Fees v. Mutual Fire and Auto. Ins. Co., 91-919

• Decision Date: 23 September 1992
• Docket Number: No. 91-919,91-919
• Citation: 490 N.W.2d 55
• Parties: Kenneth Albert FEES, Jr.; Janet Elaine Fees; and Kenneth Albert Fees, Jr., As Father and Next Friend to Jesse Daniel Fees and April Dawn Fees, Appellants, v. MUTUAL FIRE AND AUTOMOBILE INSURANCE COMPANY, Dave Temple Insurance Services, and John Woodland, Appellees.
• Court: Iowa Supreme Court

Page 55

490 N.W.2d 55

Kenneth Albert FEES, Jr.; Janet Elaine Fees; and Kenneth Albert Fees, Jr., As Father and Next Friend to Jesse Daniel Fees and April Dawn Fees, Appellants, v. MUTUAL FIRE AND AUTOMOBILE INSURANCE COMPANY, Dave Temple Insurance Services, and John Woodland, Appellees.

No. 91-919.

Supreme Court of Iowa.

Sept. 23, 1992.

Patrick B. Chambers, Webster City, for appellants.

Jack W. Rogers, Des Moines, for appellee Mut. Fire & Auto. Ins. Co.

Bruce P. Bickel, Ames, for appellee Dave Temple Ins. Services.

Mark D. Aljets and Michael E. Marshall of Smith, Schneider, Stiles, Mumford, Schrage, Zurek, Wimer & Hudson, P.C., Des Moines, for appellee John Woodland.

David L. Phipps of Whitfield, Musgrave & Eddy, Des Moines, for amicus curiae Iowa Defense Counsel Ass'n.

Considered by McGIVERIN, C.J., and LARSON, SCHULTZ, NEUMAN and ANDREASEN, JJ.

ANDREASEN, Justice.

The plaintiffs, Kenneth Albert Fees, Jr., individually, and as father and next of friend for his two children, and Janet Elaine Fees, his wife, filed their petition on April 2, 1990. They claimed damages based upon breach of contract, bad-faith failure to settle, misrepresentation, slander, and intentional infliction of emotional distress. The petition named as defendants Mutual Fire and Automobile Insurance Company, the insurer; David Temple Insurance Services, an agency of the insurer; and John Woodland, a fire investigator employed by the insurer. The petition alleged the plaintiffs had purchased a homeowners policy issued by the insurer providing coverage for their home in Jewell, Iowa, and that their claims for loss resulting from a fire that occurred on April 1, 1988, were not paid. In their answers to the petition, the defendants alleged the plaintiffs had settled the disputed fire loss claims and had executed a release of all claims.

The defendants filed motions for summary judgments. The motions were submitted to the court at hearing on May 17, 1991. Upon review of the record, the court concluded the plaintiffs had executed a valid release of their claims. The court found there was no coercion, duress, or fraud as a matter of law and that the plaintiffs were estopped from maintaining their claims. Summary judgments were entered against the plaintiffs.

The plaintiffs' appeal from the judgments was transferred to the court of appeals. See Iowa R.App.P. 401. In a divided opinion (2-1), the court of appeals reversed the summary judgments. The majority concluded the release and settlement would be invalid if procured as a result of economic duress. Finding the record presented a genuine issue of fact concerning the existence of economic duress, the court of appeals reversed the summary judgments. Upon application of all defendants, we granted further review. See Iowa R.App.P. 402. We now vacate the decision of the court of appeals and affirm the judgments of the district court.

I. Summary Judgment.

Summary judgment is proper only when the entire record before the court shows there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Iowa R.Civ.P. 237(c). The requirement of a "genuine" issue of fact means the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Hike v. Hall, 427 N.W.2d 158, 159 (Iowa 1988). An issue of fact is "material" only when the dispute is over facts that might affect the outcome of the suit, given the applicable governing law. Id. In deciding whether the defendants' summary judgment motions should have been granted, "we must determine whether any facts have been presented over which a reasonable difference of opinion could exist that would affect the outcome of a case." Behr v. Meredith Corp., 414 N.W.2d 339, 341 (Iowa 1987). We must review the record made in support of and in resistance to the motion to determine whether summary judgment was properly granted. Hoefer v. Wisconsin Educ. Ass'n Ins. Trust, 470 N.W.2d 336, 339 (Iowa 1991).

The record includes the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits. Iowa R.Civ.P. 237(c). The court may permit affidavits to be supplemented by oral testimony. Iowa R.Civ.P. 237(e). Here, the court permitted Fees to supplement the affidavit of Kenneth Fees with his sworn testimony. His testimony is a part of the record.

Counsel for the plaintiffs concede the plaintiffs have no case if the release is binding. As stated by counsel, "if the release stands, the summary judgment is correct."

II. Settlements.

Settlement agreements are basically contracts, and in reviewing them, we turn to the general principles of contract interpretation. Waechter v. Aluminum Co., 454 N.W.2d 565, 568 (Iowa 1990). The law favors settlement of controversies and, accordingly, "we have long held that voluntary settlements of legal disputes should be encouraged, with the terms of settlement not inordinately scrutinized." Wright v. Scott, 410 N.W.2d 247, 249 (Iowa 1987). The typical settlement resolves uncertain claims and defenses, and the settlement avoids the need for further legal proceedings. Id.

Fees admit they executed a "policy release and release of all claims" and received $43,257.92 from Mutual Fire. The release is clear and unequivocal. It recites Fees accept the payment as the compromise and final settlement of disputed claims. It releases Mutual Fire and its agents and others from all liability for claims under the insurance policy or claims arising out of the fire loss.

III. Economic Duress.

A contract is voidable by the victim "if the party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative." Restatement (Second) of Contracts § 175(1), at 475 (1981). Based upon this standard, we have recognized a release or settlement agreement may be invalid by reason of economic duress. Turner v. Low Rent Hous. Agency, 387 N.W.2d 596 (Iowa 1986). Economic duress can serve as a basis for invalidating a release when the releasor involuntarily accepted the terms of the release, the circumstances allowed only that alternative, and such circumstances were the results of the coercive acts of the releasee. Id. at 598-99. The releasor must establish that the duress resulted from the releasee's wrongful oppressive conduct and not by the releasor's necessities. Id.

Obviously, the burden of proving economic duress is upon the party alleging it. Any defense that a contract or writing sued on is void or voidable, or which admits the facts of the adverse pleading but seeks to avoid their legal effect, must be specially pleaded. Iowa R.Civ.P. 101. Generally, it is necessary that a party plead and present facts in support of an affirmative defense urged by the party to show that there is an issue of fact in a summary judgment proceeding. Graham v. Kuker, 246 N.W.2d 290, 292 (Iowa 1976). See also Waechter, 454 N.W.2d at 569 (failure to raise issue of economic duress in district court will prohibit consideration of the issue on appeal).

Here, the defendants urged in district court that the plaintiffs had not raised economic duress as an affirmative defense. The plaintiffs alleged in their petition that Mutual Fire had refused to provide recovery for loss sustained as a result of the fire and forced them to accept less than the amount due under the policy. The plaintiffs further alleged Woodland, individually and as agent for Mutual Fire, had accused them of committing arson, causing them to accept less than the amount of the policy coverage. They also alleged these actions were malicious, made in bad faith, and for the purpose of intimidating the plaintiffs. The district court concluded that the pleadings, including the motions for summary judgments and the resistances, raised the defense of economic duress. While we seriously question whether this defense had been properly raised in the pleadings, we recognize the issue was considered by the court, and we will therefore address it.

It is undisputed in the record that in November 1985 Fees purchased on contract their house in Jewell for $12,000. In January 1987, Fees voluntarily petitioned for bankruptcy. On their schedule of assets they valued their interest in their home at $12,000, their personal property at $1516, and their wearing apparel at $1060. Fees purchased their homeowners policy with Mutual Fire in July 1987. The policy provided limits of $35,000 on dwelling,...