Recently, a California Court of Appeal addressed whether a settlement agreement between an injured victim of a car accident and the responsible party’s insurer was valid. The injured plaintiff in this lawsuit suffered a traumatic brain injury, and she claimed that she did not consent to the settlement agreement entered into by her attorney. On appeal in this opinion, the court reviewed principles of contract law and settlement agreements, ultimately deciding that the plaintiff in this case had not in fact authorized the attorney to enter the settlement on her behalf.
Maria Carachure suffered severe injuries when she was struck by a vehicle while standing on the side of a road. The vehicle was driven by defendant Celia Acosta Scott. Ms. Carachure suffered brain, body, nervous system, and other injuries. Ms. Carachure’s close relatives, including her son and grandchildren, witnessed the accident and suffered emotional distress from witnessing the accident.
The appellate court stated that in this case, when the defendant, Ms. Scott, moved for summary judgment, she needed to prove the existence of an enforceable settlement agreement. Then, the burden would shift to Ms. Carachure to show a triable issue of fact remained.
The court stated that a settlement agreement is a contract, and legal principles that apply to contracts apply. The defendant needed to prove the elements of a contract: that there were parties capable of entering into the contract who mutually consented over a lawful object, and there was sufficient cause or consideration in support. Here, Ms. Carachure contended that Ms. Scott did not meet her burden of demonstrating that the parties entered into a binding contract.
Regarding the capacity to contract, Ms. Carachure stated that Ms. Scott needed to prove Ms. Carachure had legal capacity to enter into a contract. She contended that Ms. Scott knew that she had suffered a traumatic brain injury and that her action was being prosecuted through a guardian ad litem.
The court stated the rule that there is a rebuttable presumption that a person is legally capable of entering into a contract. The effect is that the adverse party has to prove the nonexistence of the presumed fact – in this case, the fact that Ms. Carachure had legal capacity. Here, Ms. Scott had no burden to make a prima facie showing that Ms. Carachure had legal capacity to enter into a contract. In fact, Ms. Carachure had the burden of refuting the presumption that she had legal capacity.
A traumatic brain injury does not necessarily render a person not competent to enter into a contract. In fact, a person can enter into a contract unless they are of “unsound mind.” A mere diagnosis of a mental or physical disorder is not sufficient to support a determination that a person is of unsound mind. In this case, the evidence did not show the injury rendered Ms. Carachure incapable of contracting. Simply because Ms. Carachure had been diagnosed with a traumatic brain injury did not support the conclusion her injury rendered her incapacitated.
Furthermore, while a guardian ad litem was appointed two years after the original settlement demand was issued, this did not show that Ms. Carachure had been incapacitated at the time she entered into the settlement agreement. In fact, the court stated it was possible her condition deteriorated to the point where she lacked capacity to make decisions or the capacity to contract.
The appellate court did state that Ms. Scott failed to make a prima facie showing that Ms. Carachure actually consented to be bound by the settlement agreement because Ms. Scott did not present evidence that Ms. Carachure’s attorney was authorized to enter into a settlement on her behalf.
The rule is that an attorney must be specifically authorized to settle a claim on behalf of a client. Additionally, a person dealing with an attorney must ascertain whether the agent has authority to do the act, and if they do not, that person assumes the risk. In this case, there was nothing in the correspondence between Ms. Carachure’s attorney and Safeco to establish that the law firm was authorized to act on Ms. Carachure’s behalf. Since there was no evidence Ms. Carachure knew about the settlement agreement, the burden did not shift to Ms. Carachure to demonstrate she did not agree to the agreement.
There was no evidence that Ms. Carachure actually knew about and personally agreed to enter into a settlement agreement. There remained a triable issue of fact regarding Ms. Carachure’s actual consent to the agreement.
The appellate court reversed the judgment and remanded the case for further proceedings. Ms. Carachure received costs on appeal.
The car accident attorneys at Sharifi Firm provide guidance and representation to victims throughout Southern California in personal injury claims for compensation. Contact our office today for a free consultation at 866-422-7222 or complete our online form.
More Blog Posts:
California Court of Appeal Finds Settlement Offer in Car Accident Lawsuit Invalid Because Plaintiff was Required to Sign Undescribed “Settlement and Release” Section, Southern California Injury Lawyer Blog, April 25, 2016
California Court of Appeals Allows Cross-Defendant to Recover Costs in Car Accident Lawsuit, Remands to Determine Reasonable and Necessary Costs, Southern California Injury Lawyer Blog, February 22, 2016