Bernstein v. Kapneck

430 A.2d 602, 290 Md. 452, 1981 Md. LEXIS 234

• Court: Court of Appeals of Maryland
• Decided: June 10, 1981
• Docket: [No. 77, September Term, 1980.]
• Status: Published

Opinions

Digges, J.,

delivered the opinion of the Court. Davidson, J., concurs in the result and filed a concurring opinion at page 465 infra.

Succinctly put, this appeal presents the issue whether a straightforward release of all claims for personal injuries, untainted by unconscionable conduct on the part of the releasee, may be avoided by the releasor when it later appears that unknown wounds existed at the time the document was executed; and, assuming that it may, the further issue arises whether an enrolled consent judgment springing from the release may be stricken under Maryland Rule 625 a as mistakenly entered, so as to form no block to the pursuit of additional monetary relief for the later revealed hurt.

On July 25, 1975, petitioner Irene Schulman, at the time a five year old infant, sustained substantial injuries in a two-car accident in Bethesda, Maryland, when the vehicle in which she was a passenger collided with one owned by respondent Barbara Sue Sussman and operated by respondent Dean Raum Kapneck. For a period of at least a year following the collision, Irene was thought by both her doctors and her parents to have suffered only these multiple injuries in the accident: (i) a severe hurt to the face, described by her doctor as an "extensive deep irregular laceration of the forehead which extended from the glabella area down across the nose,” (ii) chip fractures of the nasal bones, (iii) a non-displaced fracture of the right shoulder, and (iv) a moderately severe traumatic neurosis.

Acting with the advice of competent counsel and based primarily on the medical diagnosis by and prognosis of the infant’s doctors, Irene’s mother (as she was authorized to do by Maryland Code (1974,1980 Repl. Vol.), Courts and Judicial Proceedings Article, section 6-405) settled for $7500.00 the suit pending with regard to the claims she and her daughter possessed against the respondents resulting from the accident. To effectuate this understanding a release was executed by the mother, both individually and on behalf of her infant daughter, on March 2, 1978. In addition, on that same day, upon request of all the parties, a consent judgment in the agreed upon amount was entered by direction of Judge John F. McAuliffe in the damage action which had been instituted in the Circuit Court for Montgomery County on August 22, 1977.¹

The release purchased by the respondents which formed the basis for the simultaneous entry of the agreed to judgment, reads in pertinent part:

For the sole consideration of Seven Thousand Five Hundred Dollars ... Helen M. Bernstein, individually and as parent and natural guardian of Irene Schulman, a minor, hereby releases and forever discharges Barbara Sue Sussman and Government Employees Insurance Company .. . and all other persons, firms or corporations liable for or who might claim to be liable,. .. from any and all claims, demands, damages, actions, causes of action, or suits of whatsoever kind or nature, and particularly on account of loss or damage to the property and on account of bodily injuries, known and unknown, and which have resulted or may in the future develop, sustained by Irene Schulman, a minor, born on 3/25/70, or arising out of damage or loss direct or indirect sustained by the undersigned in consequence of an accident involving the automobile accident occurring on or about July 25, 1975.. .. [(emphasis supplied).]

Sometime following both consummation of the settlement and enrollment of the judgment, Irene developed epileptic symptoms that were diagnosed by a neurologist at Georgetown University Hospital as indicating a post-traumatic psychomotor seizure disorder resulting from a brain injury she sustained in the 1975 accident. In light of this revelation, the petition now before us to vacate the judgment and void the release was filed in the original law action instituted in August, 1977. By that pleading, Irene’s mother individually and as her young daughter’s next friend, together with the child’s step-father (acting individually), sought to set aside both the March 2, 1978, release and judgment, on the ground that these liability acquittals were entered into, executed and delivered as a result of a mutual mistake of fact.

At the hearing on the nullification petition, which consisted of testimony relative to the recently manifested brain injury and argument of counsel, Judge McAuliffe made pertinent factual determinations as follows:

I find from the present evidence that all parties and the Court were unaware that Irene had suffered brain damage as a result of the accident, but that the testimony of Dr. Cohan is clear and convincing that Irene had suffered such injury, and that it existed at the time of the settlement and judgment. I further find that Irene’s mother and step-father had exercised reasonable diligence in attempting to ascertain the full nature and extent of Irene’s injuries prior to entering into the settlement, and that the amount of the settlement would not have been found to be reasonable by the parties or the Court if the additional element of a serious brain injury had been known.

* * *

I... find that these parties intended to, and did, finally settle all claims for injuries known and unknown, and which had resulted or might in the future develop as a result of this accident.

With these factual determinations established, Judge McAuliffe then concluded that ignorance of the brain injury at the time of settlement constituted neither a mutual mistake of the variety which will in Maryland vitiate a release contract, nor was it a "mistake” as used in Rule 625 a so as to authorize a vacation of an enrolled judgment. He accordingly denied the relief requested. On appeal, the Court of Special Appeals agreed and affirmed the action of the trial court. Bernstein v. Kapneck, 46 Md. App. 231, 417 A.2d 456 (1980). We granted certiorari as this case poses issues without precise controlling precedent of this Court.

The releasors urge that we travel one of the circuitous paths tread by what is now a collective majority of our sister states and in this manner allow the petitioners here to avoid the enrolled judgment as well as the release which together place a formidable barricade across the usually traversed road to adequate compensation in personal injury cases. While it is true that a growing number of courts (despite a clear and unambiguous release for consideration of all known and unknown, as well as foreseen and unforeseen, claims for personal injuries) permit repudiation by a releasor when unanticipated injuries surface subsequent to the contract’s execution, we do not believe these decisions can withstand critical analysis and decline to follow them.

Within the group of cases which numerically converge to form the majority, there are nuances in and a divergence among the rationales utilized in arriving at concordant results. While most of these authorities treat personal injury releases, because they relate to human interest instead of commercial transactions, as justifying the development of a special body of contract law, they basically utilize two different types of underpinnings to vindicate the results reached. In the words of the Supreme Court of Oregon:

Some cases seem to base relief upon real or supposed mutual mistake. E.g., Clancy v. Pacenti, 15 Ill. App. 2d 171, 145 N.E.2d 802,71 A.L.R.2d 77 (1st Dist., 1951). Contra, Thomas v. Hollowell, 20 Ill. App. 2d 288, 155 N.E.2d 827 (4th Dist., 1959). Other cases seem to reform the release. Thus, the court rewrites it as if to read: "I release all claims for injuries presently known and appreciated by me, but reserve all aggravations and future disorders not presently known or discernible.” See, e.g., Couillard v. Charles T. Miller Hospital, Inc., 253 Minn. 418, 92 N.W.2d 96; Ruggles v. Selby, 25 Ill. App. 2d 1, 165 N.E.2d 733 (1st Dist., 1960). [Wheeler v. White Rock Bottling Co. of Oregon, 229 Or. 360, 366 P.2d 527, 529 (1961) (footnote omitted).]

A near exhaustive collection of the cases litigating issues related to the voiding of releases under the mutual mistake of fact theory may be found in the annotation located at 71 A.L.R.2d 82 (1960), and in its later case service. A quick walk through this compendium of cases demonstrates the existence of two conflicting legal principles — one imprisons the releasor within the terms of his contract; the other requires the releasee to fully account for his tort.² As we view it, the resolution of this conflict involves policy considerations, a fact which most of the courts taking the liberal position either fail to recognize or are reluctant to concede. On the one side, there are long established and well understood rules of contract law, which, at least in this State, normally apply to releases. Parish v. Milk Producers Ass’n, 250 Md. 24, 101, 242 A.2d 512, 555 (1968); Thomas v. Erie Ins. Exchange, 229 Md. 332, 340, 182 A.2d 823, 827 (1962). On the other side, there are considerations, largely stemming from compassion, which importune the larger number of courts to treat seemingly unambiguous and freely entered into personal injury releases as sui generis, so as to justify their permitting the releasor to renege on his bargain. We agree with the trial judge when he commented that the general policy considerations to be reckoned with were well articulated by the Supreme Court of Minnesota, when it said:

There are at least two policy considerations that this court must balance in determining when voidance of personal injury releases should be permitted. One compelling argument in favor of a liberal policy is that the individual who lacks knowledge of his injuries because of fraud, concealment of facts, or mistake may sign a release and thereafter become a public charge... . However, it is also true that the law favors compromises, and there must be a zone of free action within which differences may be terminated by the parties with the complete assurance that the matter is final. "To permit [release settlements] to be vacated except for the most compelling reason creates 'uncertainty, chaos, and confusion’ with respect to future dispositions, and is a disservice to other litigants whose matters are thereby delayed.” [Schmidt v. Smith, 299 Minn. 103, 216 N.W.2d 669, 671-72 (1974).]

In balancing the policies that underlie the competing tenets here, we are convinced that our society will be best served by adherence to the traditional methodology for interpreting contracts in general, including other species of releases. Before explaining the reasons for this conclusion, we make several observations that impact on this result: (i) since (as already mentioned) releases in this State are contractual, it follows that, in the absence of constitutional, statutory or clear important policy barriers, parties are privileged to make their own agreement and thus designate the extent of the peace being purchased, Dish Realty T. Ins. v. Jack Spicer R. Est., 280 Md. 422, 429, 373 A.2d 952, 956 (1977); (ii) particularly in this era of burgeoning litigation, compromise and settlement of disputes outside of court is to be encouraged and, thus, a release evidencing accord and satisfaction is a jural act of exalted significance which without binding durability would render the compromise of disputes superfluous, and accordingly unlikely; and (iii) because releases are contracts, conventional rules of construction dictate that when the scope of the agreement is stated in clear and unambiguous language, the words utilized to express this breadth should be given their ordinary meaning as there is no room for interpretation, Parish v. Milk Producers Ass’n, supra; Thomas v. Erie Ins. Exchange, supra. In this latter regard, it is appropriate that we repeat here our summary of just a few weeks ago in Goldberg v. Goldberg, 290 Md. 204, 428 A.2d 469 (1981), with respect to what is the longstanding law of this State regulating construction of such compacts.

[S]ettlement agreements, as all other contracts scrutinized under the law of this State, are subject to interpretation in light of the settled and oft-repeated principles of objective construction. Orkin v. Jacobson, 274 Md. 124, 128, 332 A.2d 901, 903 (1975). "The written language embodying the terms of an agreement will govern the rights and liabilities of the parties, irrespective of the intent of the parties at the time they entered into the contract, unless the written language is not susceptible of a clear and definite understanding...Slice v. Carozza Prop., Inc., 215 Md. 357, 368, 137 A.2d 687, 693 (1958). "[W]here a contract is plain and unambiguous, there is no room for construction, and it must be presumed that the parties meant what they expressed.” Kasten Constr. v. Rod Enterprises, 268 Md. 318, 328, 301 (1973); Little v. First Federated Life, 267 Md. 1, 6, 296 A.2d 372, 375 (1972); Devereux v. Berger, 253 Md. 264, 269, 252 A.2d 469, 471 (1969). Thus, when interpreting [an] . .. agreement, this Court is "bound to give effect to the plain meaning of the language used.” Woodham v. Woodham, supra [235 Md. 356], 360, 201 A.2d [674,] 676; Sands v. Sands, 252 Md. 137, 249 A.2d 187 (1969).

To this epitome we now add that the law of this State does not permit contracts to be reformed or otherwise ignored merely because of uncommunicated mental reservations entertained by one of the parties at the time it was executed. And as a matter of substantive law, parole evidence ordinarily is inadmissible to vary, alter or contradict a contract, including a release, that is complete and unambiguous, in the absence of "fraud, accident or mutual mistake.” McLain v. Pernell, 255 Md. 569, 572, 258 A.2d 416, 418 (1969) (emphasis in original).

It is against this backdrop of principles, so often stated as to be inculcated in the contract law of this State, that the petitioners request they be absolved of responsibility under the release, and in this way be freed to pursue additional monetary relief for the newly discovered brain injury. In explaining why we choose not to follow the path indicated by the petitioners, we initially observe what most, if not all, of the courts which adhere to the majority view concede: If "from the particular language of the release or from the circumstances of the negotiated settlement, there was a conscious and deliberate intention to discharge liability from all consequences of an accident, the release will be sustained and bar any future claims of previously unknown injuries.” Mangini v. McClurg, 24 N.Y.2d 556, 301 N.Y.S.2d 508, 249 N.E.2d 386, 391 (1969); Ranta v. Rake, 91 Idaho 376, 421 P.2d 747, 755 (1967); Denton v. Utley, 350 Mich. 332, 86 N.W.2d 537, 542 (1957); Hanson v. Northern States Power Co., 198 Minn. 24, 268 N.W. 642, 644 (1936); Boman v. Johnson, 83 S.D. 265, 158 N.W.2d 528, 530 (1968). See also Annot., 71 A.L.R.2d 82, 160 (1960). This being true, it follows then that the major policy considerations advanced to justify this majority position — the victim not become a charge on the public, the tortfeasor (and normally an insurance carrier) be required to compensate injuries for which he is otherwise at law responsible (and, in the case of an insurance company, for which that corporation was itself paid to assume the risk) —are not in and of themselves overriding, so as to necessitate the creation of an absolute rule making this type of release unenforceable. Given the fact that a release of unknown injuries is almost universally permissible, it seems to us that the real issue, as is often the case involving contractual disputes, boils down to a question of the intent of the contracting parties. In making this essential and factual determination, the liberal stance casts aside the centuries old methodology utilized for the interpretation of contracts in favor of an approach which rejects the objective theory of contracts and is designed to elicit the supposed actual contractual consciousness of the releasor alone. This approach often overlooks or avoids the words used by the parties to express their agreement and in its place substitutes undefined conjecture as to what the releasor would have intended if the full extent of the injuries had been known at the time of the compact. Thus, these courts depart from the otherwise settled rules of construction which, for the most part, have operated satisfactorily for centuries, in order to dispose of particularly distressing cases in a compassionate and seemingly just manner.

Although we still would not agree with the ultimate determination, the conceptual basis of the opinions espousing the majority view would be more palatable if those courts had determined that the policy considerations in favor of permitting the voidance of a release of existing, but not yet known, injuries were so manifest and overwhelming that a rule was required which rendered such releases voidable. No decision we have found, however, arrives at this result by openly balancing these policies. Rather, the courts forming the majority attempt to justify the result they reach by an utterly inappropriate application of the mutual mistake of fact doctrine to factual circumstances which not only do not present a mutual misconception of basic fact, but often do not appear to involve a mistake by even one party. Thus, the "mistake” found is the fact that the parties did not know the extent of the injuries suffered, notwithstanding that the releasor expressly assumed the risk (as parties to all contracts inevitably do) of the lack of omniscience as to what might develop in the future, by an express release of all únknown claims. In our view, the bastardization of the well-founded principles concerning mutual mistake of fact is entirely too high a price to pay for the obtention of an unprincipled, if temporarily desirable, result. We are not convinced that violence to the human body presents a unique situation such that an independent set of principles is required to interpret contracts concerning the injury, and indeed, we can conceive of a number of circumstances where a binding release of othér types of claims can create hardship of an equal or greater dimension eliciting sympathy and compassion of comparable magnitude. If hardship is the criterion, then the line of enforceability should not be drawn in accordance with the nature of the claim, but rather the extent of the hardship suffered. If, on the other hand, the issue is (as we think) whether there has been a mutually intended release of unknown injuries then the nature and extent of the misfortune is beside the point, for the inquiry focuses on the intention of the parties to the contract and not on knowledge gained subsequent to its execution. Long ago, it was resolved that this intention is to be derived in the usual case from the meaning that an individual would normally ascribe to the words chosen by the parties to memorialize their agreement, and not from other evidence indicating "what the parties thought the agreement meant or intended it to mean.” Board of Trustees v. Sherman, 280 Md. 373, 380, 373 A.2d 626, 629 (1977). In any event, this intent is certainly not to be garnered from evidence indicating that one party to an unambiguous contract alone had a disparate intent. McLain v. Pernell, supra, Peters v. Butler, 253 Md. 7, 12, 251 A.2d 600, 602-03 (1969). We believe our McLain decision goes a long way to refute the appellant’s contrary assertion, because as that case makes quite clear under circumstances not unlike those now being presented, where "there is no evidence whatever to show that the [releasee] did not understand ... the release to [mean] exactly what it said,” there is no showing that a mutual mistake of fact existed. McLain v. Pernell, supra at 574, 258 A.2d at 418-19.

We also fail to see on what basis the principle of res judicata can be distinguished, as the majority view apparently does, from those principles favoring binding settlements, so that a judgment for damages entered after the trial of a claim for personal injuries, pursued without full knowledge of the extent of the harm suffered, cannot similarly be reexamined and voided. Nor do we perceive why there should be an appreciable difference between the effect of the bar resulting from a release and that encompassed in our statutes of limitations. Moreover, it seems to us that any fair concept of true mutuality would necessitate that in the reverse situation from that presented by this case — where a tortfeasor pays for injuries that are apparently permanent while in fact only temporary — the payor be allowed to similarly extricate himself from the consequences of the release contract and recover the amount given for the elusive injury. In short, to adopt the rationale advanced by the petitioner would signal a fundamental shift away from, or a disregard of, the significant tenet encouraging the finality of legal matters and claims which weaves its way through many aspects of our law and procedure.

Finally, we take notice that the General Assembly has perceived the existence of, and addressed, particular problems associated with the release of personal injury claims. By one statute, it has made any release of claims for personal injxxries or any contract for legal representation with respect to recovery of damages for the tort, executed within five days of the casualty, voidable at the behest of the injured party at any time within sixty days. See Md. Code (1957, 1980 Repl. VoL), Art. 79, § 11. Additionally, by another enactment, the legislature has ordained that settlement agreements and releases entered into by a victim of an alleged tort within fifteen days of the occurrence of the mishap under certain circumstances "shall not be utilized for any purpose in any legal action” connected with the injury. Code (1957, 1980 Repl. Vol.), Art. 79, § 12. Notably absent from the statutory law of this State is any further enactment voiding, modifying or otherwise affecting releases of unknown, but later manifested, injuries. This absence indicates to us that, in pondering the problems associated with the release of personal injuries, the legislature neither considered exoneration of unknown injuries to be against public policy nor discerned that releases of this type presented particular difficulties requiring some form of legislative control or regulation. We perceive no compelling reasons why this Court should do more.

We now return to the release presented by this case. In so doing we are confronted with the earlier quoted language releasing all claims "on account of bodily injuries, known and unknown, and which have resulted or may in the future develop, sustained by Irene Schulman ... in consequence of ... the automobile accident occurring on or about July 25, 1975.” It is readily apparent from a mere glance at this verbiage that the release could not be more clear, more specific, more complete, more all-inclusive or more all-embracing. It would require turning the English language on its head to conclude that, from these words used, the releasors did not by this document exhibit a clear desire to extinguish the claim for the damages they now seek.³ Moreover, since Judge McAuliffe specifically found as a fact that "all parties intended to and did finally settle all claims for injuries known and unknown” which resulted or might develop in the future as a consequence of the accident, even in most of the jurisdictions following the liberal view, this factual finding would prevent the further pursuit of damages. The release, therefore, effectively bars the petitioners’ claim for the later discovered personal injuries.

Having concluded that the release here executed by the releasors now prohibits the collection of any supplemental damages by them from the respondents for the July 25,1975, accident, there remains no reason to consider whether the substantial additional barrier caused by entry of the consent judgment may be dislodged. Accordingly, we will affirm the judgment of the Court of Special Appeals.

Judgment affirmed.

Costs to be paid by petitioners.

1 . A line by the plaintiffs noting the judgment as being "paid fully and satisfied,” as well as one directing that the remaining claims against all defendants be marked "settled and dismissed with prejudice,” were filed on March 6, 1978.

2 . For a discussion of settlement agreements in personal injury cases, see: Dobbs, Conclusiveness of Personal Injury Settlements: Basic Problems, 41 N.C.L. Rev. 665 (1963); Malina, Unilateral Mistake of Fact in Personal Injury Releases, 10 Clev. Mar. L. Rev. 70 (1961); Havighurst, Problems Concerning Settlement Agreements, 53 N.W.U.L. Rev. 283 (1958); Andrews, The Personal Injury Release, Ins. L.J., p. 212, April, 1965; Havighurst, The Effect Upon Settlements of Mutual Mistake as to Injuries, 12 Defense L.J. 1 (1963); Note, Personal Injury Release and the Mistake of Fact, 39 N.D.L. Rev. 421 (1963); Note, Avoidance of a Release for Personal Injuries on the Ground of Mutual Mistake of Fact as to the Extent or Nature of the Injuries, 19 U. Pitt. L. Rev. 111 (1957).

3 . Additionally, we note a number of cases have indicated the fact that a release is given based on independent medical or legal advice, or both, as here, supports the conclusion there was an intentional release of unknown injuries. See cases collected in Annot., 71 A.L.R.2d 82, 116-17 (1960), and the later case service.