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Malone v McRell, et al (COA – UNP 9/22/2022; RB #4481)   

Michigan Court of Appeals; Docket #356416; Unpublished 
Judges Swartzle, Ronayne Krause, and Garrett; Per Curiam 
Official Michigan Reporter Citation: Not Applicable; Link to Opinion; Link to Dissent


STATUTORY INDEXING: 
Not Applicable

TOPICAL INDEXING: 
Release and Settlements


SUMMARY: 
In this unanimous, unpublished, per curiam decision, the Court of Appeals affirmed the trial court’s summary disposition order dismissing Plaintiff Heather Malone’s auto negligence action against Defendant Zhetman Brighton, LC (“Zhetman”).  The Court of Appeals held that Malone could not proceed with her action against Zhetman—the employer of Conor McRell, who rear-ended Malone while delivering a pizza—because she entered into a settlement agreement releasing her claims against McRell.  Since Zhetman was only vicariously liable for Malone’s injuries, a release of her claims against McRell operated as a release of her claims against Zhetman, as well, notwithstanding the express intent of the parties to the contrary in their settlement agreement.

Heather Malone was injured as a result of her vehicle being rear-ended by Conor McRell while McRell delivered pizzas for Zhetman.  Malone filed suit against both McRell and Zhetman, but eventually settled with McRell for $50,000 and a dismissal with prejudice of her claim against him.  The settlement agreement explicitly stated that it would not affect Malone’s lawsuit against Zhetman, but Zhetman moved for summary disposition of Malone’s remaining claim, nonetheless, arguing that, because its liability was entirely derivative of McRell’s, a release of Malone’s claim against McRell operated as a release of her claim against Zhetman, too.  The trial court agreed, granting Zhetman’s motion.

The Court of Appeals affirmed the trial court’s summary disposition order, holding that Malone did inadvertently release her claim against Zhetman when she entered into the settlement agreement with McRell, even though she explicitly intended to preserve it.  Zhetman’s liability flowed only and entirely from McRell’s actions, and thus a release of McRell was also a release of any further claim against Zhetman.

“Accordingly, the settlement agreement released Malone’s claims against McRell. Because Zhetman could only be liable through McRell’s actions, the release also released Malone’s claims against Zhetman despite its attempt to do otherwise. Zhetman cannot be liable for McRell’s actions because Malone contracted away the opportunity to seek further relief based on McRell’s actions. Thus, the trial court did not err by granting summary disposition to Zhetman.” 

The Court also affirmed the trial court’s refusal to set aside Malone’s agreement with McRell, because the Court Rules do not provide an avenue for such relief under the circumstances presented.

“Malone struck a bargain with McRell when they reached their settlement, but she now has buyer’s remorse and argues that we should set aside the order dismissing McRell from the case under either MCR 2.612(C)(1)(a), (c), or (f). Subrule (a) does not apply because the mistake, if any, arose from Malone’s misunderstanding of the settlement agreement’s legal effect. See Limbach v Oakland Co Bd of Co Rd Comm’rs, 226 Mich App 389, 393; 573 NW2d 336 (1997). Subrule (c) similarly cannot save Malone because she has not directed this Court to any legal authority supporting her argument that relief is warranted under that subrule, thereby abandoning the argument. See Cheesman v Williams, 311 Mich App 147, 161; 874 NW2d 385 (2015). Finally, subrule (f) similarly does not apply because granting relief to Malone under that subrule would prejudice McRell and no extraordinary circumstances warrant setting aside the order dismissing McRell. See King v McPherson Hosp, 290 Mich App 299, 305, 308; 810 NW2d 594 (2010); Rose v Rose, 289 Mich App 45, 62; 795 NW2d 611 (2010).” 

Judge Ronayne Krause dissented, arguing that the settlement agreement was ambiguous and that an evidentiary hearing should be held to determine whether the parties intended for it to be a true release, as opposed to a mere covenant not to sue.

“The nature of the settlement agreement here is not entirely clear. However, some clues in its language are suggestive. The settlement agreement is phrased entirely in the future tense, suggesting that it does not have immediate effect. The parties unambiguously expected that plaintiff’s claims against Zhetman would continue, and McRell is impliedly obligated to be a witness in the proceedings. Most notably, the parties expressly specified that some kind of future release would be entered into at a later date, as a separate transaction. Contracts should be construed to avoid rendering any part surplusage or nugatory. See Lebenbom v UBS Financial Svcs, Inc, 326 Mich App 200, 216; 926 NW2d 865 (2018). To construe the settlement agreement as itself being a release would impermissibly render its final clause surplusage. Nevertheless, although phrased in the future tense, the parties’ language is seemingly absolute, and as noted, the parties’ choice of labels is not dispositive. As observed by Justice Boyle, simply because the parties used the word ‘release’ does not necessarily mean they intended to use that word as a specific term of art. See Theophilis, 430 Mich at 496 (BOYLE, J). This is especially concerning given that the settlement agreement was drafted by a facilitator. I conclude that when the settlement agreement is read as a whole, see Lebenbom, 326 Mich App at 216, the agreement is ambiguous on its face as to whether the parties intended it to be a release or a covenant not to sue. 

. . . 

I think, under the circumstances, the proper resolution of this matter would be to follow Justice BOYLE’s concurrence in Theophelis and remand for an evidentiary hearing to take parol evidence to resolve the ambiguity of the parties’ intentions. Theophelis, 430 Mich at 493-497 (BOYLE, J.). I recognize that plaintiff did not advance an argument referring to a ‘covenant not to sue’ by name until late in the litigation. However, the dispositive question is what the parties intended, not whether they invoked the correct terminology. As discussed, further compounding the problem is that the settlement agreement was apparently drafted by a facilitator, not by the parties. It is probable that it simply never even occurred to anybody whether some hypertechnical turn of phrase would have such significant consequences. See id. at 499-505 (LEVIN, J).” 


Michigan auto accident attorney Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit SinasDramis.com.

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