A new decision of the Appellate Division, Second Department, relies upon two established principles the courts apply when determining attempts to avoid signed releases: (1) Releases of claims are not lightly disregarded; and (2) Failing to understand a contract one signs is usually not a basis to avoid being bound.
The decision is Prete v Tamares Dev. 1, LLC, 2023 NY Slip Op 04783 (2d Dep’t Decided Sept. 27, 2023).
Strength of Releases
Courts do not take lightly efforts to avoid the binding effect of written, executed releases of claims. See my post, Challenging Releases Based on Fraudulent Inducement is a Challenge. The leading case in New York is Centro Empresarial Cempresa S.A. v América Móvil, S.A.B. de C.V., 17 NY3d 269 (2011). As the Court of Appeals explained there:
Generally, “a valid release constitutes a complete bar to an action on a claim [*5]which is the subject of the release” (Global Mins. & Metals Corp. v Holme, 35 AD3d 93, 98 [1st Dept 2006]). If “the language of a release is clear and unambiguous, the signing of a release is a ‘jural act’ binding on the parties” (Booth v 3669 Delaware, 92 NY2d 934, 935 , quoting Mangini v McClurg, 24 NY2d 556, 563 ). A release “should never be converted into a starting point for . . . litigation except under circumstances and under rules which would render any other result a grave injustice” (Mangini, 24 NY2d at 563). A release may be invalidated, however, for any of “the traditional bases for setting aside written agreements, namely, duress, illegality, fraud, or mutual mistake” (id.).
Although a defendant has the initial burden of establishing that it has been released from any claims, a signed release “shifts the burden of going forward . . . to the [plaintiff] to show that there has been fraud, duress or some other fact which will be sufficient to void the release” (Fleming v Ponziani, 24 NY2d 105, 111 ).
Duty to Read and Understand Contracts
Courts also do not view kindly efforts to avoid signed contracts by claiming an inability to read the language in which the contract was written and related confusion of its actual contents. That applies equally to signed releases as to all written contracts. As I summarized in my post, Second Department Rejects Claim That Party Was “Tricked” Into Signing Note and Mortgage:
It is quite rare for a court to accept a fraud claim based upon an allegation that the party seeking to avoid the legal effect of a document it signed did not know what the document actually said or what it was. Frankly, even if the party is illiterate or blind or does not understand the language of the document, ordinary prudence would dictate that such person should take reasonable steps to make sure he or she understands the document, with assistance of others if necessary, before signing it.
In Prete, plaintiff, an individual, sued defendant to recover property damages allegedly sustained as a result of a construction project on property adjacent to plaintiff’s premises. The defendant moved pursuant to CPLR 3211(a)(5) to dismiss the complaint on the ground that the plaintiff executed a release of all claims arising out of the project in exchange for a payment of $15,000.
In opposition to the motion to dismiss, plaintiff argued that his natural language was Italian, that he was not fluent in the English language, and that he signed the release without understanding the meaning and scope of the release. The defendant countered that the release clearly and unambiguously covered the claims in the complaint, and plaintiff had not established fraud, duress, illegality, or mutual mistake so as to avoid the signed release.
The court below denied the motion to dismiss by relying on cases that have found the overall circumstances of signing a release to be unfair or otherwise sufficient to raise issues as to the effectiveness of the release:
[P]laintiff’s allegations in opposition were sufficient to raise a question of fact as to whether the release was signed by plaintiff under circumstances which indicate unfairness (see Sacchetti-Virga, 158 AD3d at 784; Pacheo, 139 AD3d at 834; Farber v Breslin, 47 AD3d 873 [2d Dept 2008]). Those circumstances as described by plaintiff are, inter alia, that his comprehension of English is poor, that defendant was aware of same, that defendant represented that the agreement with which he was presented covered clean-up of debris only, which circumstances are sufficient to warranted denial of the motion (see e.g. Fuentes v Aluskewicz, 25 AD3d 727 [2d Dept 2006]). As to plaintiff’s understanding as to what payment allegedly encompassed/what defendant represented it encompassed, same is akin to those cases in which purported releasors understand the payment of money in connection with signing a release to be payment for property damage only and not also encompassing personal injury (see e.g. Haynes v Garez, 304 AD2d 714 [2d Dept 2003]).
On appeal, the Second Department reversed and dismissed the complaint based upon the release.
After reciting the general principles governing challenges to releases as explained by Centro and related cases, the Second Department quickly disposed of plaintiff’s argument that he did not understand the release he signed:
Here, in support of its motion to dismiss the complaint, the defendant submitted a release executed by the plaintiff, which, by its terms, barred the instant action against the defendant (see Davis v Rochdale Vil., Inc., 109 AD3d 867, 867). In opposition, the plaintiff failed to raise an issue of fact as to whether there had been fraud, duress, or some other circumstance which would be sufficient to void the release (see id. at 867). The plaintiff’s claim of illiteracy in the English language was, “by itself, insufficient to avoid the rule that [a] party who signs a contract without any valid excuse for having failed to read it is conclusively bound by its terms” (Kenol v Nelson, 181 AD2d 863, 866 [internal quotation marks omitted]). The plaintiff did not allege that the defendant misrepresented the content of the release, nor did he claim to have made any effort to have the document translated or explained to him. “A person who does not understand the English language is not automatically excused from complying with the terms of a signed agreement, since such person must make a reasonable effort to have the agreement made clear to him or her” (Ivasyuk v Raglan, 197 AD3d at 638; see Nerey v Greenpoint Mtge. Funding, Inc., 144 AD3d 646, 648). Accordingly, the Supreme Court should have granted the defendant’s motion pursuant to CPLR 3211(a)(5) to dismiss the complaint.
When it comes to enforcing executed releases, courts are generally not inclined to relieve a party of the consequences of the written release. Particularly, if actual fraud is not established, the grounds for avoiding a release are quite narrow. In the cases relied upon by the plaintiff in Prete, there was more than a mere inability to understand the language in which the release was written, such as overreaching, mutual mistake, or other egregious unfairness. The Second Department in Prete did not find any of those special factors to be present and instead relied upon the well-established principles upholding the signed release.