogation rights.
Relied on documentary evidence attached to the petition (the sworn proof of loss and loan receipt), the insurance policy, and the defendant's deposition in support of the motion.

Appellee (Defendant) — H. A. Booth, Jr.

Admitted executing the proof of loss but alleged it was prepared by the plaintiff's agent and that he did not read or know its contents because he relied on the agent's representations.
Asserted the agent represented the matter was "fully and finally settled" between them, that the plaintiff would recover the loss through its own efforts, and that the defendant therefore had no further responsibility; he claimed these statements estopped the plaintiff from asserting the loan receipt.
Deposed that the agent told him he would not need an attorney, that the release was simply to give the company "full authority" over the car so they could attempt to recover their money, and, relying on these oral assurances and the agent's relationship of friendship/trust, he signed the documents without reading them.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Levy v. Miles F. Bixler Co., 20 Ga. App. 766, 93 S.E. 233	One who signs an instrument written by the opposite party without reading it, when capable of doing so, cannot later assert fraud in procurement absent trick or emergency.	Used to support the principle that the defendant cannot avoid the written instrument merely because he did not read it and relied on the other party's preparation of the document.
Swofford v. First Nat. B. L. Assn., 184 Ga. 312, 191 S.E. 103	Similar rule concerning inability to avoid instruments signed without reading when no trick, artifice, or emergency.	Reinforced the rule against setting aside a signed instrument on such grounds.
Martin v. Alford, 214 Ga. 4, 102 S.E.2d 598	Same principle cited in context of signatures and fraud in procurement.	Supported the court's reliance on established law precluding avoidance of a contract for failure to read absent special circumstances.
Logan v. Bond, 13 Ga. 192	All oral negotiations preceding or accompanying the execution of a written contract merge into and are extinguished by the written instrument (parol evidence/merger rule).	Applied to hold that prior or contemporaneous oral representations cannot be used to vary the explicit written terms of the loan receipt.
Parcel Delivery Co. v. American Oil Pump Co., 25 Ga. App. 659, 104 S.E. 27	In absence of fraud, accident, or mistake, parol evidence of prior or contemporaneous statements is inadmissible to add to or vary a written instrument.	Supported exclusion of the defendant's alleged oral representations as a means to alter the written loan receipt absent actionable fraud.
Thomas v. Byrd, 107 Ga. App. 234, 129 S.E.2d 566	Fraud cannot be predicated on misrepresentations of law; such statements are generally opinions and not actionable, especially absent a confidential relationship.	Quoted to reject the defendant's contention that the agent's statements about the legal effect of the documents constituted actionable fraud.
Fields v. Fire Cas. Ins. Co. of Conn., 101 Ga. App. 561, 114 S.E.2d 540	Authority for the proposition that misrepresentations as to matters of law are ordinarily expressions of opinion and not actionable fraud.	Used to reinforce the conclusion that agent statements about legal consequences did not create a fraud-based defense.
Bryant v. Motors Ins. Corp., 109 Ga. App. 47, 134 S.E.2d 905	Similar authority addressing misrepresentations of law and their insufficiency as actionable fraud.	Further supported the court's determination that the defendant's allegations did not show actionable fraud, waiver, or estoppel.

Court's Reasoning and Analysis

The court framed the dispositive question as whether the defendant's deposition and answer — alleging oral statements by plaintiff's agents inducing his signature and disclaiming further responsibility — raised a triable issue of fact or instead failed as a matter of law.

The court analyzed the evidence and law in the following steps:

It recited the well-established rule that a person who signs an instrument prepared by an interested opposing party, without reading it and when capable of reading, cannot later assert fraud in the procurement of the signature unless trick or artifice was used or there was an emergency requiring haste. The court cited Levy, Swofford, and Martin in support of this proposition.
It applied the parol-evidence/merger rule (Logan v. Bond; Parcel Delivery Co.) that oral negotiations preceding or accompanying a written contract merge into and are extinguished by the instrument; absent fraud, accident, or mistake, prior or contemporaneous oral statements cannot be used to add to or vary a written instrument.
The defendant's attempted avoidance of these rules hinged on characterization of the agents' statements as a waiver of subrogation (or conduct giving rise to estoppel). The court examined that contention and concluded the defendant's theory rested solely on alleged fraudulent misrepresentations as to the terms or legal effect of the contract.
The court then addressed the legal sufficiency of those alleged misrepresentations. It held that the statements attributed to the plaintiff's agents were statements as to the legal effect of the documents — expressions of opinion about legal consequences — and observed the general rule that fraud cannot be predicated upon misrepresentations of law. The court cited Thomas v. Byrd, Fields, and Bryant to emphasize that misstatements of law are ordinarily opinions and not actionable as fraud, especially in the absence of a confidential relationship.
Because the defendant offered no evidence of trick, artifice, emergency, or a confidential relationship sufficient to transform the agent's legal opinion into actionable fraud, the court concluded there was no showing of actionable fraud that would permit admission of the oral statements to vary the written instruments.

Based on these legal principles and the evidence in the record (the deposition and the written instruments), the court determined the defendant's asserted defense — waiver/estoppel founded on the agent's statements — was legally insufficient to defeat the plaintiff's contractual rights under the loan receipt.

Holding and Implications

Judgment reversed.

Implications and direct effect:

The Court of Appeals reversed the trial court's denial of the plaintiff's motion for summary judgment (the opinion states simply "Judgment reversed").
The court held that oral representations concerning the legal effect of a written agreement merge into and are extinguished by the written instrument and cannot be used to contradict its explicit provisions absent actionable fraud, accident, or mistake.
The court further held that misrepresentations of law or statements about the legal effect of documents are ordinarily expressions of opinion and cannot alone constitute actionable fraud or give rise to waiver or estoppel, particularly where no confidential relationship, trick, or emergency is shown.
No broader new legal rule was announced beyond application of the established principles (merger/parol-evidence rule and the rule that misrepresentations of law are ordinarily not actionable as fraud); the opinion addresses the direct effect on the parties' rights under the loan receipt and the sufficiency of the defendant's defense as presented in the record.

Judge Quillian delivered the opinion of the court. Jordan, P. J., and Deen, J., concurred.

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COTTON STATES MUTUAL INSURANCE COMPANY v. BOOTH.

Representations as to the legal effect of a written agreement made to the defendant by the plaintiff's agents prior to the execution of the written agreement between the parties merged into and were extinguished by that instrument and can not be used to contradict its explicit provisions.

ARGUED SEPTEMBER 11, 1967 — DECIDED SEPTEMBER 29, 1967.

Cotton States Mutual Insurance Company filed an action against H. A. Booth, Jr., in Ware Superior Court seeking recovery of $1,815 under a loan receipt. The petition alleges that the plaintiff issued to the defendant a family combination automobile policy which insured the defendant's 1961 Dodge and included $50 deductible collision coverage. On July 19, 1962, the defendant submitted to the plaintiff a sworn statement in proof of loss in the amount of $1,865, less $50 deductible, for damage to his vehicle as a result of a collision which occurred on June 4, 1962. The plaintiff loaned the defendant $1,815 and received a loan receipt from him. Thereafter, the defendant filed suit against the alleged tortfeasor for damages arising out of the collision and ultimately settled the suit without repayment of the loan to the defendant.

The loan receipt provided that the amount stated was repayable only to the extent of any net recovery made by the defendant and further provided that the defendant agreed to prosecute a suit for the loss, "with all due diligence, at the expense and under the exclusive direction and control of said insurance company."

The defendant's answer admitted the execution of the proof of loss but asserted that it was prepared by the plaintiff's agent in whom the defendant reposed trust and, as a result, the defendant did not read or know the contents of the same; that the defendant signed the documents relying on the representations of the plaintiff's agent that the matter was fully and finally settled between them; that the plaintiff would recover the loss through its own efforts and that the defendant had no further responsibility in that regard; that as a result of these statements and acts the plaintiff is estopped from asserting the validity of the loan receipt.

The plaintiff filed a motion for summary judgment asserting that there was no material issue of fact because by settling the litigation the defendant released all adverse parties and thereby deprived the plaintiff of its subrogation rights. Thus, the plaintiff was entitled to judgment as a matter of law. The motion was predicated on the documents attached as exhibits to the petition (sworn proof of loss and loan receipt), the insurance policy and the defendant's deposition. After hearing argument, the trial judge entered an order denying the plaintiff's motion for summary judgment and the plaintiff appealed to this court.

QUILLIAN, Judge.

The defendant's deposition, in substance, followed what was alleged in his answer. He testified that the plaintiff's agent showed him some papers to sign and then related: "I said, well, I don't sign no papers until I consult my attorney and the man says, well, Mr. Booth, you won't need any attorney for this, says, we just want to release the car over to us where we will have full authority, said, you won't need it, Mr. Booth, it is just to release it, and I said, Gordon, do you mean it will be all right. And, he said, yes, it will be all right to sign it, just everything to turn the car over full to them so they can take charge of it and do what they can and get their money. And, I says, you mean that releases responsibility of you all to me and me to you all. And, he says, yes, except for the fifty dollars." The defendant also testified: "He told me they wanted me to sign the release over the car, over to them so they could take it and go ahead and see what they could do with it about getting their money back"; relying entirely on the statements made to him by the plaintiff's agents, he executed the proof of loss and loan receipt without reading them. The defendant gave no testimony tending to show an emergency or other excuse for his failure to read other than that he and the agent had been "friends" and he relied on the agent's representations as stated and to the effect that "they" wanted the release so "they" could have "full authority" and it would be all right to sign.

The sole basis of defense now relied upon by the defendant is that by these statements of its agents the plaintiff waived the subrogation agreement and is now estopped to proceed under the loan receipt. Hence, we must determine whether, as a matter of law, these facts constitute a defense which would be for a jury's determination.

It is well settled that: "One who signs an instrument written by the opposite party at interest therein, without reading it, when he is capable of doing so, can not afterwards set up fraud in the procurement of his signature thereto, when no trick or artifice was resorted to for the purpose of inducing him to thus sign it, and it was not signed under any emergency requiring haste in its execution." Levy v. Miles F. Bixler Co., 20 Ga. App. 766 (1) ( 93 S.E. 233); Swofford v. First Nat. B. L. Assn., 184 Ga. 312, 314 ( 191 S.E. 103); Martin v. Alford, 214 Ga. 4, 7 (1) ( 102 S.E.2d 598). Moreover, "All oral negotiations between parties to a written contract, which either preceded or accompanied the execution of the instrument, are to be regarded as merged in, or extinguished by it; and the writing is to be treated as the exclusive medium of ascertaining the agreement to which the contractors bound themselves." Logan v. Bond, 13 Ga. 192 (3). In the absence of fraud, accident, or mistake, parol evidence of prior or contemporaneous conversations, representations, or statements is inadmissible to add to or vary the written instrument. Parcel Delivery Co. v. American Oil Pump c. Co., 25 Ga. App. 659 ( 104 S.E. 27).

The defendant attempts to obviate the effect of the merger rule by contending that, prior to or contemporaneously with the execution of the documents, the plaintiff's agents waived the subrogation provisions by their acts or declarations.

With this novel proposition we can not agree. Regardless of the terminology used by the defendant, his position is predicated solely on the legal theory of fraudulent misrepresentation as to the terms of the contract. The allegations of the answer and evidence adduced by deposition consist of alleged misrepresentations by the plaintiff's agents which were calculated to induce and procure the defendant's signature to the instruments in question. However, the statements made by the agents comprise and constitute merely expressions of opinion as to the legal effect of the instruments in question. "The general rule is well settled that fraud cannot be predicated upon misrepresentations of law or misrepresentations as to matters of law. Everyone is presumed to know the law and therefore can not in legal contemplation be deceived by erroneous statements of law, and such representations are ordinarily regarded as mere expressions of opinion, and this is especially so where there is no confidential relationship between the parties." Thomas v. Byrd, 107 Ga. App. 234, 236 ( 129 S.E.2d 566); Fields v. Fire Cas. Ins. Co. of Conn., 101 Ga. App. 561 ( 114 S.E.2d 540); Bryant v. Motors Ins. Corp., 109 Ga. App. 47 ( 134 S.E.2d 905).

There being no showing of actionable fraud, the statements attributed to the plaintiff's agents are insufficient to constitute a waiver or cause the plaintiff to be estopped from asserting the contractual provision here involved.

Judgment reversed. Jordan, P. J., and Deen, J., concur.

COTTON STATES MUT. INS. CO. v. BOOTH