Supreme Court of Nebraska
Case Citation: 282 Neb. 47 (August 19, 2011)
Background: Thirteen-year-old Efrain Ramos-Domingo (Efrain) was killed by a Union Pacific Railroad Company (Union Pacific) train in Schuyler, Nebraska, on July 27, 2005. Two days later, Efrain’s mother, Manuela Domingo Gaspar Gonzalez (Manuela), was approached by a Union Pacific claims representative and signed a document releasing Union Pacific from liability for Efrain’s death, in exchange for $15,000. Manuela filed a complaint in district court alleging claims for wrongful death and breach of fiduciary duty. Manuela alleged that she had not understood the meaning of the release and had not known that by signing the release, she was giving up the right to pursue legal action against Union Pacific arising from Efrain’s death. She alleged that Union Pacific’s claims representative had not advised her of the legal consequences of signing the release.
Issues: (i) Whether Manuela alleged facts (or could allege facts) sufficient to support an inference that the release is void or voidable? (ii) Whether Union Pacific had a fiduciary duty to act in Manuela’s interests?
Analysis: (i) Wrongful Death Claim-
The general rule is that a release of a claim for relief should not be upheld if fraud, deceit, oppression, or unconscionable advantage is connected with the transaction. If the releasor was under a misapprehension, not due to his or her own neglect, as to the nature or scope of the release, and if this misapprehension was induced by the misconduct of the releasee, then the release, regardless of how comprehensively worded, is binding only to the extent actually intended by the releasor. This is because there was no meeting of the minds, or binding mutual understanding, necessary to create a contract.
Case law is replete with instances in which persons illiterate in English have been able to obtain relief from releases that were inadequately explained to them or that they simply did not understand. For instance, in Ward v. Spelts & Klorterman, 39 Neb. 809, 58 N.W. 426 (1894), the parties had entered into a contract for the sale of corn. “The doctrine, that the carelessness or negligence of a party in signing a writing estops him from afterwards disputing the contents of such writing,” does not apply “when the defense is that such writing, by reason of fraud, does not embrace the contract actually made.”
In sum, the court found that Manuela alleged facts that, if proved, could demonstrate that the release was void on the basis of its failure to represent a binding mutual understanding of the parties or was voidable as the product of fraud, overreaching, or duress.
The court also considered whether a return of the settlement proceeds was a prerequisite to Manuela’s suit. The general rule of tender is that when a person seeks to avoid the effect of a release, he or she must first tender or return whatever he or she has received for executing the release. But in a case of fraud in the execution, because there never was a contract or release, tender or return of the consideration is not required. The principle that consideration should be returned or tendered does not apply to cases where a party holds out that he gives the consideration for one thing, and by fraud obtains an agreement that it was given for another thing.
The court found that tender or return of the consideration for the release is not necessary if the release is void due to fraud in the execution and that even if it is merely voidable, Manuela may still be able to prove an exception to the tender requirement. Thus, she did not have to return the settlement proceeds at the pleading stage.
(ii) Fiduciary Duty Claim-
A fiduciary duty arises out of a confidential relationship which exists when one party gains the confidence of the other and purports to act or advise with the other’s interest in mind.
Manuela points to evidence in the record suggesting that Union Pacific’s claims representatives are trained to gain the trust and confidence of potential claimants in order to facilitate settlement. In her affidavit, Manuela averred that Union Pacific employees had told her that “they were here to offer their help.” This, according to Manuela, was sufficient to support a finding of a fiduciary duty from Union Pacific to Manuela. The court said that even if Union Pacific held itself out as acting in Manuela’s interest, there is no evidence that Manuela believed it or invested sufficient trust in Union Pacific for Union Pacific to have an opportunity to unduly influence her. With the absence of such evidence, the court affirmed the district court’s conclusion that Union Pacific owed no fiduciary duty to Manuela.
Judgment: Affirmed in part, Reversed and Remanded in part.
The district court’s dismissal of Manuela’s wrongful death claim was reversed and remanded. However, the court affirmed the district court’s ruling of summary judgment against Manuela’s fiduciary duty claim.
To see the Court's complete opinion, please click here.