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Hagen v. Gallerano

Decided: March 16, 1961.


Price, Gaulkin and Foley. The opinion of the court was delivered by Gaulkin, J.A.D.


[66 NJSuper Page 320] This case is before us for the second time. Following our previous opinion, dated December 26,

1958, the pleadings were completed and the cases were consolidated and pretried. We shall attempt to bring the issues into focus as briefly as possible.

On December 8, 1956 plaintiff was severely injured while crossing a street in Newark. He claims his injuries were the result of being struck by two automobiles, one owned by George W. Hauk and driven by Janet L. Hauk, and the other owned and driven by William Wenger. On November 21, 1957 he commenced a negligence suit against all these parties. The Hauks were insured by Maryland Casualty Company (Maryland), which filed an answer on their behalf denying liability and pleading a release or covenant not to sue, executed by plaintiff for $1. Since even defendants were not sure whether to characterize it as a release or a covenant not to sue, we shall call it the "paper." This paper is a printed form, originally captioned "Release." The changes in the form, and the portions we have underlined, were written by Gallerano. It reads as follows:


IN CONSIDERATION of the payment of One dollar and no cents ($1.00) Dollars to Al Hagen, 1 Pioneer St., Newark, N.J. in hand paid by Janet L. Hauk and George W. Hauk 5 Venetia, Ave, Cranford, N.J. (hereinafter called Payer(s)) I/We do hereby covenant to forever discharge only said Payer(s) mentioned above from any consequences of the accident hereinafter described all claims arising out of an accident occurring on or about 12/8/56, at Elizabeth Avenue, Newark, N.J. wherein the said Al Hagen sustained injuries both internal and external and lost [sic] by reason of medical expenses.

IT IS UNDERSTOOD AND AGREED that the payment of said amount by the said Payer(s) is not to be construed as an admission of liability on the part of said Payer(s), but that said payment is in compromise and settlement of my (our) claim which is not admitted but is denied and disputed by said Payer(s); that this release is being given by me (us) voluntarily and not based on any representations or statements of any kind made by the Payer(s) or his, or her, or their representative, as to the merits, legal liability, or value of my (our) claim or any other matter relating thereto.

IT IS FURTHER UNDERSTOOD AND AGREED, that this release is intended to cover all actions, causes of action, claims and demands for, upon or by reason of any damage, loss or injury which may be traced either directly or indirectly to the aforesaid Payers as now appearing or as may appear at any time in the future, no matter how remotely they may be related to the aforesaid accident. And this Covenant is executed with the full knowledge and understanding on my or our part that there may be more serious consequences, damages or injuries as the result of the accident aforementioned than now appear, and that more serious and permanent injuries, even to the extent of death, may result from the injuries sustained in accident aforementioned.

IN WITNESS WHEREOF I have hereunto set my hand(s) and seal(s) this day of March 14, 1957.

SIGNED, SEALED AND READ IN THE PRESENCE OF Witness /s/ Pascal Gallerano x /s/ Albert Hagen (SEAL)"

It is admitted that Gallerano was employed by Maryland, and that he procured plaintiff's signature on the paper while Hagen was in the Newark Convalescent Hospital (Martland Medical Center) where he paid him the $1 by Maryland's draft, which Gallerano made out and signed.

Hagen filed a reply to the answer in the negligence suit, in which he alleged that his signature to the paper was procured by the fraud of Gallerano. Shortly thereafter he instituted a suit against Gallerano and Maryland for $200,000 compensatory and $5,000,000 punitive damages, for their fraud in obtaining and using the paper, making the same allegations of fraud as he made in the said reply. The pretrial order abstracts those allegations as follows:

"Plaintiff contends that * * * Gallerano * * * falsely represented to plaintiff that Gallerano was a lawyer for plaintiff; that he would see that he got a lot of money; that plaintiff had nothing to worry about since he, Gallerano, would take care of the case, investigate it; that he would see the witness, secure statements, and see the case through to its conclusion * * * Gallerano represented * * * that the instrument plaintiff was signing was merely a requisition to the hospital for cigarettes or an authorization so that plaintiff could get cigarettes."

Plaintiff states that his fraud action is based upon Automobile Underwriters, Inc. v. Smith , 166 N.E. 2 d 341 (Ind. App. Div. 1960), rehearing denied 167 N.E. 2 d 882 (Ind. App. Div. 1960); Ware v. State Farm Mutual Automobile Insurance Co. , 181 Kan. 291, 311 P. 2 d 316 (Sup. Ct. 1957); Inman v. Merchants Mutual Casualty Co. , 190 Misc. 720, 74 N.Y.S. 2 d 87 (Sup. Ct. 1947), affirmed 274 App. Div. 320, 83 N.Y.S. 2 d 801 (App. Div. 1948); Kordis v. Auto Owners Ins. Co. , 311 Mich. 247, 18 N.W. 2 d 811 (Sup. Ct. 1945). But see the numerous and conflicting authorities as to the measure and proof of damages, and even the elements of the cause of action, cited in Shallenberger v. Motorists Mutual Ins. Co. , 167 Ohio St. 494, 150 N.E. 2 d 295 (Sup. Ct. 1958) and in the annotation in 58 A.L.R. 2 d 500 (1958).

For reasons best known to counsel and seemingly immaterial now, the negligence action above mentioned was dismissed without prejudice by stipulation of all of the parties. However, on December 5, 1958, just before the statute of limitations would have run, plaintiff instituted a new negligence action identical with the one discontinued, and defendants filed substantially the same answers, including the defense of the paper, and plaintiff filed substantially the same reply. The last mentioned negligence action is the one that was consolidated with the fraud case, and both are now before us.

In the pretrial order Maryland and Gallerano admitted the paper was obtained for $1, but denied all of plaintiff's other allegations. In addition, Maryland said that whatever "fraud or deceit was practiced by defendant Gallerano it was ultra vires his employment, beyond scope of his employment, without consent, authority or approval of defendant Maryland and was not done or practiced as its agent or in the performance of his duties for defendant Maryland."

The trial court ordered that "the common issue of legal fraud is to be tried first with a jury. The fraud issue is

to be so framed as to determine the issue of agency as between the defendant Gallerano, and the defendant, Maryland Casualty Company." Pursuant to the pretrial order the issues whether the paper had been procured by Gallerano by fraud, and whether Maryland had ratified and adopted that fraud so as to make it equally responsible with Gallerano, were tried before a jury. The jury returned a verdict in favor of plaintiff on both issues and, pursuant to leave granted, defendants now appeal from that verdict.

The first ground of appeal is that defendant's motions for dismissal, and for judgment non obstante or for a new trial, should have been granted. This argument is based chiefly upon the proposition that the evidence was not sufficient to prove fraud. On the contrary, we find it difficult to conceive how the jury could have come to any other conclusion. As the court said in Atchison, T. & S.F. Ry. Co. v. Cunningham , 59 Kan. 722, 727, 54 P. 1055, 1057 (Sup. Ct. 1898) in referring to a similar situation:

"Where such unseemly haste is made in obtaining settlements with parties who have sustained such serious injuries, and where the amount paid is so trifling, and utterly disproportionate to any just compensation, it seems like wasting time to nicely discuss questions of evidence bearing on the plaintiff's capacity to transact business. Taking the testimony offered by the defendant in its most favorable aspect, the settlement was made at such a time, under such conditions, and on such terms as to condemn it as a fraud and imposition."

However, we shall review the evidence.

Hagen was a widower, about 60 years old, with a sixth grade education, earning $40 to $50 per week as an automobile body painter. Gallerano was a law school graduate, although not a lawyer, and had been employed by Maryland as an adjuster for over seven years.

On January 14, 1957 Gallerano came, uninvited, to see Hagen in the hospital. Hagen was not represented by counsel. Hagen was in a cast and in pain. He testified that Gallerano said he "was my lawyer. He said he was

going to get me a lot of money," and left his card. Gallerano admitted that he told Hagen that he was going to make a further investigation of the case and would notify Hagen of the results.

Gallerano learned, during the January 14 interview, that Hagen knew little, if anything, of how the accident happened. In the very statement which Gallerano had Hagen sign that day Hagen said he saw a car approaching, the color and make of which he did not know, "and before I knew what happen [ sic ] I was struck by it, it happen [ sic ] so fast I don't remember what part of his car hit and I do not remember being thrown against any other passing car." He awoke in the hospital in pain, with a broken leg and other injuries. He did not know who owned or drove either car. We note that Wenger's answer in the negligence action alleges, as a separate defense, that "The accident, if any, in which the plaintiff was involved occurred prior to the time that defendant, William Wenger, arrived at the scene and defendant, William Wenger, denies that there was any contact between his automobile and the plaintiff at any time."

On or about February 18, not having heard from Gallerano, Hagen wrote him a letter saying that he had been moved to the Convalescent Hospital and:

"I would like to hear from you I would like to how things ...

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