Baker Pacific Corp. v. Suttles

220 Cal. App. 3d 1148, 269 Cal. Rptr. 709, 1990 Cal. App. LEXIS 567

Opinions

Opinion

BENSON, J.

This action raises the questions of whether the trial court abused its discretion in denying a motion to set aside a default and whether a release form which an employer required to be signed by asbestos removal workers as a condition of employment violates public policy or is otherwise contrary to law. Finding that the trial court did not abuse its discretion in denying the motion to set aside the default, we shall nevertheless reverse the judgment because the release form tendered to the workers as condition of employment violated the statutory prohibition of Civil Code section 1668.

I

Statement of the Case

Baker Pacific Corporation is a licensed asbestos abatement and remediation contractor. Appellants, Thomas M. Suttles and Ralph Runckel, are two individuals who had been employed by Baker Pacific on various asbestos removal projects prior to October 1987. On October 26, 1987, Baker Pacific entered a contract with Metropolitan Life Insurance Company for the removal of asbestos from an office building owned by Metropolitan located at 425 Market Street, San Francisco, California. As an express condition pre- cedent to awarding the contract to Baker Pacific, Metrópoli tan required Baker Pacific’s employees to read and sign a written certificate of workers’ release form.

Baker Pacific employs asbestos removal workers on a project-by-project basis as needed. Prior to October 26, 1987, appellants had been employed by Baker Pacific on asbestos removal projects. On October 26, 1987, appellants were on layoff status with Baker Pacific. During the last part of October 1987, Baker Pacific offered work to appellants on the Metropolitan job but appellants refused to sign the release claiming the release violated California and federal public policy. Metropolitan would not permit Baker Pacific to employ appellants for work in its building.

The release form provided that in consideration of appellants’ employment by Baker Pacific and in consideration of the sum of one dollar, appellants would waive certain rights. Appellants were required to acknowledge they understood the dangers of working with asbestos and to warrant they have not been disabled by asbestosis or any other cancer disease. The portion of the release pertinent to this appeal reads as follows: “I knowingly assume all risks in connection with potential exposure of asbestos and I do hereby covenant not to sue, and to release and forever discharge Building Owner, Owner’s Professional Consultant, independent testing laboratory or engineers employed by the Building Owner or Owner’s Professional Consultant, and all of their directors, officers, employees, nominees, personal representatives, affiliates, successors, and assigns for, from and against any and all liability whatsoever, at common law or otherwise, except rights which the undersigned may have under the provision of the applicable workmen’s [sic] compensation laws. Except as specifically set forth herein I hereby waiver [sic] and relinquish any and all claims of every nature which I now have or may have or claim to have which are in any way, directly or indirectly, related to exposure to asbestos and asbestos-containing materials.” (Italics added.)

On May 11, 1988, the court entered a declaratory judgment holding that the release was valid.

A timely appeal followed.¹

II

Discussion

A., B.*

C. Whether the Release Is Valid

The trial court entered judgment declaring in relevant part that . . the Release is not void as against public policy or otherwise; and [that Baker Pacific’s] compliance with Metropolitan’s requirement that its employees execute the Release is not contrary to law . . . Appellants contend this decision is contrary to law in that it violates Civil Code sections 3513 and 1668 ² and because the terms of the agreement are unconscionable in an adhesion contract. In the trial court and on appeal, appellants rely on an opinion letter issued by the Legislative Counsel of California which found the release to be unenforceable. Appellants also read the release as waiving their rights against Baker Pacific in violation of sections 2801 and 2804 of the Labor Code.

Baker Pacific replies the release is not contrary to public policy since “. . . no public policy opposes private, voluntary transactions in which one party, for a consideration, agrees to shoulder a risk which the law would otherwise have placed upon the other party . . . .” (Tunkl v. Regents of University of California (1963) 60 Cal.2d 92, 101 [32 Cal.Rptr. 33, 383 P.2d 441, 6 A.L.R.3d 693].) Baker Pacific argues that in exchange for voluntarily signing the release, the employees obtained high-paying jobs while also retaining recourse for injuries against their employer and other potential third parties such as the manufacturer of protective equipment they wear. Baker Pacific asserts this situation is markedly different from that of the plaintiff in Tunkl who had no choice but to sign the hospital’s release form in order to obtain necessary medical treatment.³

Lastly, Baker Pacific points out that the release specifically excepts any rights the employees may have against their employer under the worker’s compensation law and therefore it does not violate the provisions of the Labor Code which prohibit waiver of those rights.

“For it to be valid and enforceable, a written release exculpating a tortfeasor from liability for future negligence or misconduct must be clear, unambiguous and explicit in expressing the intent of the parties. If a tortfeasor is to be released from such liability the language used ‘must be clear, explicit and comprehensible in each of its essential details. Such an agreement, read as a whole, must clearly notify the prospective releasor or indemnitor of the effect of signing the agreement.’” (Madison v. Superior Court (1988) 203 Cal.App.3d 589, 598 [250 Cal.Rptr. 299], citation omitted.) “Whether a contract provision is clear and unambiguous is a question of law, not of fact.” (Ibid.) Our review of the release dictates the conclusion that the agreement is clear and unambiguous. It provides: the employees “knowingly assume all risks in connection with potential exposure of asbestos”; it releases Metropolitan “from and against any and all liability whatsoever, at common law or otherwise”; and it waives “any and all claims of every nature . . . related to exposure to asbestos.” It is hard to imagine a clearer or broader release. There can be no doubt that this release includes a release of Metropolitan for its “own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent” as proscribed in Civil Code section 1668. Indeed, as we earlier noted, Baker Pacific does not argue the release should be read to exclude release of liability for conduct proscribed by Civil Code section 1668 as does our dissenting colleague. Baker Pacific asserts the release “. . . is precisely the type of ‘private, voluntary transaction’ contemplated by the Tunkl court, and the Release thus cannot be contrary to public policy.”

“Traditionally, the law has looked carefully and with some skepticism at those who attempt to contract away their legal liability for the commission of torts. This general policy of the common law found legislative expression early in California history with the enactment of Civil Code section 1668. This section made it clear a party could not contract away liability for his fraudulent or intentional acts or for his negligent violations of statutory law. However, a contract exempting from liability for ordinary negligence is valid where no public interest is involved and where no statute expressly prohibits it. (Gardner v. Downtown Porsche Audi (1986) 180 .)” (Nunes Turfgrass, Inc. v. Vaughan-Jacklin Seed Co., Inc. (1988) 200 Cal.App.3d 1518, 1534.)

Here, the broad release clearly includes a release from liability for fraud and intentional acts and thus on its face violates the public policy as set forth in Civil Code section 1668. The trial court erred in determining the release was “not void as against public policy or otherwise.”

Baker Pacific also maintains that even if the release were found to contravene public policy, its compliance with Metropolitan’s requirement that its employees sign the release as a condition of employment would not be contrary to law since if the release were of no force or effect, then Baker Pacific’s action would be of no force and effect and thus could not be contrary to law. We find this argument circular and unintelligible. Since we have determined the release as proffered is violative of Civil Code section 1668, it follows that requiring prospective employees to sign an illegal agreement as a condition of employment is contrary to law.

Our dissenting colleague, while seeming to acknowledge the language of the release sufficiently broad so as to exclude liability for fraud, wilful injury, and wilful or negligent violation of law, nevertheless argues the majority simply postulates “. . . the future possibility of a party to a liability release, pertaining to either past or future events (or a combination of both), attempting to seek its application illegally; i.e., to utilize it to bar his liability for fraud, willful injury, or violation of law because of the release’s general language.” (Dis. opn., post, p. 1159.) We do not see the case before us in that light.

Here, the damage is already done. Because two workers have refused to execute a written release of liability, the terms of which would necessarily include release of liability for fraud, wilful injury or violation of law (negligent or wilful), they have been denied an employment opportunity. In short, the release has already been applied illegally by conditioning employment on the execution of a contract containing terms violating the statutory law of this state.

The dissent would have us place an appellate court imprimatur on the declaratory judgment of the lower court because: (1) the language used in the release is common in virtually all releases; and (2) any effort by the judgment holder to use it illegally will predictably be rejected.

We are less sanguine than our colleague regarding the predictability of rejection. After all, the release has already been declared “not void as against public policy or otherwise.” What is predictable, however, is respondent’s use of the declaratory judgment (if it were allowed to stand) as a defensive weapon to urge appellants are collaterally estopped from pursuing their damage claim in the pending San Francisco Superior Court action.

“The doctrine of collateral estoppel obviates the need to relitigate issues on a second action already adjudicated in the first action. [Citation.] There are three prerequisites which must be shown before the doctrine will be applied: (1) the issue in the second action must be identical to the issue adjudicated in the first action; (2) the first action must have proceeded to a final judgment on the merits; and (3) the party against whom the collateral estoppel is to be asserted must have been a party, or in privity with a party, to the first action. [Citation.]” (Tushinsky v. Arnold (1987) 195 Cal.App.3d 666, 672 [241 Cal.Rptr. 103].)

It is not our province to offer a prediction as to whether an asserted collateral estoppel defense would succeed or fail. (We would feel more comfortable in predicting another appeal if the trial court were required to decide the issue.) However, it is obvious to the majority that these workers will be put to the burden, expense and risk of overcoming an issue they should not have to meet. We see an essential unfairness inherent in the position taken by the dissent. The issue bears significantly on the relative sophistication and bargaining strength of the parties to the proposed release. The workers are given the choice of adhering to its terms or foregoing gainful employment. The employer, rather than amending the release to meet the legitimate policy concerns expressed by the workers (a matter readily accomplished by excepting the provisions of Civil Code section 1668 from the terms of the release), simply refused to hire these presumably otherwise qualified workers.

This “pistol to the head” approach to an employment relationship, where hiring is conditioned on acceptance of statutorily proscribed terms, is not acceptable to us. Moreover, it has potential for bringing serious mischief to the work place. We cannot expect workers generally to be cognizant of judicial decisions concerning the interpretation of exculpatory provisions within releases. We reject the concept that a worker, compelled by economic necessity to secure employment, can be thus coerced into signing sweeping agreements exculpating various responsible entities from all aspects of tort liability in the uninformed hope the agreement will not be enforced by the courts. We foresee situations where the uninformed releasing employee will forego legitimate claims rather than assume the risk of expensive, time-consuming litigation for an uncertain result.

Our research has not produced a reported case where, as here, the validity of the release language under section 1668 is tested in a declaratory relief action prior to the parties’ acceptance of the release language and their entry into the underlying transaction. In that significant respect the cases relied on by our dissenting colleague are materially distinguished by the case we are called upon to decide. Werner v. Knoll (1948) 89 Cal.App.2d 474 [201 P.2d 45], Hulsey v. Elsinore Parachute Center (1985) 168 Cal.App.3d 333 [214 Cal.Rptr. 194], and Madison v. Superior Court (1988) 203 Cal.App.3d 589 [250 Cal.Rptr. 299], each involve a situation where the exculpatory language is subjected to judicial review in litigation arising after the complaining party has signed and accepted the release, entered into the underlying transaction or service contemplated in the contract, injury is suffered and a suit for damages is brought against the releasee. The exculpatory language is then raised as an affirmative defense, and the issue is resolved in summary proceeding or bifurcated trial.

We have no quarrel with the holdings in these cases cited by the dissent. Werner, Hulsey, and Madison simply stand for the proposition that where a plaintiff/releasor has knowingly and willingly contracted to exculpate the defendant releasee from liability, accepts the benefits of the agreement, and then sues the releasee on causes of action not statutorily proscribed by Civil Code section 1668 (i.e., negligence, warranty, strict liability), the releasor will not be permitted to avoid his agreement on public policy grounds by urging that statutorily proscribed actions, irrelevant to the actions pursued by the releasor, can be inferred as included within the broad exculpatory language of the agreement.

The dissent’s reliance on Palmquist v. Mercer (1954) 43 Cal.2d 92 [272 P.2d 26], also misses the mark. As in Werner, Hulsey, and Madison, the Palmquist release had been signed and accepted by plaintiff releasor who then entered the transaction (renting a horse for a ride), sustained injury, and sued the riding academy/releasee. The trial court granted a judgment of nonsuit based on the release which purported to release the academy from all liability including liability for its own fraud. The Supreme Court reversed, finding the record contained ample evidence to sustain liability for fraud and this issue should have been left for the jury. Werner, Hulsey, Madison, and Palmquist are inapposite. The cases do not remotely approach the problem before us where the trial court, apparently responding to respondent’s argument that its release is a “private, voluntary transaction” without public policy implications, condones the required execution of the release as a condition of employment by judicially declaring the release “not void as against public policy.”

The dissent also refers to “1 West’s California Civil Code Forms (3d ed. 1989) Obligations, section 1541, form 3, page 573” (dis. opn,,post, p. 1158, fn. 2) as further evidence that “[t]he ‘all’ and ‘any and all’ language of this release is common to virtually every form release contemporarily and heretofore used by practitioners.” We do not quarrel with this generalization but merely point out that this form of release, and all of the forms cited under Civil Code section 1541, are expressly designed for the settlement of cases between parties in litigation. The settlement language of the release is intended to be appropriate only at the conclusion of an adversarial relationship as an accord and satisfaction of the dispute. In short, the release is designed to prevent relitigation or collateral attack upon a cause of action arising from a past event. The rationale behind this policy of repose is not germane to the situation before this court.

In summary, we reject the notion advanced by the dissent that our opinion contradicts settled law or that we do damage to time honored forms of release. We do neither. We hold, in the context of this declaratory relief action, a release containing terms violative of Civil Code section 1668 and tendered to prospective employees as a condition of employment is void as against public policy.

III

Disposition

The judgment is reversed, and the matter is remanded to the trial court with directions to enter a judgment declaring the release void. Appellants are awarded their costs on appeal.

Smith, Acting P. J., concurred.

Footnotes

1

The record discloses these parties have a separate action filed four months after this one and pending in the San Francisco Superior Court. (Action No. 892425; filed May 25, 1988.) In the action appellants have sued respondent and Metropolitan for damages and injunctive relief in causes of action for wrongful termination, breach of the covenant of good faith and fair dealing, tortious interference with contract, and intentional and negligent infliction of emotional distress.

*

See footnote, ante, page 1148.

2

Civil Code section 3513 provides: “Anyone may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement."

Civil Code section 1668 provides: “All contracts which have for their object, directly or indirectly, to exempt anyone from the responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.”

3

Respondent’s patent effort to justify the validity of this release in all respects (including exculpation for fraud, wilful injury, or violation of law) contradicts our dissenting colleague’s observation that “This record does not reveal that the release presented to appellants was ever contended by respondent to include release of the acts proscribed by section 1668.” (Dis. opn,,post, p. 1158.) In fact, respondent, here and in the lower court, has never acknowledged any Civil Code section 1668 limitation on the scope of this release, nor disclaimed any intention to exclude fraud, wilful injury, or violation of law from its provisions.