Case Name: LARKIN v. OTSEGO MEMORIAL HOSPITAL ASSOCIATION
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1994-11-07
Citations: 207 Mich. App. 391
Docket Number: Docket No. 166826
Parties: LARKIN v OTSEGO MEMORIAL HOSPITAL ASSOCIATION
Judges: Before: Reilly, P.J., and Taylor and M. E. Kobza, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 207
Pages: 391–401

Head Matter:
LARKIN v OTSEGO MEMORIAL HOSPITAL ASSOCIATION
Docket No. 166826.
Submitted September 21, 1994, at Grand Rapids.
Decided November 7, 1994, at 9:25 a.m.
Leave to appeal sought.
Herbert J. and Elizabeth A. Larkin brought an action in the Otsego Circuit Court against Otsego Memorial Hospital Association and Kwang S. Kim, M.D., alleging medical malpractice on the part of Dr. Kim in failing to diagnose Herbert Larkin’s lung cancer and vicarious liability on the part of the hospital. Following an admission by the hospital of an agency relationship between it and Dr. Kim, the parties stipulated the dismissal of Dr. Kim with prejudice and without costs. The court, William A. Porter, J., granted summary disposition for the hospital, ruling that the stipulation and order to dismiss Dr. Kim was a consent judgment and that the hospital, as Dr. Kim’s principal, was entitled to dismissal of the claim of vicarious liability brought against it. The plaintiffs appealed.
The Court of Appeals held:
1. The release of an agent from liability acts also as the release of the principal for its vicarious liability arising out of the agency relationship. However, entering into a covenant not to sue with an agent does not act to release the principal from its vicarious liability.
2. The trial court erred in holding that the dismissal operated as a consent judgment. There is nothing in the language of the motion to dismiss that suggests that the plaintiffs intended the dismissal of Dr. Kim to act as a dismissal of the hospital. The stipulation and order to dismiss was a convenant not to sue Dr. Kim only and did not operate as a release of the hospital. Summary disposition for the hospital should not have been granted.
Reversed.
References
Am Jur 2d, Release §§ 2, 30, 34.
Release of, or covenant not to sue, one primarily liable for tort, but expressly reserving rights against one secondarily liable, as bar to recovery against latter. 24 ALR4th 547. Release of (or covenant not to sue) master or principal as affecting liability of servant or agent for tort, or vice versa. 92 ALR2d 533.
Taylor, J., dissenting, stated that the grant of summary disposition for the hospital was proper because the stipulation and order to dismiss Dr. Kim with prejudice operated as the equivalent of a consent judgment, which had the effect of releasing the hospital, as Dr. Kim’s principal, from its vicarious liability.
Agency — Vicarious Liability — Dismissals op Actions — Covenants Not to Sue.
A dismissal with prejudice of an agent does not act as a consent judgment, which releases the agent’s principal from vicarious liability, but rather acts as a covenant not, to sue, which preserves the right to pursue a claim against the principal on the basis of the principal’s vicarious liability for the acts of the agent, where there is no indication that release of the principal was intended.
Sommers, Schwartz, Silver & Schwartz, P.C. (by Matthew G. Curtis and Richard D. Toth), for the plaintiffs.
Smith, Haughey, Rice & Roegge (by Jon D. Vander Ploeg), for the defendant.
Before: Reilly, P.J., and Taylor and M. E. Kobza, JJ.
Circuit judge, sitting on the Court of Appeals by assignment.

Opinion:
Reilly, P.J.
Plaintiffs appeal as of right an order granting defendant summary disposition under MCR 2.116(C)(7) (release). Plaintiffs claim that the trial court erred in ruling that the stipulation and order to dismiss defendant Kwang S. Kim, M.D., only, with prejudice and without costs, was a consent judgment entitling defendant hospital to dismissal as well. We agree and reverse.
This case involves a claim of malpractice against Dr. Kim, alleging failure to diagnose plaintiff Herbert Larkin's lung cancer after viewing his x-rays, and a claim of vicarious liability against the hospital. Following an admission by the hospital that there was an agency relationship between it and Dr. Kim, the parties stipulated to the dismissal of Dr. Kim with prejudice and without costs. The issue presented is whether the dismissal of Dr. Kim, the agent, operated simply as a covenant not to sue him, or whether it operated as a consent judgment or release, entitling the hospital, the principal, to dismissal as well.
The common-law doctrine that release of an agent discharges the principal from vicarious liability is still recognized in Michigan. Felsner v McDonald Rent-A-Car, Inc, 193 Mich App 565, 569; 484 NW2d 408 (1992). That principle has not been changed by the statute governing rights of contribution. Theophelis v Lansing General Hosp, 430 Mich 473, 490-491; 424 NW2d 478 (1988) (opinion of Griffin, J.).
However, the use and significance of a release is considerably different from a covenant not to sue. A covenant not to sue is distinguishable from a release in that it is not a present abandonment or relinquishment of the right or claim but is merely an agreement not to sue with respect to an existing claim. It does not extinguish the cause of action. Id. at 492, n 14, citing 66 Am Jur 2d, Release, § 2, p 679. As between the parties to the agreement not to sue, the final result is the same as if a release is given. The difference is primarily in the effect relative to third parties and is based mainly on the fact that in the case of a release there is an immediate release or discharge extinguishing the cause of action, whereas in the case of a covenant not to sue there is merely an agreement not to prosecute a suit. Id.
We agree with plaintiffs that their stipulation to dismiss was not a release but an agreement, following the initiation of their lawsuit, to dismiss Dr. Kim, and to refrain from suing him regarding the claimed malpractice in the future. On the facts presented, the stipulation and order to dismiss was a covenant not to sue, not a consent judgment or a release.
Plaintiffs and Dr. Kim did not agree to a judgment in favor of either party on the merits of the malpractice claim, or on the basis of a settlement. See Rzepka v Michael, 171 Mich App 748; 431 NW2d 441 (1992). Nor did they agree to accept a mediation award, which has been determined to be equivalent to a consent judgment. Felsner, supra at 570. We find no basis for the trial court's conclusion that the dismissal operated as a consent judgment.
Additionally, we find no merit to defendant's claim that the voluntary dismissal was a release. Defendant's reliance upon the rulings in In re Koernke Estate, 169 Mich App 397; 425 NW2d 795 (1988), and Brownridge v Michigan Mutual Ins Co, 115 Mich App 745, 748; 321 NW2d 798 (1982), that a voluntary dismissal can constitute a decision on the merits and that dismissals with prejudice can effectively bar future litigation, is misplaced. In both Koernke and Brownridge, the opinions dealt only with the effect of voluntary dismissals on subsequent lawsuits by the same plaintiffs against the previously dismissed defendants. The decisions did not consider the effect of the dismissals on third parties, such as the other defendants. They did not address the issue presented here, i.e., whether voluntary dismissal with prejudice of an agent after the initiation of a lawsuit, but before trial, operates as a release of the codefendant principal.
This issue was directly addressed in Boucher v Thomsen, 328 Mich 312; 43 NW2d 866 (1950). In Boucher, the Supreme Court considered whether an agreement not to sue a driver of a motor vehicle, who allegedly caused the death of the plaintiff's decedent, effectively released the owner of the vehicle from vicarious liability. The agreement not to sue was given for monetary consideration, but expressly reserved the right to proceed against the owner. The subsequent order of dismissal was with prejudice and without costs. The Court unanimously determined that the agreement did not operate as a release of the owner's liability.
The suggestion that the covenant not to sue, if sustained, results in a legal injustice to defendant [owner] is without merit. Neither may it be said, in view of the language of the covenant, that the parties thereto contemplated that [the driver and garage keeper] would necessarily be released from further liability with respect to the subject matter. The instrument did not provide for such a release. It clearly appears that it is merely an undertaking that plaintiff will not sue the covenantees. She did not, either directly or indirectly, covenant against their possible liability to defendant [owner] if judgment is obtained and enforced against him. The undertaking is not ambiguous and must be construed in accordance with the plain intent of the language used by the parties. [Id. at 317-318.]
In the case before us, the stipulation to dismiss did not reserve expressly plaintiffs' claim against the hospital. Nevertheless, it stated that the hospital was legally responsible for the actions of Dr. Kim and that his dismissal was based upon the hospital's acknowledgment that he was the hospital's agent for the purposes of this case. Nothing in that language suggests that by dismissing Dr. Kim the plaintiffs intended to dismiss the hospital. Rather, the implication is that the plaintiffs recognized that the codefendant hospital was the principal that could be held responsible for the negligent acts of the agent and they would proceed against the hospital on that basis after the dismissal of Dr. Kim.
We conclude, therefore, that the stipulation and order to dismiss was a covenant not to sue Dr. Kim only. Although the issues are res judicata as between plaintiffs and Dr. Kim, the dismissal did not relinquish plaintiffs' claim and extinguish the malpractice action. It did not operate as a release of the defendant hospital. Accordingly, the order of the trial court granting summary disposition for the defendant hospital is reversed.
M. E. Kozba, J., concurred.
In Theophelis, Justices Riley, Brickley, and Griffin joined in the lead opinion, while Justice Boyle concurred, disagreeing only with regard to whether remand was necessary to determine whether the documents were releases or covenants not to sue. Because four justices concurred that MCL 600.2925d; MSA 27A.2925(4) does not abrogate the common-law rule in question, Theophelis is binding with regard to that point of law. [Felsner, supra at 569.]
We note that in Koernke, supra at 400, this Court concluded that a 1971 order of dismissal in the probate court that did not state "without prejudice" was a judgment on the merits. We are unable to determine from the opinion the factual basis for the order of dismissal. However, we agree with the panel in Koernke that if the order of dismissal is on the merits, the decision is res judicata with regard to the parties.