The opinion of the court was delivered by: SIRICA
Pursuant to Rule 42, Fed.R.Civ.P., a separate trial was had on the issue of the validity of the release, which resulted in a jury verdict for the plaintiffs setting aside the release. As grounds for setting this verdict aside, the defendant urges that the evidence did not establish the elements of fraud; that it was insufficient to meet the plaintiffs' burden of proof; and that the plaintiffs failed to act with reasonable promptness after discovering what is alleged to have constituted fraud, and that, therefore, they must be deemed to have ratified the alleged fraud. The plaintiffs, on the other hand, assert that the defendant's motion was not timely filed; and that the evidence was sufficient to establish fraud and to meet their burden; and that there was no conduct on their part constituting ratification.
Initially, the Court is of the opinion that the plaintiffs' argument that the motion comes too late is not well taken. Assuming, without deciding, that the jury verdict setting aside the release in this case is a "judgment" under Rule 54 of the Federal Rules of Civil Procedure, Rules 50(b) and 59(b) allow ten days from the entry of judgment to file motions for judgment notwithstanding the verdict and for a new trial. Although this time may not be enlarged, Fed.R.Civ.P. 6(b), an additional day is allowed if the last day of the period falls upon a Saturday, a Sunday or a legal holiday, Fed.R.Civ.P. 6(a). In the instant case, the jury verdict was returned on November 18, 1965, and the defendant's motions were filed on November 29, 1965. However, November 28 was a Sunday and accordingly, the filing on November 29 was timely.
As to the claim of ratification, the defendant asserts that on the basis of the fact that the alleged fraud was discovered in August of 1962, and that no mention of it was made until April of 1963, when suit was filed, the plaintiffs should be precluded from raising it. Although the plaintiffs' reliance upon Dice v. Akron, Canton & Youngstown R.R., 342 U.S. 359, 72 S. Ct. 312, 96 L. Ed. 398 (1952), appears misplaced, this Court cannot say as a matter of law that this delay was of such unreasonable duration that the plaintiffs should be deemed to have ratified the alleged fraud, especially since the defendant has not indicated that she has been prejudiced in any way in the presentation of her defense.
It seems to be beyond dispute that to establish fraud, a party must show, by clear and convincing evidence, Public Motor Serv., Inc. v. Standard Oil Co., 69 App. D.C. 89, 99 F.2d 124 (1938), the following elements:
(1) A representation. (2) Its falsity. (3) Its materiality. (4) The speaker's knowledge of its falsity or ignorance of its truth. (5) His intent that it should be acted on by the person and in the manner reasonably contemplated. (6) The hearer's ignorance of its falsity. (7) His reliance on its truth. (8) His right to rely thereon. Heckenkamp v. Kennedy, 267 F.2d 887, 891 (8th Cir.1949); see United States v. Kiefer, 97 U.S.App.D.C. 101, 228 F.2d 448, cert. denied, 350 U.S. 933, 76 S. Ct. 305, 100 L. Ed. 815 (1956).
The defendant maintains that the evidence of fraud was not clear and convincing; that any representations made were not material; and that the plaintiffs cannot claim a right to rely on any representations made to them.
While this Court does not believe from the evidence that the insurance agent intended to mislead the plaintiffs or that he knowingly made any false statements to the plaintiffs, the fact that the Court would have found in favor of the defendant does not mean that the jury's verdict should, for that reason alone, be set aside. Although the Court has the right to comment to the jury on the evidence, it is not the trier of the facts. See Quercia v. States, 289 U.S. 466, 53 S. Ct. 698, 77 L. Ed. 1321 (1933). The plaintiffs' testimony was not wholly without confusion, but if the testimony of the plaintiffs and their daughter is to be believed, and apparently the jury did so, the evidence is sufficient to meet their burden of proof, and thus a jury question was raised. See Southwestern Greyhound Lines v. Buchanan, 126 F.2d 179 (5th Cir.), cert. denied, 317 U.S. 646, 63 S. Ct. 41, 87 L. Ed. 520 (1942). This Court is a great believer in the jury system and although it may sometimes disagree with a jury verdict, it will not set one aside unless it is clearly erroneous.
The final contention advanced by the defendant is that the plaintiffs cannot claim that their reliance on the agent's representations, if any were in fact made, was reasonable. This contention raises significant questions and the Court will examine the authorities on this point. "The inveterate policy of the law is to encourage, promote, and sustain the compromise and settlement of disputed claims." Tulsa City Lines, Inc. v. Mains, 107 F.2d 377, 380 (10th Cir.1939). Still, if a settlement was the product of a fraud upon which a party relied, it will be set aside. See Ibid. While it is the policy of the law to protect the dignity of contracts, there is equally as strong a policy to protect the gullible from sharp practices and not to allow a wrongdoer to profit from his wrong.
As indicated earlier, a person claiming to have been harmed by a false representation must have a right to rely upon the representation, and this plainly presupposes that the party is justified under all of the circumstances in relying on it. 3 Pomeroy, Equity Jurisprudence § 891 (5th ed. Symons 1941). A question often arising in these cases is whether the party had a duty to investigate the representation made to him. If so, any knowledge that might have been gained by such an investigation is considered as gained, see Palace Laundry Dry Cleaning Co. v. Cole, 41 A.2d 231, 232 (Munic.App.D.C.1945) (dictum), because the general rule is "[one] who signs a contract which he had an opportunity to read and understand is bound by its provisions," Paterson v. Reeves, 113 U.S.App.D.C. 74, 75, 304 F.2d 950, 951 (1962).
In recent years there appears to have been a trend in this area away from the theory of caveat emptor. See Sainsbury v. Pennsylvania Greyhound Lines, 183 F.2d 548, 551, 21 A.L.R.2d 266 (4th Cir.1950). Such a trend is certainly proper for it seems unfair to allow a wrongdoer to defend on the ground that his word should not have been believed. The Restatement of Torts indicates that in some circumstances an investigation into the truth or falsity of a representation is not necessary to justify reliance upon it. See Restatement, Torts, § 540 (1938). This would seem especially true where such an inquiry would be expensive, difficult or demand a certain amount of expertise not possessed by the party, or where the truth of the matter would be particularly within the knowledge of the person making the representation. See, e.g., Stein v. Treger, 86 U.S.App.D.C. 400, 182 F.2d 696 (1950). However, where the truth or falsity of the representation is obvious on its face, or if a mere cursory glance would have revealed its falsity, the party would not necessarily be justified in relying upon the representation, see Restatement, op. cit. supra § 540, comment b; § 541 and comment a, the rationale being that if something is apparent to ordinary observation it cannot be ignored, see Sainsbury v. Pennsylvania Greyhound Lines, supra, 183 F.2d at 551. In the last analysis, then, whether there is a duty to inquire in a particular case depends on what is reasonable under the circumstances. See Chesapeake & O. Ry. v. Howard, 14 App.D.C. 262, 294-295 (1899), aff'd, 178 U.S. 153, 20 S. Ct. ...