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Ward v. Callahan.

March 24, 1942


Appeal from the District Court of the United States for the District of Kansas, First Division; Richard J. Hopkins, Judge.


Before BRATTON, HUXMAN, and MURRAH, Circuit Judges.

HUXMAN, Circuit Judge.

Alma Callahan, an insance person, by Lewis Callahan, her husband, as guardian, instituted suit against Montgomery Ward & Company, herein called the Company, in the District Court of the United States for the District of Kansas, to recover the sum of $45,000 damages for personal injuries suffered as a result of the negligence of the Company, and the further sum of $15,000 for the use and benefit of her husband. By answer the Company entered a general denial and plead specially an accord and satisfaction resulting from a release executed by her. Appellee by reply plead that the release was of no effect because it was executed as a result of mutual mistake of fact, that the Company's agents had conspired to fraudulently deceive and coerce her into executing the release and that defendant was estopped thereby to rely on the release as a defense.

The release upon which the Company relied is a strong one. In it appellee accepts the sum of $200 and the payment of the doctor's bill in full settlement and satisfaction and as consideration for a final release and discharge of "all actions, claims and demands whatsoever, that now exist, or may hereafter accrue against Montgomery Ward & Co., and any other person, corporation, association or partnership charged with responsibility for injuries to * * * the Undersigned, * * * and the consequences flowing thereform, * * * .

"The Undersigned Warrants, that no promise or inducement has been offered except as herein set forth; that this Release is executed without reliance upon any statement or representation by the person or parties released, or their representatives, or physicians, concerning the nature and extent of the injuries and/or damages and/or legal liability therefor; * * * .

"The Undersigned Agrees, as a further consideration and inducement for this compormise settlement, that it shall apply to all unknown and unanticipated injuries and damages resulting from said accident * * * as well as those now disclosed." It evidences an intent to settle not only present known damages and pending actions, but also any that might arise in the future.

The Company's position is that where, as here, parties contract with reference to all possible unknown and unanticipated injuries, mutual mistake as to the nature and extent of the injuries becomes immaterial and the release may not be set aside for that reason. The soundness of this position must be determined from the laws and decisions of Kansas. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188, 114 A.L.R. 1487. In Smith v. Kansas City, 102 Kan. 518, 171 P. 9, 10, the Supreme Court of Kansas considered a release purporting to release and discharge all demands, claims, past, present and future, for a nominal consideration. Considering this release, the court said: "It is not only fair, but reasonably clear, therefore, that both parties were acting under a misapprehension of a real condition - in other words, were mutually mistaken; and it must go without saying that in view of the real condition the amount paid was beyond all question inadequate."

In Rider v. Kansas City Terminal R. Co., 112 Kan. 765, 212 P. 678, 679, the Kansas Supreme Court considered a release which released the company from "any and all liability for all claims for all injuries, including those that may hereafter develop, as well as those now apparent * * * ." It released the company from "all causes of actions and claims for injuries and damages, which I have, or might have, arising out of such injuries * * * ." It provided that it was "the intention of the parties that all matters of difference between them shall be and are hereby compromised and settled." It further provided: "In making this settlement I do not rely upon any statement of any doctor, physician or surgeon as to what my physical condition was, is or will be in the future, as a result of my injuries, and I do not make this settlement because of what anyone has told me about what condition is or will be. I have read this release. I know that I am settling for everything and that no representations of any kind have been made to me." Notwithstanding this strong language, the Supreme Court of Kansas held that the evidence was sufficient to submit to a jury the question of mutual mistake as to the nature and extent of injuries suffered.

If a set of facts understood and believed by two parties induced them to execute a contract which they would not have executed had they known or believed the facts to be otherwise than understood by them, then why in all fairness and good conscience should it not be set aside, no matter what the contract itself said?

From appellee's evidence it substantially appears that: John Walker, an employee of the Company, was waiting on appellee when the accident occurred; that he had the right to leave the store any time he wanted to; that the accident occurred on the afternoon of April 20, 1938; that on the evening of April 21 he came to appellee's home; that on the evenings of April 22 and 23 he came back and told appellee and her husband that the Company would have to make a good settlement; that they should not get an attorney; that if they did the attorney would get all and they would get nothing; that he was on the inside and could find out and keep them posted on what was going on; that he was there every night with the exception of one or two, until the settlement was made; that he told them that he had been to Kansas City to see a lawyer friend of his and that he had been informed that there was not much chance for them to get anything out of it. The day before the settlement, Walker came back and told them he had seen the doctor's reports and had examined them, that appellee was only slightly injured and would soon recover; that Dr. Colt's report showed that she could have been released two weeks before; that a claim agent of the company was coming to offer them $200 and that they had better take it because the doctor's report showed that she had not been injured in any way; that on the day of the settlement, appellee's husband went to the Company's store at Manhattan where he talked to Clifton and Bingamon, the claim adjuster and store manager for the Company, respectively; that Bingamon said he had talked to one of the doctors and had seen the reports of the others, and that there was nothing wrong with Mrs. Callahan.

Taking this testimony as true, it clearly appears that appellee and Walker believed that the reports of the doctors established that appellee's injuries were slight. The Company, however, contends that it is not chargeable with either the belief or the statements of Walker, as he had no authority to represent or bind the Company. This ignores the testimony that Bingamon, who was the Company's representative, made similar statements. But aside from that, the Company may not accept the beneficial results of Walker's work and at the same time escape its burdens by repudiating him. 2 C.J.S., Agency, § 49, p. 1097; 2 Am. Jurisprudence, § 227, p. 183; Gould v. Hutchinson Oil & Gas Co., 150 Kan. 516, 95 P.2d 301.

Another ground urged to set aside the release was that Walker, Clifton and Bingamon conspired to defraud appellee and coerce her into executing the release. On May 17, the day the settlement was made and the release was executed, Walker appeared at the place where Callahan was working and told him the Company was going to offer his wife $200 and that they had better take it. Later that day, Clifton and Bingamon appeared at the home and offered appellee $200. Bingamon at that time stated that the doctor's report showed only slight injury. Appellee replied that "If the doctor's reports say I am not injured, I might just as well sign it." When the release was signed, Bingamon produced $200 in cash and paid her. The settlement was made about 6 P.M. Almost immediately after Bingamon and Clifton left, Walker reappeared and said, "I see you have made a settlement." He collected $50 and left, and apparently lost all further interest in the Callahans. Walker seems to have been fully conversant with the plans of the Company regarding the settlement. For complete strangers, the efforts of Walker, Clifton and Bingamon synchronized perfectly and produced a result which perhaps would not have been brought about except for this accidental cooperation.

The Supreme Court of Kansas has held that while inadequacy of consideration alone may not be sufficient to set aside a release, such a release would be closely scrutinized and viewed with suspicion. Orr v. Missouri Pac. R. Co., 98 Kan. 120, 157 P. 421; Railway Co. v. Cunningham, 59 Kan. 722, 54 P. 1055. It is difficult to believe that appellant would have asked appellee to accept the paltry sum of $200 if there had been any question of serious injury or belief that the injuries were other than trifling. An analysis of all the ...

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