No. 88-324
IN THE SIJPREME COIJRT OF THE STATE OF MONTANA
1989
ELEANOR KELLY,
Plaintiff and Appellant,
-vs-
DON WIDNER and HARLEY HUNTLEY,
Defendants and Respondents.
APPEAL FROM: District Court of the Twentieth Judicial District,
In and for the County of Sanders,
The Honorable C.B. McNeil, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Joan Jonkel argued; Jonkel Law Offices, Missoula,
Montana
Richard Simonton; Simonton, Howe & Jackson, Glendive,
Montana
For Respondent:
Robert A. Terrazas argued; Worden, Thane & ~aines,
Missoula, Montana
Submitted: February 10, 1989
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Mr. J.ustice Fred J. Weber delivered the Opinion of the Court.
This appeal arises from a suit for personal injuries
brought by Eleanor Kelly against Mr. Widner and Mr. Huntley.
Ms. Kelly signed a release with Farmers Insurance Company in
exchange for $8,900. She later filed a personal injury
action against the insureds, Mr. Widner and Mr. Huntley,
alleging negligence. In their answer, defendants plead the
affirmative defense of release. The District Court granted
summary judgment in favor of the defendants and Ms. Kelly
appeals from that judgment. We reverse the summary judgment
of the District Court and remand.
The issues are:
1. Did the District Court err in granting summary
judgment by finding that no genuine issues of material fact
existed?
2. Did the District Court err in imposing technical
pleading requirements in its summary judgment motion?
3. Did the District Court err in granting defendants'
request for a protective order?
Ms. Kelly was injured in an auto accident on November
18, 1979. Mr. Widner was the driver of the automobile which
was owned by Mr. Huntley. Ms. Kelly was a passenger in the
automobile. The accident fractured Ms. Kelly's left leg in
several places and caused other minor injuries. Doctors
inserted a rod and bolts in her leg to hold the bone together
and placed the leg in a cast. Ms. Kelly was hospitalized for
23 days, and was in a cast for 10 months.
At the time of the accident Ms. Kelly was 45, divorced,
and lived alone. She had a ninth grade education. She
rented a log cabin with no phone, and her car did not run.
She had previously worked as a waitress, earning $2.75 an
hour. Had she not been injured, she claims she would have
begun a new job at $3.50 an hour. With her leg in a cast she
was unable to work at all. During the months of December
1979 and January 1980, she had only $10 and food stamps to
live on. In January 1980 Mr. Huntley's insurance agents
contacted Ms. Kelly. Mr. Widner brought her to his home so
she could receive a call from the insurance agents. They
questioned her over the phone about the accident and her
injuries. The next day, on thirty minutes notice, the agents
came to her home. They asked about her medical bills, lost
wages, and income. The agents made out a check for $5,325,
which Ms. Kelly endorsed to the hospital, and a check to Ms.
Kelly for $3,634. From the $3,634, Ms. Kelly paid $1,542 in
doctor bills; $1,460 was attributable to lost wages. The
agents were at her home approximately thirty minutes. Ms.
Kelly was not represented by an attorney. In exchange for
the checks Ms. Kelly signed a release dated ~Tanuary24, 1980.
She also endorsed the two checks. Each check contained
release language above the signature line. Thus Ms. Kelly
actually signed three releases.
In September of 1980 Ms. Kelly's doctors determined that
her bone had not healed. They removed the cast and performed
another leg surgery. However, pain and instability have
prevented Ms. Kelly from holding any job which requires
standing and walking. Ms. Kelly has incurred additional
medical bills, and claims she has been unable to work during
the 8 years since the accident.
Before discussing the issues involved, we feel it is
appropriate to mention the obvious time delay in Ms. Kelly's
suit. While this is not a complicated case, it has stretched
over a period of nearly 9 years to date. Ms. Kelly filed her
initial suit on November 25, 1980. Defendants answered on
March 5, 1981, asserting the release as an affirmative de-
fense. In February of 1982, Ms. Kelly served her first set
of interrogatories; however, defendants objected, calling
them stock interrogatories. The case then lay dormant for
fo.ur years, and from 1986 to present minimal discovery has
been accomplished. No explanation is given for this delay.
It is apparent that plaintiff's co.unse1 have not been dili-
gent in pursuing this claim. The record also demonstrates
that the defendants were not interested in bringing the
matter to dispostion. Neither party has handled this case in
a timely manner.
Did the District Court err in granting summary judgment
by finding that no genuine issues of material fact existed?
The appropriate standard in granting summary judgment
was stated in Kronen v. Richter (1984), 211 Mont. 208, 683
Summary judgment is never to be .used as a
substit.ute for trial if a factual controversy
exists. Reaves v. Reinbold (Mont. 1980), 615 P.2d
896, 37 St.Rep. 1500. S.umrnary judgment is only
proper if the pleadings, depositions, answers to
interrogatories and admissions on file show there
is no gen-uine issue of material fact. Anderson v.
Applebury (1977), 173 Mont. 411, 567 P.2d 951. The
standard that an appellate court applies in review-
ing a grant or denial of a motion for summary
judgment is the same as that utilized by the trial
co,urt initially ,under Rule 56, M.R.Civ.P.--a summa-
ry j,udgment is proper when it appears "that there
is no gen.uine issue as to any material fact and
that the moving party is entitled to a judgment as
a matter of law." 10 Wright, Miller and Kane,
Federal Practice and Procedure, section 2716, p.
643.
F,urther, the defendant correctly recognizes the burden
of proof which is required in a summary adjudication. Ini-
tial.1~the b.urden of proof must be carried by the moving
party seeking summary judgment, in this case, Mr. Widner and
Mr. Huntley. However, where the record discloses no genuine
issue of material fact, the b.urden of proof shifts to the
party opposing the motion, in this case Ms. Kelly, who must
come forward with substantial evidence raising an issue of
fact. Once the burden has shifted in this fashion, the party
opposing the motion is held. to a standard of proof abo.ut
eq.ual to that initially imposed upon the moving party under
Rule 56 (c), M.R.C~V.P. Harl-and 17. Anderson (19761, 169 Monte
447, 548 P.2d 613, 615; Kronen, 683 P.2d at 1318.
In light of the above standard and burden of proof, we
concl.ude that Ms. Kelly raised a genuine issue of material.
fact in this case. Therefore, summary judgment was not
appropriate.
A release is governed by contract law, and may be re-
scinded for the same reasons which allow rescission of a
contract. Westfall v. Motors Insurance Corporation (1962),
140 Mont. 564, 374 P.2d 96, 98-99. The validity of a release
may be challenged therefore on the basis of
unconscionability.
In determining .unconscionability we have previously
applied the UCC standard. In All-States Leasing v. Top Hat
Lounge (1982), 198 Mont. 1, 649 P.2d 1250, a case involving a
lease transaction, we looked to S 30-2-302, MCA, which is
modeled after the same provision in the Uniform Commercial
Code, and provides:
(1) If the court as a matter of law finds the
contract or any clause of the contract to have been
.unconscionable at the time it was made the court
may ref.use to enforce the contract, or it may
enforce the remainder of the contract without the
unconscionable clause, or it may so limit the
application of any .unconscionable cla,use as to
avoid any unconscionable result.
(2) When it is claimed or appears to the
court that the contract or any cl.a,usethereof may
be unconscionable the parties shall be afforded a
reasonable opport.unity to present evidence as to
its commercial setting, p.urpose and effect to aid
the court in making the determination.
The official comment to this section of the UCC states
the basic test for unconscionability:
[Wlhether, in light of the general commercial
background and the commercial needs of the particu-
lar trade or case, the clauses involved are so
one-sided as to be .unconscionable under the circum-
stances existing at the time of the making of the
contract . . . The principle is one of the preven-
tion of oppression and .unfair surprise.
In Westlake v. Osborne (1986), 713 P.2d 548, 551, 43
St.Rep. 200, 204, we applied this test in a contract case.
While this statute applies to sales transactions .under the
UCC, courts have .used this definition by analogy, to apply in
non-sales cases. Restatement (Second) of Contracts S 208
(1979). See also Howard D. Hunter, Modern Law of Contracts S
12.06 (1986). We reaffirm the use of this standard.
Unconscionability is an equitable doctrine, without a
s.uccinct or precise definition. While no single factor is
determinative, elements which may be indicators of
unconcionability include unequal bargaining power, lack of
meaningful choice, oppression, and exploitation of the weaker
party's vulnerability or lack of sophistication. See gener-
ally, J. Calamari and J. Perillo, The Law of Contracts § 56
(1970). Inadequacy of consideration does not by itself
invalidate a bargain, but may be a factor in determining
conscionability. Restatement {Second) of Contracts 228
(1979).
The und-erlying principle of conscionability is that of
doing justice under the circ.umstances of each case. We
approve of this standard, framed by the Illinois S.upreme
C o u r t , i n S c h e r e r v . Ravenswood Hosp. Med. C t r . (Ill. 1979),
388 N.E.2d 1 2 6 8 , 1 2 7 1 , when it s t a t e d :
The modern t r e n d i s t o s e t a s i d e r e l e a s e s o f p e r -
s o n a l i n j u r y c l a i m s i n s i t . u a t i o n s where t h e f a c t s ,
when f i n a l l y known, p r e s e n t an .unconscionable
r e s u l t because o f t h e e q u i t a b l e p r i n c i p l e of d o i n g
j u s t i c e under t h e c i r c u m s t a n c e s o f e a c h c a s e .
The p r e s e n t c a s e i n c l u d e s t h r e e c i r c u m s t a n c e s which a r e
r e l e v a n t t o a determination of .unconscionability. F i r s t , M s .
K e l l y 1s d i r e f i n a n c i a l s i t u a t i o n , h e r l a c k o f e d , u c a t i o n and
lack of l e g a l advice, and h e r i s o l a t e d l i v i n g a r r a n g e m e n t s
created a vulnerability susceptible t o exploitation. Second,
a t t h e t i m e o f s e t t l e m e n t t h e r e was s u b s t a n t i a l u n c e r t a i n t y
a s t o t h e e x t e n t o f i n j u r y t o M s . K e l l y ' s l e g , and t h e f u t u r e
prognosis. The s.urgery on Ms. KeI..ly1s l e g had required
i n s e r t i o n of a s t e e l rod. When M s . Kelly executed t h e re-
lease, it had o n l y been two months s i n c e t h e a c c i d e n t . Her
l e g was s t i l l i n a c a s t and would remain i n a c a s t f o r a n o t h -
e r 8 months. I t was 0 b v i o . u ~t h a t M s . K e l l y 1s l e g wo,uld n o t
be h e a l e d f o r some t i m e . I t was a l s o c l e a r t h a t M s . Kelly
would be .unable t o resume work i n t h e near future. Ms.
Kelly's physical condition suggests that this was not an
a p p r o p r i a t e t i m e f o r e x e c u t i o n of a complete r e l e a s e . Third,
t h e insurance adj.ustors promred a very hasty settlement i n
t h i s case, spending only h a l f an hour i n t h e t o t a l disc.us-
sion. When t h e y l e f t , M s . K e l l y had r e l e a s e d a l l c l a i m s , y e t
received barely eno,ugh money to pay her medical expenses
through t h e d a t e of settlement. There i s an i s s . u e o f f a c t
whether t h e checks i s s u e d t o M s . K e l l y were a d e q u a t e ,under
t h e c i r c . u m s t a n c e s known by t h e p a r t i e s a t t h a t time. The
appropriateness of having M s . K e l l y exec.ute a complete r e -
lease in her partic.ular sit,uation, and procured in that
manner, is subject to question. We conclude that the
combination of these three circumstances raises an issue of
fact whether under all the circumstances, justice was done.
Furthermore, facts subsequent to a settlement may be
considered in determining unconscionability. Newborn v. Hood
(Ill.App.3d 1980), 408 N.E.2d 474, 476. The Illinois Supreme
Court in Scherer and Hood considered the large disparity
between the settlement amount and the actual monetary loss
which the injured party eventually incurred. In the present
case that disparity may be similarly large. Ms. Kelly claims
she has been unable to work for the 8 years since the acci-
dent, and this disability may continue. She claims her leg
needs further medical attention, including surgery. She is
entitled to a factual determination on the issue of whether
the settlement amount indicates an unconscionable bargain.
We conclude that Ms. Kelly has raised a sufficient issue of
material fact to preclude summary iudgment.
We reverse the summary judgment by the District Court
and remand.
I1
Did the District Court err in imposing technical plead-
ing requirements in its summary judgment ruling?
Ms. Kelly alleges that the District Court imposed tech-
nical pleading requirements in making its summary judgment
ruling, and we conclude that the court may have done so. We
therefore discuss this issue although it does not appear that
Ms. Kelly was prejudiced. In Ms. Kelly's complaint she
alleged only negligence. Defendants ' answer raised the
affirmative defense of release. Ms. Kelly challenged the
validity of the release in answers to interrogatories and in
her brief in opposition to summary j udgment. She never
amended her complaint, nor made a responsive pleading to
defendants' answer. In the Order and Memorandum which grant-
ed summary judgment, the District Court stated, "The
Plaintiff has not, in any o f her pleadings or replys to
D e f e n d a n t ' s p l e a d i n g s , q u e s t i o n e d t h e v a l i d i t y of t h e Jan.uary
24, 1980 R e l e a s e . " The o p i n i o n a l s o mentioned t w i c e t h a t
p l a i n t i f f had n o t p l e a d w i t h p a r t i c . u l a r i t y n o r argued d u r e s s ,
menace, f r a . u d , n o r .und.ue i n f l u e n c e . The co.urt s t a t e d t h a t it
t h e r e f o r e ~70,uldn o t a d d r e s s any o f t h o s e d e f e n s e s which M s .
K e l l y had a s s e r t e d . Because we have concl.uded t h a t an i s s u e
o f f a c t e x i s t s a s t o . u n c o n s c i o n a b i l i t y , i t i.s u n n e c e s s a r y t o
c o n s i d e r whether a n i s s u e o f f a c t e x i s t s r e l a t i v e t o t h e s e
other theories. W nevertheless
e discuss t h e pleading re-
quirements f o r c l a r i f i c a t i o n .
P l e a d i n g r e q u i r e m e n t s b e g i n w i t h Rule 7 ( a ) M. R.Civ.P.,
which p r o v i d e s :
There s h a l l be a c o m p l a i n t and an answer; and
t h e r e s h a l l be a r e p l y t o a co,unt.erclaim denomi-
n a t e d a s s.uch; and an answer t o a c r o s s - c l a i m ; a
t h i r d - p a r t y c o m p l a i n t , i f a p e r s o n who was n o t an
o r i g i n a l p a r t y i s summoned ,under Rule 1 4 ; and t h e r e
s h a l l be a t h i r d - p a r t y answer, i f a t h i r d - p a r t y
complaint i s served. N o t h e r p l e a d i n g s h a l l be
o
a l l o w e d , e x c e p t t h a t t h e c o , u r t may o r d e r a r e p l y t o
an answer o r a t h i r d - p a r t y answer.
T h i s r u l e n e i t h e r r e q u i r e s nor a l l o w s a r e s p o n s i v e p l e a d i n g
t o an answer. Th.us M s . K e l l y was n o t r e q u i r e d t o r e p l y t o
defendant I s answer. F.urther, the affirmative defense of
r e l e a s e was deemed d e n i e d p.urs,uant t o Rule 8 ( d ) , M.R.Civ.P.,
which p r o v i d e s :
Averments i n a p l e a d i n g t o which a r e s p o n s i v e
pleading i s req.uired, o t h e r than those a s t o t h e
amount of damage, a r e a d m i t t e d when n o t d e n i e d i n
t h e responsive pleading. Averments i n a p l e a d i n g
t o which no r e s p o n s i v e p l e a d i n g i s r e q u i r e d o r
p e r m i t t e d s h a l l be t a k e n a s d e n i e d o r avoided.
I n Wheat v. Safeway S t o r e s , Incorporated ( 1 9 6 5 ) , 146
Mont. 105, 404 P.2d 317, the defendants raised the
affirmative defense of release in the answer, and later moved
for judgment on the pleadings based on the gro.und that plain-
tiff failed to reply to the answer. The motion was granted,
b.ut we concl.uded that the District Co.urt had erred, stating:
From this a.uthority, it is clear that the
plaintiff had no duty to reply unless ordered to do
so by the court. No s.uch order was made in this
case. The defendant's contention that a reply was
mandatory to an affirmative defense of a release
set forth in defendant's answer is, under the above
a.uthority and Rule 7 (a), without merit.
404 P.2d at 319.
The intent of Rule 7 (a) was explained in E . Mason, The
Montana Rules of Civil Procedure, 23 Mont.L.Rev. 3, 19,
(1961), as follows:
Under the Rules pleadings are fewer and termi-
nate earlier than under code practice. Code prac-
tice contemplates a three stage system of
pleadings, consisting of a complaint, an answer,
and a reply whenever new matter is alleged in the
answer. The Rules allow only two stages, unless
the co,urt in its discretion otherwise orders.
Under Rule 7(a) a reply is mandatory only when the
answer contains a co,unterclaim denominated. as s.uch
As stated in Wheat, Ms. Kelly was not req.uired to file a
reply or otherwise plead to the issue of release. The ab-
sence of a responsive pleading sho.uld not have been consid-
ered by the District Co,urt in a s.ummary j,udgmentmot.?'.on.We
sense the presence of fr.ustrationon the part of the District
Co.urt because of the extreme delay in this case, and we have
the same sense of fr.ustration. Nevertheless, procedural- law
must still be applied to Ms. Kelly's case.
Did the District Court err in granting defendant's
request for a protective order?
I n December o f 1986, d e f e n d a n t moved f o r summary judg-
ment on whether t h e r e l e a s e b a r r e d M s . K e l l y ' s claim. Ms.
Kelly requested a continuance pursuant to Rule 56(f),
M.R.Civ.P., which was g r a n t e d . Thereafter, i n interrogate-
r i e s and r e q . u e s t s f o r p r o d u c t i o n , she req,uested information
abo,ut t h e t r a i n i n g o f t h e insurance agents, t h e p r o c e s s by
which they evaluate claims, and their job descriptions.
Defendants sought a protective order, stating that this
i n f o r m a t i o n was n o t r e l e v a n t t o t h e adequacy of t h e r e l e a s e .
The co.urt g r a n t e d t h e p r o t e c t i v e o r d e r .
I n view of o.ur concl.usions i n P a r t I it i s n o t n e c e s s a r y
t o disc.uss t h i s i s s u e i n d e t a i l . Ms. K e l l y may now proceed
under Rule 2 6 , M.R.Civ.P., and t h i s t y p e of i n f o r m a t i o n w i l l
be o b t a i n a b l e .
W r e v e r s e and remand t o t h e D i s t r i c t C o u r t .
e
W Concur:
e A
Mr. J u s t i c e R . C . McDonough d i d n o t t a k e p a r t i n t h i s d e c i s i o n .