Holmes v. Lankenau Hospital

*464 BROSKY, J.,

concurring.

I reluctantly concur in the result of the majority’s opinion. I feel constrained to concur in light of various decisions which appear to control the present controversy. However, I cannot agree with the reasoning set forth in those decisions.

In the present case appellants are the administrators of their father’s estate. Their father died several days after sustaining head injuries in an accidental fall at the home of some friends. Acting as administrators of their father’s estate, appellants signed a “release” of liability form ostensibly releasing the homeowners from any additional liability and settling the claim of the estate against them. The consideration paid was a sum of ten thousand dollars, a modest sum in today’s times. The consideration was that modest because it was apparently understood by appellants to be the limits of the homeowners’ property insurance. Be that as it may, appellants did not believe the sole cause of their father’s death was the injuries sustained in the fall. Appellants believed that their father’s death was more proximately caused by negligent treatment received after he sustained the injuries subject to the settlement. In other words, they believed that, although injured in the fall, the decedent never should have died from those injuries. Consequently, they filed suit against the hospital and doctors in question only to find that their signing of the release with the homeowners has worked to prevent recovery from these parties as well. This is true despite the fact that the various appellees were not parties to the release and paid no consideration to appellants for the release from liability.

The supposed goal of judicial interpretation of a contract is to effectuate the intent of the parties, if not the actual shared intent of both parties — should there, indeed, be one — then at least the intent fairly and reasonably implicated by the terms of the agreement and the surrounding circumstances. A sort of intent imputed to the parties and regarded as their actual intent. Ideally then, with respect to the release in question, it should not release third parties to it unless that was the actual contemplated intent of the parties who signed the release. *465 Yet, the premise that the parties actually intended that result is mostly preposterous. I doubt that anyone truly believes that appellants knowingly intended to release their claims against the doctors and hospital by virtue of executing the release with the homeowners and the receipt of ten thousand dollars. Those parties represented the “deep pockets” of the case. Moreover, the parties, at that time, were negotiating only with the homeowners. There was no discussion with the hospital and doctors regarding potential medical malpractice liability. More likely, in settling with the homeowners, appellants were attempting to get the “small case” out of the way before proceeding to the “big case.”

That the homeowners intended to benefit unnamed potential defendants by executing the release is only slightly more plausible. There seems to be little reason that a homeowner would care or even think about the potential liability of another party when defending against a lawsuit or claim for damages. More likely, an average person in the position of the homeowners here would be greatly concerned about the ramifications of the proceedings against them and give no thought at all to other potential defendants. Thus, to suggest that the homeowners, in settling, intended by the execution of the release to also confer that benefit upon unnamed parties is somewhat dubious. The homeowner really has nothing to gain from such an intention or action and it is not something which would naturally come within his or her contemplation. 1 Thus, *466 in situations like the present one, it can be fairly assumed that it is not the actual intent of both parties that unnamed and unrelated parties be “released” from liability by virtue of execution of the release. Nevertheless, this is exactly what the prior decisions of our courts have dictated.

In Buttermore v. Aliquippa Hospital, 522 Pa. 325 , 561 A.2d 733 (1989), under a similar factual pattern, our Supreme Court found that the release, by its own wording, released all parties from liability. They commented:

If such a release can be nullified or circumvented, then every written release and every written contract or agreement of any kind no matter how clear and pertinent and all-inclusive, can be set aside whenever one of the parties has a change of mind or whenever there subsequently occurs a change of circumstances which were unforeseen---- It would make a mockery of the English language and of the law to permit this release to be circumvented or held to be nugatory.

I do not dispute the validity of this commentary as to the parties to the release agreement. Should appellants have a change of heart and attempt to extract more money from the homeowners, I would agree that their execution of the release would prevent those efforts. I would support this position even if the appellants argued that they did not understand the implications of the release or had made a mistake in executing it. To do otherwise is to make the agreement impotent and illusory. However, I do not believe that the commentary is particularly persuasive as to its application to strangers to the release. Appellants here are not suggesting that the release can be negated as to the homeowners who signed it, appellants’ only argument is that the release should not work to bestow a benefit to third parties who did not contribute to the consideration, who did not bargain for a release of liability and *467 who did not sign the document. As to such parties the release acts as a windfall benefit under circumstances that clearly penalize the releasor.

If it is clear that one did not intend to release other potential defendants when signing a release, as I believe is the case here, then giving the release that effect is at best punishing the releasor for his or her naivete, and at worst, when only the releasee intended such a result, allowing a near fraud to be perpetrated upon the releasor. If neither party intended such a result then arguably there is a “mutual mistake” at work and that interpretation should not follow at all. However, regardless of the scenario, it is very unlikely that that result was truly bargained for. Consequently, it begs the question: why are we so willing to allow a stranger to enforce an agreement to which he is not a party, has paid no consideration for and did not participate in the negotiation of? From a policy standpoint there seems little reason to allow this result other than to elevate form, the verbose and overbroad wording of boilerplate release forms, over substance, the actual intent of the parties in question.

Aside from the above commentary, the standing and position of the third party to assert the release must be questioned. When one asserts a release under circumstances like the present he is essentially asserting a third party benefit. He is not a party to the contract, nor is he in privity to a party. Consequently, he is attempting to be a third party beneficiary under the contract. Yet when the caselaw regarding third party beneficiaries is reviewed you find that these contracts are rather restrictively enforced.

Recently, in Scarpitti v. Weborg, 530 Pa. 366 , 609 A.2d 147 (1992), our Supreme Court recited the qualifications for being recognized as a third party beneficiary. They stated that one becomes a third party beneficiary:

only where both parties to the contract express an intention to benefit the third party in the contract itself, ... unless, the circumstances are so compelling that recognition of the beneficiary’s right is appropriate to effectuate the intention of the parties, and the performance satisfies an obligation of *468 the promisee to pay money to the beneficiary or the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.

Id., 609 A.2d at 150-151 . (emphasis in original) Under the above criteria it is difficult to understand why a stranger to the contract is allowed to enforce it against the releasor. It is difficult to conclude that the release agreement expresses an intent to benefit a third party unless one determines that in including the language “and any other person, firm or corporation charged or chargeable with responsibility or liability,” the parties expressly intended to benefit an unknown and indefinite class of persons. More likely, this language is typical overbroad legal phrasing intended to encompass the parties and all their privies. However, even if it were the intention of the parties to release everyone in the world who might also be liable to the releasor, it is questionable that such a broadly defined class of persons or entities would qualify for third party status.

The second prong of the analysis fails also. Recognizing a third party’s right cannot be said to be necessary to effectuate the intent of the parties. The clear and primary intent in signing the release agreement is to settle the dispute finally as between the parties signing the agreement. If the agreement works to offer the same immunity from a lawsuit to an unknown third party, as the court held below, then this would seem to be at best an ancillary or incidental intent of the parties, it is clearly not the primary intent of the parties. Consequently, I believe that a third party’s right to claim third party beneficiary status under the release is suspect. If a third party does not gain benefit of the release as a third party beneficiary, then the only other theory that comes to mind that might allow the third party to rely upon the release is estoppel. However, this also appears dubious.

“A cause of action under detrimental reliance or promissory estoppel arises when a party relies to his detriment on the intentional or negligent representations of another party, so that in order to prevent the relying party from being harmed, the inducing party is estopped from showing that the facts are *469 not as the relying party understood them to be.” Rinehimer v. Luzerne County Community College, 372 Pa.Super. 480 , 539 A.2d 1298, 1306 (1988). It is straining the above definition, in my opinion, to assert that in settling with the homeowners, appellants have made a promise to appellees. Secondly, I see no reliance to appellees’ detriment. To the contrary, appellees were in a position of having to defend themselves in a lawsuit of potentially large proportions until such time as they discovered the execution of the release in question. These are not circumstances that invite the application of promissory estoppel.

If the above two theories do not allow a third party to assert a release as a defense, then the propriety of allowing that assertion at all is suspect. Especially when it is considered that the parties probably did not have an explicit intent to release such third parties, and it is clearly inequitable to allow the third party to assert it. Consequently, I believe that the policy behind allowing a stranger to a release to assert it as a defense in a context such as the present one should be reexamined by our Supreme Court and overruled.

. Perhaps the only individual or entity which has intended the result our courts are imposing in these situations is the insurer. The insurer may have this intention to protect itself from paying out more money should one or more of the third parties spared liability as a result of the signing of the release happen to be one insured by itself. Should this occur, the payment of $10,000 on behalf of the homeowners might spare the insurer liability in the millions of dollars when a doctor or hospital it has insured escapes liability as a result of the signing of the release. Even if this possibility is remote, it figures that if all, or most, insurance companies draft their releases in similarly broad fashion the industry as a whole will certainly be spared a significant amount of money as a result of potential "deep pocket” defendants being saved from liability when unsuspecting claimants or litigants execute releases like the one found here to settle seemingly unrelated claims. The more insurers who use such releases the more likely that all will benefit in *466 the long run. Consequently, it is not difficult to imagine the insurer possessing this intent.

However, when representing an insured in a liability context, the insurer is not truly a party in interest, the insured is. Consequently, the insurer’s intent in drafting the release so broadly is not pertinent to interpreting the document as between the parties who signed it.