Opinion ID: 2602138
Heading Depth: 2
Heading Rank: 2

Heading: enforceability of the release

Text: ¶ 13 Peterson argues that the release is void or should have been reformed because (1) Swire was an undisclosed principal at the time the release was signed and therefore should not be allowed to take advantage of the release; (2) Peterson was incompetent to sign the release; (3) mutual mistake of the parties requires the release's reformation; and (4) applying the JOA instead of the LRA to vicariously liable parties is unconstitutional.
¶ 14 At the time Peterson signed the release agreement with Stengel, he did not know that Stengel was employed by Swire. Peterson argues that because Swire was Stengel's principal, Swire could not be released from vicarious liability for the accident without first disclosing its relationship to Stengel. Swire bases this argument on our decision in Garland v. Fleischmann, 831 P.2d 107, 110 (Utah 1992), where we observed: It is well established in the law that a principal is liable for the acts of his agent within the scope of the agent's authority, irrespective of whether the principal is disclosed or undisclosed. The fact that an agent acts in his own name without disclosing his principal does not preclude liability on the part of the principal when he is discovered to be such by a third party who has dealt with the agent. 3 Am.Jur.2d Agency § 320 (1986). This is true even though the third person dealing with the agent did not learn of the existence of the principal until after the bargain was completed. Holman-O.D. Baker Co. v. Pre-Design, Inc., 104 N.H. 116, 118, 179 A.2d 454, 455 (1962). ¶ 15 Peterson's reliance on Garland is misplaced. Garland stands for the proposition that disclosure or nondisclosure of a principal will not absolve the principal of responsibility for an agent's actions. See id. However, the present case does not involve a question of agency or the existence of vicarious liability. Instead, it depends on the interpretation of a contractual release. For purposes of summary judgment, Swire conceded that Stengel was its agent acting in the course of his employment. Swire does not argue that it is free from liability for its agent's actions based on anything other than the release. ¶ 16 Peterson argues that his lack of knowledge of Stengel's agency justifies voiding or reforming the release. `If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient.' Miller v. Celebration Mining Co., 2001 UT 64, ¶ 10, 29 P.3d 1231 (quoting Restatement (Second) of Contracts § 164(1) (1981)). Peterson, however, has presented no evidence that his lack of knowledge of Stengel's agency was caused by fraud or misrepresentation.
¶ 17 Peterson argues that the release he signed with Stengel and Stengel's insurer should be voided because of Peterson was incompetent at the time of the contract. Competency to enter a contract is measured by whether `the mental facilities [were] so deficient or impaired that there was not sufficient power to comprehend the subject of the contract, its nature and its probable consequences, and to act with discretion in relation thereto, or with relation to the ordinary affairs of life.' Walker v. U.S. General Inc., 916 P.2d 903, 907 (Utah 1996) (citations omitted). ¶ 18 Peterson offered no evidence before the trial court indicating that he was unable to understand the nature of the release at the time he signed it. He relied on his wife's appointment as his general guardian in 1997 to demonstrate incompetence. The release, however, was signed by Peterson on August 4, 1993, more than four years before the guardianship appointment. Although Mrs. Peterson's appointment as Peterson's general guardian is evidence of incompetence in 1997, it is not evidence that he was incompetent in 1993. Peterson's argument is particularly tenuous in light of the fact that neither Mrs. Peterson, Peterson's lawyer, Stengel, or Stengel's insurance carrier raised any concerns about Peterson's mental capacity at the time the release was signed.
¶ 19 Peterson next argues that the release should be voided due to mutual mistake. Mutual mistake warrants the reformation of written instruments if the complaining party can show: (1) that the instrument as made failed to conform to what both parties intended; or (2) that the claiming party was mistaken as to its actual content and the other party, knowing of this mistake, kept silent; or (3) that the claiming party was mistaken as to actual content because of fraudulent affirmative behavior. Mabey v. Kay Peterson Constr. Co., 682 P.2d 287, 290 (Utah 1984). ¶ 20 Peterson argues that neither of the parties intended to release Swire, so the release must fail. However, his characterization of the intent of Stengel and his insurance carrier is entirely speculative. Although upon summary judgment the court must view all facts and inferences in favor of the nonmoving party, it may not assume facts for which no evidence is offered. Allegations or denials in the pleadings are not a sufficient basis for opposing summary judgment. Hall v. Fitzgerald, 671 P.2d 224, 227-28 (1983). The non-moving party must set forth specific facts showing that there is a genuine issue for trial. Thornock v. Cook, 604 P.2d 934, 936 (Utah 1979). Peterson has offered nothing more than unsupported allegations to prove the intent, mistake, or fraud of the other parties to the release. Thus, the trial court properly found that Peterson's claim of mutual mistake fails. Cf. Hess v. Ford Motor Co., 27 Cal.4th 516, 526, 117 Cal.Rptr.2d 220, 41 P.3d 46 (2002) (holding that a release's broad language did not release a third party where the uncontroverted evidence established mutual mistake).
¶ 21 In general `[A] constitutional question is not to be reached if the merits of the case in hand may be fairly determined on other than constitutional issues.' State v. Webster, 2001 UT App 238, n. 8, 32 P.3d 976 (quoting Hoyle v. Monson, 606 P.2d 240, 242 (Utah 1980)). Because this case has not been resolved on other grounds, we address the constitutional question presented by Peterson. ¶ 22 As mentioned above, in Nelson we held that the release clause of the Joint Obligations Act applies to releases dealing with vicariously liable parties, while the release clause of the Liability Reform Act applies to all other co-defendants. See Nelson, 935 P.2d at 514 n. 3. Under the JOA, there must be an express reservation of rights by plaintiffs or the release operates to release all joint obligors. See Krukiewicz, 725 P.2d at 1350. Under the LRA, the release must name the defendant or identify the defendant with some degree of specificity for there to be a release. See Child, 892 P.2d at 12. Peterson argues that applying the JOA to vicariously liable parties and the LRA to regular co-defendants is a violation of Article I, Section 24, of the Utah Constitution's uniform operation of laws clause, because doing so affects similarly situated parties differently. ¶ 23 Article I, Section 24 provides that: All laws of a general nature shall have uniform operation. Utah Const. art. I, § 24. Under the uniform operation of laws clause, we utilize a lower standard of review unless the statute infringes a fundamental or critical right . . . [or creates] classifications considered impermissible or suspect in the abstract. Ryan v. Gold Cross Services, Inc., 903 P.2d 423, 426 (Utah 1995). Peterson has not argued that a constitutional right has been implicated, nor do we find one. Therefore a low threshold applies in balancing (1) whether the classification is reasonable, (2) whether the legislative objectives are legitimate, and (3) whether there is a reasonable relationship between the two. See Ryan, 903 P.2d at 426 (citing Blue Cross & Blue Shield v. State, 779 P.2d 634, 637 (Utah 1989)); see also Malan v. Lewis, 693 P.2d 661, 670-71 (Utah 1984). A statute has a strong presumption of constitutionality, with doubts resolved in favor of its constitutionality. See Warren v. Melville, 937 P.2d 556, 558 (Utah Ct.App.1997) (citations omitted). ¶ 24 The first question is whether there is anything inherently unreasonable in the legislature's decision to treat vicariously liable defendants differently than other co-defendants. See Ryan, 903 P.2d at 427. We have often noted that vicarious liability does not arise because of actual negligence or fault. See Nelson, 935 P.2d at 513-14; Krukiewicz, 725 P.2d at 1350-51. Treating vicariously liable defendants as different in kind from defendants with some form of fault does not result in an inherently irrational classification, and is not based on any impermissible or suspect grouping. See Ryan, 903 P.2d at 427. ¶ 25 The second issue is whether the legislative purpose in separating vicariously liable defendants from regular co-defendants is legitimate. [T]he court will sustain legislative action if it can reasonably conceive of facts which would justify the classifications made by the legislation. Ryan, 903 P.2d at 427 (citing Blue Cross, 779 P.2d at 641). In the present case, imputing a legitimate purpose to the legislature is not necessary because the legislature has itself referred to its purposes. One of the primary purposes of the legislature in enacting the LRA was `basic fairness.' Sullivan v. Scoular Grain Co. of Utah, 853 P.2d 877, 880 (Utah 1993) (quoting Tape of Utah Senate Floor Debates, 46th Leg.1986, Gen. Sess. (Feb. 12, 1986)). The legislature intended to promote fairness by abolishing joint and several liability for co-defendants liable on fault grounds because no party should be liable for any amount in excess of the proportion of fault attributed to that defendant. Utah Code Ann. § 78-27-38 (1999). The same rationale does not logically extend to co-defendants to whom no fault can be apportioned, but who are instead subject to vicarious liability. ¶ 26 The LRA was intended only to abolish the joint and several liability of `defendants'. . . but that does not affect an employer, who being only vicariously liable is not a `defendant.' [2] Nelson, 935 P.2d at 515 (Howe, J., concurring). As noted above, vicarious liability does not arise because of actual negligence or fault. See Nelson, 935 P.2d at 513-14; Krukiewicz, 725 P.2d at 1350-51. Therefore, it is legitimate for the legislature to draw a distinction between co-defendants who are at-fault and vicariously liable parties who are not. It is also legitimate for the legislature to promote fairness through abolition of joint and several liability for at fault co-defendants. ¶ 27 The last issue is whether there is a reasonable relationship between the statutory classification and the legislative purpose. We conclude that the classification is not an unreasonable means of achieving fairness in the apportionment of damages between different kinds of defendants. [3] Even though the legislative distinction between at-fault co-defendants and vicariously liable co-defendants requires two separate standards for the creation and interpretation of releases, it is not the court's place to defend the merits, desirability, or rationality of legislative action. Ryan, 903 P.2d at 426. It is enough that distinguishing between at-fault co-defendants and vicariously liable ones is reasonable in light of the legislative objectives. See id. ¶ 28 Peterson extends his uniform operation of laws argument to plaintiffs who are disparately affected in their ability to collect damages by virtue of different standards governing releases under the JOA and the LRA. We disagree with the argument that the disparity is unconstitutional. In reality, both the JOA and the LRA provide a plaintiff with equal opportunity to pursue all liable parties. Neither the JOA nor the LRA will release either an at fault co-defendant or a vicariously liable one where the release expressly reserves the plaintiff's rights to pursue those parties. See Nelson, 935 P.2d at 514. Plaintiffs will only be treated differently where they do not carefully draft their releases or do not adequately investigate the possibility of other liable parties. The burden is on plaintiffs to understand the distinction between the JOA and the LRA. The JOA applies to vicariously liable co-defendants and the LRA applies to co-defendants who are at fault within the meaning of the act. See Nelson, 935 P.2d at 514 n. 3. The public policy arguments advanced by Peterson on behalf of plaintiffs should be addressed to the legislative process. So long as the distinctions made by the statute are reasonable, we may not invalidate them on constitutional grounds where no other factors such as fundamental rights are at issue.