Title: KENDRICK v. BARKER

State: wyoming

Issuer: Wyoming Supreme Court

Document:

KENDRICK v. BARKER2001 WY 215 P.3d 734Case Number: 99-333Decided: 01/09/2001

 OCTOBER TERM, A.D. 
2000

January 9, 2001

STEPHANIE B. KENDRICK,  
Appellant (Plaintiff)v.DANIEL L. BARKER, dba BARKER CONSTRUCTION, 
Appellee (Defendant)

Appeal from the District Court of 
Sheridan County

The Honorable John C. Brackley, 
Judge 

Representing 
Appellant:

James P. Castberg, 
Sheridan, Wyoming.

Representing 
Appellee:

Jeffrey C. Brinkerhoff, 
Hampton K. O'Neill, and Timothy M. Stubson of Brown, Drew & Massey, LLP, 
Casper, Wyoming. Argument by Mr. O'Neill.

Before LEHMAN, C.J., and 
THOMAS, GOLDEN, HILL, and KITE, JJ.

GOLDEN, Justice

[¶1]           
In this appeal, we 
consider whether the district court properly enforced an oral settlement 
agreement and ruled that, as a matter of law, Wyoming does not recognize unknown 
injury as grounds for finding 
that mutual mistake warrants setting aside an agreement to release all personal 
injury claims.  

[¶2]           
We affirm.  

ISSUES

[¶3]           
Appellant Stephanie B. 
Kendrick presents these issues for our review:

I.  Did 
the district judge commit error in granting the defendant's motion for 
enforcement of settlement agreement when there existed a mutual mistake between 
the parties as to the plaintiff's injuries?

II.  Did 
the district judge commit error in granting the defendant's motion for 
enforcement of settlement agreement that was an unconscionable 
settlement?

III.  Did 
the district judge commit error in granting the defendant's motion for 
enforcement of settlement agreement when plaintiff accepted the offer of 
settlement while under duress?

IV.  Did 
the district judge commit error in granting the defendant's motion for 
enforcement of settlement agreement when the plaintiff's acceptance was 
contingent upon the defendant submitting a written settlement agreement 
acceptable to the plaintiff?

Appellee 
Daniel L. Barker, d/b/a Barker Construction, presents this statement of the 
issues:

1.  Did 
the district court commit plain error when it held that plaintiff's two 
affidavits, which violated the requirements of W.R.C.P. 56(e), and which 
contained and attached hearsay statements from her medical care providers, were 
sufficient to create a question of fact as to whether a mistake concerning 
plaintiff's condition existed at the time of the settlement conference, when 
plaintiff was actually required by Wyoming law to prove such a mutual mistake by 
the much higher burden of clear and convincing evidence?

2.  Was 
the district court entirely correct in holding that the settlement agreement 
reached between the parties was as simple as the defendant agreeing to pay 
plaintiff $40,000 in exchange for a release of all claims, and was in no way 
contingent or dependent upon the form of subsequent proposed written 
documentation, which simply memorialized this agreement?

3.  Was 
the district court entirely correct in holding that plaintiff had failed to 
present even a prima facie case regarding the defense of duress, since 
plaintiff presented no evidence of duress in this case?

4.  Was 
the district court entirely correct in holding that plaintiff had failed to 
present even a prima facie case regarding the defense of 
unconscionability, since plaintiff presented no evidence of unconscionability in 
this case?

FACTS

[¶4]           
Kendrick filed suit 
for injuries she received when her vehicle collided with a Barker 
tractor-trailer.  On January 25, 
1999, an order 
entered after a scheduling conference set deadlines for motions, discovery, and 
scheduled a pretrial conference and trial.  
The order directed that there would be no change in scheduling unless 
approved by the district court; settlements should be reduced to writing and 
approved by counsel before notifying the court; and no continuances or canceling 
of hearing dates would be granted based on telephone calls.  The parties designated a mediator and, 
on May 18, 1999, the district court assigned the case to the mediator for a 
settlement conference under W.R.C.P. 40(b).  

[¶5]           
A settlement 
conference was held on June 4, 1999.  
On June 7, 1999, the mediator wrote to both parties outlining the terms 
of the tentative settlement agreement that had been reached and stating that 
Kendrick had until close of business on June 8 to accept 
Barker's final offer.  The letter 
noted that the offer was open to allow Kendrick to determine an issue about a 
vehicle damages payment. On June 8, 1999, Kendrick's attorney faxed to Barker's 
attorney and the mediator Kendrick's acceptance of  "$40,000.00 in full settlement of all 
claims against the Defendant."  The 
mediator responded with a letter that day instructing the parties to prepare the 
first drafts of closing and settlement documents within three weeks.  Kendrick's attorney also notified the 
district court, and the trial setting was vacated.  After Kendrick received the document 
drafts, she notified her attorney that she would not accept the settlement and 
hired a new attorney. 

[¶6]           
Barker filed a motion 
seeking enforcement of the settlement agreement 
and denial of the withdrawal of Kendrick's first attorney.   Kendrick opposed enforcement, 
contending that the drafts' terms were inaccurate because she had agreed to the 
settlement offer of $40,000.00 for medical expenses only, not lost income, and 
contingent upon her car insurer's not seeking subrogation.  Additionally, Kendrick contended that on 
July 19, 1999, after the settlement conference, she was diagnosed with a closed 
head injury, and she argued that mutual mistake precluded enforcement of the 
agreement. 

[¶7]           
The trial court held a 
hearing on September 16, 1999, and Kendrick confirmed that she was objecting to 
form by requiring that the settlement proceeds be designated as medical expense 
damages and was not contending that she had reserved a claim against 
Barker.  She also stated that she 
had been unable to obtain a written release of any subrogation claim from her 
car insurer and enforcement of the agreement could lead to an actual recovery of 
$2,000 which she contended was unconscionable.  Kendrick also argued duress.  Barker conceded that her acceptance of 
the offer was contingent upon whether her insurer would seek subrogation, but 
contended that her former attorney's affidavit indicated that he had confirmed 
the insurer would not seek subrogation before her acceptance and it was 
therefore not an issue barring enforcement.  Barker contended that in Wyoming mutual 
mistake was inapplicable and, in any event, Kendrick's summary judgment 
materials violated W.R.C.P. 56(e) and the court did not have proper medical 
records before it to reach a decision on mutual mistake. 

            

[¶8]           
After Kendrick told 
the trial court that that her car insurer had paid $10,000.00 for medical 
expenses and $8,000.00 for property damage, the trial court advised that the 
settlement proceeds 
could be designated strictly for medical expenses; however, in its order, the 
trial court did not make such a designation and, instead, ruled that a 
preponderance of the evidence showed that an oral settlement agreement without 
contingencies was reached after both parties negotiated concessions to their 
original positions with counsel present.  
The trial court also noted that Kendrick did not question the mediator's 
letter outlining the tentative settlement and unequivocally accepted the offer, 
and further, the parties' notification to the court that a settlement agreement 
had been reached resulted in vacating the pretrial conference and trial to which 
Kendrick did not object and she did not appear for those proceedings.  The trial court found that the agreement 
was not contingent upon the form of written documentation and a prima facie case 
of duress and unconscionable bargain was not established.  It further found that a question of fact 
on the issue of mutual mistake existed; but because Wyoming did not recognize a 
tort theory of mutual mistake, which the trial court understood to be different 
from mutual mistake in contract law, summary judgment was granted to Barker on 
that issue.  This appeal 
followed.

DISCUSSION

Standard 
of Review

[¶9]           
In 
Wyoming, 
trial courts have the inherent power to summarily enforce settlement agreements 
entered into by parties litigant in a pending case.  Wyoming Sawmills, Inc. v. Morris, 
756 P.2d 774, 779 (Wyo. 1988); 
Kukla v. National Distillers Products Company, 483 F.2d 619, 621 (6th Cir. 1973).  
The authority to enter a final judgment does not rest upon W.R.C.P. 
56.  Kukla, 483 F.2d  at 621. 

"The 
power of a trial court to enter a judgment enforcing a settlement agreement has 
its basis in the policy favoring the settlement of disputes and the avoidance of 
costly and time-consuming litigation.  
To effectuate this policy, the power of a trial court to enforce a 
settlement agreement has been upheld even where the agreement has not been 
arrived at in the presence of the court nor reduced to 
writing."

Wyoming 
Sawmills, 
756 P.2d  at 779 (quoting Kukla, 483 P.2d at 
621).

[¶10]       When the trial court 
is determining 
whether an oral settlement agreement exists that must be summarily enforced 
under its inherent authority, the court should examine factors indicating that, 
after involving the court in the dispute, the parties intended to settle the 
claim out of court and with legal advice and abandoned pursuit of a legal 
remedy.  McCormick v. 
McCormick, 962 P.2d 360, 363 (Wyo. 1996); cf. Kukla, 483 P.2d  at 
621-22.

Enforcement 
of Settlement Agreement

[¶11]       Addressing Kendrick's 
last issue first, she contends that her agreement 
to settle was contingent upon the written contract's expressing that the 
settlement amount was for medical expenses only, not lost income, and that her 
car insurer would not be seeking subrogation for the medical expenses that it 
paid.  Barker contends that the 
trial court correctly ruled that the oral agreement was simply $40,000.00 in 
exchange for a release of all claims and no contingencies existed that prevented 
enforcement of the agreement.  
Although the transcripts show that the trial court explored avenues to 
resolve Kendrick's concern that the proceeds be designated as medical expenses, 
we agree with Barker that the trial court decided that Kendrick's acceptance of 
Barker's offer was not contingent upon the form of the written 
documentation.

[¶12]       A settlement agreement 
is a contract that is subject to the legal principles applicable to any 
contract.  McCormick, 
926 P.2d  at 362.  Whether an oral or 
written contract has been entered into depends on the parties' intent and is a 
question of fact.  Wyoming 
Sawmills, 756 P.2d  at 775.  The 
finder of fact in this case was the trial court, which heard all of the evidence 
offered by Kendrick and Barker.  In 
our review of this decision, we assume that the evidence of the prevailing party 
below is true and give that party every reasonable inference that can fairly and 
reasonably be drawn from it.  We do 
not substitute ourselves for the trial court as a finder of facts; instead, we 
defer to those findings unless they are unsupported by the record or erroneous 
as a matter of law.  Burg v. Ruby 
Drilling Co., Inc., 783 P.2d 144, 153 (Wyo. 
1989).  

[¶13]       Here, the trial court 
found that an oral agreement existed, rejected Kendrick's argument that the 
agreement was contingent upon the written agreement, and examined many 
factors 
similar to those listed in McCormick to find that the agreement should be 
enforced.  Kendrick does not contend 
those findings are unsupported or in error, and we defer to these findings.  

Mutual 
Mistake

[¶14]       The trial court 
determined that, as Kendrick 
contended, the majority of courts will set aside a release of a personal injury 
claim upon grounds of mistake involving an unknown injury.  It further found that Kendrick had 
established a genuine issue of fact whether she suffered from an unknown closed 
head injury at the time she agreed to a settlement and release; however, it 
ruled that because Wyoming had not adopted unknown injury as grounds for setting 
aside the release, it was proper to enter summary judgment for Barker.  Barker does not accept that summary 
judgment proceedings were properly invoked on this issue; however, because the 
trial court invoked that standard, it contends that Kendrick's evidence of an 
unknown injury was improper under Rule 56(e) and insufficient to survive summary 
judgment.

[¶15]       The trial court 
specifically found that it was not ruling that Kendrick's medical evidence was 
competent to withstand summary judgment but was instead determining that, as a 
matter of law, Wyoming does not recognize discovery of an unknown injury as 
grounds 
for setting aside a release of all claims.  
We agree with the trial court that the issue whether Kendrick's release 
of all claims should be set aside for mutual mistake must be decided.  

[¶16]       Kendrick contends that 
the basis for her mutual mistake claim is that the parties were unaware she had 
suffered a closed head injury at the time of the settlement.  As she claims, many courts will set 
aside a release of all claims reached by settlement for 
an unknown injury usually after considering factors indicating that the 
settlement was unconscionable.  
See Casey v. Proctor, 378 P.2d 579, 587 (Cal. 1963); Wheeler v. White Rock Bottling Co. of Oregon, 
366 P.2d 527, 530 (Or. 1961). 

The 
courts which have granted relief from premature releases in such cases 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 
articles 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.

Wheeler, 
366 P.2d  at 530.

[¶17]       On the other 
hand, 
a competing set of policy reasons justify a decision that the mutual mistake of 
unknown injury is not grounds for setting aside an untainted agreement to 
release all claims:

[T]his 
court has considered the settlement of claims prior to litigation to be 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 rendered upon a verdict that hindsight 
later proves to have been obtained too soon and for too little.  

* 
* *

[T]here 
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.

Wheeler, 
366 P.2d  at 530.

[¶18]       We have long held that 
the policy of the court is to encourage settling 
claims without litigation.  
Wyoming Sawmills, 756 P.2d  at 779.  "A release discharges another from an 
existing or asserted duty, claim or obligation, and it bars recovery 
thereon."  M & A Const. Corp. 
v. Akzo Nobel Coatings, Inc., 936 P.2d 451, 456 (Wyo. 
1997) (quoting Kelliher v. Herman, 701 P.2d 1157, 1159 (Wyo. 
1985)).  Releases, or exculpatory 
agreements, are contractual in nature. Id.; Milligan v. Big Valley 
Corp., 754 P.2d 1063, 1065 (Wyo. 
1988).  In Wyoming, we recognize 
that fraud, duress, mistake, or unconscionable bargain will vitiate a 
contract.  Snyder v. 
Lovercheck, 992 P.2d 1079, 1089 (Wyo. 
1999).  Further, we recognize that 
there is a special relationship created by the unequal bargaining power that an 
insurer has over an insured.  
McCullough v. Golden Rule Insur. Co., 789 P.2d 855, 858-59 (Wyo. 
1990); see Durdahl v. National Safety Assoc., 988 P.2d 525, 527-28 (Wyo. 
1999).  Absent these factors, 
however, when parties reduce a contract to writing, they must abide by its 
plainly stated terms. Snyder, 992 P.2d  at 1089 (citing Patel v. 
Harless, 926 P.2d 963, 966 (Wyo. 
1996)).  Courts are not free to 
rewrite contracts under the guise of interpretation where the contractual 
provisions are clear and unambiguous. Id. (citing Klutznick v. 
Thulin, 814 P.2d 1267, 1270 (Wyo. 
1991).  "Accordingly, in private 
disputes, a court must enforce the contract as drafted by the parties and may 
not relieve a contracting party from anticipated or actual difficulties 
undertaken pursuant to the contract."  
Id.  

[¶19]       A mutual mistake is 
one that is reciprocal and common to both parties, each alike laboring under the 
same misconception.  Shrum 
v. Zeltwanger, 
559 P.2d 1384, 1386 (Wyo. 
1977).  A contract is voidable on 
grounds of mutual mistake when both parties independently make a mistake at the 
time the contract is made as to a basic assumption of the contract, unless the 
party seeking avoidance bears the risk of the mistake.  Restatement (Second) of Contracts § 152 
(1981).  A party bears the risk of 
mistake when "he is aware, at the time the contract is made, that he has only 
limited knowledge with respect to the facts to which the mistake relates but 
treats his limited knowledge as sufficient."  Id. at § 154(b).  In such a situation, there is no 
mistake.  Instead, there is an 
awareness of uncertainty or conscious ignorance of the future.  Id. at § 154, cmt. 
c.

[¶20]       In this case, Kendrick 
entered into the release agreement years after the accident and with the advice 
of counsel.  Kendrick 
knew there was uncertainty surrounding the extent or consequences of her 
injuries, as she was not yet cured.  
Therefore, by accepting Barker's settlement offer Kendrick accepted a 
known risk that the extent or consequences of her injuries could change in the 
future. 

[¶21]       At the trial court 
hearing on September 16, 1999, Kendrick confirmed that she had understood the 
release was in full settlement 
of her claim against Barker.  She 
did not contend that she had reserved certain claims. As stated by the Maryland 
Court of Appeals:

If 
from the particular language of the release or from the circumstances of the 
negotiated settlement, there was a conscious and deliberate intention to 
discharge liability from all consequences of an accident, the release will be 
sustained and bar any future claims of previously unknown injuries. 

Bernstein 
v. Kapneck, 
430 A.2d 602, 607 (Md. 1981).  
"Thus, the mistake' found is the fact that the parties did not know the 
extent of the injuries suffered, notwithstanding that the releasor expressly 
assumed the risk (as parties to all contracts inevitably do) of the lack of 
omniscience as to what might develop in the future, by an express release of all 
unknown claims." Id. 

Releasees 
do not make settlement and take general releases merely to pay the releasor the 
first installment on what he should have, leaving the matter open for the 
releasor to come back for more if his injuries prove serious.  On the contrary, a settlement is made 
and a general release taken for the purpose of foreclosing further claims.  The releasee does not stand in a 
fiduciary relation to the releasor.  
The injured party is not required to make a settlement, and the general 
rule of freedom of contract includes the freedom to make a bad 
bargain.

 Sanger v. Yellow Cab Co. Inc., 486 S.W.2d 477, 481-82 (Mo. 1972).

[¶22]       Although the trial 
court found a genuine issue of fact whether Kendrick suffered from 
an unknown closed head injury at the time she agreed to a settlement, we find 
the factual issue of whether a mutual mistake existed irrelevant.  Kendrick bargained away all of her 
rights against Barker when she accepted the settlement offer.  In light of these facts and available 
protections under the law, we do not find it necessary to adopt a rule providing 
for special treatment of releases for personal injuries.

Duress 
and Unconscionable Bargain

[¶23]       Kendrick also seeks to 
defend against enforcement of the 
settlement with claims of duress and unconscionable bargain.  She claims that she was placed under 
duress to settle when her first attorney caused her to believe that she would be 
responsible for all of Barker's attorney fees if she lost at trial at a time 
when medical expenses and lost income had financially harmed her.  She also contends that her attorney 
pressured her to accept the settlement agreement.  She claims that in the event that her 
insurer seeks subrogation an unconscionable result will occur because she will 
recover a mere $2,000 under the settlement as enforced.  The trial court ruled that these 
allegations did not establish prima facie cases of these two defenses and 
entered judgment against Kendrick.

[¶24]       Kendrick bears the 
burden of proving that 
she agreed under duress.  Goodson 
v. Smith, 69 Wyo. 439, 457-58, 243 P.2d 163, 171 (Wyo. 
1952).  "[D]uress exists whenever a 
person is induced, by the unlawful act of another, to perform some act under 
circumstances which deprive him of the exercise of free will."  In Re TR, 777 P.2d 1106, 1111 (Wyo. 
1989).  Kendrick's argument that 
financial issues constituted duress is a claim of economic duress.  

Whether 
particular facts are sufficient to constitute economic duress is a question of 
law.  Whether these circumstances 
exist is a question of fact.  The 
Tenth Circuit Court of Appeals, when applying Wyoming law to a duress defense to 
avoid the enforcement of an agreement, said:

The 
Wyoming test for duress is not inconsistent with the test for economic duress 
developed in those states which have expressly recognized economic duress as 
grounds for avoiding a settlement agreement.

This 
Court, however, has not directly had the opportunity to adopt what is commonly 
known as the "economic duress"  
doctrine.  We take this 
opportunity now to do so and embrace the three-prong test employed by many 
courts to determine whether economic duress exists.  Under this test, economic duress occurs 
when (1) a party involuntarily accepts the terms of another, (2) circumstances 
permit no other alternative, and (3) such circumstances are the result of 
coercive acts of the other party.  
Economic duress does not exist, however, unless a person has been the 
victim of a wrongful act and has no reasonable alternative but to agree with the 
terms of another or be faced with a serious financial hardship.  What constitutes a coercive act or 
reasonable alternative is a question of fact depending upon the circumstances of 
each case.  Ordinarily, those people 
who are claiming coercion are attempting to avoid the consequences of a 
modification or breach of a contract or a settlement and release of a contract, 
as in this case.  A person may not 
have a reasonable alternative or remedy when the delay in pursuing the remedy 
would cause immediate or irreparable serious loss or financial 
ruin.

Blubaugh 
v. Turner,        842 P.2d 1072, 1074-75 (Wyo. 1992) (citations and quotations omitted).  Kendrick does not present argument 
specific to these elements and does not present authority that her attorney's 
actions were wrongful, unlawful, or that these left her with no 
alternative.  Refusing to sign the 
settlement agreement and hiring another attorney indicates that Kendrick was 
willing to go to trial and was not economically coerced into settling.  She has not presented any evidence that 
she faced irreparable serious loss or financial ruin.  We do not find any facts to support her 
claim of duress and affirm the trial court's ruling.

[¶25]       The district court's 
order of judgment is affirmed.