IN THE SUPREME COURT OF THE STATE OF MONTANA
SUZANNE E. SOUTH,
Plaintiff & Appellant,
TRANSPORTATION INSURANCE CO,
Workers' Compensation Court
The Honorable Mike McCarter, Judge presiding.
COUNSEL OF RECORD:
Don Edgar Burris,
Todd A. Hammer, Warden,
Berg, Kalispell, Montana
Submitted on Briefs:
MAR 1 8 1996
CLER.K OF SUPREME CO”=
S T A T E OF McmTANA
January 4, 1996
March 18, 1996
Justice William E. Hunt, Sr. delivered the Opinion of the Court.
Appellant Suzanne E. South (South) appeals the decision of the
Montana Workers' Compensation Court denying her petition to rescind
a settlement agreement arising from her 1986 back injury. We
The sole issue on appeal is whether the Workers' Compensation
Court erred in refusing to rescind the settlement agreement.
South sustained an on-the-job injury to her back in 1986.
underwent back surgery in late 1986 and again in 1988 to alleviate
her back problems.
Both surgeries were on the "L5/Sl"
she entered into a full and final compromise
settlement agreement with her insurer.
level of her
list of seven jobs which both parties felt were
acceptable for South to do, and which were approved as appropriate
by a doctor.
One of the approved jobs was that of massage
South moved to Seattle in order to begin massage
Shortly after beginning the program, however,
South began to experience worsening back pain,
for which she
When her back pain did not abate,
consulted a Seattle area doctor.
South quit the massage training program and returned to Montana.
In 1994, South underwent a third surgery on her back, at the
level of the spine.
She subsequently petitioned the
Compensation Court to rescind the settlement agreement,
alleging that both parties were operating under a mutual mistake of
fact when it was signed.
After trial, the Workers' Compensation
and declined to
In so doing, the Workers' Compensation Court
pointed out that the current problem area in South's back is
different than the area injured in her 1986 on-the-job accident.
The Workers' Compensation Court further cited testimony given by
South's doctor, who stated that "something new" must have happened
around 1991 to cause the re-injury. On this basis, the Workers'
Compensation Court found that the parties were not operating under
a mutual mistake regarding the nature or extent of South's injuries
at the time the settlement agreement was reached.
refused to rescind the settlement agreement, and South appeals.
Did the District Court
to rescind the
STANDARD OF REVIEW
We review the Workers' Compensation Court's findings of fact
Strickland v. State Comp. Mut. Ins. Fund (Mont. 19951,
901 P.zd 1391, 1393, 52 St.Rep.
Lumbermen's Mutual Casualty Co.
963 (citing Wunderlich v.
270 Mont. 404, 892 P.2d
We review the Workers' Compensation Court's conclusions of
law to determine whether they are correct. Strickland, 901 P.2d at
1393 (citing Glaude v. State Comp. Mut. Ins. Fund (1995), 271Mont.
136, 894 P.2d 940).
South alleges that the settlement agreement should be set
therapist" as a career for someone who had
suffered a back injury.
She contends that the settlement agreement
should be rescinded because of this mutual mistake.
however, found that no mistake had been made
regarding the nature or extent of South's injury at the time that
the settlement agreement was entered into, and therefore declined
to rescind it.
Full and final settlement agreements are contracts and are
subject to contract law.
Giles v. Bozeman Public Schools (1993),
257 Mont. 289, 292, 849 P.2d 180, 182. A contract may properly be
rescinded if the parties were
laboring under a mutual mistake
regarding a material fact at its inception.
266 Mont. 219, 879 P.2d 725.
mistake occurs when, at the time the contract is made, the parties
share a common misconception about a vital fact upon which they
774 P.2d 384,
Mitchell v. Boyer (1989), 237 Mont. 434,
386 (citations omitted).
the mutual mistake must be regarding a fact that is
vital to the completion of the contract.
In order to justify
879 P.2d at 725.
it must be "so substantial and fundamental as to defeat
the object of the parties in making the contract." Wyman v. DuBray
Land Realty (1988), 231 Mont. 294, 298, 752
Johnson v. Meiers (1946), 118 Mont. 258, 164
P.2d 196, 199 (citing
In the field of Workers' Compensation, the seminal case on
rescission for reason of mutual mistake of fact is Kienas v.
Peterson (1980), 191 Mont 325, 624 P.2d 1.
of modern cases to apply the principles of general
contract law to workers' compensation
Kienas was the first in
a final settlement agreement was set aside because the
parties were mutually mistaken regarding the nature and extent of
the claimant's injuries at the time the settlement was established.
624 P.2d at 3.
Numerous subsequent cases followed the line of reasoning set
forth in Kienas.
These cases similarly addressed the question of
whether a mutual mistake of fact existed regarding the nature or
extent of the claimant's injuries at the time of settlement.
Sanford v. Brandon Owens, Inc. (1994), 268 Mont. 8, 885 P.2d 444;
Giles, 849 P.2d 180; Wolfe v. Webb (1992), 251 Mont. 217, 824 P.2d
240; Rath v. St.
Labre Indian School (1991), 249 Mont. 433, 816
P.2d 1061; Whitcher v. Winter Hardware Co. (1989),
769 P.2d 1215; Kimes v. Charlie's Family Dining
236 Mont. 289,
175, 759 P.2d 986; Weldele v. Medley Development (1987), 227 Mont.
738 P.2d 1281.
Some were set aside, some were not, but all
confined the inquiry solely to whether or not a mutual mistake
existed regarding the nature or extent of claimant's injuries.
injured worker, it is only to be expected that very frequently the
alleged mutual mistake would concern the claimant's injury.
Compensation Court, however, interpreted the
Kienas decision and its progeny to establish that a mutual mistake
regarding the nature or extent of the claimant's injury is the a
Having concluded that no such mistake existed at the
time the settlement agreement was formed, the Workers' Compensation
Court declined to allow the agreement to be rescinded.
While such a limitation might reasonably be surmised from the
fundamental contract principles which allow for rescission do not
support such a narrow application.
mistake of any material fact,
If a party can show a mutual
impacting the contract to such an
extent that the intended bargain of the parties is defeated, the
contract may be rescinded.
774 P.2d at 386.
general contract principles justifies the limitation of the mistake
doctrine to the nature and extent of the injuries.
in a workers'
to set it
then it should be set aside.
If a mutual
under general contract
Because Kienas and its
progeny have their basis in these fundamental principles of
contract law, they must not be construed in such a way as to defeat
those same fundamental principles.
Moreover, while Montana workers' compensation cases have only
addressed rescission for mutual mistake of fact in the context of
other states have recognized that other
types of mutual mistakes may also warrant rescission.
Court of Appeals set aside a worker's compensation settlement when
the parties mistakenly stipulated that the claimant had no loss of
earning capacity, when in fact he had.
of Arizona (Ariz.Ct.App.
Dutton v. Industrial Com'n
784 P.2d 290.
Supreme Court set aside a workers'
mistakenly listed an incorrect date of injury, when the mistake
materially affected the claimant's rights under the settlement.
Heath v. Airtex Industries (Minn. 1980), 297 N.W.2d 269.
the operative question is whether a mutual
mistake existed which justified rescission, without limitation to
how or when the mistake was made.
We find no error in the Workers'
conclusion that the parties were not mistaken regarding the nature
and extent of South's injury at the time the contract was formed.
As set out above,
the inquiry cannot end with that
we do find error in the Workers'
failure to consider South's contention of
mutual mistake regarding the propriety of the job approved for her
In South's settlement agreement, seven jobs were set out, with
a doctor's approval,
these jobs was massage therapist.
for her to pursue.
In accordance with the terms of
the agreement, South elected to begin massage therapist training in
order to pursue the career she had chosen from the approved list.
While in training, she re-injured her back, was forced to quit the
training program, and subsequently required additional surgery.
The Workers' Compensation Court focused on the testimony of
who testified that
occurred after the settlement agreement to cause the re-injury to
Relying on that testimony, the court refused to rescind
because the occurrence of a re-injury did not
necessarily indicate that the parties were mistaken regarding the
initial injury when the contract was formed.
The mutual mistake that South alleged,
however, was not
regarding the injury itself, but rather regarding the propriety of
as a potential career for one who has an
South's doctor testified unequivocally that such a
career was entirely inappropriate for someone in South's condition
because it involved repeated bending as well as standing for
South contended that both parties
mistakenly believed such training to be acceptable at the time the
signed because both parties relied upon the
erroneous opinion of the doctor who approved the list of possible
Compensation Court noted that "something
must have occurred to cause the re-injury.
It therefore concluded
that the re-injury cannot be related back to the first injury.
South alleged that the "something new"
which caused her to re-
injure her back was the massage training itself.
that it was her good-faith pursuit of an inappropriate job that led
to the second injury--a job she never would have attempted if it
had not been approved by and included in the settlement agreement.
The insurer argues, however, that even if such a mistake was
to the contract because
therapist" was only one of seven jobs approved for South to pursue.
It contends that South remains free to pursue any of the remaining
and that rescission is
We are not persuaded that the "massage therapist" job was not
material to the contract simply because the contract also included
six other jobs which South might have tried instead.
might have done is entirely irrelevant;
what she did was act in
conformity with the contract to her detriment.
Since, of the seven
choices, "massage therapist" was the job she chose, it is entirely
material whether she was able to do it or not.
Nor are we persuaded that the contract should not be set aside
because it still provides six other jobs South is free to explore.
Those jobs were approved after her first injury, but prior to her
no evidence was presented that any of those jobs would
be appropriate now,
after the re-injury.
settlement agreement in no way takes into account the ramifications
of the re-injury.
At the trial before the Workers' Compensation Court, South's
doctor testified that it was more probable than not that the
massage training caused her re-injury.
elicited testimony from the doctor conceding that, hypothetically,
any number of events could cause a re-injury to a weakened back,
But these hypothetical scenarios
from coughing to mowing the lawn.
cannot overcome South's allegation that the massage
with the doctor's testimony that the
training more likely than not was the cause of it.
South alleged a mutual mistake regarding the propriety of
including "massage therapist" as a possible career for someone with
a back injury.
She further alleged that her attempt to pursue this
career, in conformity with the settlement agreement, caused her to
re-injure her back.
The Worker's Compensation Court was presented
with uncontroverted testimony that such a career is in
inappropriate and that it more likely than not caused South's reinjury.
We hold that both parties,
for South to pursue.
at the time of the contract,
therapist" to be an appropriate job
We further find that the inclusion of
therapist" as a job option was a material part of the
contract at issue, because that was the option that South did in
Because both parties, at the time of the contract,
were mutually mistaken regarding a material fact, South is entitled
to rescission of the settlement agreement.
The settlement agreement is set aside.
Justice Charles E. Erdmann dissenting.
determination that the Workers' Compensation Court did not err when
it concluded that the parties were not mistaken in regard to the
nature and extent of South's injury at the time the settlement
majority's conclusion that the parties were mutually mistaken in
regard to the massage therapist position
The majority states that the Workers'
failed to consider South's contention of mutual mistake regarding
Compensation Court made both factual findings and conclusions of
The relevant factual
findings are as follows:
18. Dr. Moseley testified that with the exception
of the masseuse position the claimant is presently
capable of performing all the jobs previously approved by
19. The claimant testified that she would not have
agreed to the 1990 settlement if she had known she would
be unable to work as a masseuse.
She did not, however,
tell Transportation or its adjuster that her acceptance
of the settlement was conditioned on the masseuse
position. Moreover, I did not find her testimony in this
Claimant has failed to persuade me that there
was any mistake concerning her ability to perform the job
of masseuse. As Dr. Moseley testified, "something new"
occurred in 1990 or 1991 which affected the claimant's
spine at ~4-5 level and worsened her condition.
Court is not persuaded that claimant would have been
unable to work as a masseuse absent the additional
Claimant has also failed to persuade me that
the masseuse position was material to the settlement
agreement. Dr. Shaw approved several jobs and, with the
exception of masseuse, she can still perform those jobs.
Claimant's ability to perform several jobs was material
to the agreement and she can still do so.
Conclusion of Law No. 3 reads as follows:
The claimant also contends that a mutual
mistake of material fact exists as to the parties'
of her residual labor market.
contention fails for two reasons.
First, claimant has
failed to persuade me that her inability to work as a
masseuse is due to her original injury. Second, even if
the parties were mistaken as to the appropriateness of
the masseuse position, the settlement was not based on
that particular position but rather on the approval of
several positions, only one of which is now deemed
With the exception of the masseuse
position, the claimant has the same residual market now
as at the time of settlement. While she now asserts that
she would not have entered into the settlement had she
known that [she] could not work as a masseuse, she never
communicated that fact to Transportation. Moreover, the
Court is not persuaded that she would have in fact
refused the settlement had the position been disapproved
by Dr. Shaw.
This Court has reopened workers' compensation settlements, but
so rarely and reluctantly.
236 Mont. 289, 769 P.2d 1215.
It is well
established that this Court will not overturn the findings and
Compensation Court where there is
substantial evidence to support them.
Laber v. Skaggs Alpha Beta
247 Mont. 172, 175, 805 P.2d 1375, 1377.
Nor will this
Court substitute its judgment for that of the Workers' Compensation
Court as to the weight of evidence on questions of fact.
Group v. State Comp. Mut. Ins. Fund (1991), 249 Mont 449, 452, 816
P.2d 1070, 1072.
Even though conflicting evidence may exist in the
it is the duty of the Workers' Compensation Court, and not
particularly when such
decisions involve credibility of witnesses and live testimony.
Smith v. United Parcel Service
(1992), 254 Mont. 71, 75, 835 P.2d
To establish the element of mutuality, South testified that
she would not have entered into the agreement if the
position had not been approved.
The Workers' Compensation
specifically found South's testimony in this regard not to be
South also testified that she did not inform the insurer
or its adjuster of this condition so it is impossible to establish
that the insurer was even aware of South's unilateral expectation.
South was approved
for seven different positions.
selected one of those positions
and was ultimately unable to
rather than accept one of the six
remaining positions, she essentially argues that the agreement was
for the masseuse position or nothing.
In agreeing with South's
argument, the majority has ignored the essence of the agreement and
has rewritten its terms.
The fact that South cannot perform one of
seven positions for which she was approved is not material to the
note that the majority properly cites the standards of
from decisions of
Court, which are whether that court's findings are
supported by substantial evidence and whether its conclusions are
the majority then completely ignores and
fails to apply those standards to the decision before us.
The majority's substitution of its judgment for that of the
fact finder is evidenced by the statement: "& are not persuaded
that the 'massage therapist' job was not material to the contract"
of the Workers'
Court's specific findings that & was not persuaded the job was
material, based in large part on its credibility finding regarding
Similarly, the majority "finds" that the job was a material
part of the contract,
in direct contravention of the Workers'
Compensation Court's findings relating to that issue.
Compensation Court's conclusion that there was no "mutual" mistake
in regard to the masseuse position since the agreement was not
conditioned on South's ability to ultimately qualify for that
concluded that there was no mistake as to a "material" fact, since
the agreement approved seven positions from which South could
She can still choose from six of the positions and there
is no legal basis on which to rescind the settlement agreement. I
would affirm the Workers' Compensation Court
Chief Justice J. A. Turnage and
foregoing dissenting opinion.