Ranta v. Rake

421 P.2d 747, 91 Idaho 376, 1966 Ida. LEXIS 289

• Court: Idaho Supreme Court
• Decided: December 21, 1966
• Docket: 9796
• Status: Published

Opinions

SPEAR, Justice.

This appeal presents the issue whether an honest release, irrespective of its terms, may be avoided where it later appears that unknown injuries existed at the time it was executed.

On April 8, 1962, appellant (Werner Edward Ranta) sustained injuries in an automobile accident for which he seeks damages against Charles Rake, a minor, the driver of the other car, and his parents, Charles C. and Janet F. Rake. The accident occurred at an intersection in the Lewiston Orchards, near the City of Lewis-ton, Nez Perce County, Idaho. Both Ranta and his wife, Eva Jean Ranta, were, as a result of the accident, taken to the hospital in Lewiston for treatment. Mrs. Ranta sustained a cut on her right knee and was otherwise bruised and shaken up. The record discloses that when appellant was admitted to the emergency room at the hospital he was suffering from a contusion of the left eye, á laceration of the left check, a laceration under the left arm and a back injury. The injuries however seemingly were only minor in nature and within a few days following the accident Ranta returned to work.

Dr. John E. Carssow, the Ranta family physician for more than fifteen years, treated appellant at the hospital and for a month following the accident at his office in Lewiston. The doctor X-rayed and otherwise treated the back injury which appellant had sustained but was unable to diagnose the injury as anything more serious than a lumbar strain or pulled muscle.

Charles P. Burch, an independent adjuster representing respondents’ insurance carrier, visited the Ranta home within two or three days after the accident and secured from each a written statement which detailed the facts of the collision as known by them and the nature of the injuries each had sustained. There was no discussion of a settlement at this time. The parties intended to ascertain the full extent of the injuries sustained by appellant and his wife before attempting to settle. Subsequently appellant told his physician that he had been contacted by an insurance adjuster and that he was going to sign a release based on the results of the doctor’s diagnosis. Dr. Carssow told appellant it was his opinion that appellant would “probably get better” and that he expected him to “get better.” Appellant, in fact, continued to show improvement.

One month after the accident, on May 8, 1962, appellant and Mrs. Ranta, at their request, again met with Mr. Burch at their home. They now agreed to settle and compromise, for $1,114.50, any claim they had against Charles Rake, or his parents as owners of the car their son was driving, arising out of the accident. The couple executed a general release, and the consideration set forth in the release subsequently was paid to them, and a receipt therefor given by them. The payment of $1,114.50 was apportioned to appellant’s car damage in the amount of $285.00, to Mrs. Ranta’s general and special damages of $223.00, and the balance' to appellant’s general and special damages. The figures used to arrive at the amount of the settlement were submitted by appellant and his wife and were agreed to as such by Charles Burch, the adjuster. The release, a form instrument, is broadly worded and is a release for all known and unknown injuries which may have resulted from the accident of April 8th. Its terms are as follows:

“RELEASE OF ALL CLAIMS

“KNOWN ALL MEN BY THESE PRESENTS:

“That the undersigned, being of lawful age, for the sole consideration of ONE THOUSAND ONE HUNDRED FOURTEEN AND 50/100 . DOLLARS ($1,114.50) to the undersigned in hand paid, receipt whereof is hereby acknowledged, do/does hereby and for my/our/its heirs, executors, administrators, successors and assigns release, acquit and forever discharge Charles E. Rake and Clarence Rake and his, her, their, or its agents, servants, successors, heirs, executors, administrators and all other persons, firms, corporations, associations or partnerships of and from any and all claims, actions, causes of action, demands, rights, damages, costs, loss of service, expenses and compensation whatsoever, which the undersigned now has/have or which may hereafter accrue on account of or in any way growing out of any and all known and unknown, foreseen and unforeseen bodily and personal injuries and property damage and the consequences thereof resulting or to result from the accident, casualty or event which occurred on or about the 8th day of April, 1962, at or near Lewiston, Idaho.

“It is understood and agreed that this settlement is the compromise of a doubtful and disputed claim, and that the payment made is not to be construed as an admission of liability on the part of the party or parties hereby released, and that said releasees deny liability therefor and intend merely to avoid litigation and buy their peace.

“The undersigned hereby declare (s) and represent (s) that the injuries sustained are or may be permanent and progressive and that recovery therefrom is uncertain and indefinite and in making this Release it is understood and agreed, that the undersigned rely(ies) wholly upon the undersigned’s judgment, belief and knowledge of the nature, extent, affect and duration of said injuries and liability therefor and is made without reliance upon any statement or representation of the party or parties hereby released or their representatives or by any physician or surgeon by them employed.

“The undersigned further declare (s) and represent(s) that no promise, inducement or agreement not herein expressed has been made to the undersigned, and that this Release contains the entire agreement between the parties hereto, and that the terms of this Release are contractual and not a mere recital.

“THE UNDERSIGNED HAS READ THE FOREGOING RELEASE AND FULLY UNDERSTANDS IT.

“Signed, sealed and delivered this 8th day of May, 1962.

CAUTION: READ BEFORE SIGNING BELOW”

Appellant had been in constant touch with his physician prior to the execution of the release and had been informed the injuries which he had received were relatively minor. However, on June 15th, more than a month following the execution of the release, appellant experienced severe pain in the area of his left hip, which radiated down his left leg. He secured treatment from two doctors in Lewiston, and one in Spokane, Washington. Dr. Colburn concluded appellant was suffering from an intervertebral herniated disc, which he removed by surgery on September ■2, 1962. It was Dr. Colburn’s opinion that the immediate and initiating cause of the herniated disc was the car accident of April 8th. Appellant had experienced low back pain and trouble while in high school particularly in the year 1948 or 1949 and had some disc pathology prior to April 8, 1962, but Dr. Colburn concluded the accident of that day aggravated or triggered the pain which appellant experienced on or about June 15th, and which resulted in the subsequent surgical procedure.

On December 19, 1963, appellant filed an action against respondents, in which he alleged that the respondent Charles Rake was negligent in operating the automobile owned by his parents and that such negligence was the proximate cause of the accident of April 8, 1962, which resulted in the injuries he sustained. Respondents entered the affirmative defense that appellant had executed a general release which barred further recovery and precluded the action against respondents. The matter, in accord with the stipulation of the parties, was tried on the sole issue of respondents’ affirmative defense. The trial court specifically found that the appellant intended in executing the release to effect a complete release as to any condition in his back which existed at or prior to the execution of the release and as to any subsequent development of that condition. The court further found that appellant had released respondents from any and all causes of action he had against them on or prior to May 8, 1962, or any subsequent development known or unknown, anticipated or unanticipated. From these findings the trial court concluded that at the time of the release, appellant understood the entire terms, covenants and conditions of the release, and that any mistake as to appellant’s condition or health was a unilateral mistake and not a mutual mistake as between appellant and his releasees. The court further concluded that the release was binding and valid and afforded respondents a complete defense to the action. Judgment was entered thereupon for the respondents dismissing the action with prejudice. From this judgment this appeal was taken.

The judgment must be reversed.

There is an irreconcilable split of authority on this question in the opinions of sister states which have had the occasion to rule thereon. The minority view is aptly expressed in Wheeler v. White Rock Bottling Co. of Oregon, 229 Or. 360, 366 P.2d 527 (1961). After recognizing the existence of the majority rule and the reasons ordinarily given to substantiate it, the Oregon court rejected the rule and, in part, stated:

“Heretofore this court has considered the settlement of claims prior to litigation to be in the public interest. In the redress of wrongs between motorists, we follow adversary procedure in court when settlement is not otherwise made. There is no reason in principle why an improvident settlement made before trial is any more to be set aside than a judgment rendered upon a verdict that hindsight later proves to have been obtained too soon and for too little. No one has suggested that judgments in personal injury cases should be kept open like claims under the Workmen’s Compensation Act for additional awards in the event of aggravation (ORS 656.276).

“As noted, there are attractive policy reasons for adopting a rule that would permit perfectly honorable releases to be repudiated in the event of aggravation of an injury or the discovery of undiagnosed injuries. There are less compassionate but equally sound policy reasons for requiring persons of legal age and capacity to contract to stand by their covenants, including bargains containing an element of chance. * * *

“Accordingly, while we are mindful of the trend elsewhere toward treating releases as binding only when they do not result in hardship, we believe that our own decisions and previous choices of competing policy considerations require us to reject mere improvidence as a plausible ground for setting aside otherwise unimpeachable contracts.”

It will be noted there was a strong dissent to this opinion.

The majority and the more modern view, while recognizing the policy of encouraging out-of-court settlements of personal injury claims, permits a releasor to avoid a release where unknown injuries existed at the time the release was executed though the release invariably is broad enough to encompass unforeseen injuries and though the release was honestly obtained without fraud, overreaching or undue influence on the part of the releasee. Some courts have recognized that cases of this type are to some degree sui generis and substantially abandon any attempt to fit these situations within the classic limitations of the law of fraud or mistake and have held that the release may be set aside upon a showing of an inequitable result unless it is established that it was “fairly and knowingly made.” Casey v. Proctor, 59 Cal.2d 97, 28 Cal.Rptr. 307, 378 P.2d 579 (1963); Denton v. Utley, 350 Mich. 332, 86 N.W.2d 537 (1957); Clancy v. Pacenti, 15 Ill.App.2d 171, 145 N.E.2d 802, 71 A.L.R.2d 77 (1957); Smith v. Broscheid, 46 Ill.App.2d 117, 196 N.E.2d 380 (1964); Goodman v. Missouri Pacific Railroad Co., 312 S.W.2d 42 (Mo.1958); 6 Corbin on Contracts, § 1292, pp. 181-183 (1962); and 5 Williston, Contracts, § 1551, pp. 4347-4349 (rev. ed. 1937). For an exhaustive coverage of this question see 71 A.L.R.2d 82.

The courts following this policy of avoiding releases where improvidently made are guided by the following factors: (a) the peculiar dignity the law accords the human person, as distinguished from articles of commerce; (b) the very real possibility of being mistaken about the long range effects of damage to human tissue; (c) the inequality of the bargaining positions of the contracting parties; and (d) the amount of consideration received compared to the risk of the existence of unknown injuries. The rationale is most aptly expressed by the Illinois court in Clancy v. Pacenti, supra, as follows:

“We have not taken into account cases, other than those involving personal injuries because personal injury cases in this respect are sui generis. Ricketts v. Pennsylvania R. Co., 2 Cir, 153 F.2d 757, at page 767, 164 A.L.R. 387. However no rationale has been formulated' for the special treatment of such cases. It appears to rest on the peculiar character of personal injuries. In such cases it is not an article of commerce that is involved, but the human mind and body, still the most complicated and mysterious of all the things that are upon or inhabit the earth. Here, mistakes, are easily made and the consequences are more serious than in any other of the affairs of man. A slight abrasion may mean nothing or it may lead to a malignacy. Insignificant pain may mean the beginning of a fatal coronary attack or only a slight intestinal disturbance. Yet, a man cannot and does not live in dread of these possibilities. He accepts assurances that all will be well, even though ultimate consequences cannot be appraised as in matters involving property or services. In Ricketts v. Pennsylvania R. Co., supra, 153 F.2d at page 767, Judge Frank, in a specially concurring opinion says:

“ Tn all likelihood, it is because the courts have sensed the differentiated character of releases of personal injury claims that the “modern trend” as Wigmore describes it, “is to * * * develop a special doctrine * * * for that class of cases, liberally relieving the party who signed the release.” Wigmore, Evidence, § 2416.’

“The sharp economic inequality of the bargaining parties which generally exists in this class of cases has also been considered by the courts in their consideration of this doctrine. It is by no means as modern an innovation as to some may appear. Long before personal injury cases began to absorb the common law courts, the rule was applied to seamen in admiralty cases. (See opinion of Judge Frank, supra, quotation from Mr. Justice Story.) That related to contracts between seamen and their employers, but no one can doubt that it has a considerable bearing upon situations such as are here presented.

“The foregoing are the principal reasons which have impelled courts to take a broad view in affording relief for a release executed on a mistaken understanding of the nature and extent of personal injuries. Yet it is important to preserve a field of free action within which parties may compromise their differences with substantial assurance that the matter will not arise again. We therefore summarize the aspects of the instant case which bring it within any reasonable rule to be deduced from the cases cited. The release was given for a nominal sum, $150, $100 of which was for damages to plaintiff’s car. Both parties understood plaintiff’s injuries to be of little or no consequence when, as a matter of fact, they were of a character different, both as to nature and extent, from the diagnosis. If plaintiff had known that as a result of the accident she had two herniated discs and had settled on the assumption that the consequences would not be as severe as those which followed, a different case would have been presented to us. The mistake was clearly proved.” 145 N.E.2d at 805. For a complete summary of the rule as applied in Illinois, see Reede v. Treat, 62 Ill.App.2d 120, 210 N.E.2d 833 (1965), a late case which approves the theory adopted in Clancy v. Pacenti, supra.

The same factors are present in the case at hand and require setting aside the release executed by the appellant.

Additionally it will be noted, this court has previously recognized this general principle requiring setting aside of a release when the true facts were unknown to the parties at the time the release was executed. In Heath v. Utah Home Fire Ins. Co., 89 Idaho 490, 406 P.2d 341, although the court there was concerned with a release involving damages to real property by hail, nevertheless the court relied upon, and extensively quoted from, Casey v. Proctor, supra, the California case which involved personal injuries of almost the exact nature suffered by appellant in the case at hand. This court also cited Sloan v. Standard Oil Co., 177 Ohio St. 149, 203 N.E.2d 237 (1964).

See also I.C. § 29-113 ¹, which we find is indicative of recognition by the Idaho legislature, that releases of claims for personal injuries involve special policy considerations.

For another case which applies the majority rule to facts strikingly similar to those in the case before the court, see Goodman v. Missouri Pacific Railroad Co., 312 S.W.2d 42 (Mo.1958).

It is conceded that the releasor has the burden of proving the reasons for setting aside the release by clear, satisfactory and convincing evidence, Estes v. Magee, 62 Idaho 82, 109 P.2d 631, but the record shows appellant adequately sustained that burden of proof in the proceedings before the trial court.

The finding of the trial court that appellant intended in executing the release to effect a complete release as to the condition in his back which then existed and as to any subsequent development in that condition, is, we feel, supported only by the wording of the release in evidence. This is not conclusive. To the contrary, the record presents convincing evidence that appellant did not intend to release a claim for the herniated disc, the existence of which was completely unknown at the time the release was executed.

We are of the opinion the majority rule referred to herein is the better rule and applied to the facts at hand, as in the Illinois and Missouri courts in Clancy v. Pacenti, supra, and Goodman v. Missouri Pacific Railroad Co., supra, respectively, requires avoiding any release signed on the basis that the injured party had suffered only a pulled muscle or muscle strain in the back where in fact the releasor had sustained a much more serious disc injury unknown to the releasor at the time of the execution of the release. We do not fear, as did the court in Reinhardt v. Wilbur, 30 N.J.Super. 502, 105 A.2d 415 (1954), that this decision will open the floodgates to recurrent challenges in the courts of releases honestly secured. Our decision does no more than provide just relief in those relatively few cases where it would be inequitable to hold the release a bar to later action or renewed negotiation because the injuries sustained prove more serious than could reasonably have been foreseen by any of the parties at the time the release was executed. This leaves free that much larger area and more frequent situation where out-of-court settlement is satisfactorily and equitably achieved.

The basis for this conclusion is found in the particular facts of this case and in the nature of the peculiar injury involved. The record shows appellant was in constant contact with and secured the advice of his family physician before agreeing to settle with respondents. Having been advised the back injury was relatively minor and would improve, appellant went ahead and executed a release of claim for personal injury on the basis of the professional ilk-formation available to him. The consideration or compensation received was not consistent with an awareness that the injury was or might become as serious as in fact it did, and was a trifling amount compared to the medical cost and other monetary loss which appellant subsequently incurred. By his complaint appellant states that medical expense alone by December 1963 amounted to $1,250.89; that he will incur future medical, hospital and drug expenses in an approximate sum of $5000; that he sustained a wage loss of $3000; and that, as a result of the injury sustained he suffered the loss of enjoyment of those recreational activities that he formerly enjoyed, entitling him to an additional $25,000 damages.

Judgment reversed, with costs to appellant, and the action remanded to the trial court for further proceedings.

McQUADE and TAYLOR, JJ., concur.

1 . “29-113. Release for personal injury—Any agreement entered into by any person within fifteen days after he incurs a personal injury, which may adversely affect his right to be compensated for such injury, may be disavowed by such injured person within one year after the making of the agreement. No agreement disavowed may be introduced as evidence in any subsequent court or administrative proceeding.”