Campbell v. Stagg

• Decision Date: 12 June 1979
• Docket Number: No. 15912,15912
• Citation: 596 P.2d 1037
• Parties: Eugene P. CAMPBELL, Plaintiff and Respondent, v. Pearl STAGG, Defendant and Appellant.
• Court: Utah Supreme Court

Page 1037

596 P.2d 1037

Eugene P. CAMPBELL, Plaintiff and Respondent, v. Pearl STAGG, Defendant and Appellant.

No. 15912.

Supreme Court of Utah.

June 12, 1979.

Ray H. Ivie of Ivie & Young, Provo, for defendant and appellant.

Jackson B. Howard, Provo, for plaintiff and respondent.

MAUGHAN, Justice:

This case involves an action for damages arising out of an automobile accident in 1973. The district court held a release entered into between plaintiff and defendant was voidable, because of a mutual mistake of fact, and awarded plaintiff damages on his claim against defendant. Defendant asserts there was no mutual mistake of fact; and, in any event, the release is still in effect because defendant's insurer was not joined as an indispensable party. We affirm and award costs to plaintiff. All statutory references are to Utah Code Ann., 1953, as amended.

The collision giving rise to this litigation occurred near Price, Utah, on September 9, 1973. Plaintiff was taken by a police officer to Carbon Hospital and examined by Dr. Gorishek, who ordered X-rays and performed a clinical examination upon plaintiff. The doctor was at that time of the opinion the injuries to plaintiff were minor, consisting of bruises and cervical strain. Plaintiff also thought he was not seriously injured, and returned to work the following day.

On September 12, 1973, plaintiff telephoned LaVell Brown, an agent for State Farm Mutual Automobile Insurance Company (State Farm), defendant's insurer. Plaintiff represented to Brown he was not seriously injured, and Brown informed his superiors that plaintiff's injuries consisted only of "multiple bruises." On September 21, 1973, plaintiff signed a release which provided that State Farm would pay $850 for damage to plaintiff's car, $400 for pain and suffering, and amounts not to exceed a specified upper limit for medical costs and lost wages.

In December, plaintiff's condition deteriorated, and he was admitted to St. Marks Hospital in Salt Lake City. A neurologist diagnosed plaintiff's neck injury as a herniated cervical disc with compression of nerve roots C-5 and C-6. He was released from the hospital January 4, 1974, and notified State Farm in February of his decision to rescind the release agreement. The complaint was filed February 25, 1974, and defendant's answer setting up the release agreement as an affirmative defense, was filed in March.

To relieve the increasing pain in his neck and arm, plaintiff later underwent surgery, which was for the most part unsuccessful. He has been partially disabled because of his injury since 1974.

On October 3, 1977, the first day of trial, defendant moved to vacate the trial setting because State Farm was not named as a party. Judge Edward Sheya denied the motion, heard the case without a jury, and took the matter under advisement. He subsequently died before rendering a decision, and the matter was reset for trial on February 23, 1978. The district court denied defendant's "Objection to Trial," which asserted State Farm was an indispensable party, and heard the case without a jury. From a judgment in favor of plaintiff, defendant appealed, claiming: (1) State Farm is an indispensable party to the action, and because all parties to the release are not before the court, the release as to defendant cannot be set aside; (2) there was no mutual mistake of fact between plaintiff and Brown; (3) plaintiff ratified the release agreement by his conduct after September 21, 1973; and (4) the district court incorrectly allowed interest on special damages under § 78-27-44. We address these issues in the order presented above.

Defendant argues since the release agreement names not only defendant, but also State Farm, State Farm must be named in an action to set the release aside. In support of this argument, defendant refers us to 12 C.J.S. Cancellation of Instruments § 52:

The rules of equity with reference to parties control in a suit wherein plaintiff seeks to enforce equitable rights through the equitable remedy of cancellation or rescission. All persons whose rights, interest, or relations with or through the subject matter of the suit would be affected by the cancellation or rescission are proper and necessary parties in order that they may have an opportunity to be heard; and unless they are made parties the court is precluded from rendering a judgment or decree of cancellation. Where such persons are not made parties originally, they may be brought in by amendment; but until the omission is corrected the court should not proceed further, even though no objection is made by any party litigant.

Additionally, defendant cites Stone v. Salt Lake City, 11 Utah 2d 196, 356 P.2d 631 (1960), in which this Court stated:

One should be regarded as a necessary party to a law suit if he has rights or interests involved in the subject matter in such a way that his presence is essential to a full, fair and equitable determination of his rights and those of other parties to the suit, and necessary parties include the grantees of a deed, in an action in which the validity of such deed is under attack.

We do not disagree with the above statements of law, but we find them inapplicable to this situation.

State Farm has committed no act making it liable in tort to plaintiff, as has defendant. State Farm did, however, Contractually bind itself with defendant, the insured, to compensate persons such as plaintiff in the event of a collision caused by defendant. State Farm's liability to plaintiff arises only secondarily, through its contractual arrangement with defendant, and the release agreement itself cannot alter State Farm's liability to defendant under the terms of contract between them.

In Utah, a plaintiff must direct his action against the actual tortfeasor, not the insurer. ¹ The fact that plaintiff signed a release agreement which named the insurer as a releasee does not change the nature of the rights between plaintiff and the insurer; plaintiff has no direct cause of action against the insurer which he could release. Plaintiff's only cause of action lies against defendant, which is an action in tort. On this basis, we distinguish Pattison v. Highway Insurance Underwriters, Tex.Civ.App., 278 S.W.2d 207 (1954), cited by defendant in support of her argument. In Pattison, plaintiffs alleged the insurer's agents fraudulently misrepresented the amount of coverage provided in the defendant's insurance policy, inducing plaintiffs to sign a release agreement. The court held plaintiffs could have the insurer joined as a party in view of plaintiffs allegations of torts committed by both defendant and the insurer. The court held: "We think the (trial court's) action in sustaining defendants' exceptions setting up that plaintiffs had plead(ed) tort actions which were improperly joined was wrong." Here, no tort by the insurer is alleged.

As stated in Stone v. Salt Lake City, supra, one is a necessary party if his interests or rights are involved in such a way that his "presence is essential to a full, fair and equitable determination of his rights and those of other parties to the suit," and that is not the situation in the case before us. Although the release was negotiated by the agent for State Farm on behalf of defendant, State Farm's presence as a party in the action to set aside the release is not essential to a determination of its rights, since State Farm's liability is governed solely by its contract with defendant. The execution and avoidance of the release are matters affecting defendant's direct liability to plaintiff as a tortfeasor, and do not require the presence of the insurer as a named party.

Defendant and plaintiff both rely on the same cases concerning the issue of whether the release should have been set aside because of a mutual mistake of fact. In Reynolds v. Merrill, 23 Utah 2d 155, 460 P.2d 323 (1969), this Court held an injured person may have a release set aside if there is a mutual mistake of fact regarding an injury which actually was in existence but unknown to the parties when the release was signed. The court distinguished an Unknown injury from Unknown consequences of a Known injury, noting that "(t)he former can be the basis of a mutual mistake of fact, while the latter would be only a mistake of opinion." The court quoted from Ranta v. Rake, 91 Idaho 376, 421 P.2d 747, 751 (1967), in which the Idaho Supreme Court declared:

The majority and the more modern view, while recognizing the policy of encouraging out-of-court settlements of personal injury claims, permits a releasor to avoid a release where unknown injuries existed at the time the release was executed though the release invariably is broad enough to encompass unforeseen injuries and though the release was honestly obtained without fraud, overreaching or undue influence on the part of the releasee.

In 1976, we reaffirmed the Reynolds approach in Carter v. Kingsford, Utah, 557 P.2d 1005 (1976). In Carter, plaintiff's injuries from an automobile accident were diagnosed by her doctor on the day of the accident as "cervical contusion" or cervical strain. She was hospitalized the next day and remained there for five and one-half weeks. X-rays taken during this time indicated plaintiff had a "slight degenerative disc disease at C-5 and 6." Three months after the accident, she signed a release. Three and one-half years after signing the release, plaintiff was hospitalized for surgery involving fusion of the C-5 and C-6 discs. The denial of the petition to set aside the release was affirmed by a divided court, the majority holding that this was a situation involving unknown consequences of a known injury.

In Reynolds, the diagnosis at the time of the signing of the release was "traumatic bursitis of right shoulder," and "(t)raumatic myositis (of) posterior neck muscles." The doctor reported plaintiff would be able to continue working, which plaintiff did. A few months later plainti...