Opinion ID: 484641
Heading Depth: 2
Heading Rank: 2

Heading: TGA's Release Defense

Text: 40 Woodling sought rescission of the Release she had signed in favor of TG and TGA on the ground that she had been induced to sign it as a result of material misrepresentations with respect to two matters: TG's total control over TGA's operations and the availability of an insurance benefit to Albert Woodling's estate under the American Home policy. The jury answered interrogatory questions favorably to Woodling on both issues, and rescission was granted. TG and TGA ask us to uphold the validity of the Release on a variety of grounds or at least to grant a new trial because of alleged errors in the conduct of the trial. We find their arguments with respect to the misrepresentations as to TGA operations to be without merit, and since this ground for rescission was independent of the question of whether Woodling had also relied on misrepresentations as to available insurance benefits, we need not reach the latter ground.
41 The Release provided that [t]he validity, effect and enforceability, as well as the rights of the parties hereto regarding this Release shall be governed, construed and interpreted solely in accordance with the laws of the State of Connecticut. Since this is a diversity action, the district court, sitting in New York, properly looked to the choice-of-law rules of New York to determine whether and to what extent the parties' contractual choice should be honored. 42 When such a provision exists and the jurisdiction chosen by the parties has a substantial relationship to the parties or their performance, New York law requires the court to honor the parties' choice insofar as matters of substance are concerned, so long as fundamental policies of New York law are not thereby violated. See A.S. Rampell, Inc. v. Hyster Co., 3 N.Y.2d 369, 381, 165 N.Y.S.2d 475, 486, 144 N.E.2d 371, 379 (1957); Restatement (Second) of Conflict of Laws Sec. 187 (1971). The contractual choice of law provision is deemed to import only substantive law, however, not procedural law. See Sears, Roebuck & Co. v. Enco Associates, Inc., 43 N.Y.2d 389, 397, 401 N.Y.S.2d 767, 772, 372 N.E.2d 555, 560 (1977); Gambar Enterprises, Inc. v. Kelly Services, Inc., 69 A.D.2d 297, 304, 418 N.Y.S.2d 818, 822 (4th Dep't 1979); Restatement (Second) of Conflict of Laws Sec. 187(3) & comment h. 43 The issues of the validity and enforceability or voidability of a release are plainly matters of substance as to which the parties' choice of law will be honored. See Siegelman v. Cunard White Star Ltd., 221 F.2d 189, 194-95 (2d Cir.1955); Restatement (Second) of Conflict of Laws Sec. 201 & comment a. The extent to which the parol evidence rule may be applicable to bar extraneous evidence to show the voidability of a release is also considered by New York conflicts law to be a matter of substance. See Smith v. Bear, 237 F.2d 79, 83 (2d Cir.1956); Restatement (Second) of Conflict of Laws Sec. 205 comment e. The question of burden of proof, on the other hand, is regarded by New York law as a question of procedure to which the law of the forum applies. See Lobel v. American Airlines, Inc., 192 F.2d 217, 219 (2d Cir.1951), cert. denied, 342 U.S. 945, 72 S.Ct. 558, 96 L.Ed. 703 (1952); Clark v. Harnischfeger Sales Corp., 238 A.D. 493, 495, 264 N.Y.S. 873, 876 (2d Dep't 1933); Wright v. Palmison, 237 A.D. 22, 22, 260 N.Y.S. 812, 813 (2d Dep't 1932). 44 Since Connecticut is the principal place of business of TG, the court properly honored the parties' contractual choice of Connecticut law with regard to matters of substance, and looked to that law with respect to the issues of the validity and enforceability or voidability of the Release, and with respect to the admissibility of parol evidence on those issues. It properly applied the law of New York on the issue of burden of proof. 45
46 Woodling testified that prior to signing the Release, she had received a letter from TG purporting to set forth information [that] pertains to the relationship between [TG] and [TGA]. The letter stated that TGA had no employees and no business operations beyond holding title to the former TGI aircraft; that [a]ll pilots and aircraft support personnel are employees of TGI at Stamford, Connecticut; and that TGI has the sole power to hire and fire the pilots and ground personnel. TG and TGA contend that they were entitled to have judgment as a matter of law dismissing this basis for rescission because, inter alia, the claimed misrepresentations were matters of opinion rather than fact, they were fair and reasonable, and, in any event, Woodling could not justifiably rely on them. We find no merit in any of these contentions. 47 Under Connecticut law, even an innocent material misrepresentation can provide grounds for avoidance of a contract. See Duksa v. City of Middletown, 173 Conn. 124, 376 A.2d 1099, 1101 (1977). To be a misrepresentation, however, a statement must falsely assert fact rather than opinion. See Restatement (Second) of Contracts Sec. 159 & comment a (1981). The test for whether a statement is one of opinion or fact is whether under the circumstances surrounding the statement, the representation was intended and understood as one of fact as distinguished from one of opinion. Crowther v. Guidone, 183 Conn. 464, 441 A.2d 11, 13 (1981); see also Board of Water Commissioners of City of New London v. Robbins & Potter, 82 Conn. 623, 74 A. 938, 943 (1910) (estimates supplied as approximately correct information to be relied on were statements of fact not opinion). Moreover, a statement of opinion, including one regarding the application of the law to facts, impliedly asserts that the facts known to the maker are not incompatible with that opinion. See Restatement (Second) of Contracts Secs. 168(2)(a), 170 comment b. Of course, even if the facts explicitly and implicitly represented are literally true, there may still be a misrepresentation if the statement is a half-truth because it omits reference to material unfavorable matter. See id. Sec. 159 comment b; Duksa v. City of Middletown, 376 A.2d at 1101; Franchey v. Hannes, 152 Conn. 372, 379, 207 A.2d 268, 271 (1965); Wedig v. Brinster, 1 Conn.App. 123, 469 A.2d 783, 788 (1983), cert. denied, 192 Conn. 803, 472 A.2d 1284 (1984). 48 The evidence at trial was sufficient to show that the TG representations as to its control over TGA operations were intended as and taken as assertions of fact. The letter itself characterized these assertions as information. TG's Senior Counsel, Eugene McGuire, testified that these assertions were not the product of any legal research; he referred to them as facts. Woodling testified that at a meeting with a TG representative these matters were discussed as facts that would provide a basis for a workers' compensation defense if Woodling were to bring suit against TGA. The trial court properly instructed the jury that TGA had the burden of proving that the Release was valid, see Mangini v. McClurg, 24 N.Y.2d 556, 563, 301 N.Y.S.2d 508, 514, 249 N.E.2d 386, 390 (1969), and that if the jury found the assertions merely to be opinions it should find in favor of TGA. The jury's finding that these were assertions of purported fact was a fair inference from the trial evidence and may not be set aside. 49 The question of whether these representations were fair and reasonable conclusions on the part of TG also presented a fact issue that, in light of the evidence at trial, was an entirely inappropriate basis for a directed verdict or judgment n.o.v. There was ample evidence as to TGA's unfettered control over its own aviation activities, discussed in Part II.A. above, from which the jury could have concluded that the representations were literally false or at best half-truths. 50 Notwithstanding a defendant's express or implied misrepresentations, a plaintiff may be denied recovery under Connecticut law if reliance on those misrepresentations was unjustified. When the premise of such unjustifiability is the plaintiff's failure to discover the truth, Connecticut law precludes recovery only if that failure was so extreme as to be, in itself, a breach of good faith and fair dealing. Pacelli Brothers Transportation, Inc. v. Pacelli, 189 Conn. 401, 456 A.2d 325, 329 (1983); Restatement (Second) of Contracts Sec. 172 & comment a. Consequently, the plaintiff's failure to make a reasonable investigation does not bar relief unless the truth would have been uncovered by even a cursory examination. Id. Sec. 172 comment b; see Clark v. Haggard, 141 Conn. 668, 109 A.2d 358, 361 (1954); Kavarco v. T.J.E., Inc., 2 Conn.App. 294, 478 A.2d 257, 262 (1984). A plaintiff's mere negligence in failing to discover that a representation was false is no defense to an action for rescission. Id. Nor do general principles of common law bar an action based on reliance on representations made by a lawyer for an antagonistic interest, even when the recipient is also represented by a lawyer. See, e.g., Sainsbury v. Pennsylvania Greyhound Lines, 183 F.2d 548, 550-52 (4th Cir.1950); National Conversion Corp. v. Cedar Building Corp., 23 N.Y.2d 621, 626, 298 N.Y.S.2d 499, 503, 246 N.E.2d 351, 354 (1969); Madison Trust Co. v. Helleckson, 216 Wis. 443, 257 N.W. 691, 693-95 (1934); cf. Restatement (Second) of Torts Secs. 540 & comment a, 541 comment a (1977) (independent investigation not required to make reliance justifiable even when maker of misrepresentation is an adverse party). If anything, a lawyer's duties of professional responsibility render such reliance on factual representations particularly justifiable. See generally Sainsbury v. Pennsylvania Greyhound Lines, 183 F.2d at 551-52; cf. A.B.A. Model Code of Professional Responsibility DR 7-102(A)(5) (1983) (a lawyer shall not ... [k]nowingly make a false statement of law or fact). 51 Woodling's reliance on the statements of McGuire, a member of the bar, in the context of a relationship that both she and McGuire characterized as one of trust and confidence regarding facts concerning TG's and TGA's internal operations cannot be characterized, as a matter of law, as a breach of good faith and fair dealing on her part. Plainly it would have taken far more than a cursory examination by her to reveal the actual facts. 52 Reliance by TG and TGA on Krupa v. Kelley, 5 Conn.Cir. 127, 245 A.2d 886 (1968), is misplaced. In Krupa, an insurance company offered plaintiffs $3,000, stating that was what their claim was worth. The plaintiffs declined the offer. When they later sought to avoid the bar of the statute of limitations, the court held there had been no fraudulent concealment. 245 A.2d at 890. In Krupa, unlike the present case, there was no proof that the defendant misrepresented or even knew of adverse facts and the plaintiffs' rejection of the settlement offer conclusively proved there was no reliance at all. 53 Finally, Woodling's claim of reliance on the statements as to TG's control of TGA's operations was not barred by the disclaimer in the Release stating that she ha[d] not been influenced to any extent whatsoever in making and signing same by any representations or inducements whatsoever by [TG and TGA]. It is well settled under Connecticut law that parol evidence is admissible to show fraud or misrepresentation. See Jay Realty, Inc. v. Ahearn Development Corp., 189 Conn. 52, 453 A.2d 771, 773 (1983); Paiva v. Vanech Heights Construction Co., 159 Conn. 512, 271 A.2d 69, 73-74 (1970); Kiss v. Kahm, 132 Conn. 593, 46 A.2d 337, 338 (1946). The presence of a disclaimer such as that signed by Woodling provides no exception to this general rule. See New Haven Tile & Floor Covering Co. v. Roman, 137 Conn. 462, 78 A.2d 336, 337 (1951) (even though written agreement stated that terms could not be varied by any verbal representation or promise, parol evidence to show that agreement was not binding and valid was admissible); see also Restatement (Second) of Contracts Sec. 214 comment e; cf. Sabo v. Delman, 3 N.Y.2d 155, 160-62, 164 N.Y.S.2d 714, 717-19, 143 N.E.2d 906, 908-10 (1957) (general merger clauses do not bar claim for misrepresentation). 54 In sum, the trial court properly applied the pertinent principles of governing law. TGA was not entitled to a directed verdict or judgment n.o.v. on its defense of release, and we see no basis for overturning the jury's findings against it. 55