Denton v. Utley

• Decision Date: 26 November 1957
• Docket Number: No. 27,27
• Citation: 350 Mich. 332,86 N.W.2d 537
• Parties: Vernon S. DENTON, Plaintiff-Appellee, v. William UTLEY and Citizens' Mutual Automobile Insurance Company, an Insurance corporation, Defendants-Appellants.
• Court: Michigan Supreme Court

Page 537

86 N.W.2d 537

350 Mich. 332

Vernon S. DENTON, Plaintiff-Appellee, v. William UTLEY and Citizens' Mutual Automobile Insurance Company, an Insurance corporation, Defendants-Appellants.

No. 27.

Supreme Court of Michigan.

Nov. 26, 1957.

Carl F. Davidson, Detroit, Roy P. Nelson, Detroit, of counsel, for defendants-appellants.

Paul B. Mayrand, George Stone, Detroit, for plaintiff-appellee.

Before the Entire Bench, except BOYLES, J.

SMITH, Justice.

This case must be read with great care. We are upsetting the particular release here involved. We are not saying that all releases are vulnerable. What we are saying is that release have no particular immunity of their own to attack on the ground of mistake or fraud. ¹ There is no form of words, there is no formula, no instrument, no transaction, that rises above the chancellor's scrutiny or resists his intervention. 'Fiat justitia ruat coelum.'

In the case before us Vernon Denton got into an automobile accident. At the time he had what he calls 'collision insurance with a $50.00 deductible policy.' The details of the accident are unimportant. It matters not to the issue before us who got to the corner first. Denton's car was badly hurt. The frame was sprung. He says he 'didn't want it any more.' So he 'negotiated for a new car' with the Hammond Motor Sales. A bargain was struck. But Denton was short a little. He needed, in fact, the $50 that was coming to him, he thought, from the other driver's policy. (The other driver was defendant William Utley, whose insurance carrier was defendant Citizens' Mutual Automobile Insurance Company.) As Denton puts it, 'I got in touch with them (Citizens' Mutual); I sent them a letter asking them to sent me the $50.00 because I couldn't get my new car until I had that.'

It was not immediately paid. Denton was restless. He 'was using the company's car for transportation back and forth to work.' This, he says, 'was working a hardship on the company as well as myself'; it was 'tying up the man I work for by using his truck.' He called Citizens' Mutual 'and asked them where the blazes my $50.00 was.' The girl at Citizens' explained that they had had no report of the accident. Denton submitted one. Item 9 thereon consisted of question and answer: 'Were you or anyone in your car injured? No.' There seems to have been no discussion of personal injuries. 'There was nothing else discussed,' testified Denton, 'with the Citizens' Mutual Automobile Insurance Company, other than the $50.00 deductible collision.' We do not, in fact, find Citizens' claiming otherwise. At any rate, we are told, 'The check came through in a day or so and when it did, I went over there (to Mr. Hammond, at Hammond Motor Sales) and they gave me the check which I signed at that time and my new car was given to me. The check that I received was the check for the $50.00 deductible.' This check was endorsed by Denton. Did he read it before he signed it? 'I presume I did.' On the reverse side, above the endorsement is the following:

'Release

'(Read Before Endorsing)

'Endorsement by payee/payees is acceptance of the face amount of draft in full settlement, accord and satisfaction of any and all claims, demands, causes of action of every nature which he/they now have or hereafter may have against any person, firm or corporation charged or chargeable with responsibility or liability because of the accident mentioned on the face of this draft resulting in injury to him/them and/or damage to his/their property and in consideration of the payment of this sum hereby remise, release and forever discharge all persons from any further claim or payment because of said accident and damage done herein.

'Endorsement:

'Vernon S. Denton

'5470 Baldwin

'City'

Thereafter, we learn from the bill of complaint, Denton 'became seriously sick and ill, and discovered the same was due to the injuries received by him in the above mentioned accident.' He instituted suit at law for damages. The defendant Utley, and his insurer (Citizens') answered that Denton's action for personal injuries was 'barred and released by virtue of the receipt by him of the aforementioned $50.00 on the company's draft No. 91874 which purported to contain a release of all of plaintiff's claims whether for injury to him or damage to his property.' Plaintiff then filed in equity the bill before us, asserting that he had in fact suffered severe injuries to his person at the time of the accident, that those injuries 'were not ascertainable or known at the time' and that if the 'purported release has the effect now claimed for it by defendants Utley and the Company, then such release was obtained under fraudulent representations and circumstances, mistake and undue influence, and for a grossly inadequate consideration.' The bill further stated a tender of the $50 and prayed that the release 'be cancelled or reformed so as to constitute a release of plaintiff's property damage only with right to enforce his claim for personal injuries.'

To all of this the defendants reply, in effect, that Denton had disavowed personal injuries both to his own insurance carrier and to them, that he read and fully understood the release conditions which purported to release all past, present, and future claims for personal injuries or property damage, that there was no fraud and no duress, if there was a mistake it was not mutual, and, most important of all, that 'a release contract fairly entered into by competent parties with complete understanding of terms and without fraud, duress or overreaching will be upheld because society demands it.' The issue tendered the trial chancellor was the validity of the release itself, conceding, for purpose of the tendered issue only, some injury in general from the accident, but none in specific detail. (Defendants answered, in part, that 'plaintiff was aware of a limited amount of injury at the time the release was executed.') The necessary factual issues thus remain for the action at law. Compare practice under the formerly-employed demurrer. Belden v. Blackman, 124 Mich. 667, 83 N.W. 616. The trial chancellor 'cancelled, vacated and held for naught' the release, save as it pertained to property damages, and the case is before us on a general appeal.

The difficulty in the case arises, as always, from competing considerations. On the one hand we have the stability of business transactions. It would, it is said, open the door to wholesale repudiation of releases were we to here uphold the trial chancellor, it would discourage settlements and it would increase litigation. On the other we have an assertedly seriously injured plaintiff, abandoned to his own resources, while an insurer reaps a windfall, having successfully avoided, through the payment of a trifling sum of money, any possibility of having to make good on an obligation it has been paid to assume.

The position of the defendants, summarily put, is that the 'contractor must stand by the word of his contract,' citing Upton v. Tribilcock, 91 U.S. 45, 23 L.Ed. 203, quoted in Powers v. Indiana & Michigan Electric Co., 252 Mich. 585, 233 N.W. 424. If this were the law under all circumstances the case would not detain us long. But it is questionable whether it was ever true (in the sense that a contract has always been enforceable according to its literal terms, e. g., Thoroughgood's Case, 2 Coke Rep. 9a, 76 Eng.Rep. 408, 1582; Ricketts v. Pennsylvania R. Co., 2 Cir., 153 F.2d 757, 164 A.L.R. 387) and, with all certainty, we can say that it is not true today. Whether our law of contracts does, in truth, embody the subjective theory (see Whittier, The Restatement of Contracts and Mutual Assent, 17 Cal.L.Rev. 441), or whether the objective theory enunciates the true faith (e. g., Williston, Contracts, Rev. ed. § 35), the result is the same: under some circumstances a release is avoided. To those holding with the subjective theory, of course, this presents no problem should there be a variance between intent and expression. But even to those professedly adhering to the objective theory the problem is not a difficult one. If is of approximately the same order of difficulty as the problem of long division to the expert mathematician. The objectivists simply say that a contract is voidable where one party has made a mistake and the other 'has reason' to know it. (Restatement of Contracts, § 503). And what does a man have reason to know? He has reason to know no more and no less than a court deems it fair, from the posture of the parties and the circumstances of the case, to ascribe to his knowledge. So much for theories of contract. Both here reach the same result.

But we have merely rephrased our problem. We said that 'under some circumstances' a release will be avoided. What are those circumstances? Why are they unique? The answer to those questions requires a perspective. The problem in the case before us concerns the law of mistake. The position of the plaintiff may be very simply stated. He said he was mistaken about the existence of any injuries. ('At that time [of the report to Citizens'] I didn't know I was injured. I couldn't tell them that I was.') Under what circumstances, then, will a mistake on the part of one or both parties to a release justify its avoidance?

We do not propose here even to summarize the black-letter catch titles of the law of mistake. Those interested in its broader aspects may refer to Durfee and Dawson's 'Restitution,' where will be found some 400 pages of text, cases, and footnote material ranging from cases on simple misunderstandings, through mistakes in integration, to those mistakes involving errors in basic assumptions. The point to be gathered from all of this material, these scores, these hundreds of cases, is that it is too late in the law to insist that the contractor must in all events stand by the literal words of his contract. Mistakes can happen. We have not yet reached the ...