Morta v. Korea Ins. Corp., 86-2643

• Decision Date: 26 February 1988
• Docket Number: No. 86-2643,86-2643
• Citation: 840 F.2d 1452
• Parties: Vicente L. MORTA; FHP, Inc., Plaintiffs-Appellees, v. KOREA INSURANCE CORP., Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1452

840 F.2d 1452

Vicente L. MORTA; FHP, Inc., Plaintiffs-Appellees, v. KOREA INSURANCE CORP., Defendant-Appellant.

No. 86-2643.

United States Court of Appeals Ninth Circuit.

Argued and Submitted May 14, 1987.

Decided Feb. 26, 1988.

Thomas C. Sterling, Klemm, Blair, Sterling & Johnson, Agana, Guam, for defendant-appellant.

Peter F. Perez and Daniel R. Del Priore, Agana, Guam, for plaintiffs-appellees.

Appeal from the United States District Court for the District of Guam, Appellate Division.

Before WIGGINS ^* and KOZINSKI, Circuit Judges, and GRAY, ^** District Judge.

KOZINSKI, Circuit Judge:

We consider whether, under Guam law, a release signed as part of a settlement of claims arising from an automobile accident bars recovery for after-discovered injuries.

Facts

On November 26, 1982, appellee Vicente Morta suffered a collision that damaged his 1976 Mazda station wagon and caused him bodily injury. According to Morta, the car was "a total loss." 1 Reporter's Transcript (RT) at 39. Morta himself was knocked unconscious and taken by ambulance to the emergency room at Guam Memorial Hospital. After treating Morta, the attending physician assured him that he was fine and could go home. Afterwards, Morta continued to have pain in his muscles, chin and chest. He was treated three days later by a second physician at the Seventh Day Adventist Clinic, who also told him he was fine and the pain would eventually subside.

Morta sought compensation for his losses from appellant Korea Insurance Corporation (KIC), which insured the driver who had caused the accident. Morta was directed to Bernabe Santa Maria, a claims adjuster. Morta and Santa Maria happened to be from the same area of the Philippines and conversed in their native tongues, Tagalog and Ilocano. Morta testified that he had no problem understanding Santa Maria.

Santa Maria helped Morta complete the claim form, received from Morta his medical reports, examined the damaged Mazda and, acknowledging the liability of his insured, offered Morta $900. Morta testified that the settlement offer had several components: "Three Hundred Dollars for my car; $250 from loss of compensation of work, like that; and Two Hundred some for sufferings and injury that I suffered, you know. So, they told me, included also the medical bill from SDA and the towing expenses, that item." 1 RT at 70-71; id. at 44. ¹

Morta was not satisfied with that amount, claiming that the car alone had a blue-book value of $2300. ² Santa Maria told him that $900 was all he could pay. Morta did not jump at the offer; he thought it over and went to see a lawyer. He showed the lawyer the medical and police reports. The lawyer evaluated Morta's claim and advised him that he would be unlikely to recover much more than the $900 KIC had offered and that any attempt to do so would delay payment. Morta returned to Santa Maria's office and accepted the $900. Because the settlement check covered damages for the car as well as for personal injuries--in short, all of Morta's claims--Morta signed a standard release.

About a week after the settlement, Morta began to feel ill and dizzy. He was given medication by his doctor but soon thereafter he collapsed unconscious, awaking in a Honolulu hospital after undergoing emergency surgery for a blood clot in his brain. The medical bills amounted to approximately $11,000, all paid for by Morta's insurer, FHP, Inc.

Morta filed suit to recover damages resulting from this injury, disavowing the release on the ground that Santa Maria fraudulently misrepresented its contents. FHP intervened to recover from KIC for all medical expenses incurred in treating Morta's accident-related injuries. The parties stipulated to a separate trial on the validity of the release. After the evidence was presented, KIC moved unsuccessfully for a directed verdict. The jury returned a general verdict holding the release invalid, and the superior court entered judgment to that effect. The parties then stipulated, subject to KIC's right to appeal, to entry of judgment against KIC for $14,600, which, together with the $900 settlement, constituted the limits of the insurance policy.

The Appellate Division of the District Court for the District of Guam affirmed the judgment and KIC appealed to us under 48 U.S.C. Sec. 1424-3(c) (Supp. III 1985).

Contentions of the Parties

KIC argues that Morta signed the release with eyes open and for valuable consideration. By its terms, the release covers all claims arising out of the accident, whether known or unknown. In KIC's view, the release therefore conclusively bars Morta's claim, and the superior court should have directed a verdict in KIC's favor.

Morta attacks the release on two grounds. First, he argues the release is subject to rescission because it was obtained by fraud, undue influence, mistake or deceit. Second, he argues that, even if the release is binding, it may not be invoked to bar recovery for injuries unknown and unanticipated at the time of execution. Morta argues that there was sufficient evidence for the jury to return a verdict in his favor on one or more of these theories and the superior court was therefore correct in refusing KIC's request for a directed verdict.

Discussion

A directed verdict will be granted only if, examining the evidence in the light most favorable to the nonmoving party and drawing all reasonable inferences in its favor, "there is no substantial evidence to support a verdict for that party." Fabrica Inc. v. El Dorado Corp., 697 F.2d 890, 892 (9th Cir.1983); see Peterson v. Kennedy, 771 F.2d 1244, 1256 (9th Cir.1985), cert. denied, 475 U.S. 1122, 106 S.Ct. 1642, 90 L.Ed.2d 187 (1986) (directed verdict proper where "the evidence permits only one reasonable conclusion as to the verdict"). We apply the same standard as the trial court in reviewing its decision. Walker v. KFC Corp., 728 F.2d 1215, 1223 (9th Cir.1984); Fabrica, 697 F.2d at 892.

I

The jury was properly instructed that the release could be set aside if induced by fraud, undue influence, mistake or deceit. ³ We therefore examine the record to see whether there is any substantial evidence to support rescission on any of these theories. ⁴

A. Fraud. Morta's original complaint did not attack the release at all. He later amended the complaint to add two counts disavowing the release and alleging that KIC "falsely and fraudulently and with intent to deceive and defraud the plaintiff represented to plaintiff that the Release of All Claims form was not a complete settlement of damages plaintiff was requesting for injuries sustained in an auto accident." Excerpt of Record at 4; see Guam Civ. Code Sec. 1572 (1970) (defining actual fraud). The proof at trial does not bear out this allegation.

The evidence presented to the jury consisted largely of testimony from Morta and Santa Maria, each giving his account of the negotiations between them. Those accounts do not differ all that much. Significantly, Morta did not testify that Santa Maria misrepresented the content or effect of the release in any way, only that Santa Maria never said anything about it at all. According to Morta, Santa Maria handed him the release, stating, "This is for your claim." 1 RT at 38. This statement, standing alone, certainly does not amount to fraud or anything close to it.

Morta argues, however, that Santa Maria committed fraud when he told Morta that $900 was "the only amount the insurance could give [him]." 1 RT at 70. Morta testified that when he asked, "Is that all I can get?," Santa Maria responded, "Well, I'm not the one who decide [sic] this. They decide it in there. I'm just working for them, so, I can't do nothing." Id. at 71. According to Morta, this "led [him] to believe that $900.00 was the only amount available to compensate him." Appellees' Brief at 12. This is not a reasonable construction of Santa Maria's statement, and the evidence conclusively establishes that Morta did not interpret it in this fashion. After reviewing the offer, Morta consulted a lawyer about the possibility of recovering more. The lawyer advised him that he could in fact get more--perhaps $1500--but cautioned that it would take time. Santa Maria's representation that he could pay no more--the type of statement frequently made by parties during negotiations--simply does not amount to fraud. Neither does anything else presented at trial. We therefore are unable to find any support for the jury's verdict on a theory of actual fraud.

The jury was also instructed on constructive fraud, which consists of "any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him." Guam Civ. Code Sec. 1573(1) (1970) (emphasis added). As the language of the statute suggests, a finding of constructive fraud requires a confidential or trust relationship. Guthrie v. Times-Mirror Co., 51 Cal.App.3d 879, 889, 124 Cal.Rptr. 577, 584 (1975). ⁵ KIC had no duty to Morta, however: As Morta was well aware, KIC was not his insurer, but that of an adverse party, the driver who caused the accident. Santa Maria and Morta dealt openly and at arm's length. There was no basis for a finding of constructive fraud. See Sanger v. Yellow Cab Co., 486 S.W.2d 477, 481 (Mo.1972) ("[t]he releasee does not stand in a fiduciary relation to the releasor").

B. Undue influence. Under Guam law, undue influence may be established under any of the following circumstances: (1) "the use, by one in whom a confidence is reposed by another, ... of such confidence ... for the purpose of obtaining an unfair advantage over him"; or (2) "taking an unfair advantage of another's weakness of mind"; or (3) "taking a grossly oppressive and unfair advantage of another's necessities or distress." Guam Civ. Code Sec. 1575 (1970). We find no evidence that Morta signed the release as a...