Case Name: McCONAL AVIATION, INC., Plaintiff-Appellee, v. COMMERCIAL AVIATION INSURANCE COMPANY, Defendant-Appellant
Court: Supreme Court of New Mexico
Jurisdiction: New Mexico
Decision Date: 1990-10-10
Citations: 110 N.M. 697
Docket Number: No. 18466
Parties: McCONAL AVIATION, INC., Plaintiff-Appellee, v. COMMERCIAL AVIATION INSURANCE COMPANY, Defendant-Appellant.
Judges: BACA, J., concurs.
Reporter: New Mexico Reports
Volume: 110
Pages: 697–704

Head Matter:
799 P.2d 133
McCONAL AVIATION, INC., Plaintiff-Appellee, v. COMMERCIAL AVIATION INSURANCE COMPANY, Defendant-Appellant.
No. 18466.
Supreme Court of New Mexico.
Oct. 10, 1990.
Carpenter, Crout & Olmsted, Rebecca Dempsey, Santa Fe, McClure & Eyler, Richard R. Eyler, Ann C. Rice, Denver, Colo., for defendant-appellant.
Hinkle, Cox, Eaton, Coffield & Hensley, Nancy S. Cusack, Albert L. Pitts, Roswell, for plaintiff-appellee.

Opinion:
OPINION
WILSON, Justice.
Defendant Commercial Aviation Insurance Company, Inc. (Commercial) appeals a trial court judgment awarding Plaintiff McConal Aviation, Inc. (McConal) $65,000 in damages plus interest and costs, without credit for amounts paid by another settling defendant. We affirm the trial court. FACTS
In October 1984 Falcon Insurance Agency (Falcon) and McConal agreed that Falcon would obtain property insurance for an aircraft owned by McConal. McConal executed an installment contract to pay for the insurance and Falcon indicated that the policy was effective beginning October 12, 1984. Falcon then contacted Aviation General Insurance Company, Inc. (Aviation), an insurance broker, to obtain an insurance binder for McConal's policy. At Aviation's request Commercial issued a binder for a thirty-day period, ending November 12, 1984. Commercial then sent Aviation a letter requesting that McConal fill out an application for insurance and return it before the binder expired. Although Aviation apparently received a timely completed application and subsequently forwarded it to Commercial, Commercial did not receive it until November 25, 1984, thirteen days after the binder expired.
McConal was unaware that its aircraft was insured for only one month. On November 21, 1984 the aircraft was involved in a crash and sustained $47,369.30 in damages. When McConal requested monies to repair the aircraft, Falcon disclosed that the insurance was not in effect at the time of the crash and refused to pay.
On August 26, 1985 McConal sued Falcon, Aviation, and Commercial alleging breach of contract, negligence, bad faith, and deceptive trade practices. Specifically, McConal alleged: (1) Falcon breached its contractual duty to procure property insurance for the aircraft; (2) Falcon was Commercial's agent and Commercial was thus liable as its principal; and (3) Aviation was negligent in failing to forward to Commercial the information necessary to continue McConal's policy. McConal sought compensatory damages, punitive damages, and treble damages pursuant to the Unfair Trade Practices Act, NMSA 1978, Section 57-12-1 et seq.
Falcon never appeared in the action. A week prior to trial, Aviation settled with McConal for $40,000 and trial was held solely against Commercial. The trial court granted Commercial's motion for a directed verdict as to the negligence count, and McConal withdrew the deceptive trade practices claim. Thus the only claim remaining for the jury was for breach of contract against Commercial.
Among the proposed jury instructions Commercial submitted was a modified version of SCRA 1986, 13-1825 (UJI 1825), which the court rejected on grounds that the jury was not entitled to be informed of a prior settlement. The jury was not told of the other original defendants and was merely instructed as to McConal's damages. The jury returned a $65,000 verdict in McConal's favor.
After the verdict, Commercial argued that it should receive a $40,000 credit towards the judgment, representing the amount of Aviation's settlement with McConal. The trial court denied Commercial's motion for a credit for the settlement amount and entered judgment against Commercial for $65,000. Commercial appeals the trial court's judgment.
ISSUES
On appeal Commercial claims the trial court erred in: (1) refusing to submit Commercial's requested jury instruction based on UJI 1825, and (2) refusing to credit the amount of Aviation's settlement with McConal toward the judgment against Commercial. We address each issue in turn.
DISCUSSION
1. Jury Instruction
Commercial first claims the trial court erred by refusing to submit its modified version of the uniform jury instruction on contribution among tortfeasors.
The directions for use of UJI 1825 state that "[t]his instruction is to be used only where a joint tortfeasor has been released in conformity with the Uniform Contribution Among Tortfeasors Act, 41-3-1, NMSA 1978 " (emphasis added). For purposes of the Contribution Among Tortfeasors Act, "the term 'joint tortfeasors' means two or more persons jointly or severally liable in tort for the same injury to person or property, whether or not judgment has been recovered against all or some of them." NMSA 1978, 41-3-1 (Repl.Pamp.1989) (emphasis added).
In this case Commercial successfully obtained a dismissal of the complaint of negligence and the matter went to the jury only on the breach of contract claim. Therefore, the jury was not deciding a tort claim but a contract claim. Also, there was never a determination of liability against Aviation, so there has been no finding that any defendant is a tortfeasor. Thus the trial court did not err; the instruction was properly refused.
2. Credit of McConal's Settlement
Commercial contends that the trial court committed reversible error by refusing to credit the amount paid in settlement by Aviation to the verdict entered against Commercial. Commercial asserts that the failure to credit the amount paid by Aviation results in an impermissible double recovery by McConal. The argument is based on the contention that "McConal sued several Defendants to redress the one wrong which it suffered. It was clearly seeking only one recovery arising from the one incident." We cannot agree.
The jury found that a valid contract existed between McConal and Commercial and then found damages of $65,000 resulted from Commercial's breach of the contract. The claim against Aviation was for negligence in failing to forward the application. Had that claim also gone to the jury it might well have awarded McConal additional damages caused by Aviation's negligence. That would not have represented double recovery for the same wrong, and this fact is not changed by Aviation's decision to settle any claims against it.
McConal, on the other hand, asserts that the settlement with Aviation falls squarely within the confines of Exum v. Ferguson, 97 N.M. 122, 637 P.2d 553 (1981), and therefore should not be credited against the jury award against Commercial. We agree that Exum controls in this case.
In Exum the plaintiff sued two defendants, one of whom settled with the plaintiff prior to trial. The case proceeded against the remaining defendant based on a breach of contract claim. The defendant requested that the amount of the settlement be credited against the jury award, based on the Uniform Contribution Among Tortfeasors Act. The trial court refused to credit the settlement amount against the damages awarded by the jury for breach of contract. This court upheld the trial court, pointing out that no tort claim had been made against the remaining defendant. We held that "[bjecause Occidental's and Ferguson's suits were based on different theories of liability, they are not joint tortfeasors and Ferguson is not entitled to a credit of Occidental's settlement." Id. at 125, 637 P.2d at 556. Likewise, this case was not tried under a tort theory. Therefore, Commercial and Aviation are not joint tortfeasors, and Commercial is not entitled to credit for the settlement paid by Aviation.
Commercial attempts to distinguish Exum by pointing out that in that case it was the insurer that had settled with the plaintiff on a breach of contract claim and the case proceeded to trial on tort claims against another defendant, whereas in this case an alleged tortfeasor settled with McConal and only the breach of contract suit against the insurer was tried. We find this distinction to be irrelevant. As in Exum, there are no joint tortfeasors involved in this case.
Commercial also argues that in New Mexico a plaintiff cannot recover more than his actual losses. While this is a correct statement of the general rule, an exception is the collateral source rule. The collateral source rule allows a plaintiff to recover his full losses from the responsible defendant, even though he may have recovered part of his losses from a collateral source.
As a general rule, benefits received by the plaintiff from a source collateral to the tortfeasor or contract breacher may not be used to reduce the defendant's liability for damages. This rule holds even though the benefits are payable to the plaintiff because of the defendant's actionable conduct and even though the benefits are measured by the plaintiff's losses.
D. Dobbs, Handbook on the Law of Remedies § 3.6, at 185 (1973).
We find persuasive the case of Rose v. Hakim, 335 F.Supp. 1221 (D.D.C.1971) cited by McConal. The Hakim case involved a malpractice claim where the plaintiff settled with two of the medical practitioners for the sum of $270,000 and then took the defendant hospital to trial, recovering a jury verdict of $294,777.25, representing full compensation to the plaintiff. After the jury verdict the defendant hospital claimed the right to credit for the $270,000 paid by the settling defendants.
In rejecting the hospital's claim, the court noted that the settling defendants were found to be free of fault by the jury and that they were therefore not tortfeasors, as they had committed no tort. The amounts paid by the settling defendants were, "in the legal sense, voluntary. They were, in legal terminology, collateral sources." Id. at 1236. The court then quoted Hudson v. Lazarus, 217 F.2d 344, 346 (D.C.Cir.1954):
"In general the law seeks to award compensation, and no more, for personal injuries negligently inflicted. Yet an injured person may usually recover in full from a wrongdoer regardless of anything he may get from a 'collateral source' unconnected with the wrongdoer. Usually the collateral contribution necessarily benefits either the injured person or the wrongdoer. Whether it is a gift or the product of a contract of employment or of insurance, the purposes of the parties to it are obviously better served and the interests of society are likely to be better served if the injured person is benefitted than if the wrongdoer is benefitted."
335 F.Supp. at 1236. We agree with the Hudson court that if a collateral resource is to benefit a party, it should better benefit the injured party than the wrongdoer.
There are also sound policy reasons for not permitting the offset. The policy of New Mexico is to favor amicable settlement of claims without litigation. Ratzlaff v. Seven-Bar Flying Serv., Inc., 98 N.M. 159, 646 P.2d 586 (Ct.App.), cert. denied, 98 N.M. 336, 648 P.2d 794 (1982). We feel compelled to enforce the terms and expectations of the settling parties. See D. D. Williamson & Co. v. Allied Chem. Corp., 569 S.W.2d 672 (Ky.1978). In Williamson, one defendant (Allied) argued that it was entitled to a credit against a jury award to the extent of a settlement paid by another defendant (PB & S). The plaintiff Williamson, like McConal, insisted that he should retain the benefit of his bargain and settle ment with PB & S and that Allied should not benefit from the settlement to which it was not a party. The Williamson court said:
Williamson and PB & S reached an arms length negotiated settlement. PB & S bought its peace and Williamson sold its claim against PB & S for a price satisfactory to the settling parties. Allied and Williamson took their dispute to the jury. To now allow Allied to benefit from PB & S's generosity discourages the policy of encouraging and finalizing partial settlements .

We conclude in this case that the same policy militates in favor of allowing the plaintiff to enjoy a favorable settlement or being bound by a poor settlement.
569 S.W.2d at 674.
In agreeing to settle, McConal and Aviation both gambled that they were faring better than if they had gone to trial. Both remain bound to that settlement, even if subsequent events should prove them wrong. Yet if we were to allow Commercial the offset it seeks, the odds would be better for a defendant who refuses to settle and proceeds to trial; he might well have part of his liability borne by a party who had not been adjudged liable and might never have been even if he had gone to trial. In short, Commercial would reap the benefit of a settlement to which it was not a party.
CONCLUSION
We conclude that the same policy which binds a plaintiff to a poor settlement permits him to enjoy a favorable settlement. There was no error in refusing to offset the judgment and therefore the trial court is affirmed.
IT IS SO ORDERED.
BACA, J., concurs.
MONTGOMERY, J., specially concurring.