Higgins v. Spencer

• Decision Date: 23 February 1988
• Docket Number: No. 87,87
• Citation: 531 So.2d 768
• Parties: Larry M. HIGGINS v. John N. SPENCER and Sentry Insurance Company. CA 0030.
• Court: Court of Appeal of Louisiana — District of US

Page 768

531 So.2d 768

Larry M. HIGGINS v. John N. SPENCER and Sentry Insurance Company.

No. 87 CA 0030.

Court of Appeal of Louisiana First Circuit.

Feb. 23, 1988.

On Rehearing April 26, 1988.

Writ Denied Sept. 23, 1988.

Caliste Beard, Jr. and Jed G. Gremillion, Beard, Artigue & Gremillion, Lafayette, for appellant.

David A. Hurlburt, Hurlburt, Privat & Monrose, Lafayette, for appellees.

Before WATKINS, CARTER and FOIL, JJ.

WATKINS, Judge.

Plaintiffs, Larry and Linda Higgins, appeal the trial court's dismissal on an exception of res judicata of their personal injury suit arising out of an automobile/bicycle accident.

The accident occurred on April 7, 1985 on Louisiana Highway 182 within St. Mary Parish. On May 1, 1985 the plaintiffs were paid the sum of $10,000 in settlement and compromise of all their claims against the defendants, John N. Spencer (Spencer) and his insurer Sentry Insurance Company (Sentry).

While acknowledging their signatures on the release and acknowledging receipt of the $10,000, the plaintiffs attack the validity of the settlement on the grounds that they lacked mental capacity (because of pain medication and low intelligence) at the time of the execution of the release.

The trial court concluded that the plaintiffs failed to prove lack of capacity and dismissed their suit.

The record in this case reveals the following facts. On April 7, 1985 the plaintiffs were riding their bicycles in a westerly direction on Louisiana Highway 182 within St. Mary Parish, Louisiana, when Mr. Higgins collided with an automobile being driven by the defendant, John N. Spencer. Immediately following the accident Mr. Higgins was hospitalized for approximately four days for head abrasions, a fractured left forearm, a fractured right ankle and a gross fracture of the left tibia and fibula. He underwent surgery on his left arm, to place steel plates on the fractures, and was then placed in three casts, one on each leg and one on his left arm. He was subsequently readmitted to the hospital on May 14, 1987 for an additional five days where a second surgery was performed on his arm after he stumbled while getting out of his wheelchair causing displacement of the steel plates.

Ms. Peggy Harmon, a claims adjuster representing Sentry, visited the plaintiffs about a week after Mr. Higgins returned home from his first hospital stay. Ms. Harmon took a statement from the plaintiffs and discussed a possible settlement. She returned to the Higgins' home on April 29, 1985 with an offer to settle any claims arising from the accident for $10,000. The plaintiffs, in the presence of Mrs. Higgins' sixteen-year-old cousin and grandmother, accepted the compromise and signed a release. Ms. Harmon, the cousin and the grandmother signed the release as witnesses. Approximately two days later a check for $10,000 was delivered to the plaintiffs and the check was subsequently cashed. The plaintiffs were not represented by an attorney during the settlement negotiations.

Ms. Harmon testified that she read the entire release to the plaintiffs, occasionally stopping to explain the terms and asking if they understood, to which they answered affirmatively. Ms. Harmon further testified that she had no reason to believe these people did not understand what was occurring even though she admitted being told by Linda Higgins that she was a mini-retard. Ms. Harmon stated that she explained that $10,000 was all they would receive and that they would be responsible for covering any bills out of that amount. Her testimony further indicated that when she brought the settlement check to the plaintiffs several days after they had signed the release, that plaintiffs told her they were planning on using the money to purchase some land and a trailer.

Plaintiffs testified that Ms. Harmon read the release and asked them if they understood it; they stated that Ms. Harmon did not explain the release to them prior to their signing it. It wasn't until after they signed that Ms. Harmon explained that they would be responsible for their own medical bills and replacement costs for Mr. Higgins' bicycle and glasses. The plaintiffs further testified that they understood at the time the release was signed that $10,000 was all the money they would receive, but believed that they would receive additional monies until Mr. Higgins recovered. He had been previously earning $80.00 per week doing lawncare work. Their testimony also indicated that they were under the impression that $10,000 was all that they were entitled to receive.

Mr. Higgins also testified that he was still on pain medication at the time he signed the release and that he "didn't know what was going on." Mrs. Higgins testified that she is illiterate and is classified as a "mini-retard" and receives Social Security benefits for her disability.

Dr. F.T. Friedberg, a psychologist, examined the plaintiffs and conducted various tests designed to evaluate their intelligence. After testing the plaintiffs he concluded that the plaintiffs could not understand the release if it had simply been read to them. However, he stated that if the release had been explained to the plaintiffs, they could have understood its import. He went on to state that the explanation would have to be in very simplistic terms, pointing out in detail the fact that the plaintiffs would be responsible for paying all of their medical bills, past and future, living expenses while unemployed, and replacement costs for Mr. Higgins' bicycle and glasses which were damaged in the accident, etc., if the plaintiffs were to understand.

The testing performed by Dr. Friedburg revealed that Larry Higgins functions intellectually at approximately the lower 5% of the population, with word recognition at a third grade level, and that Linda Higgins functions at approximately the lower 1% of the population. Dr. Friedburg also stated that Larry Higgins possessed deficits in immediate memory and difficulties in abstract thinking. It was also the doctor's opinion that Larry Higgins had very few emotional, cultural or intellectual assets with which to make reasonable judgments about things like monetary remuneration involving injuries.

Based on the above facts the plaintiffs contend that Mr. Higgins' low intelligence and the fact that he was taking pain medication deprived him of reason at the time he signed the release. Furthermore, the plaintiffs contend that Mrs. Higgins' mental disability and her inability to read or write established that she was incapable of entering into a contract of this nature.

The courts have recognized three different legal theories in which a person may have a contract annulled for lack of mental capacity or reasoning ability at the time the contract was executed. We will explore each theory and its applicability to the facts in the present case.

The first theory is lack of legal capacity to contract. The Civil Code provides that a compromise is a form of contract and has a force equal to the authority of the thing adjudged. LSA-C.C. art. 3078. Ditch v. Finkelstein, 399 So.2d 1216 (La.App. 1st Cir.1981). Furthermore, "The law encourages the settlement of disputes by compromise, and such settlements should not be rescinded lightly." Durbin v. Cockerham, 442 So.2d 634, 636 (La.App. 1st Cir.1983). However, under the law of obligations, four elements are required for confection of a valid contract: (1) the parties must possess the capacity to contract; (2) the parties' mutual consent must be freely given; (3) there must be a certain object for the contract; and (4) the contract must have a lawful purpose. LSA-C.C. arts. 1918, 1927, 1966, 1971; First National Bank of Shreveport v. Williams, 346 So.2d 257 (La.App. 3d Cir.1977).

In the absence of a special exception, a presumption arises that all persons possess the capacity to contract. The exceptions to the presumption of capacity must be shown quite convincingly and by the great weight of the evidence. Meadors v. Pacific International Petroleum, Inc., 449 So.2d 26, (La.App. 1st Cir.1984), writ denied, 450 So.2d 964 (La.1984). The exceptions to the presumption of the capacity to contract are enumerated in LSA-C.C. art. 1918 as follows:

All persons have capacity to contract, except unemancipated minors, interdicts, and persons deprived of reason at the time of contracting. ¹

Furthermore, LSA-C.C. art. 1925 provides that:

A noninterdicted person, who was deprived of reason at the time of contracting, may obtain rescission of an onerous contract upon the ground of incapacity only upon showing that the other party knew or should have known that person's incapacity. ²

We find only two decisions involving a mentally retarded person seeking to annul a contract based on lack of capacity. ³ Coburn Finance Corporation v. Bennett, 241 So.2d 802 (La.App. 3rd Cir.1970); Stevenson v. Beneficial Finance Co. of Hammond, 295 So.2d 880 (La.App. 1st Cir.1974). Coburn involved a promissory note executed by a 22-year-old mental retardate. The court, applying prior civil code art. 1788, ⁴ chose to ignore the fact that the defendant had never been interdicted and instead based its decision on the fact that the defendant was mentally retarded, unable to read or write and that the defendant's employer told the plaintiff that defendant had the mentality of a 5 or 6 year old child. Obviously the court saw a need to release a person from a contract, who, although able to function without being interdicted, did not have the mental capacity to contract. The Stevenson case involved a mentally retarded plaintiff attempting to annul a default judgment rendered against him under the provisions of Code of Civil Procedure article 2002(1). ⁵ The plaintiff contended that he was so severely mentally retarded that he was incompetent within the meaning of art. 2002(1). The evidence of incompetency consisted of testimony of his attorney and a letter report from a clinical psychologist which classified ...