Wheeler v. White Rock Bottling Co.

366 P.2d 527, 229 Or. 360, 1961 Ore. LEXIS 433

• Court: Oregon Supreme Court
• Decided: November 22, 1961
• Status: Published

Opinions

GOODWIN, J.

Defendant appeals from a decree permitting plaintiff to rescind a release and proceed 'with an action for damages for personal injuries.

Defendant’s truck collided with the automobile in which plaintiff was riding. As a result of a painful back, plaintiff consulted her family doctor whom she was also seeing in connection with a pregnancy. He told her she would continue to have pain until after the pregnancy was completed, but diagnosed the injury as a back strain. A written copy of this, diagnosis was furnished the defendant’s insurer. Three months after the accident, plaintiff signed a document releasing defendant from all claims for injuries known and unknown resulting from the accident. At that time, plaintiff and the insurance adjuster who obtained the release both thought the plaintiff’s injuries were as indicated by her doctor.

Two months after signing the release, the plaintiff discovered that her condition was far worse than she had contemplated when she agreed to settle her claim. Solely for purposes of this appeal, we shall assume that defendant was responsible for plaintiff’s present infirmities.

The court below decreed rescission, and also ineidentally made a finding that plaintiff did not mean to release defendant from “unknown” and “unsuspected” claims. Thus, it is not clear whether the trial court rescinded the release, or reformed it so as to spell out the supposed intent of the parties.

Since this case turns in part on the wording of the release, we set it out in full:

“RELEASE OF ALL CLAIMS

“FOR AND IN CONSIDERATION of the payment to me/u-s at this time of the sum of Five Hundred and No/100 Dollars ($500.00) Dollars by White Bock Bottling Co. the receipt of which is hereby acknowledged, I/we do hereby forever discharge the said White Bock Bottling Co. of and from all claims, demands, damages, actions or causes of action on account of damage to property, bodily injuries or death resulting or to result from an accident which occurred on or about the 12th day of Aug 1958, by reason of auto-truck accident on Union at or near Knott Portland - Oregon.

“It is understood and agreed -that this is a FULL AND FINAL RELEASE of all claims of every nature and kind whatsoever, and releases claims that are known and unknown, suspected and unsuspected.

“I/we further state that I/we have carefully read the foregoing release and know the contents thereof, and I/we sign the same as my/our own free act.

“WITNESS our hand and -seal this 5th day of Nov, 1958.

“'■CAUTION! READ BEFORE -SIGNING

Charles

[signed] C. R. Wheeler (Seal)

[signed] Louise Wheeler (Seal)"

“IN PRESENCE OF [signed] H. L. Young

Stripped of nonessentials, this appeal presents with singular clarity the question whether an honest release, untainted 'by unconscionable conduct, can be set aside because it was improvident. There is no dodging the question. The plaintiff did not show any misconduct on the part of the defendant or its insurer, and thus eliminated from consideration such cases as Whitehead v. Montgomery Ward & Co., Inc., 194 Or 106, 239 P2d 226. She admitted that she read and fully understood what she was signing, and thereby eliminated consideration of alleged misunderstanding dealt with in such cases as Wood v. Young, 127 Or 235, 271 P 734, as well as in the Whitehead case, supra.

The trial court followed the numerical weight of authority in other jurisdictions, the precise question not having heretofore been presented to this court. In allowing the plaintiff to repudiate ’her release, the trial court made two findings of fact upon which the decree is apparently based:

“VI. Plaintiff read and understood the release but intended releasing only her claim for the sacroiliac and lumbar strains. [She now has a herniated disc.]

í í

“VIII. At the time of the execution of the release all parties concerned were mistaken as to the nature and extent of the injuries sustained by plaintiff as the result of the accident.”

We set forth the two findings because they 'lay bare the difficulty in pinning down the rationale of the decided cases. Some cases seem to base relief upon real or supposed

① mutual mistake. E.g., Clancy v. Pacenti, 15 Ill App2d 171, 145 NE2d 802, 71 ALR2d 77 (1st Dist., 1951). Contra, Thomas v. Hollowell, 20 Ill App 2d 288, 155 NE2d 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 NW2d 96; Ruggles v. Selby, 25 Ill App2d 1, 165 NE2d 733 (1st Dist., 1960). This last case, incidentally, is a classic hardship case, and a good illustration of the haziness which surrounds the real reasons for relieving plaintiffs of their improvident contracts. A comprehensive collection of such cases may be found in the Annotation, 71 ALR2d 77, 82.

The course for this court to follow depends entirely upon policy considerations. On the one hand are the established rules of contract law, which, this court has frequently observed, apply to releases,② and on the other are the considerations which have led courts to treat releases as sui generis and inferentially, therefore, to be freely set aside. As Dean Wigmore says: “In general, the modem trend is to lay down no one or more rules of thumb, but to develop a special doctrine in each Court for that class of cases, liberally relieving the party who has signed the release.” 9 Wigmore, Evidence (3d ed, 1940) 55, § 2416. See, also, Comment, Effect of the Personal Injury Release on Further Recovery in California, 42 Cal L Rev 161, 164.

Returning to the release before the court, the law in this jurisdiction does not permit contracts to be reformed merely because of uncommunieated mental reservations held by one of the parties at the time of execution. Pokorny v. Williams, note 2, supra; Rushlight Co. v. City of Portland, 189 Or 194, 219 P2d 732; 1 Williston, Contracts (3d ed, 1957) 338, §94; Restatement, 1 Contracts 74, § 71 (1932). No policy reason has been suggested for abandoning well-settled rules of law in order to permit reformation in this case.

We turn, then, to the plaintiff’s major contention, that she should be allowed to rescind the release because of mutual mistake. Since she now has incurred substantial medical expenses, far beyond her contemplation when she signed the release, she understandably says she was mistaken. She also urges that the insurance adjuster wias mistaken or he would have paid more than $500 for the release. There is little reason to doubt the truth of this assertion.

We assume, therefore, that the plaintiff would have asked and the insurer would have paid more for the release if the parties had known that the plaintiff was suffering from a ruptured disc instead of from supposedly less serious 'back injuries. The courts which have granted relief from premature releases in such eases have talked in terms of mutual mistake. The decisions recognize that ordinarily mistaken opinions, or bad guesses about future possibilities, do not constitute the kind, of mutual mistake that will make a contract voidable at the option of either party. However, the courts following the policy of treating improvident releases as voidable apparently are guided by these factors: (a) the peculiar dignity the law accords the human person, as distinguished from artides of commerce; (b) the very real possibility of being mistaken about the long-range effects of damage to human tissue; and (c) the inequality of the bargaining positions of the contracting parties.

Such cases simply hold that it is not fair to an injured tort victim to hold him to a bargain if it turns out later that the bargain was grossly unwise. The reasons mentioned above, while undeniably sound reasons for scrutinizing releases carefully for fraud or over-reaching, may prove too much when applied to bargains made advisedly and with the express purpose of shifting the burden of risk in exchange for a prompt payment of cash.

"When courts recite, for example, as a matter of more or less common knowledge, that terminal tumors sometimes begin with minor contusions, or otherwise concern themselves with details of tragedy that may stalk those who sign early releases, they are not announcing truths known only to lawyers. These matters are also commonly known by laymen.

The release in this case was signed with a complete understanding, insofar as the document itself and other evidence shows, that for $500 cash in hand the plaintiff was willing to assume whatever risks might lurk in the settlement of her personal injury claim. If the release in this case can be avoided, then no release in Oregon will be final until the statutes of limitations have run their course.

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 verdiet that hindsight later proves to have been obtained too soon and for too little. No one has suggested that judgments in personal injury eases should be kept open like claims under the Workmen’s Compensation Act for additional awards in the event of aggravation (OBS 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. We reaffirmed the general rule with reference to the stability of untainted release agreements as recently as the case of Pokorny v. Williams, 199 Or supra at 33, where we relied upon Broad v. Kelly’s Olympian Co., 156 Or 216, 66 P2d 485. See, also, Reinhardt v. Weyerhaeuser Timber Co., 144 F2d 278 (9th Cir 1944). We are not now disposed to overrule those cases.

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.

As we said through Mr. Justice Lusk in another context:

“No fraud or mistake or lack of business acumen or inability to understand the English language is claimed in this case * * *. It may be that it is a hardship case from the standpoint of the defendant, but courts are not authorized because of harsh consequences to rewrite the terms of a contract.” Ramsay Signs, Inc. v. Dyck, 215 Or 653, 337 P2d 309.

Reversed with instructions to enter a decree dismissing the complaint; neither party to recover costs.

True mutuality should permit the insurer to follow up its overpayments and rescind releases in cases where the injuries are less serious than first supposed.

See cases discussed in Pokorny v. Williams, 199 Or 17, 260 P2d 490. See, also, Springer v. Powder Tool Corp., 220 Or 102, 110, 348 P2d 1112, where we reaffirmed this court’s commitment to the objective theory of contracts.