Review Problem: Release Of Unknown Injuries

On November 26, 1982, Vicente Morta suffered a collision that damaged his 1976 Mazda station wagon and caused him bodily injury. According to Morta, the car was "a total loss." Morta himself was knocked unconscious and taken by ambulance to the emergency room at Guam Memorial Hospital. After treating Morta, the attending physician assured him that he was fine and could go home. Afterwards, Morta continued to have pain in his muscles, chin and chest. He was treated three days later by a second physician at the Seventh Day Adventist Clinic, who also told him he was fine, and the pain would eventually subside.

Morta sought compensation for his losses from appellant Korea Insurance Corporation (KIC), which insured the driver who had caused the accident. Morta was directed to Bernabe Santa Maria, a claims adjuster. Morta and Santa Maria happened to be from the same area of the Philippine and conversed in their native tongues, Tagalog and Ilocano. Morta testified that he had no problem understanding Santa Maria.

Santa Maria helped Morta complete the claim form, received from Morta his medical reports, examined the damaged Mazda, and, acknowledging the liability of his insured, offered Morta $1000. Morta testified that the settlement offer had several components: "Three Hundred Dollars for my car; $250 from loss of compensation of work, like that; and Two Hundred some for sufferings and injury that I suffered, you know. So, they told me, included also the medical bill from SDA and the towing expenses, that item."

Morta was not satisfied with that amount, claiming that the car alone had a blue-book value of $2000. But he needed the money to pay bills, and Santa Maria refused to increase the amount. So Morta  reluctantly accepted the $1,000. Because the settlement check covered damages for the car as well as for personal injuries – in short, all of Morta's claims – Morta signed a standard release, which was less than a page long. The trial court described the release as follows:

At the top, in characters a quarter-inch tall, was the word "RELEASE"; immediately beneath, in slightly smaller letters, were the words "OF ALL CLAIMS." A few concise sentences follow, clearly and unequivocally stating that Morta releases KIC from all claims "growing out of any and all known and unknown, foreseen and unforeseen bodily and personal injuries and property damage" arising out of the accident in question. Morta also acknowledges that "the injuries sustained are or may be permanent and progressive and that recovery therefrom is uncertain and indefinite ..." In capital letters near the bottom is a certification that the signer has read and understands the terms of the release; immediately above the signature line, also in capitals, is a "caution" instructing the signer to read the release before signing it.

About a week after the settlement, Morta began to feel ill and dizzy. He collapsed unconscious, awaking in a Honolulu hospital after undergoing emergency surgery for a blood clot in his brain. The medical bills amounted to approximately $11,000.

Morta filed suit to recover damages resulting from this injury.

Morta made the following arguments as to why the release was invalid:

(1)        There was a mutual mistake of fact, in that both parties assumed that there were no unknown injuries. Either the release should be avoided or reformed to exclude the phrase "unknown injuries."

(2)        There was a mistake by Morta, who did not know he was signing a release or, if he did, did not know the contents of the release and was surprised to learn that it purported to release unknown claims.

(3)        There was fraud by the agent, who misrepresented the contents by failing to disclose and discuss the clause.

(4)        The release was signed under duress, in that Morta needed the money and could not afford to refuse to sign and litigate the claim.

(5)        The release was unconscionable.

Assess the strength of these arguments.