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.

APPEAL FROM: District Court of the TwentiethJudicial District, In and for the County of Sanders, The HonorableC.B. McNeil, Judgepresiding.
COUNSEL OF RECORD:
ForAppellant: Joan Jonkel argued; Jonkel Law Offices, Missoula, Montana Richard Simonton; Simonton,Howe & Jackson, Glendive, Montana
For Respondent:
RobertA. Terrazas argued;Worden, Thane & ~aines, Missoula,Montana

Submitted: February 10, 1989

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### Mr. J.usticeFred J. 

### Weber delivered the Opinion of the Court.

This appeal arises from a suit for personal injuries brought by Eleanor Kelly againstMr. Widner and Mr. Huntley. Ms. Kelly signed a releasewith 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 ofmaterial fact existed? 2. Did the District Court err in imposing technical pleading requirements in its summary judgmentmotion? 3. 

### Did the District Court err in granting defendants' request for aprotective order? Ms. Kelly was injured in an auto accident on November 18, 1979. Mr. Widner was the driver of the automobilewhich
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 inher leg tohold the bone together and placed the leg in a cast. Ms. Kellywas hospitalized for 23 

### days,andwas in a cast for 10 months. At the time of the accidentMs. 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 havebegun 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 thirtyminutes 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 checksMs. Kelly signed a releasedated ~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 Septemberof 1980Ms. Kelly's doctorsdetermined that her bone had not healed. They removed the castand 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, ithas stretched
over a period of nearly 9years 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.uryears, and from 1986 to present minimal discovery has been accomplished. No explanation is given for this delay. It is apparent that plaintiff's co.unse1have not been diligent in pursuing this claim. The record also demonstrates that the defendants were not interested in bringing the matter to dispostion. Neitherparty hashandled this case in
a timelymanner.

Did the District Court err in granting summary judgment by finding that no genuine issues of material fact existed? The appropriate standard in granting summary judgment
was stated in Kronen v. Richter (1984), 211 Mont. 208, 683

Summary judgment is never to be .usedas 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-uineissue ofmaterial fact. Anderson v. Applebury (1977), 173Mont. 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,urtinitially ,underRule 56,M.R.Civ.P.--a summary j,udgmentis proper when it appears "that there is no gen.uineissue as to any material fact and that themoving 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.urdenof proof must be carried by the moving party seeking summary judgment, in this case,Mr. Widner andMr. Huntley. However,where the record discloses no genuine issue of material fact, the b.urdenof 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,theparty opposing the motion is held. to a standard of proof abo.ut eq.ualto that initially imposed upon the moving party under Rule 56(c)

### ,M.R.C~V.P. Harl-and17. 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.udethat 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)

### , 140Mont. 564, 374 P.2d 96, 98-99. Thevalidity of a release may be challenged therefore on the basis of unconscionability. In determining .unconscionabilitywe have previously applied the UCC standard. In All-States Leasing v. Top Hat Lounge (1982),

### 198Mont. 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 amatter of law finds the contractor any clause of the contract to have been .unconscionableat 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 maybe unconscionable the parties shall be afforded a reasonable opport.unityto present evidence as to its commercial setting, p.urposeand effect to aid the court in making the determination.
The official comment to this section of the UCC states the basic test forunconscionability:
[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 tobe .unconscionable under the circumstances existing at the time of the making of the contract

# . . . The principle is one of the prevention of oppressionand .unfairsurprise.
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 .underthe UCC, courtshave .usedthis definitionby 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.uccinctor 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-erlyingprinciple of conscionability is that of doing justice under the circ.umstancesof each case. We approve of this standard, framed by the Illinois S.upremeCourt, in Scherer v. Ravenswood Hosp. Med. Ctr. (Ill. 1979), 388 N.E.2d 1268, 1271, when it stated:
The modern trend is to set aside releases of personal injury claims in sit.uationswhere the facts, when finally known, present an .unconscionable result because of the equitable principle of doing justice under the circumstances of each case. The present case includes three circumstances which are relevant toa determinationof .unconscionability. First, Ms. Kelly1 s dire financial situation, her lack of ed,ucation and lack of legal advice, and her isolated living arrangements created a vulnerability susceptible toexploitation. Second, atthe time of settlement there was substantial uncertainty

astothe extentof injurytoMs. Kelly's leg, and the future prognosis. The s.urgery on Ms. KeI..ly1s leg had required insertion of a steel rod. When Ms. Kelly executed the release, it had only been two months since the accident. Her legwas stillina castand would remain ina cast foranother 8 months. It was 0bvio.u~ that Ms. Kelly1 s legwo,uld not be healed for some time. It was also clear that Ms. Kelly would be .unable to resume work in the near future. Ms. Kelly's physical condition suggests that this was not an appropriate timeforexecution of a complete release. Third, the insurance adj.ustorspromred a very hasty settlement in this case, spending only half an hour in the total disc.ussion. When they left, Ms. Kelly had released allclaims, yet received barely eno,ugh money to pay her medical expenses through the date of settlement. There is an iss.ueof fact whether the checks issued to Ms. Kelly were adequate ,under the circ.umstances known by the parties at that time. The appropriateness of having Ms. Kelly exec.ute a complete release in her partic.ular sit,uation, and procured in that manner, is subject to question. We conclude 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), 408N.E.2d 474, 476. The IllinoisSupreme 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 disparitymay 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 courtmay 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 interrogatoriesand 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, "ThePlaintiff has not, in any of her pleadings or replys to Defendant's pleadings, questioned thevalidity of theJan.uary 24, 1980 Release." The opinion also mentioned twice that plaintiff had not plead withpartic.ularitynor argued duress, menace, fra.ud,nor .und.ueinfluence. The co.urt statedthatit therefore ~70,uld not address any of those defenses which Ms. Kelly had asserted. Because we have concl.udedthat an issue of fact exists asto.unconscionability, it i.s unnecessary to consider whether an issue of fact exists relative to these other theories. We nevertheless discuss the pleading requirements for clarification. Pleading requirements begin with Rule 7(a) M.R.Civ.P., which provides:

There shallbe a complaint and an answer; and there shall be a reply to a co,unt.erclaim denominated as s.uch; and an answer to a cross-claim; a third-party complaint, if a person who was not an originalparty is summoned ,underRule 14; and there shall be a third-party answer, if a third-party complaint is served. No other pleading shall be allowed, except thatthe co,urtmay order a replyto an answer ora third-party answer. This rule neither requires nor allows a responsive pleading to an answer. Th.us Ms. Kelly was not required to reply to defendantIs answer. F.urther, the affirmative defense of release was deemed denied p.urs,uanttoRule 8(d)

## ,M.R.Civ.P., which provides:

Averments in a pleading to which a responsive pleading is req.uired, other than those as to the amount of damage, are admitted when not denied in the responsive pleading. Averments in a pleading to which no responsive pleading is required or permitted shall be taken as denied or avoided.
In Wheat v. Safeway Stores, Incorporated (1965), 146 Mont. 105, 404 P.2d 317, the defendants raised the

### affirmativedefense of release in the answer,and later moved for judgment on the pleadings based on the gro.undthatplaintiff failed to reply to the answer. Themotion was granted, b.utwe concl.udedthat the District Co.urthad 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.uchorder was made in this case. The defendant's contention that a replywas mandatory to an affirmative defense of a 

### release set forth in defendant's answer is,under the above a.uthorityand Rule 7(a)

## ,withoutmerit.
404 

### P.2d at 319. The intent of Rule 7(a)was explained in E. 

### Mason, The Montana Rules ofCivil Procedure, 23 

### Mont.L.Rev. 3, 19,

(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 onlywhen the answer contains a co,unterclaimdenominated.as s.uch

As stated inWheat,Ms. Kellywas not req.uiredto file a reply or otherwise plead to the issue of release. The absence of a responsive pleading sho.uldnot have been considered by the DistrictCo,urtin a s.ummaryj,udgmentmot.?'.on.We sense thepresence of fr.ustrationon thepart of the District Co.urtbecause of the extreme delay in this case,and we have the same sense of fr.ustration. Nevertheless,procedural-law must stillbe applied toMs. Kelly's case.

Did the District Court err in granting defendant's request for aprotective order?In December of 1986, defendant moved for summary judgment on whether the release barred Ms. Kelly's claim. Ms. Kelly requested a continuance pursuant to Rule 56(f), M.R.Civ.P., which was granted. Thereafter, in interrogateries and req.uests for production, she req,uested information abo,ut the training of the insurance agents, the process by which they evaluate claims, and their job descriptions. Defendants sought a protective order, stating that this information was not relevant tothe adequacy of the release. The co.urtgranted theprotective order. Inview of o.ur concl.usions inPart I it isnot necessary to disc.uss this issue in detail. Ms. Kelly may now proceed under Rule 26, M.R.Civ.P., and this type of information will be obtainable. We reverse and remand totheDistrictCourt.

We Concur: A

Mr. Justice R. C. McDonough didnot takepart inthisdecision.