Del Rosario v. Del Rosario

• Decision Date: 19 May 2003
• Docket Number: No. 50546-7-I.,50546-7-I.
• Citation: 116 Wash.App. 886,68 P.3d 1130
• Parties: Leonida DEL ROSARIO, an individual, Respondent, v. Gene DEL ROSARIO and Priscilla Del Rosario, husband and wife, Appellants.
• Court: Washington Court of Appeals

68 P.3d 1130

116 Wash.App. 886

Leonida DEL ROSARIO, an individual, Respondent, v. Gene DEL ROSARIO and Priscilla Del Rosario, husband and wife, Appellants.

No. 50546-7-I.

Court of Appeals of Washington, Division 1.

May 19, 2003.

Reconsideration Denied June 23, 2003.

Marelee Erickson, Reed McClure, Seattle, WA, David Middleton, Federal Way, WA, for Appellants.

Leslie Stomsvik, Terry Lumsden, Tacoma, WA, Howard Goodfriend, Edwards Sieh Smith & Goodfriend PS, Seattle, WA, for Respondent.

COLEMAN, J.

Leonida Del Rosario signed a release of personal injury claims against Gene and Priscilla Del Rosario in exchange for an insurance settlement. She later sought to avoid the release because at the time she signed it, she thought it concerned only lost wages. A jury awarded Leonida additional damages after the trial court instructed them that a release may be avoided if it was not "fairly and knowingly made." We hold that the trial court erred in using that standard instead of traditional contract principles. The "fairly and knowingly made" standard applies only in cases involving unknown injuries, which were not at issue here. But given the evidence presented at trial, a reasonable juror could find that Leonida, who does not understand English, reasonably relied on Priscilla's erroneous explanation of the release. Accordingly, Gene and Priscilla are not entitled to judgment as a matter of law under traditional contract principles. We remand the case for a new trial with jury instructions that accurately reflect the proper standard for avoiding a contract.

FACTS

Leonida Del Rosario sustained injuries while riding in a car driven by her brother-in-law, Gene Del Rosario. Gene was at fault. Gene's wife, Priscilla, and Gene's brother and sister were also riding in the car at the time.

Gene was insured by State Farm Mutual Automobile Insurance Company. Two days after the accident, State Farm sent a letter to Leonida with information regarding payment for her lost wages and medical bills, as well as an application for PIP benefits. Leonida's daughter read the letter and explained it to Leonida, who cannot read or understand English and relies on her daughter to read mail and pay bills. Leonida's daughter testified that she thought Leonida understood that the application for PIP benefits would result in payment of her lost wages and medical bills. The daughter filled out an application, Leonida signed it, and it was mailed back to State Farm.

Due to her injuries, Leonida was unable to work immediately after the accident. She told her daughter and Priscilla that she was concerned because bills were mounting and she could not work. Priscilla suggested that they go down to the insurance company and get her some money. Priscilla made an appointment with Scott Kimbro, a State Farm claims adjuster who was handling the liability claim. Leonida, Priscilla, and Gene's sister all went together to the office.

Leonida testified that she believed the purpose of the meeting was to get money for lost wages. At the meeting, Mr. Kimbro gave all three women release forms to sign. He explained the release forms, which were all identical. While he was speaking, Priscilla relayed what he was saying to Leonida in Illocano, their native dialect. According to Leonida, Priscilla said the release was for wage loss only. Priscilla testified that she told Leonida the money was for her pain and suffering as well as wage loss. Leonida signed the release form, and State Farm wrote her a check for $2,540.

Leonida sued for personal injuries. Gene and Priscilla argued that she had released all claims. A jury returned a special verdict indicating that the release was not fairly and knowingly made and awarded Leonida $21,600 in additional damages.

ANALYSIS

1. The "Fairly and Knowingly Made" Standard

Gene and Priscilla first argue that the trial court erred in applying the "fairly and knowingly made" standard to Leonida's release. They are correct. Personal injury releases are generally subject to the same rules as other contracts. The "fairly and knowingly made" standard is an exception that only applies where injuries develop after parties sign a release. Absent any evidence of unknown injuries, the trial court should not have applied that exception in this case.

Releases are contracts. As such, the general rule is that traditional contract principles apply. Nationwide Mut. Fire Ins. Co. v. Watson, 120 Wash.2d 178, 187, 840 P.2d 851 (1992). "Under contract law, a release is voidable if induced by fraud, misrepresentation or overreaching or if there is clear and convincing evidence of mutual mistake." Watson, 120 Wash.2d at 187, 840 P.2d 851 (citing Beaver v. Estate of Harris, 67 Wash.2d 621, 409 P.2d 143 (1965)).

In Finch v. Carlton, 84 Wash.2d 140, 524 P.2d 898 (1974), the court announced an exception to this rule. The Finch court, while reaffirming the applicability of traditional contract rules to releases, concluded that in addition to the usual means of avoiding a contract, a release may sometimes be avoided "where later-discovered injuries were clearly not contemplated by the parties at the time of release." Finch, 84 Wash.2d at 144,524 P.2d 898. Even in such cases, however, the court does not automatically void the release, but instead looks to the circumstances of the transaction to determine whether the release was "fairly and knowingly made." Finch, 84 Wash.2d at 145-46,524 P.2d 898.¹

In Bennett v. Shinoda Floral, Inc., 108 Wash.2d 386, 739 P.2d 648 (1987), the court emphasized that Finch is a narrow exception. In Bennett, two plaintiffs argued that even though they knew they were injured when they signed the release, the Finch rule should apply because they failed to appreciate the full extent of their injuries until later. Bennett, 108 Wash.2d at 394, 739 P.2d 648. The court examined two competing policies to be considered in determining the voidability of releases: "On one hand, the law favors the just compensation of accident victims. On the other hand, the law favors the private settlement of disputes and gives releases great weight in order to support the finality of such settlements." Bennett, 108 Wash.2d at 394-95, 739 P.2d 648 (citing Finch, 84 Wash.2d at 145, 524 P.2d 898) (internal citations omitted). The court held that plaintiffs who settle claims knowing they are injured assume the risk that their injuries will worsen. Bennett, 108 Wash.2d at 395, 739 P.2d 648. The court reasoned that the policies favoring finality of settlements required a narrow reading of Finch:

In summary, we conclude that the balance between the policies favoring private, final settlement and the just compensation of accident victims can be properly maintained only if the Finch test is limited to its facts. We hold, therefore, that the Finch test applies only to situations where there is no known injury at the time the release was executed.

Bennett, 108 Wash.2d at 396, 739 P.2d 648. Having determined that the Finch test did not apply, the Bennett court proceeded to apply traditional contract principles to the releases in question and concluded that the plaintiffs could not avoid the releases. Bennett, 108 Wash.2d at 396, 739 P.2d 648.

In Nevue v. Close, 123 Wash.2d 253, 867 P.2d 635 (1994), the court retreated somewhat from the restrictive language it used in Bennett:

Bennett has been criticized. The Corbin treatise concludes it is wrong. A law review article makes an extensive analysis in disapproving of the rationale and possible broad holding.

. . . .

... To paraphrase the dissent of Justice Dolliver in Bennett, only if the trier of fact determines that the parties specifically contemplated and bargained for the assumption of risk of future unknown injuries can the release be held to have been fairly and knowingly made as to those injuries.

Nevue, 123 Wash.2d at 256-58, 867 P.2d 635 (internal citation omitted). But the court explicitly declined to reject or modify either Finch or Bennett. Nevue, 123 Wash.2d at 256, 867 P.2d 635. The court merely held that the Finch test applies where a person knows of an injury to one part of the body but has a latent injury in another part of the body. Nevue, 123 Wash.2d at 258, 867 P.2d 635.

In determining that the Finch test applied in this case, the trial court relied in part on Hooper v. Yakima County, 79 Wash.App. 770, 904 P.2d 1193 (1995). In Hooper, Division Three of this court held that the plaintiff had raised an issue of fact as to whether he signed a release fairly and knowingly. Hooper, 79 Wash.App. at 774, 904 P.2d 1193. The court noted Hooper was uneducated and could not understand the release. Hooper, 79 Wash.App. at 774, 904 P.2d 1193. The court also reasoned that it was unlikely Hooper understood the full extent of his injuries because when he signed the release, he had received treatment only at the emergency room. Hooper, 79 Wash.App. at 774, 904 P.2d 1193. The Hooper court apparently assumed that the Finch test applied to all personal injury releases:

A release may be avoided on grounds less than those required for other contracts. Our supreme court requires that a release be fairly and knowingly made....

... The trial court here addressed the question of mutual mistake and not the question required by Finch—whether the release was fairly and knowingly made.

Hooper, 79 Wash.App. at 773-74, 904 P.2d 1193.

Given the language of the Hooper decision, it is not surprising that the trial court applied the Finch test in this case. Gene and Priscilla argue that Hooper can be distinguished on its facts because the court's decision was based in part on Hooper's inability to appreciate the extent of his injuries. See Hooper, 79 Wash.App. at 773-74, 904 P.2d 1193. But that reasoning is problematic in light of Bennett, which held that the failure to appreciate the future consequences of known injuries is insufficient to invoke the Finch exception. Bennett, 108 Wash.2d at 395-96, 739 P.2d 648...