Court Opinion

ID: 9760296
Source: CourtListenerOpinion
Date Created: 2023-08-29 00:47:06.82524+00
Date Added: 2024-06-11T07:29:10.591551
License: Public Domain

Davidson, J.,

concurring:

The majority here expresses the view that "our society will be best served by adherence to the traditional methodology for interpreting contracts in general, including other species of releases.” It states that "the bastardization of the well-founded principles concerning mutual mistake of fact is entirely too high a price to pay for the obtention of an unprincipled, if temporarily desirable, result.” It concludes that it can "perceive no compelling reasons why this Court should” afford protection to persons who suffer an unforeseeable injury that develops after the execution of an agreement releasing claims for personal injuries.
Thus, the majority of this Court refuses to join the overwhelming majority of courts in other jurisdictions that have developed a special doctrine applicable to personal injury releases. This doctrine now permits a person who has agreed to release a claim for personal injury to be discharged from that contractual obligation if unforeseeable injuries develop after the agreement’s execution. In my view, the majority here rigidly adheres to "a passion for aesthetic elegance, or for the appearance of an abstract consistency, to bring about obviously unjust results.” Ricketts v. Pennsylvania R. Co., 153 F.2d 757, 764 (2d Cir. 1946) (Frank, J., concurring).
As long ago as 1946, the difficulties inherent in the majority’s analysis were painstakingly identified and eruditely articulated. In his concurring opinion, Judge Jerome Frank, believing "that not only is an important social policy involved but also that a good opportunity offers itself to *466uncomplicate an excessively complicated set of legal rules,” developed a sophisticated analysis of the underlying rationale for establishing a special doctrine applicable to personal injury releases. In Ricketts, 153 F.2d at 760-70, he said:
"In the early days of this century a struggle went on between the respective proponents of two theories of contracts, (a) the 'actual intent’ theory — or 'meeting of the minds’ or 'will’ theory — and (b) the so-called 'objective’ theory. Without doubt, the first theory had been carried too far: Once a contract has been validly made, the courts attach legal consequences to the relation created by the contract, consequences of which the parties usually never dreamed — as, for instance, where situations arise which the parties had not contemplated. As to such matters, the 'actual intent’ theory induced much fictional discourse which imputed to the parties intentions they plainly did not have.
But the objectivists also went too far. They tried (1) to treat virtually all the varieties of contractual arrangements in the same way, and (2), as to all contracts in all their phases, to exclude, as legally irrelevant, consideration of the actual intention of the parties or either of them, as distinguished from the outward manifestation of that intention. The objectivists transferred from the field of torts that stubborn anti-subjectivist, the 'reasonable man’; so that, in part at least, advocacy of the 'objective’ standard in contracts appears to have represented a desire for legal symmetry, legal uniformity, a desire seemingly prompted by aesthetic impulses. Whether (thanks to the 'subjectivity’ of the jurymen’s reactions and other factors) the objectivists’ formula, in its practical workings, could yield much actual objectivity, certainty, and uniformity may well be doubted. At any rate, the sponsors of complete 'objectivity’ in contracts largely won out in *467the wider generalizations of the Restatement of Contracts and in some judicial pronouncements.
Influenced by their passion for excessive simplicity and uniformity, many objectivists have failed to give adequate special consideration to releases of claims for personal injuries, and especially to such releases by employees to their employers. Williston, the leader of the objectivists, insists that, as to all contracts, without differentiation, the objective theory is essential because 'founded upon the fundamental principle of the security of business transactions.’
He goes to great lengths to maintain this theory, using a variety of rather desperate verbal distinctions to that end. Thus he distinguishes between (1) a unilateral non-negligent mistake in executing an instrument (i.e., a mistake of that character in signing an instrument of one kind believing it to be of another kind) and (2) a similar sort of mistake as to the meaning of a contract which one intended to make. The former, he says, renders the contract 'void’; the latter does not prevent the formation of a valid contract. Yet in both instances 'the fundamental principle of the security of business transactions’ is equally at stake, for there has been the same 'disappointment of well-founded expectations.’ More than that, Williston concedes that a mistaken idea of one party as to the meaning of a valid contract (Williston’s second category) 'may, under certain circumstances, be ground for relief from enforcement of the contract.’ But he asserts that (a) such a contract is not 'void’ but 'voidable,’ and (b) that the granting of such relief is no exception to the objective theory, because this relief 'is in its origin equitable,’ and 'equity’ does not deny the formation of a valid contract but merely acts 'by subsequently * * * rescinding’ it. His differentiation, moreover, of 'void’ and 'voidable’ has little if any practical *468significance: He says that a 'voidable’ contract will be binding unless the mistaken party sets up the mistake as a defense; but the same is obviously true of agreements which (because of unilateral mistakes affecting their 'validity’) he describes as 'wholly void.’
It is little wonder that a considerable number of competent legal scholars have criticized the extent to which the objective theory, under Williston’s influence, was carried in the Restatement of Contracts. One of them, Whittier, says that the theory, in its application to the formation of contracts, is a generalization from the exceptional cases; he points out that the theory of 'actual mutual assent’ explains the great majority of the decisions, so that it would be better, he believes, to adhere to it, creating an exception for the relatively few instances where one party has reasonably relied on negligent use of words by the other. 'Why not,’ asks Whittier, 'say that actual assent communicated is the basis of "mutual assent” except where there is careless misleading which induces a reasonable belief in assent?’ There may be much in that notion: Williston admits that 'the law generally is expressed in terms of subjective assent, rather than of objective expressions * * *’; and that 'a doctrine which permits the rescission of a contract on account of a unilateral mistake approaches nearly to a contradiction of the objective theory * * *’ As able a judge as Cuthbert Pound said, not long ago, 'The meeting of minds which establishes contractual relations must be shown.’
Another critic suggests that, in general, Williston, because he did not searchingly inquire into the practical results of many of his formulations, assumed, unwarrantably, without proof, that those results must invariably have a general social value, although (as Williston admits as to the objective theory) they are 'frequently harsh.’
*469In other realms of thought, attempted over-simplification has yielded complexities in practice. So here, as appears from the following.
Fortunately, most judges are too common-sensible to allow, for long, a passion for aesthetic elegance, or for the appearance of an abstract consistency, to bring about obviously unjust results. Accordingly, courts not infrequently have departed from the objective theory when necessary to avoid what they have considered an unfair decision against a person who, for a small sum, signed a release without understanding either the seriousness of his injury or the import of the words of the release, provided (1) he was not 'negligent’ and (2) the other party (the releasee) had not, in reliance on the release, importantly 'changed his position.’ Some courts, in some of the mistake cases, frankly abandon the 'objective’ test, saying boldly that a non-negligent unilateral mistake justifies cancellation or rescission of a contract. As New York, a lively center of commerce, at least to some extent allows relief for such unilateral mistakes, it should be obvious that, contrary to Williston & Co., any deviation from the objective theory is not fatal to the functioning of business.
Some courts, however, escape marring the verbal symmetry of the objective theory, while actually abandoning it, thus: They say that a mistake by one party about a striking fact (sometimes called 'palpable’) must be deemed to have been known to the other party, that, even if the evidence fails to show that he knew it, yet he had 'reason to know it’ and is therefore to be treated as if he did; so that there results, by this device, which comes close to a fiction, a 'mutual mistake of fact.’ This court, in pre-Erie-Tompkins days, in effect adopted that rule in a case where the plaintiff, before executing the release, had consulted her own physician. That thesis has been utilized especially when an *470employee has given a release to his employer of all claims for an injury in consideration of a sum which approximates his lost wages (or his lost wages and medical expenses) and no more. Many courts have said that, on such a state of facts, it is impossible to believe that the releasor and releasee had in mind serious consequences of the injury which became apparent after the release was given, and therefore there was a 'mutual mistake of fact.’
Williston, realizing the desire of the courts to escape the objective theory in such cases, describes them as follows: 'Thus, where a release is given by one injured in an accident and more serious injuries develop than were supposed to exist at the time of settlement, it is a question of fact whether the parties assumed as a basis of the release the known injuries, or whether the intent was to make a compromise for whatever injuries from the accident might exist whether known or not. On a fair interpretation not only of the language of the instrument, but of the intention of the parties, the latter position is more likely, but presumably out of tenderness for injured plaintiffs some courts have gone very far in accordance with the former possibility.’ [Emphasis in original.] (In the instant case, plaintiff’s lawyer testified that he had received the report of a physician to the effect that plaintiff’s injury was not serious. The evidence was, then, probably sufficient to bring this case,within the mutual mistake rule; but I think the trial judge’s instructions were such as not to leave that issue to the jury.)
Two approaches have been suggested which diverge from that of Williston and the Restatement but which perhaps come closer to the realities of business experience. (1) The first utilizes the concept of an 'assumption of risk’: The parties to a contract, it is said, are presumed to undertake the risk that the facts upon the basis of which they *471entered into the contract might, within a certain margin, prove to be non-existent; accordingly, one who is mistaken about any such fact should not, absent a deliberate assumption by him of that risk, be held for more than the actual expenses caused by his conduct. Otherwise, the other party will receive a windfall to which he is not entitled. (2) The second suggestion runs thus: Business is conducted on the assumption that men who bargain are fully informed as to all vital facts about the transactions in which they engage; a contract based upon a mistake as to any such fact as would have deterred either of the parties from making it, had he known that fact, should therefore be set aside in order to prevent unjust enrichment to him who made the mistake; the other party, on this suggestion also, is entitled to no more than his actual expenses. Each of those suggestions may result in unfairness, if the other party reasonably believing that he has made a binding contract, has lost the benefit of other specific bargains available at that time but no longer open to Mm. But any such possibility of unfairness will seldom, if ever, exist in the case of a release of liability for personal injury whatever the nature of the mistake (i.e., whether it fits into one or the other of Williston’s categories).
In short, the 'security of business transactions’ does not require a uniform answer to the question when and to what extent the non-negligent use of words should give rise to rights in one who has reasonably relied on them. That the answer should be favorable to the relier when the words are used in certain kinds of contracts, does not mean that it should also be when they are used in a release of a claim for personal injury; and there may be still further reasons for an unfavorable answer when the claim is by an employee against his employer. [Emphasis in original.]
In all likelihood, it is because the courts have sensed the differentiated character of releases of *472personal injury claims that the 'modern trend,’ as Wigmore describes it, 'is to * * * develop a special doctrine * * * for that class of cases, liberally relieving the party who signed the release.’ Surely much is to be said for that liberality, especially in a case where an employee has given a release of personal injury liability, without the fullest comprehension of what he was about, for a relatively small sum which turns out to be wholly inadequate.
In the admiralty cases, such relief has long been accorded seamen; the courts, calling them 'wards of admiralty,’ have regarded them, in many of their dealings with their employers, as necessitous persons, under strong economic pressures, who, because of their helplessness, are to be protected from hard bargains, just as 'equity,’ for similar reasons, protects mortgagors and beneficiaries of spendthrift trusts. The usual non-maritime employees, because they are under similar economic pressures, are no less helpless in their trafficking with their employers. It can truthfully be said of them what the admiralty decisions say of seamen: 'They are,’ remarked Mr. Justice Story, 'considered as placed under the dominion and influence of men, who have naturally acquired a mastery over them; and as they have little of the foresight and caution belonging to persons trained in other pursuits of life, the most rigid scrutiny is instituted into the terms of every contract, in which they engage. If there is any undue inequality in the terms, any disproportion in the bargain, any sacrifice of rights of one side which are not compensated by extraordinary benefits on the other, the judicial interpretation of the transaction is that the bargain is unjust and unreasonable, that advantage has been taken of the situation of the weaker party, and that pro tanto the bargain ought to be set aside as inequitable.’ To men like plaintiff here, the following comment about seamen fully applies: *473'They are * * * placed too much in the power of the owners [i.e., employers] to be able to negotiate with them on equal terms.’
It is not surprising, then, that many courts — although without such direct expressions as those which adorn the seaman cases — have in fact in the release cases manifested, although obliquely, a not dissimilar guardianship of employees of large corporations. As already noted, the Supreme Court recently gave a broad hint that the admiralty doctrine is not as exceptional as is sometimes supposed. For reasons previously indicated, 1 think we should take that hint. It seems to me that the time has come to give up the elaboration of distinctions found in the judicial opinions relieving non-admiralty employees of their releases. I believe that the courts should now say forthrightly that the judiciary regards the ordinary employee as one who needs and will receive the special protection of the courts when, for a small consideration, he has given a release after an injury. As Mr. Justice Holmes often urged, when an important issue of social policy arises, it should be candidly, not evasively, articulated. In other contexts, the courts have openly acknowledged that the economic inequality between the ordinary employer and the ordinary individual employee usually means the absence of 'free bargaining.’ I think the courts should do so in these employee release cases. And the federal courts, I think, should so hold in respect to liability pursuant to the Federal Employers’ Liability Act. I think, therefore, that we should treat the plaintiff here as we would if he were a seaman.
Such a ruling will not produce legal uncertainty but will promote certainty — as anyone can see who reads the large number of cases in this field, with their numerous intricate methods of getting around the objective theory. Such a ruling would simply do directly what many courts have been doing *474indirectly. It is fairly clear that they have felt, although they have not said, that employers should not, by such releases, rid themselves of obligations to injured employees, obligations which society at large will bear — either, by taxes, through the government or, by donations, through private charitable organizations.
The Pennsylvania Railroad Company warns us that, if a release given by an employee, advised by his own lawyer, is disregarded in a case like this, in the absence of fraud on the part of the employer, then employers will never hereafter settle with their employees who, to their grave disadvantage, will always in the future be forced to sue even for minor personal injury claims. That is a glib prediction based upon no evidence and intended to frighten the court. Sometimes judges have been persuaded by such prophecies which later events have shown to have been unfounded. So Choate, in Pollock v. Farmers’ Loan & Trust Co., seemingly alarmed the majority of the Court by his forecast that a federal income tax would usher in a communist regime in this country. And it is well to recall Lord Abinger’s dire prediction when in 1837 he enunciated the fellow-servant rule which the Employers Liability Act has wiped out: 'If the master be liable to the servant in this action, the principle of liability will be found to carry us to an alarming extent * * * The inconvenience, not to say the absurdity of these consequences, afford a sufficient argument against the application of this principle to the present case * * * In fact, to allow this action to prevail would be an encouragement to the servant to omit that diligence and caution which he is in duty bound to exercise on the behalf of his masters, to protect him against the misconduct of others who serve him, and which diligence and caution, while they protect the master, are a much better security against any injury the servant may *475sustain by the negligence of others engaged under the same master, than any recourse against his master for damages could possibly afford.’ Certainly, that prophecy went astray.
In New York, the rule as to releases is precisely that to which the Pennsylvania Railroad here objects; yet I venture to guess that thousands of settlements yearly are made in New York by employers who take the risk that, on a proper showing, the releases will be judicially disregarded. Where the amount paid in settlement is relatively small, very likely most employers are willing to take such a risk.” (Footnotes omitted) (citations omitted.)
In his concurring opinion in Ricketts, Judge Frank extended the special doctrine applicable to personal injury releases from seamen to employees. He did not extend this doctrine to cases such as this in which the employer/employee relationship does not exist. Nonetheless, he recognized that the same social policy considerations that dictate the formulation and application of a special doctrine for personal injury releases for seamen and employees would also dictate that such a doctrine be extended to releases in other situations. As Judge Frank noted in Ricketts, 153 F.2d at 768-69 n.44:
"It has been suggested that the courts should recognize the inequality of bargaining strength in connection with other kinds of releases of personal injuries given for comparatively small sums: 'But it is believed that in many cases the individual tort claimant being solicited to release his claims is not in a position to defend his own interests even in the absence of coercive or fraudulent conduct on the part of his obligor, especially where that obligor is a powerful business organization, such as a railroad or insurance company. The prospect of a long and costly legal battle with such an opponent, often commanding almost unlimited resources, is enough to deter all but the most courageous or the most *476vindictive from taking action, especially where a tempting compromise settlement is offered in consideration of a release. It is conceivable that relief might be obtained in equity where gross inadequacy of benefits received or other circumstances render the agreement so unconscionable as to warrant equitable action.’ ”
I perceive compelling social policy considerations that dictate that this Court now establish a special doctrine generally applicable to cases involving personal injury releases. In my view, it is time to acknowledge that the ordinary person who suffers personal injury lacks bargaining strength, ordinarily is not in a position to defend his own interests, and, therefore, requires the special protection of the courts. Accordingly, I would hold that generally a person who has released a claim for personal injury be discharged from the contractual obligation if unforeseeable injuries develop after the execution of the agreement. To this extent, I respectfully disagree with the majority.
I would not consider the question whether the special doctrine generally applicable to personal injury releases is applicable in this particular case in which the trial court found as a fact "that these parties intended to, and did, finally settle all claims for injuries known and unknown, and which had resulted or might in the future develop as a result of this accident.” The record here shows that after the release was executed, a consent judgment was entered. In my view, there was no "mistake” that would justify an exercise of the trial court’s revisory power over an enrolled judgment. Hughes v. Beltway Homes, Inc., 276 Md. 382, 383-84, 386-89, 347 A.2d 837, 838-42 (1975); Brunecz v. DiLeo, 263 Md. 481, 482-84, 283 A.2d 606, 607 (1971); Md. Rule 625 a. Thus, even if the special doctrine were applicable here, there could be no recovery. Under these circumstances, I concur in the majority’s result. I, too, would affirm the judgment of the Court of Special Appeals.