Mitschelen v. State Farm Mut. Auto. Ins. Co.

• Court: Court of Appeals of New Mexico
• Writing for the Court: SUTIN
• Citation: Mitschelen v. State Farm Mut. Auto. Ins. Co., 555 P.2d 707, 89 N.M. 586, 1976 NMCA 93 (N.M. App. 1976)
• Decision Date: 14 September 1976
• Docket Number: Nos. 2365,2406,s. 2365
• Parties: Earl M. MITSCHELEN, Plaintiff-Appellee and Cross-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant and Cross-Appellee.

Page 707

555 P.2d 707

89 N.M. 586

Earl M. MITSCHELEN, Plaintiff-Appellee and Cross-Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY Defendant-Appellant and Cross-Appellee.

Nos. 2365, 2406.

Court of Appeals of New Mexico.

Sept. 14, 1976.

Certiorari Denied Oct. 21, 1976.

John A. Klecan, Klecan & Roach, Albuquerque, for State Farm Mut. Auto. ins.

LeRoi Farlow, Sarah M. Bradley, Albuquerque, for Earl M. Mitschelen.

OPINION

SUTIN, Judge.

Defendant appeals an adverse judgment arising out of an uninsured motorist protection policy. This appeal is limited to the issue of whether a release prepared by defendant and signed by plaintiff, without acknowledgment, was valid, and barred additional recovery by plaintiff against defendant. Plaintiff cross-appealed on the grounds that the trial court denied his claim for punitive damages. We affirm.

A. Facts on Defendant's Appeal.

Plaintiff was involved in an automobile accident in August, 1973, which gave rise to his claim for relief under the terms of defendant's insurance policy.

Plaintiff injured his right shoulder. After several months of difficulty, including frequent visits to Dr. Segarra, plaintiff saw Dr. Trusell in October and November. On October 19, while at work, plaintiff grabbed for a falling sack with his left arm while attempting to protect his injured right arm, and tore the tendons in his left arm. Plaintiff was advised to undergo surgery on his right arm, and was later advised that he would need an operation on his left arm.

On October 29, plaintiff executed an unnotarized Release and Trust Agreement prepared by defendant which provided that it was 'in full settlement and final discharge of all claims under the above numbered policy because of bodily injuries, known and unknown and which have resulted or may in the future develop . . ..'

Surgery on the right arm was performed in December, 1973. Surgery on the left arm was performed in January, 1974. He remained under Dr. Trusell's care until April 29, 1974. This action was filed on April 1, 1974.

The trial court held the release void because it was not acknowledged before a disinterested notary public under § 21--11--1 (C), N.M.S.A.1953 (Repl.Vol. 4, 1975 Supp.).

B. Settlements, Releases and Statements Statute.

New Mexico has an unique statute regulating this issue, enacted in 1971. We shall refer to it as 'The Release Act'.

Section 21--11--1 reads:

Settlements, releases and statements of injured patients--Acknowledgment required--Notice.--A. No person whose interest is or may become adverse to a person injured who is either under the care of a person licensed to practice the healing arts, or confined to a hospital or sanitarium as a patient shall, within fifteen (15) days from the date of the occurrence causing the person's injury:

(1) negotiate or attempt to negotiate a settlement with the injured patient; or

(2) obtain or attempt to obtain a general release of liability from the injured patient; or

(3) obtain or attempt to obtain any statement, either written or oral from the injured patient for use in negotiating a settlement or obtaining a release.

B. Any settlement agreement entered into, any general release of liability or any written statement made by any person who is under the care of a person licensed to practice the healing arts or is confined in a hospital or sanitarium after he incurs a personal injury, which is not obtained in accordance with the provisions of section 2 (21--11--2) of this act (21--11--1, 21--11--2), requiring notice and acknowledgment, may be disavowed by the injured person within fifteen (15) days after his discharge from the care of the persons licensed to practice the healing arts or his release from the hospital or sanitarium, whichever occurs first, and such statement, release or settlement shall not be evidential in any court action relating to the injury.

C. Any settlement agreement, any release of liability or any written statement

shall be void unless it is acknowledged by the injured party before a notary public who has no interest adverse to the injured person. (Emphasis added)

Section 21--11--2 reads:

Settlements, releases and statements--Applicability.--The provisions of this act (21--11--1, 21--11--2) relating to settlements, releases and statements obtained, by a person whose interest is or may become adverse, from a patient confined in a hospital or sanitarium or being treated by a person licensed to practice the healing acts, shall not apply, if at least five (5) days prior to obtaining the settlement, release or statement, the injured party had signified in writing, by a statement acknowledged before a notary public, who has no interest adverse to the injured party, his willingness that a settlement, release or statement be given, (Emphasis added)

New Mexico has indicated that, absent a valid acknowledgment, a written instrument is void if the statute expressly so provides. In Vorenberg v. Bosserman, 17 N.M. 433, 130 P. 438 (1913), a chattel mortgage was not properly acknowledged. Under the statute then existing, the chattel mortgage was valid between the parties. The Court said:

It is further urged that the absence of a valid acknowledgment rendered the instrument void. The argument is clearly unsound. The general doctrine is that, in absence of statute expressly so providing, an acknowledgment is no part of an instrument, and is not necessary to its validity. (Emphasis added) (17 N.M. at 440, 130 P. at 440)

Section 21--11--1(C) expressly provides that there be an acknowledgment before a notary public. Under this provision, we hold that the acknolwedgment is a part of the release, and it is necessary to its validity.

C. The Meaning of Subsection C.

Subsection A provides that defendant shall not obtain a general release of liability from plaintiff within 15 days from the date of the occurrence that caused plaintiff's injury.

Subsection B provides that any such 'general release' may be disavowed by plaintiff within 15 days after his discharge by the doctor. (Emphasis added)

Subsection C provides that 'any release of liability . . . shall be void unless it is acknowledged by the injured party before a notary public . . ..' (Emphasis added)

It is reasonable to infer that the phrase 'any release of liability' in subsection C refers back to the 'general release' stated in subsections A and B.

The legislative purpose is clear; the statute was enacted to prevent injustice to a claimant while he is hospitalized or under the care of a doctor. A release obtained contrary to this statute 'is often called in personal injury cases a 'rush release', and is executed in a situation wherein there exists a high potential of error. Recognizing this great possibility for error inherent in rush releases, the legislatures of at least seven states (by 1963) have passed measures affecting their validity, and two of these have expressly labeled them as 'crimes against public policy'.' Wise v. Prescott, 244 La. 157, 151 So.2d 356, 361 (1963).

The Release Act expresses the public policy of New Mexico. Subsection C simply adds another notch to the belt of an injured person and widens his area of protection. An insured member of the public is often subject to oppressive practices employed by insurance companies to obtain a favorable settlement or release. With The Release Act, the legislature has not expressed condonation of oppressive conduct on the part of the insured, as defendant contends; the insurer is protected by law, if it can prove the insured fabricated a claim. Under The Release Act, the burden is on the insurer to play the game with fairness and impartiality.

The requirement that the insurer deal fairly is expressed in Peterson v. Panovitz, 62 N.D. 328, 243 N.W. 798, 84 A.L.R. 1290 (1932). By statute, a settlement was voidable if made within 30 days after the date of the injury, when the person injured was under disability; one so injured could elect at any time within six months after the injury to avoid the settlement. A release was obtained from plaintiff within 30 days after a collision, but he elected within six months of the collision to avoid the release. We quote at length to demonstrate the spirit which meets the test of fair play, as well as the need to protect the public. The Court said:

The object the North Dakota Legislature had in mind in enacting the statute under consideration here is quite obvious. It sought to deal with and exercise some control over the undesirable practice commonly known as 'ambulance chasing.' North Dakota is not the only state that has found it necessary or desirable to look for some means of control over this practice. (Citations omitted).

There are two sides to the problem of ambulance chasing; on one side is the unprofessional attorney who solicits a retainer or contract of employment to handle the claim, in personal injury cases, generally on a contingent fee basis (citations omitted); on the other side are certain unscrupulous runners or adjusters who seek to obtain adjustments of any possible claim for damages in cases where personal injuries have been sustained in circumstances creating a basis for a claim against their employers (citation omitted). Experience has demonstrated that the two accompany and aggravate each other, each furnishing in part the reason advanced as a justification for the other. In both cases the interests of the injured party are given little or no consideration; and the agreements obtained by one class are frequently or generally as unconscionable as those obtained by the other. The records in cases which have been presented to this court bear eloquent testimony that the activities of both have resulted not only in damage to parties who have sustained personal injuries in an accident, but have resunlted as well in loss and injury to the public through ill-advised, vexatious, and needless litigation. Generally the unfortunate results could and would have been...