Edgar Hutcheson and Lena Hutcheson v. Frito-Lay, Inc.

315 F.2d 818, 1963 U.S. App. LEXIS 5575

Opinions

VOGEL, Circuit Judge.

Plaintiffs-appellants brought this action against defendant-appellee to recover damages by reason of personal injuries allegedly sustained by Lena Hutcheson in a truck-car collision. Defendant answered and along with other defenses pleaded that on May 10, 1961, the plaintiffs for a valuable consideration released the defendant from any and all actions, claims or demands of whatsoever kind or nature and arising out of the accident of April 7, 1961. Defendant moved under Rule 56, Federal Rules of Civil Procedure, 28 U.S.C.A., for summary judgment and based such motion on the deposition of the plaintiff Lena Hutcheson, the release signed by the two plaintiffs, and a draft of the American Insurance Company drawn in favor of the plaintiffs in the amount of $152.98 containing on the face thereof a release of all claims and which was endorsed by the plaintiffs. Plaintiffs resisted the motion and offered in support thereof an affidavit and the deposition of the plaintiff Lena Hutcheson; deposition of John F. White, representative of the defendant’s liability insurance carrier; and the correspondence between defendant’s insurance company and the plaintiffs. The District Judge, after giving full consideration to the contentions of the parties, granted the defendant’s motion and directed the dismissal of the plaintiffs’ complaint. See D.C., 204 F.Supp. 576. Plaintiffs brought this appeal from the judgment so entered. Diversity of citizenship and amount involved satisfy federal jurisdictional requirements.

The essential facts are not in dispute. The accident occurred on April 7, 1961, in Harrison, Arkansas. Plaintiff Lena Hutcheson, accompanied by her husband, plaintiff Edgar Hutcheson, was driving in a northerly direction on State Highway 65. As she approached the intersection of Stevenson Street, she came to a stop in obedience to an electric traffic control signal. A vehicle belonging to the defendant and driven by its employee Joe S. Roitz came to a stop immediately behind the Hutcheson car. When the traffic light changed, Mrs. Hutcheson started ahead into the intersection, intending to turn to her right on Stevenson Street. Because of pedestrians walking in a southerly direction on the east side of the intersection, she came to a complete stop, whereupon defendant’s vehicle ran into the right rear corner of the Hutcheson car. The usual charges of negligence and contributory negligence are set forth in the pleadings.

Following receipt of notice of the occurrence of the accident, the defendant’s insurance company, the American Insurance Company, through its claims adjuster John F. White, wrote to Mrs. Hutcheson on April 11, 1961, as follows: “Dear Mrs. Hutchewson:

“We will appreciate your filling out the enclosed forms in duplicate in connection with the accident which occurred on or about April 7, 1961 at or near Vine and Stevenson Streets, Harrison, Arkansas when your vehicle was involved in an accident with a car driven by Joe S. Roitz.”

On April 14, 1961, Mrs. Hutcheson completed the claim form and returned it to the insurance company. Therein she indicated she was the driver of the car and the wife of its owner and that they were making claim for $181.14, representing one of three estimates covering repair. In answer to the question, “Names of all persons in your car injured”, Mrs. Hutcheson wrote, “None”, although she claims that beginning with the day of the accident she had pains in her back. Of the three repair estimates sent in by the plaintiffs, one was in the amount of $116.81. On April 21, 1961, the insurance company wrote the plaintiffs as follows:

“Dear Mr. and Mrs. Hutcheson: “Enclosed is our draft #9861 in the amount of $116.81 and payable to both of you for damages to your car.

“Please have the attached releases executed and LEAVE THE DRAFT ATTACHED TO THE RELEASES, when presenting it for payment, as the draft cannot be honored for payment unless it is accompanied by the properly executed releases.”

The plaintiffs were dissatisfied with the amount of the offered settlement and went to their own insurance agent for assistance, during the course of which interview Mrs. Hutcheson advised that her back was hurting but “I will come out of that, I want my car fixed.” The draft in the amount of $116.81 and the release were returned to the insurance company unexecuted. On April 28, 1961, the insurance company mailed a new draft in the amount of $152.98, together with a release to the Hutchesons. The plaintiffs held the proffered check and release for a time but on May 10, 1961, they appeared at the office of Roy.Milum, a Notary Public, where they executed the release and had it witnessed and notarized. At that time Mrs. Hutcheson was still suffering pain in her back and since April 14, 1961, almost a month before, had been under the care of her doctor. In answer to the question, “Did you read the release while it was out at your house and before you took it to Mr. Milum?”, she answered, “Why yes I read it, I didn’t pay much attention to it, I just thought that I could fight this back trouble off and get out of it maybe.” The release executed by the plaintiffs covered all claims of any kind or nature whatsoever, including known and unknown injuries. Its caption at the beginning is in large letters and recites the legend: “FULL AND FINAL RELEASE COVERING ALL CLAIMS OR RIGHTS OF ACTION OF EVERY DESCRIPTION, PAST, PRESENT OR FUTURE.” The draft endorsed by the plaintiffs stated on the face thereof:

“In full settlement of all claims for known and unknown injury to person and for damage to property now existing or hereafter arising as a result of an accident occurring on or about April 7, 1961, at or near Vine and Stevenson Streets, Harrison, Arkansas it being understood and agreed that the above amount is the sole consideration of this release and payee(s) by acceptance and endorsement hereof forever release (s) and discharge(s) from all further claims and payments because of said accident the following named parties and all other persons, firms or corporations : H. W. Lay and Company, Inc., Brooks Potato Chip Company and Joe S. Roitz.”

On the basis of this record, the District Court found that there remained no genuine issue as to any material fact, that there was no mutual mistake or mistake of one party accompanied by fraud or other inequitable conduct on the part of the other. In appealing to this court from the judgment of dismissal which followed, plaintiffs claim that there were issues of material facts involving the adequacy of the consideration, fraud on the part of the insurance company and mutual mistake of the parties. The law of Arkansas is, of course, controlling.

The District Court cited and relied on Foster v. Dierks Lumber & Coal Co., 1927, 175 Ark. 73, 298 S.W. 495, wherein the Supreme Court stated at page 496 of 298 S.W.:

“It is well settled under the former decisions of this court that equity has jurisdiction to cancel or reform written instruments either where there is a mutual mistake, or where there has been a mistake of one party, accompanied by fraud or other inequitable conduct of the other party, but, before it will do so, there must be something more than a mere preponderance of the evidence. It has has been uniformly held under such circumstances that the proof must be clear, unequivocal, and convincing. American Alliance Insurance Co. v. Paul (Ark.) [173 Ark. 960] 294 S.W. 58, May 2, 1927; Welch v. Welch, 132 Ark. 227, 200 S.W. 139.”

See also Mississippi River Fuel Corp. v. Hamilton, 1940, 200 Ark. 475, 139 S.W.2d 404; Benedum-Trees Oil Co. v. Sutton, 1939, 198 Ark. 699, 130 S.W.2d 720; Toland v. Uvalde Construction Co., 1939, 198 Ark. 172, 127 S.W.2d 814; and Crockett v. Missouri Pac. R. Co., 1929, 179 Ark. 527, 16 S.W.2d 989, wherein the Arkansas Supreme Court stated at page 990 of 16 S.W.2d:

“The undisputed testimony shows that appellant’s intestate, the person injured in the collision or accident, executed a full release to the railroad company for all damages or injuries, including both known and unknown injuries and future developments thereof growing out of or in any way resulting from the accident or collision, describing it, for the consideration paid, and, there being no fraud alleged or proved in the procurement of the injured person’s acceptance of its terms, no mental incapacity alleged or shown, and no claim of the injured person having executed the release in reliance upon the statement of a physician as to the extent of the injury suffered, both parties were necessarily bound by it, and the court did not err in directing the verdict. Kansas City Southern R. Co. v. Armstrong, 115 Ark. 123, 171 S.W. 123; Francis v. St. Louis, I. M. & S. R. Co., 102 Ark. 616, 145 S.W. 534; St. Louis, I. M. & S. R. Co. v. Campbell, 85 Ark. 592, 109 S.W. 539; Missouri Pac. Ry. Co. v. Elvins, 176 Ark. 737, 4 S.W.(2d) 528.”

While the plaintiffs charge inadequacy of consideration, fraud and mutual mistake, we agree with the District Court that the undisputed facts admit of no such finding. Plaintiffs concede that Arkansas is in accord with the general rule that inadequacy of consideration alone is not sufficient to vitiate a release. In Harmon v. Harrison, 1941, 201 Ark. 988, 147 S.W.2d 739, the Arkansas Supreme Court stated at page 741 of 147 S.W.2d:

“While it is true that mere inadequacy of the consideration alone would not be sufficient to avoid a release, it may be taken into consideration along with all the other circumstances surrounding the procuring of the release.”

In the more recent case of Wilson v. Southwest Casualty Ins. Co., 1957, 228 Ark. 59, 305 S.W.2d 677, the Arkansas Supreme Court stated that a submissible jury question on the issues of fraud or undue influence may be made through the presence of the additional factor of inadequate consideration, but that such a circumstance could not independently support a verdict. Such statement was again approved by the Arkansas court in the recent case of Creswell v. Keith, 1961, 233 Ark. 407, 344 S.W.2d 854.

In the light of subsequent events it may well be that the consideration paid for the release was inadequate to compensate the plaintiffs for the personal injuries sustained by Lena Hutcheson. The release, however, must be judged by the circumstances and conditions existing at the time of its execution. The adequacy or inadequacy of the consideration may not be viewed in the light of after events. Mrs. Hutcheson and her husband were the only ones who knew anything about the injuries. She was fully aware of them and had been to see a doctor with reference to them. She denied their existence in making the claim to the insurance company but nevertheless at the same time reported her injuries to her own insurance agent and also to her doctor. She stated to her own agent:

“My back is hurt, but I will come out of that, I want my car fixed.”

In Wilson v. Southwest Casualty Ins. Co., supra, the Arkansas court said, at page 682 of 305 S.W.2d:

“Furthermore, the term ‘grossly inadequate’ should have been defined and limited to the facts then in existence and known, and not to subsequently ascertained injuries. In Smith v. Missouri Pac. Trans. Co., 197 Ark. 692, 122 S.W.2d 176, a release had been executed shortly after the injury and subsequent injuries thereafter developed. The release was held good against the subsequently developed injuries because-the release was executed in the light of conditions as they then existed. To the same effect, see Mississippi River Fuel Corp. v. Hamilton, 200 Ark. 475, 139 S.W.2d 404.”

It cannot be said here that the consideration was “grossly inadequate” in light of the circumstances existing at the time» and known by Mrs. Hutcheson. Additionally, inadequacy of the consideration to be effective must be coupled with and viewed in the light of other circumstances, such as fraud, misrepresentation or mutual mistake.

Mrs. Hutcheson claims to have been mistaken as to the legal effect of the release which she and her husband executed. To be grounds for avoidance of the executed release, the mistake must be mutual. Fullerton v. Storthz, 1930, 182 Ark. 751, 33 S.W.2d 714. The Arkansas court stated at page 717 of 33 S.W.2d:

“Nor is a contract reformed for ■ mistake, unless it be clearly shown that the mistake was common to both parties, and that the contract as executed does not express the contract as understood by either of them.”

Assuming, arguendo, that both parties to the release were mistaken as to some facet of the negotiations or the release ■contract, they were quite obviously not mistaken on the same matter. Mrs. Hutcheson claims that she did not understand the full import of the release agreement and mistakenly believed it to cover only the damages to the automobile. However, there can be no genuine factual ■question as to the insurance company’s ■understanding of the full legal effect of •the release, nor do plaintiffs claim that the company was mistaken as to such ■effect. What they do claim is that the insurance company was mistaken as to the existence of Mrs. Hutcheson’s injuries; a mistake, it must be noted, that was entirely the fault of Mrs. Hutcheson lierself. Again, there is no question but what Mrs. Hutcheson was aware that she had injuries, even if she was not aware of their full extent. It must follow that any mistakes that possibly existed were not mutual in nature, and ■consequently not a ground for rescission.

It is true, of course, that the mistake of one party if accompanied by fraud or misrepresentation or other inequitable conduct by the other party may be sufficient to avoid a release. Foster v. Dierks Lumber & Coal Co., supra. Here, however, the record discloses no possibility of establishing fraud or misrepresentation on the part of the insurance company. The company dealt at arm’s length with the plaintiffs. The entire transaction was through the .mails. First there was the claim blank which Mrs. Hutcheson completed and returned; then the attempt on the part of the insurance company to settle for the smaller amount; the dissatisfaction of the plaintiffs therewith and their returning the draft and release; and finally the insurance company making a further offer by the forwarding of a draft in a larger amount plus a release which the plaintiffs ultimately executed on May 10, 1961. There being absolutely no independent evidence of fraud, misrepresentation or other inequitable conduct, the possible existence of a unilateral mistake or of inadequate consideration could not vitiate the effect of such a release.

Affirmed.