Sellon v. General Motors Corp.

• Decision Date: 09 September 1981
• Docket Number: Civ. A. No. 79-611.
• Citation: 521 F. Supp. 978
• Parties: Orville SELLON and Levi Baggs, Administrator of the Estate of Alice Baggs, deceased, Plaintiffs, v. GENERAL MOTORS CORPORATION, a corporation of the State of Delaware, Defendant, v. Christine F. SMITH, Third-Party Defendant.
• Court: U.S. District Court — District of Delaware

521 F. Supp. 978

Orville SELLON and Levi Baggs, Administrator of the Estate of Alice Baggs, deceased, Plaintiffs, v. GENERAL MOTORS CORPORATION, a corporation of the State of Delaware, Defendant, v. Christine F. SMITH, Third-Party Defendant.

Civ. A. No. 79-611.

United States District Court, D. Delaware.

September 9, 1981.

William J. Wier, Jr., Thomas C. Crumplar, and Terry Curtis Seningen, Bader, Dorsey & Kreshtool, Wilmington, Del., for plaintiffs.

Robert K. Payson, and Somers S. Price, Jr., Potter, Anderson & Corroon, Wilmington, Del., for defendant.

Wayne N. Elliott, Prickett, Jones, Elliott, Kristol & Schnee, Wilmington, Del., for third-party defendant.

OPINION

MURRAY M. SCHWARTZ, District Judge.

In this personal injury diversity action, two Canadian plaintiffs seek damages from General Motors ("GM"), a Delaware corporation, on three claims of negligence, breach of warranty and reckless disregard of faulty design of the car whose explosion occasioned this suit.¹ Presently before the Court are plaintiffs' motion for summary judgment and defendant's motion for judgment on the pleadings. These motions require determination of the question whether a broadly phrased release in favor of the third-party defendant also bars recovery against General Motors.

The Facts

On January 13, 1978, a car driven by third-party defendant Christine F. Smith struck the rear of a 1973 Oldsmobile Omega manufactured by defendant GM and driven by plaintiff Orville Sellon with plaintiff Baggs' decedent Alice Baggs as a passenger. The Omega burst into flames which engulfed the car causing severe injury to Sellon and fatal injury to Mrs. Baggs. During the following year, plaintiffs' Delaware counsel negotiated a settlement with Smith and her insurer, Insurance Company of North America ("INA"). The settlement resulted in payment to plaintiffs and others² of $299,999 from the $300,000 insurance policy. In return, the releases were executed whose effect forms the basis of these motions. The documents signed by Baggs and Sellon "release, acquit and forever discharge William N. Smith and Christine F. Smith and his, her, their, or its agents, servants, successors, heirs, executors, administrators and all other persons, firms, corporations, associations or partnerships." emphasis supplied

This form of release was supplied by INA after discussions with representatives of the Smiths and plaintiffs. In February, 1979, plaintiffs' Delaware counsel accepted the documents and transmitted them to Canadian counsel for Sellon and Baggs. (Affidavit of Robert Jacobs, Esq., and attachments). Counsel reviewed the documents and presented them to plaintiffs who read them "in a cursory manner" and signed. (Affidavits of Joseph F. Foreman, Q. C., Doc.No. 29, and of J. Paul Roche, Q. C., Doc. No. 32 and Affidavits of Orville Sellon, Doc. No. 30 and of Levi Baggs, Doc. No. 31).

In December, 1979, plaintiffs filed this action against GM. GM answered with a number of affirmative defenses and filed a third-party complaint against Smith on the grounds that she was wholly or jointly liable for plaintiffs' injuries. Discovery ensued in which the releases between plaintiffs and Smith were brought to light. As a consequence, GM amended its answer to allege a complete affirmative defense based on the releases. In its motion for judgment on the pleadings, GM argues that the language discharging "all other persons, firms, corporations, associations or partnerships" relieves it of liability. In their motion for summary judgment, plaintiffs reply that this phrase does not include GM because the parties to the agreement had no such intent. If, say plaintiffs, the release is construed to release GM, then this Court should reform the contract because of mutual mistake regarding the effect of the language.

After oral argument on the motions, the Court determined that the case of Chakov v. Outboard Marine Corp., then on appeal to the Delaware Supreme Court, could be determinative in this diversity case. Accordingly, this matter was stayed pending the outcome of Chakov. Opinions in that case having issued,³ and the parties having supplemented their briefs in letter memoranda, the motions are ready for decision.

Choice of Law

The first issue for decision is which law will govern this action. Under Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), the federal district court exercising diversity jurisdiction must look to appropriate state substantive law. Delaware choice of law rules control since Delaware is the forum state. See Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). At this point, it becomes necessary to determine the nature of the action in order to apply the proper rule. Unfortunately, neither the parties nor the Court has been able to uncover Delaware case law pertinent to conflicts issues regarding the effect of a release.⁴ Therefore the more general categories of tort law and contract law will have to be examined. Although the parties appear to have viewed the claims as sounding in tort, the Court is of the opinion that, with the reduction of the summary judgment issue to the legal effect of the release, this aspect of the case is more properly regarded as a contract matter. Whatever the characterization, however, it would appear that Delaware's substantive law applies.

Delaware's choice of law rule in tort cases is fairly clearcut. The law of the place of the injury, Delaware, governs the action. See Friday v. Smoot, Del.Supr., 211 A.2d 594 (1965); TEW v. Sun Oil Co., Del. Super., 407 A.2d 240, 242 (1979); Unit, Inc. v. Kentucky Fried Chicken Corporation, Del.Super. 304 A.2d 320, 329 (1973).⁵

If the action is viewed as one of contract, the same conclusion results although the route to that end is more circuitous. Recent Delaware cases suggest that rather than the old rule in which the place of the making of the contract governs, here Canada,⁶ the State now accepts the standard of the Restatement (Second) Conflict of Laws which advocates application of the law of the state that has the "most significant relationship to the transaction." 1 Restatement (Second) Conflict of Laws § 188(1) at 575 (1971). This section is cited and paraphrased in a recent Delaware Supreme Court case involving an indemnity clause in a purchase-order contract. Oliver B. Cannon and Son v. Dorr-Oliver, Inc., Del.Supr. 394 A.2d 1160, 1166 (1978). There, the Delaware Supreme Court considered the Delaware residence of two of the parties, and the Delaware location of the property and the lawsuit which gave rise to the claim for indemnification sufficient to establish that Delaware had "such a close relationship to the transaction and the parties that we should apply Delaware law." Id. The message taken by the lower Delaware State courts is that the Restatement's test is now a force in Delaware choice-of-law/contract cases. See TEW v. Sun Oil Co., Del.Super., 407 A.2d 240, 242 (1979) (dictum).⁷ Therefore this Court will examine the issue under the "most significant relationship" test.

Application of the Restatement test reveals that Delaware has a larger stake than has Canada in governing the validity of these releases. Both General Motors Corporation and the third-party defendant for whose benefit the agreement was negotiated are citizens of Delaware. INA is a Pennsylvania corporation doing business in Delaware. Uncontested portions of plaintiffs' affidavits make clear that the substance of negotiations between INA and the plaintiffs occurred in Delaware through plaintiffs' local counsel, Bader, Dorsey & Kreshtool.⁸ In addition, the accident and the evidence connected with it are in Delaware. While Canada has a significant interest in seeing that plaintiffs, its citizens, are compensated for their injury, this cannot outweigh the factors outlined above, particularly Delaware's interest in control of the meaning of documents created by its attorneys and concerning its citizens, Smith and GM, as much as Canada's citizens, Sellon and Baggs. Therefore Delaware law will govern this suit.

GM's Motion — The "Plain Meaning" of the Releases

In its motion for judgment on the pleadings (Doc. No. 19), GM relied only on the Sellon and Baggs releases attached to its amendment to its answer (Doc. No. 14). Consequently, the Court will treat this motion as limited to the question whether the language of the documents is sufficient to release GM without reference to extrinsic facts. The issue of the extrinsic facts' significance arises from plaintiffs' motion for summary judgment and is dealt with below. There being no disagreement as to the language of the agreements the issue is solely one of law. However, the Court must draw from the language all inferences favorable to plaintiffs. Bryson v. Brand Insulations, Inc., 621 F.2d 556, 559 (3d Cir. 1980); Mortensen v. First Federal Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977).

GM contends that the contractual language releasing claims against "all other persons, firms, corporations, associations or partnerships" expressly dissolves its potential liability. This interpretation, it is said, reflects the plain meaning of the documents and, under the parol evidence rule, cannot be varied by reference to extrinsic evidence. They cite several cases from other jurisdictions in which courts confronted with similar language found that it "plainly" covers unnamed third-party corporations. See, e. g., Frank v. Volkswagenwerk, A.G., 522 F.2d 321, 328 (3d Cir. 1975); Dorenzo v. General Motors Corporation, 334 F.Supp. 1155 (E.D.Pa.1971); Peters v. Butler, 251 A.2d 600 (Md.Ct.App.1969). GM also references the Delaware joint tortfeasor statute's restriction on release of joint tortfeasors: release of one does not extinguish liability of others "unless the release so provides." 10 Del.C. § 6304(a).⁹ It is urged that the broad release here does "so provide."

Plaintiffs...