KELLY v WIDNER

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No. 88-324 IN THE SIJPREME COIJRT OF THE STATE OF MONTANA 1989 ELEANOR KELLY, Plaintiff and Appellant, -vsDON WIDNER and HARLEY HUNTLEY, Defendants and Respondents. District Court of the Twentieth Judicial District, In and for the County of Sanders, The Honorable C.B. McNeil, Judge presiding. APPEAL FROM: COUNSEL OF RECORD: For Appellant: Joan Jonkel argued; Jonkel Law Offices, Missoula, Montana Richard Simonton; Simonton, Howe & Jackson, Glendive, Montana For Respondent: Robert A. Terrazas argued; Worden, Thane Missoula, Montana Submitted: ,- . . : -.. < ' > -. *-:I ..J !: .- -- .v. o -"5 P Clerk ~aines, February 10, 1989 . . . . .; , , " .., t. ,? & Mr. J.ustice Fred J. Weber delivered the Opinion of the Court. This appeal arises from a suit for personal injuries brought by Eleanor Kelly against Mr. Widner and Mr. Huntley. Ms. Kelly signed a release with Farmers Insurance Company in exchange for $8,900. She later filed a personal injury action against the insureds, Mr. Widner and Mr. Huntley, alleging negligence. In their answer, defendants plead the affirmative defense of release. The District Court granted summary judgment in favor of the defendants and Ms. Kelly appeals from that judgment. We reverse the summary judgment of the District Court and remand. The issues are: 1. Did the District Court err in granting summary judgment by finding that no genuine issues of material fact existed? 2. Did the District Court err in imposing technical pleading requirements in its summary judgment motion? 3. Did the District Court err in granting defendants' request for a protective order? Ms. Kelly was injured in an auto accident on November 18, 1979. Mr. Widner was the driver of the automobile which was owned by Mr. Huntley. Ms. Kelly was a passenger in the automobile. The accident fractured Ms. Kelly's left leg in several places and caused other minor injuries. Doctors inserted a rod and bolts in her leg to hold the bone together and placed the leg in a cast. Ms. Kelly was hospitalized for 23 days, and was in a cast for 10 months. At the time of the accident Ms. Kelly was 45, divorced, and lived alone. She had a ninth grade education. She rented a log cabin with no phone, and her car did not run. She had previously worked as a waitress, earning $2.75 an hour. Had she not been injured, she claims she would have begun a new job at $3.50 an hour. With her leg in a cast she was unable to work at all. During the months of December 1979 and January 1980, she had only $10 and food stamps to live on. In January 1980 Mr. Huntley's insurance agents contacted Ms. Kelly. Mr. Widner brought her to his home so she could receive a call from the insurance agents. They questioned her over the phone about the accident and her injuries. The next day, on thirty minutes notice, the agents came to her home. They asked about her medical bills, lost wages, and income. The agents made out a check for $5,325, which Ms. Kelly endorsed to the hospital, and a check to Ms. Kelly for $3,634. From the $3,634, Ms. Kelly paid $1,542 in doctor bills; $1,460 was attributable to lost wages. The agents were at her home approximately thirty minutes. Ms. Kelly was not represented by an attorney. In exchange for the checks Ms. Kelly signed a release dated ~Tanuary24, 1980. She also endorsed the two checks. Each check contained release language above the signature line. Thus Ms. Kelly actually signed three releases. In September of 1980 Ms. Kelly's doctors determined that her bone had not healed. They removed the cast and performed another leg surgery. However, pain and instability have prevented Ms. Kelly from holding any job which requires standing and walking. Ms. Kelly has incurred additional medical bills, and claims she has been unable to work during the 8 years since the accident. Before discussing the issues involved, we feel it is appropriate to mention the obvious time delay in Ms. Kelly's suit. While this is not a complicated case, it has stretched over a period of nearly 9 years to date. Ms. Kelly filed her initial suit on November 25, 1980. Defendants answered on March 5, 1981, asserting the release as an affirmative defense. In February of 1982, Ms. Kelly served her first set of interrogatories; however, defendants objected, calling them stock interrogatories. The case then lay dormant for fo.ur years, and from 1986 to present minimal discovery has been accomplished. No explanation is given for this delay. It is apparent that plaintiff's co.unse1 have not been diligent in pursuing this claim. The record also demonstrates that the defendants were not interested in bringing the matter to dispostion. Neither party has handled this case in a timely manner. Did the District Court err in granting summary by finding that no genuine issues of material fact The appropriate standard in granting summary was stated in Kronen v. Richter (1984), 211 Mont. judgment existed? judgment 208, 683 Summary judgment is never to be .used as a substit.ute for trial if a factual controversy exists. Reaves v. Reinbold (Mont. 1980), 615 P.2d 896, 37 St.Rep. 1500. S.umrnary judgment is only proper if the pleadings, depositions, answers to interrogatories and admissions on file show there is no gen-uine issue of material fact. Anderson v. Applebury (1977), 173 Mont. 411, 567 P.2d 951. The standard that an appellate court applies in reviewing a grant or denial of a motion for summary judgment is the same as that utilized by the trial co,urt initially ,under Rule 56, M.R.Civ.P.--a summary j,udgment is proper when it appears "that there is no gen.uine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." 10 Wright, Miller and Kane, Federal Practice and Procedure, section 2716, p. 643. F,urther, the defendant correctly recognizes the burden of proof which is required in a summary adjudication. Initial.1~the b.urden of proof must be carried by the moving party seeking summary judgment, in this case, Mr. Widner and Mr. Huntley. However, where the record discloses no genuine issue of material fact, the b.urden of proof shifts to the party opposing the motion, in this case Ms. Kelly, who must come forward with substantial evidence raising an issue of fact. Once the burden has shifted in this fashion, the party opposing the motion is held. to a standard of proof abo.ut eq.ual to that initially imposed upon the moving party under Rule 56 (c), M.R.C~V.P. Harl-and 17. Anderson (19761, 169 Monte 447, 548 P.2d 613, 615; Kronen, 683 P.2d at 1318. In light of the above standard and burden of proof, we concl.ude that Ms. Kelly raised a genuine issue of material. fact in this case. Therefore, summary judgment was not appropriate. A release is governed by contract law, and may be rescinded for the same reasons which allow rescission of a contract. Westfall v. Motors Insurance Corporation (1962), 140 Mont. 564, 374 P.2d 96, 98-99. The validity of a release may be challenged therefore on the basis of unconscionability. In determining .unconscionability we have previously applied the UCC standard. In All-States Leasing v. Top Hat Lounge (1982), 198 Mont. 1, 649 P.2d 1250, a case involving a lease transaction, we looked to S 30-2-302, MCA, which is modeled after the same provision in the Uniform Commercial Code, and provides: (1) If the court as a matter of law finds the contract or any clause of the contract to have been .unconscionable at the time it was made the court may ref.use to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any .unconscionable cla,use as to avoid any unconscionable result. (2) When it is claimed or appears to the court that the contract or any cl.a,usethereof may be unconscionable the parties shall be afforded a reasonable opport.unity to present evidence as to its commercial setting, p.urpose and effect to aid the court in making the determination. The official comment to this section of the UCC states the basic test for unconscionability: [Wlhether, in light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be .unconscionable under the circumstances existing at the time of the making of the contract The principle is one of the prevention of oppression and .unfair surprise. . . . In Westlake v. Osborne (1986), 713 P.2d 548, 551, 43 St.Rep. 200, 204, we applied this test in a contract case. While this statute applies to sales transactions .under the UCC, courts have .used this definition by analogy, to apply in non-sales cases. Restatement (Second) of Contracts S 208 (1979). See also Howard D. Hunter, Modern Law of Contracts S 12.06 (1986). We reaffirm the use of this standard. Unconscionability is an equitable doctrine, without a s.uccinct or precise definition. While no single factor is determinative, elements which may be indicators of unconcionability include unequal bargaining power, lack of meaningful choice, oppression, and exploitation of the weaker party's vulnerability or lack of sophistication. See generally, J. Calamari and J. Perillo, The Law of Contracts § 56 (1970). Inadequacy of consideration does not by itself invalidate a bargain, but may be a factor in determining conscionability. Restatement {Second) of Contracts 228 (1979). The und-erlying principle of conscionability is that of doing justice under the circ.umstances of each case. We approve of this standard, framed by the Illinois S.upreme C o u r t , i n S c h e r e r v . Ravenswood Hosp. Med. C t r . 388 N.E.2d (Ill. 1979), 1 2 6 8 , 1 2 7 1 , when it s t a t e d : The modern t r e n d i s t o s e t a s i d e r e l e a s e s o f p e r s o n a l i n j u r y c l a i m s i n s i t . u a t i o n s where t h e f a c t s , when f i n a l l y known, p r e s e n t an .unconscionable r e s u l t because o f t h e e q u i t a b l e p r i n c i p l e of d o i n g j u s t i c e under t h e c i r c u m s t a n c e s o f e a c h c a s e . The p r e s e n t c a s e i n c l u d e s t h r e e c i r c u m s t a n c e s which a r e r e l e v a n t t o a determination of .unconscionability. F i r s t , M s . K e l l y 1s d i r e f i n a n c i a l s i t u a t i o n , h e r l a c k o f e d , u c a t i o n and l e g a l advice, lack of and h e r i s o l a t e d l i v i n g a r r a n g e m e n t s created a vulnerability susceptible t o exploitation. Second, a t t h e t i m e o f s e t t l e m e n t t h e r e was s u b s t a n t i a l u n c e r t a i n t y a s t o t h e e x t e n t o f i n j u r y t o M s . K e l l y ' s l e g , and t h e f u t u r e s.urgery on prognosis. The i n s e r t i o n of a s t e e l rod. Ms. KeI..ly1s l e g When M s . had required Kelly executed t h e re- it had o n l y been two months s i n c e t h e a c c i d e n t . lease, Her l e g was s t i l l i n a c a s t and would remain i n a c a s t f o r a n o t h e r 8 months. I t was 0 b v i o . u ~t h a t M s . be h e a l e d f o r some t i m e . would .unable t o be Kelly's physical K e l l y 1s l e g wo,uld n o t I t was a l s o c l e a r t h a t M s . resume condition work i n t h e near suggests that Kelly future. this was Ms. not a p p r o p r i a t e t i m e f o r e x e c u t i o n of a complete r e l e a s e . an Third, t h e insurance adj.ustors promred a very hasty settlement i n t h i s case, sion. spending only h a l f When t h e y l e f t , M s . received barely an hour i n t h e t o t a l disc.us- K e l l y had r e l e a s e d a l l c l a i m s , y e t eno,ugh money to pay her medical expenses through t h e d a t e of settlement. There i s an i s s . u e o f f a c t whether t h e checks i s s u e d t o M s . K e l l y were a d e q u a t e ,under t h e c i r c . u m s t a n c e s known by t h e p a r t i e s appropriateness of lease manner, in her is having M s . partic.ular subject to a t t h a t time. The K e l l y exec.ute a complete r e - sit,uation, question. and W e procured conclude in that that the combination of these three circumstances raises an issue of fact whether under all the circumstances, justice was done. Furthermore, facts subsequent to a settlement may be considered in determining unconscionability. Newborn v. Hood (Ill.App.3d 1980), 408 N.E.2d 474, 476. The Illinois Supreme Court in Scherer and Hood considered the large disparity between the settlement amount and the actual monetary loss which the injured party eventually incurred. In the present case that disparity may be similarly large. Ms. Kelly claims she has been unable to work for the 8 years since the accident, and this disability may continue. She claims her leg needs further medical attention, including surgery. She is entitled to a factual determination on the issue of whether the settlement amount indicates an unconscionable bargain. We conclude that Ms. Kelly has raised a sufficient issue of material fact to preclude summary iudgment. We reverse the summary judgment by the District Court and remand. I1 Did the District Court err in imposing technical pleading requirements in its summary judgment ruling? Ms. Kelly alleges that the District Court imposed technical pleading requirements in making its summary judgment ruling, and we conclude that the court may have done so. We therefore discuss this issue although it does not appear that Ms. Kelly was prejudiced. In Ms. Kelly's complaint she alleged only negligence. Defendants ' answer raised the affirmative defense of release. Ms. Kelly challenged the validity of the release in answers to interrogatories and in her brief in opposition to summary j udgment. She never amended her complaint, nor made a responsive pleading to defendants' answer. In the Order and Memorandum which granted summary judgment, the District Court stated, "The Plaintiff has not, in any o f her pleadings or replys to D e f e n d a n t ' s p l e a d i n g s , q u e s t i o n e d t h e v a l i d i t y of t h e Jan.uary 24, 1980 R e l e a s e . " The o p i n i o n a l s o mentioned t w i c e t h a t p l a i n t i f f had n o t p l e a d w i t h p a r t i c . u l a r i t y n o r argued d u r e s s , menace, f r a . u d , n o r .und.ue i n f l u e n c e . The co.urt s t a t e d t h a t it t h e r e f o r e ~70,uldn o t a d d r e s s any o f t h o s e d e f e n s e s which M s . K e l l y had a s s e r t e d . Because we have concl.uded t h a t an i s s u e o f f a c t e x i s t s a s t o . u n c o n s c i o n a b i l i t y , i t i.s u n n e c e s s a r y t o c o n s i d e r whether a n i s s u e o f f a c t e x i s t s r e l a t i v e t o t h e s e W nevertheless e other theories. discuss t h e pleading re- quirements f o r c l a r i f i c a t i o n . P l e a d i n g r e q u i r e m e n t s b e g i n w i t h Rule 7 ( a ) M. R.Civ.P., which p r o v i d e s : There s h a l l be a c o m p l a i n t and an answer; and t h e r e s h a l l be a r e p l y t o a co,unt.erclaim denomin a t e d a s s.uch; and an answer t o a c r o s s - c l a i m ; a t h i r d - p a r t y c o m p l a i n t , i f a p e r s o n who was n o t an o r i g i n a l p a r t y i s summoned ,under Rule 1 4 ; and t h e r e s h a l l be a t h i r d - p a r t y answer, i f a t h i r d - p a r t y complaint i s served. N o t h e r p l e a d i n g s h a l l be o a l l o w e d , e x c e p t t h a t t h e c o , u r t may o r d e r a r e p l y t o an answer o r a t h i r d - p a r t y answer. T h i s r u l e n e i t h e r r e q u i r e s nor a l l o w s a r e s p o n s i v e p l e a d i n g Th.us M s . t o an answer. defendant I s answer. K e l l y was n o t r e q u i r e d t o r e p l y t o F.urther, the affirmative defense of r e l e a s e was deemed d e n i e d p.urs,uant t o Rule 8 ( d ) , M.R.Civ.P., which p r o v i d e s : Averments i n a p l e a d i n g t o which a r e s p o n s i v e pleading i s req.uired, o t h e r than those a s t o t h e amount of damage, a r e a d m i t t e d when n o t d e n i e d i n t h e responsive pleading. Averments i n a p l e a d i n g t o which no r e s p o n s i v e p l e a d i n g i s r e q u i r e d o r p e r m i t t e d s h a l l be t a k e n a s d e n i e d o r avoided. I n Wheat Mont. 105, v. 404 Safeway S t o r e s , P.2d 317, the Incorporated defendants ( 1 9 6 5 ) , 146 raised the affirmative defense of release in the answer, and later moved for judgment on the pleadings based on the gro.und that plaintiff failed to reply to the answer. The motion was granted, b.ut we concl.uded that the District Co.urt had erred, stating: From this a.uthority, it is clear that the plaintiff had no duty to reply unless ordered to do so by the court. No s.uch order was made in this case. The defendant's contention that a reply was mandatory to an affirmative defense of a release set forth in defendant's answer is, under the above a.uthority and Rule 7 (a), without merit. 404 P.2d at 319. The intent of Rule 7 (a) was explained in E . Mason, The 3, 19, Montana Rules of Civil Procedure, 23 Mont.L.Rev. (1961), as follows: Under the Rules pleadings are fewer and terminate earlier than under code practice. Code practice contemplates a three stage system of pleadings, consisting of a complaint, an answer, and a reply whenever new matter is alleged in the answer. The Rules allow only two stages, unless the co,urt in its discretion otherwise orders. Under Rule 7(a) a reply is mandatory only when the answer contains a co,unterclaim denominated. as s.uch As stated in Wheat, Ms. Kelly was not req.uired to file a reply or otherwise plead to the issue of release. The absence of a responsive pleading sho.uld not have been considered by the District Co,urt in a s.ummary j,udgmentmot.?'.on.We sense the presence of fr.ustrationon the part of the District Co.urt because of the extreme delay in this case, and we have the same sense of fr.ustration. Nevertheless, procedural- law must still be applied to Ms. Kelly's case. Did the District Court err request for a protective order? in granting defendant's I n December o f 1986, d e f e n d a n t moved f o r summary judgK e l l y ' s claim. ment on whether t h e r e l e a s e b a r r e d M s . Kelly requested M.R.Civ.P., a continuance which was g r a n t e d . pursuant Thereafter, r i e s and r e q . u e s t s f o r p r o d u c t i o n , abo,ut t h e t r a i n i n g o f which they Defendants evaluate sought a to and protective 56(f), i n interrogate- she req,uested information t h e insurance agents, claims, Rule Ms. their order, job t h e p r o c e s s by descriptions. stating that this i n f o r m a t i o n was n o t r e l e v a n t t o t h e adequacy of t h e r e l e a s e . The co.urt g r a n t e d t h e p r o t e c t i v e o r d e r . I n view of o.ur concl.usions i n P a r t I it i s n o t n e c e s s a r y t o disc.uss t h i s i s s u e i n d e t a i l . under Rule 2 6 , M.R.Civ.P., Ms. K e l l y may now proceed and t h i s t y p e of i n f o r m a t i o n w i l l be o b t a i n a b l e . W r e v e r s e and remand t o t h e D i s t r i c t C o u r t . e W Concur: e Mr. A J u s t i c e R . C . McDonough d i d n o t t a k e p a r t i n t h i s d e c i s i o n .

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