Maglin v. Tschannerl

Annotate this Case

Maglin v. Tschannerl (2000-182); 174 Vt. 39; 800 A.2d 486

[Filed 24-May-2002]

NOTICE: This opinion is subject to motions for reargument under
V.R.A.P. 40 as well as formal revision before publication in the Vermont
Reports. Readers are requested to notify the Reporter of Decisions,
Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
any errors in order that corrections may be made before this opinion goes
to press.

No. 2000-182

Beth A. Maglin Supreme Court

On Appeal from
v. Windham Superior Court

Janaki N. Tschannerl June Term, 2001

Richard W. Norton, J.

Kristen P. Swartwout of Crispe & Crispe, Brattleboro, for Plaintiff-Appellant.

James E. Preston and Richard H. Wadhams, Jr. of Pierson, Wadhams, Quinn & Yates,
Burlington, for Defendant-Appellee.

PRESENT: Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.

JOHNSON, J. Plaintiff Beth Maglin appeals a Windham Superior Court
order granting defendant Janakin Tschannerl's motion for summary judgment
on plaintiff's personal injury claim for harm suffered in an automobile
accident. The court held that a release signed by plaintiff after the
accident barred her from seeking further relief. Plaintiff claims that the
release should be voided because 1) the release violates the legislative
remedy for rush releases, 12 V.S.A. § 1076; 2) there was a mutual mistake
of fact concerning her injury; and 3) it is unconscionable to enforce the
release. We affirm.

Defendant's car hit plaintiff's car from behind in a two-car accident on
March 12, 1996. Plaintiff's car did not sustain major damage, but
plaintiff suffered from whiplash. Ten days after the accident, an agent
from defendant's insurance company, State Farm Insurance, visited plaintiff
at her home. Plaintiff told the insurance agent she incurred "minor
whiplash" from the accident. Plaintiff accepted the insurance agent's
$500 as compensation for the accident in exchange for her agreeing to
release defendant from all possible future claims. The release stated:

For the sole consideration of $500.00 the receipt and sufficiency
is hereby acknowledged, the undersigned hereby releases and
forever discharges [defendant] from any and all claims . . .
causes of action or suits of any kind or nature whatsoever, and
particularly on account of all injuries, known and unknown, both
to the person and the property, which have resulted or may in the
future develop from an accident which occurred on or about the
12th day of March, 1996.

(Emphasis added). At the time, plaintiff knew she sustained injury, but
believed the $500 to be reasonable compensation for what she viewed as a
minor accident with minor injuries. Plaintiff did not consult a physician
about her injuries or an attorney about possible claims against defendant.
Nevertheless, she signed the release.

Shortly after signing the release, plaintiff's symptoms worsened. She
experienced significant neck pain, headaches, nausea, pain in her arms,
numbness in her hands, and she could not stand, sit, or lie down
comfortably. Plaintiff's chiropractor subsequently diagnosed her symptoms
as stemming from whiplash. Her chiropractor explained to her that
whiplash injuries are commonly misunderstood and underestimated until
serious symptoms occur. Plaintiff incurred medical expenses in excess of
$10,000 for treatment for her whiplash injury and other symptoms. These
expenses were incurred through numerous diagnostic imaging techniques
together with successive chiropractic, physical, and cranial sacral
therapy sessions.

Plaintiff filed a complaint for personal injury damages alleging that
defendant's negligence resulted in severe personal injuries to plaintiff.
Defendant and plaintiff filed cross motions for summary judgment. At
issue was whether the release signed by plaintiff barred defendant's
liability for damages. In granting defendant summary judgment, the court
concluded that the release is valid and enforceable. The court stated
that plaintiff's mistake as to the future consequences of a known injury
is not a mutual mistake of fact that can void the contract. The court
therefore barred plaintiff's claims. This appeal followed.

On appeal, plaintiff contends that the release is unenforceable
because it violates the statutes designed to provide relief from rushed
and unfair release agreements, 12 V.S.A. §§ 1076-77. Plaintiff argues
that even absent strict compliance with §§ 1076 and 1077, the statutes
evince the Legislature's general intent to void these types of releases.
She claims that because the statutes are designed to protect people like
plaintiff from executing rush releases, this Court should allow her to
disavow the release. Additionally, plaintiff argues that she and defendant
were mistaken as to a material fact when they entered into the release.
She claims the relevant inquiry should be what her intent was at the time
she signed the agreement. Thus, plaintiff argues, she did not intend to
release a claim for the symptoms she later developed, but rather only for
the "minor whiplash" she believed she suffered at the time. Finally,
plaintiff claims that the release is unconscionable because of the unequal
bargaining power between the insurance agent and herself.

Defendant counters that plaintiff cannot raise an argument based on 12
V.S.A. §§ 1076-77 because she failed to raise it below. Even if this
court considers §§ 1076 and 1077, defendant contends that plaintiff failed
to comply with the statute of limitations and other requirements of the
statutes, thus, the release is enforceable. Defendant also maintains that
there was no mistake of fact

that should void the release because, at the time the release was executed,
both parties knew of plaintiff's whiplash injury and plaintiff
demonstrated an understanding of the terms of the release. Finally,
defendant asserts that the release is not unconscionable because any
inherent unequal bargaining power was not used coercively, and plaintiff
was not subject to any undue pressure or duress.

Before we turn to the specific claims of plaintiff, we note that there
is a substantial body of case law with facts similar to those presented
here, and that plaintiff is correct that the trend is to avoid releases on
the various legal grounds plaintiff has raised here. E.g., Newborn v.
Hood, 408 N.E.2d 474, 476 (Ill. App. Ct. 1980); see also Annotation,
Modern Status of Rules as to Avoidance of Release of Personal Injury Claim
on Grounds of Mistake as to Nature and Extent of Injuries, 13 A.L.R. 4th
686, 694 (1982) (citing cases). Apparently, it is quite common for people
to enter into early releases without fully considering the consequences.
Because of the unjust results in many of these cases, courts have
responded by avoiding releases between injured parties and insurance
companies. Newborn, 408 N.E.2d at 476 ("facts, when finally known, present
an unconscionable result because of the equitable principle of doing
justice under the circumstances"). An examination of those numerous
decisions reveals at least one truth-that the greater the disparity in the
actual damages that manifested themselves after the signing of a release,
and the amount paid in the early settlement, the more likely it is that
the court will find some manner of voiding the release. The grounds for
decision vary, but include avoidance of the release on mutual mistake of
fact, or on what courts have found to be a more "objective" view of the
parties' intent, or because the surrounding circumstances were considered
unconscionable. See, e.g., Witt v. Watkins, 579 P.2d 1065, 1069 (Alaska
1978) (applying objective test to overturn release, yet acknowledging that
any mistake of

fact was unilateral); Woyma v. Ciolek, 465 N.E.2d 486, 488 (Ohio Ct. App.
1983) (release set aside on the grounds of mutual mistake despite clear
language of the release where compensation was deemed inadequate); see
also McCamley v. Shockey, 636 F.2d 256, 259 (8th Cir. 1981) (language of
release was held not to indicate parties' intent to settle claims for
unknown injuries when result would be inequitable). To be sure, there are
contrary decisions that reject the distortion of mistake of fact doctrine
and contract interpretation, and that hold to the competing policies that
underlie the validity of releases voluntarily and knowingly given. See,
e.g., Bernstein v. Kapneck, 430 A.2d 602, 607-08 (Md. 1981) (noting that
most cases voiding releases "bastardiz[e]" the concept of mutual mistake
of fact, and concluding, "[w]e 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");
Raymond v. Feldmann, 853 P.2d 297, 299 (Or. Ct. App. 1993) ("the
settlement of claims prior to litigation [is] in the public interest.
There is no reason in principle why an improvident settlement made before
trial is any more to be set aside than a judgment . . . that hindsight
later proves to have been obtained too soon and for too little.")
(citations omitted); Collier v. Walls, 369 S.W.2d 747, 762 (Tenn. App. Ct.
1962) (refusing to set aside a settlement based on a release "merely
because the injuries proved more serious than the releaser . . . believed
them to be") (internal citations omitted).

We are unable to find, however, a decision avoiding a release in the
face of a statutory remedy, the terms of which plaintiff has failed to
meet. 12 V.S.A. §§ 1076, 1077. Because our own Legislature has addressed
plaintiff's problem, and set the terms for avoidance of a release entered
into shortly after personal injury, the decision for this Court is more
problematic than for courts in

other states faced with similar facts. We turn first, then, to the
application of the statute and the impact of legislative policy on
plaintiff's claims.

Section § 1076 governs disavowal of releases for claims of personal
injury or death. The statute provides in part that: "an agreement entered
into by a person or his legal representative within fifteen days after
personal injury to him . . . may be disavowed by such person or his legal
representative within three years after making the agreement." Id. In
addition, 12 V.S.A. § 1077 further requires that to disavow the release
plaintiff must return "any consideration received to the person who paid
or delivered the same."

Plaintiff failed to comply with either of the requirements imposed by
the statutes to disavow the release. She did not meet the three-year
limitation period, nor did she return the consideration received for the
release. She concedes that she did not raise the arguments below.
Plaintiff argues here that she satisfied the two requirements of the
statutes when she filed the original case on December 15, 1997 and again
on April 19, 2000 when she filed the appeal. Even if we were to consider
an argument that was not raised below, cf. In re Palmer, 171 Vt. 464, 473,
769 A.2d 623, 629 (2000) (matters not raised or fairly presented below are
not preserved for appeal), the statutory remedy is unavailing because the
first time plaintiff invoked the statute-during this appeal-falls outside
the three-year limitations period, and plaintiff has not returned the
consideration as required. (FN1)

Plaintiff's contention that strict compliance with the statutes is
unnecessary to benefit from the remedy is unpersuasive. The Legislature
created a generous three-year time period to rescind a release entered
into too quickly, undoubtedly in recognition of the fact that injuries may
turn out to be more serious than they seemed initially. Plaintiff failed
to take advantage of §§ 1076 and 1077, even after she had the advice of
counsel. We will not alter the limitations period or the requirements for
disavowal set out by the statute, where plaintiff has made no effort to
comply with them.

Moreover, in view of the statute, we are constrained, in the absence
of extraordinary facts, to find a common law remedy for plaintiff.
Plaintiff argues that the release should be avoided on the basis of mutual
mistake of fact, because she was mistaken as to the extent of her injuries.
Without getting into whether a valid distinction should be made between
cases in which the plaintiff does not know of the injury that later
manifests itself, and those in which plaintiff has a known injury, but
misjudges the future consequences of it, plaintiff has to show, at the very
least, that the mistake was mutual. But plaintiff showed only that she
was mistaken as to her injuries. Without a mutual mistake of fact "one of
the parties can no more rescind the contract without the other's express or
implied assent, then he alone could have made it." Enequist v. Beamis, 115
Vt. 209, 212, 55 A.2d 617, 619 (1947) (internal quotations omitted). In
any event, the release signed by plaintiff explicitly covered "all
injuries, known and unknown, both to the person and the property, which
have resulted or may in the future develop." Plaintiff makes no claim
that she did not understand the release, which was clear in its terms.
See Lamoille Grain Co. v. St. Johnsbury, 135 Vt. 5, 8, 369 A.2d 1389, 1390
(1976) ("Where the language of the agreement is clear, the intention and
understanding of the parties must be taken to be that which their
agreement declares.")

The more probative question in this case is whether the circumstances
of the agreement were so unconscionable that we should set aside the
release, notwithstanding the clarity of its language and the lack of proof
of a mutual mistake of fact. Plaintiff argues that the release should be
disavowed for two reasons-the timing of the insurance agent's visit and the
fact that she had unequal bargaining power with the agent.

With respect to the timing issue, the Legislature has already made the
value judgment that releases entered into within fifteen days may be set
aside for that fact alone, as long as the release is rescinded within
three years and the consideration returned. If we allowed plaintiff, who
entered into a release on the tenth day following her accident, to rescind
on this basis alone or to allow it to weigh heavily in determining
unconscionability, we would simply be circumventing the terms of the
statute.

The release may still be avoided, however, if an element of oppression
infected the bargaining process or its result; but we have been clear that
unequal bargaining power alone will not nullify a contract. Lamoille, 135
Vt. at 8, 369 A.2d at 1391. Instead, we are primarily concerned with
unequal bargaining power when the differential is used to coerce the less
powerful party into agreement because that party has no other meaningful
choice. See id. See also In re Palmer, 171 Vt. at 474, 769 A.2d at 630
(holding terms of bail bond were plainly unconscionable where there was
unequal bargaining power and lack of meaningful choice). The proper
inquiry is whether there is:

evidence of some overreaching on the part of one of the parties
such as that which results from an inequality in bargaining power
or under other circumstances in which there is an absence of
meaningful choice on the part of one of the parties, together
with contract terms which are unreasonably favorable to that
party.

Davis v. M.L.G., 712 P.2d 985, 991 (Colo. 1986) (emphasis added).

Plaintiff complains that defendant's insurance agent was in a more
powerful bargaining position based on his greater experience with whiplash
injuries. Even if this allegation were true, this power differential is
not enough to void the release-the power imbalance must have been used to
coerce the weaker party. Here, the contract is not unconscionable because
there is nothing in the record to indicate that the insurance agent
coerced plaintiff into signing the release, or that plaintiff believed
that she had no choice but to sign the release. Plaintiff produced no
evidence showing any other circumstances, other than her desire to receive
$500 for what she considered a minor injury, that compelled her to sign
it. Indeed, in light of the non-pressing circumstances, plaintiff could
have chosen not to sign the release at all, or she could have, at the very
least, delayed signing the release until she had consulted a lawyer or
doctor. As the court held in Morta v. Korea Ins. Co., 840 F.2d 1452,
1458 (9th Cir. 1988) "[a] person who without coercion or undue persuasion,
executes a solemn release cannot subsequently impeach it on the grounds of
his own carelessness" (citations omitted). See also Clancy v. Pancenti,
145 N.E.2d 802, 804 (Ill. App. Ct. 1957) (in deciding whether to uphold a
release, court examined the extent to which plaintiff exerted a reasonable
effort to discover her injuries prior to signing); Ranta v. Rake, 421 P.2d 747, 753 (Idaho 1967) (whether plaintiff sought medical advice was
significant factor in determining whether plaintiff was unreasonable in
protecting her own interests). Because she had an opportunity for
meaningful choice when the release was presented to her, any differential
in bargaining power was not critical to the contract's formation and not
enough to void the release as unconscionable.

In sum, plaintiff produced no evidence of extraordinary circumstances
that would compel us to overcome, on common law grounds, the effect of the
release entered into by the parties. Summary judgment was properly
granted. Bacon v. Lascelles, 165 Vt. 214, 218, 678 A.2d 902, 905 (1996)

("Summary judgment is appropriate only when the record clearly shows that
there is no genuine issue of material fact and that the movant is entitled
to judgment as a matter of law.").

Affirmed.

FOR THE COURT:

_______________________________________
Associate Justice

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Footnotes

FN1. The dissent asserts that plaintiff's filing of the suit was
sufficient to invoke its protections. At the very least, however,
plaintiff had an obligation to mention the statute somewhere in her trial
court filings, which she failed to do. The first time plaintiff attempts
to invoke the specific protections of the statute was on appeal. The
dissent's suggestion that plaintiff be allowed to hold on to the
consideration if and until she receives a favorable verdict larger than
the amount received allows her to enjoy both the benefits of the
consideration and the potential payoff of a lawsuit with no risk or
consequences.

------------------------------------------------------------------------------
Dissenting

No. 2000-182

Beth A. Maglin Supreme Court

On Appeal from
v. Windham Superior Court

Janaki N. Tschannerl June Term, 2001

Richard W. Norton, J.

Kristen P. Swartwout of Crispe & Crispe, Brattleboro, for Plaintiff-Appellant.

James E. Preston and Richard H. Wadhams, Jr. of Pierson, Wadhams, Quinn & Yates,
Burlington, for Defendant-Appellee.

PRESENT: Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.

MORSE, J., dissenting. Because of the overwhelming disparity of power
between insurance companies and the individual, the difficulty of
anticipating the long-term effects of human-tissue injuries and the
potential for substantial hardship resulting from hasty settlements, our
law provides that agreements for compensation entered into within fifteen
days of injury "may be disavowed . . . within three years of making the
agreement." 12 V.S.A. § 1076; see generally Annot., Modern Status of
Rules as to Avoidance of Release of Personal Injury Claim on Grounds of
Mistake as to Nature & Extent of Injuries, 13 A.L.R.4th 686, 691-98 (1982)
(noting competing interests underlying rescission rules). "When an
agreement is disavowed," the law further requires that the claimant
"tender any consideration received to the person who paid or delivered the
same." 12 V.S.A. § 1077.

Significantly, however, the law is silent on the means required for
communicating a decision to "disavow" such an agreement, as well as on the
definitive moment required for "tendering" the compensation paid.
Although the statute provides for tender "when an agreement is disavowed,"
"when" is a notoriously imprecise modifier. See Webster's New Int'l
Dictionary 2910 (2d ed. 1955) ("when" includes "[a]t the time that,
during, or after the time that"). Must the claimant "tender" payment at
precisely the same moment as the disavowal? May tender be accomplished a
day later? A month? A year?

Despite the statutory silence, the Court holds that strict compliance
with the statutes is required to invoke their protection. This holding is
doubly puzzling. First, despite its holding, the Court provides no
guidance as to how to comply with the notice requirements of a statute that
contains no notice requirements, or how to timely tender the "consideration
received" in the absence of clear time constraints. The Court would
appear to require something like a written letter to the insurer, stating
as follows: "I hereby disavow the agreement entered on such and such a
date under the authority of 12 V.S.A. § 1077; tender of payment previously
received is hereby enclosed." But the fact of the matter is that the
statute does not say this; it simply says that the agreement "may be
disavowed" and that "when an agreement is disavowed" the payment shall be
tendered.

The puzzle is compounded by the Court's rejection out of hand of the
seemingly reasonable statutory construction that would find the agreement
to have been "disavowed" when the insurer is put on notice that the
plaintiff has determined to set aside the settlement and seek additional
compensation. To disavow is to "deny responsibility for," "to disclaim,"
"to disown." See Webster's, supra, at 741. Why is it not reasonable to
conclude that plaintiff in this case put defendant on notice that she was
disavowing or disowning the settlement when she filed a lawsuit -

well within the three-year time period - seeking damages from the accident
totaling $100,000? Is there any doubt that defendant, at that moment,
became fully aware that plaintiff was seeking to disavow the agreement?
Defendant immediately invoked the agreement in its answer to the
complaint, and subsequently relied on its terms in moving for summary
judgment. In her opposition to the motion, moreover, plaintiff explicitly
argued that the agreement should be "set aside."

All of this activity occurred well within the required three-year
period of the statute. Why, then, was it insufficient to put defendant on
notice that plaintiff was seeking to disavow the agreement? The Court's
only answer is that plaintiff had not actually "invoked the statute" in her
pleadings. Ante, at 6. For plaintiff to be required to intone the precise
title and section of the statute substitutes ritual for effect in
communication. Defendant knew exactly what plaintiff intended.

Nor does the Court indicate when precisely the tender of compensation
must be received, noting only that plaintiff failed to return it "as
required." Id. Presumably the purpose of returning the money is to
prevent the plaintiff from benefitting under an agreement that she has
rescinded. See, e.g., Watson v. Bugg, 280 S.W.2d 67, 70 (Mo. 1955) ("It
is just that a plaintiff should not appropriate the benefits of a contract
of settlement and deny its obligations."). Here, unless the insurer
argues and proves that plaintiff incurred less than $500 in damages (the
amount of the settlement), no such enrichment has occurred. Since the
only means of determining plaintiff's actual damages is at trial, it would
appear to be reasonable, for purposes of the statute, to allow tender of
compensation at that time.

Although reason and common sense appear to support these alternative
readings of the statutes, we need not rely exclusively on such reasoning.
In the face of statutory silence or uncertainty, we may consult the common
law, of which there is a substantial body addressing the

rescission of such agreements. See Swett v. Haig's, Inc., 164 Vt. 1, 5,
663 A.2d 930, 932 (1995) (statutory language of uncertain meaning will not
be construed to abrogate common law principles). Thus, we find that the
issues before us were thoughtfully and comprehensively explored by the
California Supreme in the case of Casey v. Proctor, 378 P.2d 579 (Cal.
1963), which concluded as follows:

The courts, therefore, have been very liberal in allowing the
releaser to meet any requirement of notice of rescission or of
timely tender back of the consideration. It is generally held
that bringing suit for the later discovered injuries is
sufficient notice and that a tender even after the action has
been filed is timely, although it is usually stated that it must
be prior to trial. It has been recognized, and rightly so, that
the important question is whether the releasee has been
prejudiced by any delay.

Id. at 589 (emphasis added); see also H. Havighurst, Problems Concerning
Settlement Agreements, 53 Nw. U. L. Rev. 283, 311-13 (1958) (noting that
numerous courts have allowed plaintiffs to return compensation paid under
settlement agreements at or during trial).

This Court has consistently held that remedial statutes should be
liberally construed in favor of those who are intended to benefit from the
legislation. See, e.g., Muzzy v. Chevrolet Div., General Motors Corp., 153
Vt. 179, 187, 571 A.2d 609, 614 (remedial statutes "are entitled to a
liberal construction in favor of those who are intended to benefit from
the legislation"); Viskup v. Viskup, 150 Vt. 208, 211, 552 A.2d 400, 402
(1988) (remedial purpose of legislation "requires a liberal construction
to give full force and effect to the intentions of the Legislature").
Today's holding represents a sharp departure from this salutary principle,
for reasons that are not apparent from the Court's opinion or the law.
Accordingly, I respectfully dissent.

_______________________________________
Associate Justice

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