Court Opinion

ID: 9656394
Source: CourtListenerOpinion
Date Created: 2023-08-23 19:47:43.993423+00
Date Added: 2024-06-11T18:13:32.183025
License: Public Domain

WILLIAM G. CALLOW, J.
(dissenting). The majority concludes: (1) The inclusion of the words “IT IS EXPRESSLY UNDERSTOOD . . . [that the defendants] have no insurance covering equestrian activities" is a misstatement of fact going to the essence of the exculpatory contract in the instant case, supra, at 207, and that (2) public policy renders such an exculpatory contract unenforceable. Supra, at 215. I disagree that the above-referenced words go to the essence of the contract. Further, I do not believe that the exculpatory contract in the instant case is violative of public policy as I understand the law in this area. Accordingly, I dissent.
Turning to the majority’s first conclusion, for which it cites no authority — that the defendants’ misstatement *216concerning insurance coverage was highly relevant and went to the essence of the bargain between the parties— I find, following a thorough review of the record and the release agreement, that the misstatement had little, if any, effect upon Bonnie Merten. It certainly was not, as the majority appears to characterize it, a condition precedent to the signing of the contract.
In the first paragraph of the release it states: “The undersigned acknowledges that there are dangers and risks of injury inherent in these equestrian activities, but still desires to participate in these activities.” The immediately succeeding “THEREFORE” clause states: “THEREFORE, the undersigned, . . . does hereby forever release . . . [the defendants] from any accident. . . arising out of equestrian activities.” Clearly, as I read the contract, the release of liability was in response to the nature of the activity the plaintiff desired to pursue.
I agree with the following conclusion reached by the court of appeals:
“There is no indication, either in the pleadings or the affidavits and depositions, that the [insurance] recital was a material fact upon which Merten relied. She admitted reading the release before signing it; she understood it and even questioned Kerry Nathan about it. Kerry Nathan said the release meant the stable was not legally responsible for any negligence. Merten said she understood that she was ‘releasing Burgundy Ridge Farms from any responsibility.’ With respect to the recital that the star-ble had no insurance, she said that when she first read this, ‘it bothered me, but I signed it anyway.’ There is no allegation that she signed the release because of or in reliance on the recital.” (Emphasis added.)
The majority concludes that “[e]ven though all the elements of misrepresentation . . . cannot be proved in a case involving an exculpatory contract . . . , relief should be granted from an exculpatory contract when the probability of unfairness exists.” Supra, at 215. *217This broad statement takes great license with the law, and the majority has not shown any evidence of unfairness in the instant case.
“The elements of fraudulent misrepresentation are well established in the case law: First, there must be a false representation; second, it must be made with intent to defraud and for the purpose of inducing another to act upon it; and third, such other person must rely on it and be induced to act, to his injury or damage.”
Goerke v. Vojvodich, 67 Wis. 2d 102, 107, 226 N.W.2d 211, 214 (1975). In my review of this case, Bonnie Mer-ten has not proven elements two and three of this tort. The majority apparently believes that she does not have to prove these elements if an exculpatory contract is involved and the concomitant probability of unfairness exists. The majority opines that enforcing an exculpatory contract which contains a false statement of fact “open[s] the door to sharp practice.” I submit this is the very reason the tort of misrepresentation evolved. Simply because the plaintiff cannot meet its well-established elements is no reason for this court to carve out an exception in the case of exculpatory contracts.1
*218I would stress that, absent a statute to the contrary, the generally accepted rule is that contracts against liability for negligence are valid except in those cases where a public interest is involved. 57 Am. Jur. 2d Negligence sec. 23, 366 (1971); W. Prosser, Handbook of The Law of Torts, sec. 68, 442 (4th ed. Hornbook Series 1971); 2 Restatement (Second) of Contracts sec. 195, 65 (1981) ; Restatement of The Law of Contracts sec. 575, 1080-81 (1932); 15 Williston on Contracts sec. 1750A, 141-46 (3d ed. Jaeger, 1972). See also Abel Holding Co., Inc. v. American District Telegraph Co., 138 N.J. Super. 137, 153-54, 350 A2d 292 (1975). “The justification for upholding the validity of such clauses stems from the concept of freedom of contract, grounded in state and federal constitutional provisions.” College Mobile Home Park & Sales, Inc. v. Hoffmann, 72 Wis. 2d 514, 516-17, 241 N.W.2d 174 (1976). See Queen Insurance Company of America v. Kaiser, 27 Wis. 2d 571, 575, 135 N.W.2d 247 (1965) (exculpatory clauses are not uncommon and are a proper subject of the bargain of the parties). While the majority is correct in stating that exculpatory clauses should be strictly construed against the drafter in cases of ambiguity, the contract in the instant case is not am*219biguous, and the strict construction rule is inapplicable because the intent of the parties is clear. See Johnson v. Prange-Geussenhainer Co., 240 Wis. 363, 375, 2 N.W.2d 723 (1942) (rule of strict construction should not be invoked to defeat clear intent of the parties). Exculpatory contracts have not been statutorily prohibited in this state, and I believe this court should endeavor to uphold them when they result in a bargained for exchange and do not violate public policy. “The mere fact that a contract is somewhat harsh or unfair in its operation does not excuse performance, and the court cannot create contractual obligations which are not based on the expressed intention of the parties.” Abel Holding Co., Inc. v. American District Telegraph Co., 138 N.J. at 155.
The court of appeals reached the following conclusions in holding that the exculpatory contract in the instant case is readily distinguishable from the following types of contracts which are violative of public policy:
“(1) The contract arises out of a business generally thought suitable for public regulation, e.g., a common carrier or a public utility. See Western Union Telegraph Co. v. Nester, 309 U.S. 582 (1940) ; Fox, 138 Wis. at 653, 120 N.W. at 401. Cf. Duszynski, 32 Wis. 2d at 468, 145 N.W.2d at 738.
“(2) The party seeking exculpation is engaged in performing a service of great importance to the public, e.g., places of public accommodation, such as retail stores, restaurants and the like. When such public accommodation is a matter of practical necessity for some members of the public, these businesses become subject to a public interest. New York Central Railroad Co. v. Lockwood, 84 U.S. (17 Wall.) 357, 378-82 (1873);
“(3) The party seeking exculpation holds itself out as willing to give reasonable public service to all who apply, e.g., public warehousemen, common carriers and innkeepers. See Lombard v. Louisiana, 373 U.S. 267 (1963) (Douglas, J., concurring), and
“ (4) As a result of the essential nature of the service in the economic setting of the transaction, the party in-*220yoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks the services and confronts the public with a standard contract. As a result, the person is placed under the control of the seller subject to the risk of carelessness, e.g., hospital-patient contracts where a member of the public, despite his or her economic inability to do so, faces the prospect of a compulsory assumption of the risk of another’s negligence. See Tunkl, 60 Cal.2d at 102, 383 P.2d at 447, 32 Cal. Rptr. at 39.” (Emphasis in original.)
See also W. Prosser, supra at sec 68, 442-44; Restatement (Second) of Contracts, supra at sec. 195 comment a; supra, at 213.
The majority, acknowledging that the instant case does not fall within these four well-recognized policy ambits denying enforceability, seemingly dismisses the legal parameters to unenforceability by advocating that courts define public policy using “community common sense and common conscience.” Supra, at 213. The majority proceeds to shift the emphasis of its opinion to the false statement concerning the insurance policy in the exculpatory clause, holding that such a misstatement vitiates the integrity of the bargaining process, smacks of overreaching and lack of good faith, and of oppression to the party executing the release. Supra, at 214, 215.
I question what the majority’s position would be if an exculpatory contract contained a misstatement that a defendant had no insurance when the agreement was signed but where the policy had lapsed at the time of the accident. Furthermore, the majority declares that, because of the existence of an insurance coverage misstatement in the contract, a defendant is not relieved from the liability excused by the terms of the contract. The liability thus imposed is not limited to the face value of the insurance policy, and accordingly a defendant would be obliged to pay that portion of a judgment which *221exceeded the insurance coverage. Imposing this burden on a defendant is clearly a result contrary to the express terms of such an exculpatory contract.
Even though I believe that the misstatement in the instant case did not have a determinative effect on the parties bargained for exchange (i.e., I believe the record clearly reveals that Bonnie Merten would have signed the release with or without the disclaimer of insurance), the majority’s interpretation of the misrepresentation should be analyzed under the tort of misrepresentation, not expansion of the policy limitations on the enforceability of exculpatory contracts because the plaintiff fails to satisfy the requisites of the applicable tort.
I would note that exculpatory clauses are routinely inserted in contracts dealing with recreational activities, such as horseback riding.
“Sports or recreational events, whether there be actual participation or vicarious enjoyment have not as yet in any court or by any legal authority been recognized as a business or facility having a public-service character. . . . All of the above events are leisure pursuits, many of which naturally involve a certain amount of risk. In Riding Academy v. Miller, (1934) 127 Ohio 545, 189 N.E. 647, the court noted that a person who hires a riding horse must be prepared for the ordinary risks involved.”
Duszynski v. B & T Riding Academy, Inc., 32 Wis. 2d 464, 468, 145 N.W.2d 736 (1966). In the instant case Bonnie Merten desired to take riding lessons, and I believe she intended to contract away her rights and remedies for future negligence on the part of the defendants in exchange for the lessons. See State Farm Fire & Casualty Co. v. Home Insurance Co., 88 Wis. 2d 124, 129, 276 N.W.2d 349 (Ct. App 1979) (lessee not in a position of either signing a contract or having no place to go). “Freedom of contract is a fundamental concept underlying the law of contracts and is an essential element of the free enterprise system.” Rawlings v. Layne *222& Bowler Pump Company, 93 Idaho 496, 499, 465 P2d 107, (1970). There is nothing in the facts of the case “to suggest that the parties were not on equal footing or that they did not deal at arm’s length. ‘There is no rule of public policy which denies effect to their expressed intention, but on the contrary, as the matter lies within the range of permissible agreement, the highest public policy is found in the enforcement of the contract which was actually made.’ ” Sun Oil Co. v. Dalzell Towing Co., Inc., 287 U.S. 291, 294 (1932) (emphasis added).
The majority correctly notes that “courts [must] examine the facts and circumstances of each exculpatory contract with special care to determine whether enforcement of the exculpatory contract in the individual case contravenes public policy.” Supra, at 211 (emphasis added). The majority concludes that a proper judicial inquiry focuses on whether a misstatement in an exculpatory contract would be relevant to a reasonable person (an objective standard). I believe that, where the plaintiff in the individual case declares that the misstatement was not of consequence to him, then the reasonable person test is not applicable. I would only apply a reasonable person test when the record does not reveal the effect of the misstatement upon the individual plaintiff. Accordingly, because Bonnie Merten declared that she signed the release regardless of the insurance disclaimer, I do not believe that the exculpatory contract in the instant case was unfair or violative of public policy, and I would uphold it. See College Mobile Home Park & Sales, Inc. v. Hoffman, 72 Wis. 2d at 519 (courts must examine the actual effect of the particular release clause upon the parties).
I believe the majority errs in concluding that the misstated insurance disclaimer went to the essence of the contract and under notions of community common sense changed the bargain between the parties. I believe the *223plaintiff has failed to prove a case of misrepresentation, principally because she did not rely upon the misstated insurance disclaimer in signing the contract. I, unlike the majority, would refuse to expand previously well-established public policy principles to preclude enforceability of this agreement. Accordingly, I dissent.

 The majority states it would grant relief in cases where “the probability of unfairness exists.” Supra, at 215. Where there is is no evidence that the insurance statement was made with any intent to induce the signing of the contract and where the plaintiff did not rely upon the disclaimer in so contracting, I question whether unfairness exists. The majority apparently believes Bonnie Merten would not have signed the contract had she known of the existence of the insurance. Supra at 214. However, I know of no duty to disclose the existence of an insurance policy, and in fact, I doubt such disclosure is customary practice with any contract — particularly an exculpatory contract. While the majority may see disclosure as desirable to a potential plaintiff, it is not the law.
As I read the majority opinion, had the contract been silent regarding the issue of insurance, it would have been upheld. But because the defendants had the misfortune to use their standard *218form, drafted prior to the acquisition of insurance, which the plaintiff did not rely upon, the majority has imposed liability. I submit the defendants’ actions should be scrutinized under the well-established tort of misrepresentation, not the new variety designed by the majority under facts it finds unfair.
An exculpatory contract exempting a landlord from liability resulting from a condition on the premises does not apply if the damage is attributable to the landlord’s active negligence. Queen Insurance Company of America v. Kaiser, 27 Wis. 2d 571, 576, 135 N.W.2d 247 (1965). In the instant case, I see the defendants’ actions as passive negligence. They inadvertently omitted removing the six words regarding insurance in the exculpatory clause in a contract. By way of analogy, I note that passive negligence is insufficient to nullify an otherwise valid exculpatory clause in a lease. Id. at 577.