#### D. M. IPOCK v. ATLANTIC AND NORTH CAROLINA RAILROAD COMPANY and NORFOLK SOUTHERN RAILROAD COMPANY et al.

(Filed 27 March, 1912.)

1. Contracts — Voidable—Insane Persons — Defenses.

Executed contracts of an insane person, before office found, l. 6., when such condition has not been formally ascertained and declared, are not void, but voidable, usually at his election or of the person appointed to act in his behalf, unless it is made to appear that the party contracting with him has acted without knowledge of the insanity or notice of such facts in reference thereto as would put a reasonably prudent man upon inquiry; and that no unfair advantage was taken, and that the consideration passed cannot be restored or adequate compensation made therefor.

2. Same — Burden of Proof.

While one who seeks to avoid a contract on the ground of insanity.has the burden of proving his position, when it is established that the contract has been made with a person mentally incapable of making a contract, the burden is so far shifted that the agreement will be set aside unless the sane party brings himself within the requirements necessary to uphold it as a binding one.

3. Same — Release—Damages—Evidence.

When in defense to an action for damages it is shown that the plaintiff has accepted a voucher which by its terms purports to be a full release for a grossly inadequate consideration, that the injury was inflicted by a blow on the head resulting from defendant’s negligence from which partial paralysis followed, and under these conditions, known to a great extent by the defendant, the voucher was obtained, it is sufficient to set aside the voucher as a bar to the plaintiff’s recovery.

*4464. Same — Judgments—Credits.

When a voucher is set up as a defense in bar to plaintiff’s recovery in his action for damages for a personal injury negligently inflicted on him, and it appears that it should he disregarded as such, but without reason to conclude that the defendant had any design or purpose to circumvent him, the action, in this regard, is in the nature of an equitable proceeding to set aside the voucher or avoid the effect of the payment received thereon, and in the absence of positive, as ’distinguished from constructive fraud, is subject to the maxim that he who seeks equity must do equity, and, consequently, the amount received on the voucher will be held as a credit upon a judgment which has ascertained the full amount of the damages suffered.

Appeal from Whedbee, J., at November Term, 1911, of CRAVEN.

Civil action to recover damages for personal injuries caused by alleged negligence on tbe part of defendant companies.

There was evidence, on paid of plaintiff, tending to show that be was an employee, as section boss of tbe defendant companies and, on 24 August, 1908, be was seriously and permanently injured by tbe derailment of a band-car be was tben using in tbe course of tbe employment; tbe derailment being.caused by a defective wheel, attributable to negligence of defendants.

The defendants denied tbe negligence and set up, by way of defense, a voucher, issued in plaintiff’s favor, on 24 October, 1908, for $150, purporting to be in “full settlement of all claims against tbe railroad companies on account of tbe injuries; indorsed by plaintiff, making bis mark, and tbe proceeds of which were shown to have been received and spent for plaintiff’s benefit.

Plaintiff made formal reply, alleging that, at the time tbe voucher was issued and indorsed and at time of proceeds received and used, owing to bis injuries, be was incapable, mentally, of making any binding contract affecting bis interests, and was-utterly unable to understand or appreciate tbe character of tbe transaction or its effect upon bis rights, and offered evidence in support of bis allegation. ■ On issues submitted, tbe jury rendered tbe following verdict:

*4471. Did tbe plaintiff indorse tbe voucher or release introduced in evidence and marked Exbibit A? Answer: Yes, by consent of plaiñtiff.

2. "Was tbe plaintiff, by reason of bodily pain, mental anguish, or mental incapacity, unable to comprehend tbe effect of such release indorsed by him, and was such release signed and indorsed by him without knowledge that tbe same was a release for bis injury? Answer: Yes.

3. Did tbe plaintiff draw tbe money upon said voucher from tbe bank without knowledge that it was in full payment and release by him for all injuries sustained? Answer': Yes.

4. Was tbe plaintiff injured by tbe negligence of tbe defendant, as alleged? Answer: Yes.

5. If so, what damages has plaintiff sustained thereby? Answer : $1,500.

Judgment on the verdict foi’ $1,500, and defendants excepted and appealed.

D. L. Ward and Guión & Guión for plaintiff.

L.- J.. Moore for defendant.

Hoke, J.,

after stating tbe case: There was ample evidence to support tbe verdict on tbe issues as'to defendants’ negligence and the amount of damages awarded, tbe testimony of plaintiff tending to show that, on the derailment be received a blow on tbe back of tbe bead, from one of tbe bandies of tbe car, rendering him unconscious at tbe time, causing partial paralysis of bis limbs and seriously affecting bis mental capacity for several months after tbe occurrence; one of tbe physicians testifying, further, that in some of tbe effects tbe injuries were likely to be permanent; and it -was chiefly urged, against tbe validity of tbe recovery, that plaintiff’s demand was barred by reason of tbe terms and effect of tbe voucher issued in bis favor, and tbe use of tbe proceeds by bim or for bis benefit.

On this question, and in view of tbe facts in reference to plaintiff’s mental condition, established by tbe verdict on tbe first and second issues, it is held with us that tbe executed contracts of an insane person and before office found, before such condition has been formally ascertained and declared, are voidable and not *448void, and it is also recognized that snob contracts are usually voidable at tbe election of tbe lunatic or person properly appointed to act in bis behalf, unless it is made to appear that tbe other party to tbe agreement acted without knowledge of tbe insanity or notice of such facts in reference thereto as would put a reasonably prudent person upon inquiry; that no unfair advantage was taken and tbe consideration passed cannot be restored or adequate compensation made therefor. West v. R. R., 154 N. C., 24, and s. c., 151 N. C., 231; Godwin v. Parker, 152 N. C., 673; Sprinkle v. Wellborn, 140 N. C., 163; Odom v. Riddick, 104 N. C., 515; Riggan v. Green, 80 N. C., 236; Gribben v. Maxwell, 34 Kan., 8; Eaton v. Eaton, 37 N. J. L., 108; Flack v. Gottschalk, 88 Md., 368; Hostler v. Beard, 54 Ohio St., 398; Clark on Contracts, pp. 178 and 183.

Tbe general rule which prevails under ordinary conditions in such cases is very well stated in Clark on Contracts as follows: “As a rule, a contract entered into by an insane person or person non compos mentis is voidable at bis option, but tbe rule is subject to exceptions as follows:

> “2. In most, but not all, jurisdictions where tbe sane party acted fairly and in good faith, without actual or constructive knowledge of tbe other’s insanity, and tbe contract has been so far executed that be cannot be placed in statu quo.” . . ;

From tbe form in which this rule is here given, and tbe authorities applicable, we bold it to be tbe correct principle that, while one who seeks to avoid a contract on tbe ground of insanity has the burden of proving bis position, when it is established that tbe contract has been made with a person mentally incapable of making a contract tbe burden is so far shifted that tbe agreement will be set aside unless tbe sane party, by proper proof, brings bis case within tbe rule, as stated, to wit, that be acted in ignorance of conditions that no unfair advantage was taken; that tbe insane person is not able to restore tbe consideration or make adequate compensation therefor. Sprinkle v. Wellborn, supra; Hostler v. Beard, supra; Bigelow on Finance, p. 377; Eaton’s Equity, p. 317.

*449In tbe Obio ease, just cited, it was beld, as appears from tbe digest of tbe ease in 56 Amer.. Decisions: “Plaintiff suing upon a negotiable instrument or other contract made by an insane person must assume tbe burden of proving tbat it was given for necessaries or during a lucid interval, or while tbe insane person was apparently of sound mind and not known to be otherwise, and for property purchased by him under a fair and bona fide contract, and which be has received and fully enjoyed, so tbat tbe parties can no longer be put in statu quo.”

This being tbe correct principle, on tbe facts established by tbe verdict and admission of tbe parties, tbat tbe plaintiff, at tbe time, was mentally incapable of making tbe contract or understanding its full effect and meaning, and, under such conditions, a contract was obtained, on consideration of $150, purporting to be in full settlement for an injury amounting to $1,500, tbe right of plaintiff to recover is undoubted. We are not inadvertent to a verdict very similar, appearing in tbe West case, 151 N. C., 231, and to some expressions in tbe opinion having a tendency to declare tbat tbe facts therein established are insufficient to support tbe judgment; but a judge’s opinion, as a rule, must be considered in reference to tbe facts of tbe case before him, and a careful perusal of tbe facts and tbe-opinion in tbat well-sustained case will disclose tbat recovery was denied because there were no facts in evidence sufficient to show mental incapacity on part of plaintiff, or tbat defendant bad any knowledge or notice of mental weakness which would disable plaintiff from taking proper and intelligent care for bis own interest, or tbat any unfair advantage was taken of plaintiff, under facts and conditions as they reasonably appeared to both parties when tbe adjustment and payment was made, and this is tbe time by which tbe fairness of tbe transaction must be tested. See same case, 154 N. C., pp. 29 and 30.

When tbe $1,511.61 was paid plaintiff in tbat case be was apparently in perfect possession of bis mental faculties and with full prospects of permanent recovery, and under all tbe circumstances of tbe case, as they then appeared, tbe amount given him was a fair and full allowance for tbe injuries received. It turned out tbat, unknown to defendant or plaintiff, bis injuries *450were progressive in their ill effects, and that tbe amount paid him was insufficient as compensation; but this should not be allowed to affect bona fides of the settlement, which, as stated, must be determined under conditions as they then were or as they reasonably appeared. The nonsuit was ordered in the West case, therefore, not on the ground that the verdict was insufficient, but that the facts in evidence were not sufficient to support the verdict.

But' no such conditions are present in the case before us, where it appears that plaintiff was injured by a blow on the back of his head, which rendered him unconscious, at the time; that it was followed by partial paralysis; that he acted throughout with the aid of others, and that the attendant conditions were to a great extent known to defendant’s agents who looked after the adjustment. ’While it is not established, nor is there sufficient reason to conclude that these agents had any design or purpose to circumvent plaintiff, there were sufficient facts observable to notify them that $150 was not a fair compensation for the injuries, and that- it was not improbable that plaintiff’s mental capacity was affected. We hold, therefore, that plaintiff’s right to recover, in the present case, must be sustained, but on the facts established and admitted that the $1,500 awarded as the full value of the plaintiff’s injury should be credited with the $150 received by him or used for his benefit.

Although the authorities are to the effect that the contract, under the circumstances of the present case, is voidable at the option of the plaintiff, and it is not regarded as essential that plaintiff should restore the consideration, when it appears that he is unable to do so, the action in this aspect of the case is in the nature of an equitable proceeding to set aside the voucher or avoid the effect-of the payment had, pursuant to an adjustment between the parties, and, in the absence certainly of positive as distinguished from constructive fraud, is in no wise exempt from the wholesome maxim that he who seeks equity must do equity. This principle was fully recognized with us in the well-considered ease of Odom v. Riddick, 104 N. C., 523, and the ruling is in accord with authoritative decisions here and elsewhere. Creekmore v. Baxter, 121 N. C., 31; Coburn v. Raymond, 76 *451 Conn., 484; Rea v. Bishop, 41 Neb., 202; Rickets v. Jolief, 62 Miss., 440.

In the present case it appears that the $150 has been paid plaintiff on account of this injury, and same has been used by him or applied for his benefit, and the amount of the recovery being under the control of the Court, it is in accord with good reason and well-considered precedent that the amount awarded as damages for the injuries received hy plaintiff should be reduced by the sum received and used by him.

The judgment will be reduced by crediting the $150 and, so modified, the recovery is affirmed.

Modified and affirmed.