Opinion ID: 2406086
Heading Depth: 1
Heading Rank: 2

Heading: the trial court's interpretation and application of the tennessee contribution among tort-feasors act

Text: To adopt the language of appellant the lower court interpreted T.C.A. § 29-11-102(g) of the Act to mean that where a breach of trust or other fiduciary obligation is involved, the Uniform Act does not apply, thereby reinstating the common law rule with the effect that the release of one joint tort-feasor releases all. The court also held that the participation of Carte and Jenkins in overcharging insurance premiums to the plaintiff made them liable as joint tort-feasors. That this liability was fundamentally tortious not contractual in nature and resulted in the release of the Jenkins Agency and the associated Jenkins defendants. We agree with the appellant's argument that this interpretation of the act is too simplistic. In reading and applying the Act, it is necessary to look to subsection (g) of § 102 with a view to arrive at the true intention of each section and the effect to be given, if possible, to the entire Act. See Bible and Godwin Construction. Co., Inc. v. Faener Corporation, 504 S.W.2d 370, 371 (Tenn. 1974). The Act plainly and clearly applies to negligence and tort cases where there is injury to person or property, including wrongful death. It is plain and clear that it applies exclusively to the right of contribution among individuals liable for such acts of negligence, and nowhere within its text is there any reference to the right of a claimant to pursue a cause of action against any others who may be liable for an injury he has sustained after having released one or more other tort-feasors of liability unless it can be found in T.C.A. § 29-11-105. Moreover there is a paucity of case law in this State, as well as in other jurisdictions regarding the exclusion of breaches of trust or fiduciary obligations from the operation of the Act. In Buchbinder v. Register, 634 F.2d 327 (1980) the 6th Circuit Court of Appeals concurred in the finding of the Federal District Court in a suit against a joint tort-feasor, specifically filed under the Tennessee Uniform Contribution Among Tort-Feasors Act, where the plaintiff apparently had settled with the executor of an estate trust for less than the full amount he had misappropriated from the trust. She then sued an accounting firm charging negligence in preparation of the executor's tax forms and aiding and abetting the executor in his scheme to defraud the remaindermen of their interests in the trust funds. It was held that the Uniform Act did not apply in actions involving breached fiduciary relationships and the suit could not be maintained. Buchbinder must be confined to its facts and is of little assistance in resolving the issues in the case under consideration. The nearest rationalization of the issue we have found is in Eason v. Lau, Fla. App., 369 So.2d 600 (1978). In that case an action was brought to recover for tort involving, inter alia, a breach of trust or fiduciary obligation. The trial court found that a Florida statute (F.S. § 768.041) abrogated the common law rule that a voluntary dismissal with prejudice of the action against one defendant was tantamount to a release discharging the other defendants. The Florida Court of Appeals affirmed. F.S. § 768.041 provides in material part: A release or covenant not to sue as to one tort-feasor for property damage to, personal injury of, or the wrongful death of any person shall not operate to release or discharge the liability of any other tort-feasor who may be liable for the same tort or death. In making its ruling the Court noted: (1) The Florida legislature adopted the Uniform Contribution Among Tort-feasors Act verbatim; and (2) The similarity in subject matter treated in F.S. § 768.041(1) and subsection F.S. § 768.31(5) of their Uniform Contribution Act. Pertinent to our investigation here the Court stated: It syllogistically follows, therefore, that if the tort charged sub judice involved breach of trust or other fiduciary obligation and that F.S. 768.31 (the Uniform Contribution Among Tortfeasors Act) is not applicable to breaches of trust or other fiduciary obligation and if 768.041 is applicable to all torts, as held by the Supreme Court ..., then the conclusion is inescapable that F.S. 768.31 is inapplicable and F.S. 768.041 is controlling. F.S. 768.041 being controlling, the common law rule is inapplicable; therefore the release of ... [one tort-feasor] did not operate as a release or discharge of the other joint tortfeasors. The reasoning utilized by the Florida court can be found within the parameters of T.C.A. § 29-11-101, et seq. The provisions of T.C.A. § 29-11-105, relative to the effect of a release or covenant not to sue upon the liability of other tort-feasors take preeminence over Section 29-11-102(g) excluding breaches of trust or other fiduciary obligations from application of the Act. T.C.A. § 29-11-105 provides: XX-XX-XXX. Effect of release or covenant not to sue upon liability of other tort-feasors. (a) When a release or covenant not to sue or not to enforce judgment is given in good faith to one (1) of two (2) or more persons liable in tort for the same injury or the same wrongful death: (1) It does not discharge any of the other tort-feasors from liability for the injury or wrongful death unless its terms so provide; but it reduces the claim against the others to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, whichever is the greater; and (2) It discharges the tort-feasor to whom it is given from all liability for contribution to any other tort-feasor. (b) No evidence of a release or covenant not to sue received by another tort-feasor or payment therefor may be introduced by a defendant at the trial of an action by a claimant for injury or wrongful death, but may be introduced upon motion after judgment to reduce a judgment by the amount stipulated by the release or the covenant or by the amount of the consideration paid for it, whichever is greater. In Bible and Godwin Construction Co., supra, in construing T.C.A. § 23-2102(f) [T.C.A. § 29-11-102(f)] in conjunction with T.C.A. § 23-3104(f) [T.C.A. § 29-11-104(f)] the Court stated the rule on the construction of statutes as follows: In construing T.C.A. § 23-3104(f), which is a part of Chapter 575, enacted by the Legislature as one Act, we examine the entire Act with a view to arrive at the true intention of each section and the effect to be given, if possible, to the entire Act and every section thereof. Where different sections are apparently in conflict we must harmonize them, if practicable, and lean in favor of a construction which will render every word operative. (Citations omitted). When there is an irreconcilable conflict between statutes we have to rely on an established rule of statutory construction; that is, where there is such conflict between two sections of a statute the one last mentioned will control. (Citations omitted). In Yett v. Smoky Mountain Aviation, Inc., 555 S.W.2d 867 (Tenn. App. 1977) it was made clear that T.C.A. § 23-3105 [T.C.A. § 29-11-105] applies to all tort-feasors and not just those jointly liable. The case citing from Layne v. United States, 460 F.2d 409 (9th Cir.1972), throws some further light on the common law release rule:  Layne misapprehends the purpose and effect of § 4 of the Uniform Act. While § 4 changed the common law in one respect (i.e., by providing that release of one joint tortfeasor does not automatically release the other joint tortfeasors), it retained that part of the common law rule embodying the sound public policy of permitting a plaintiff to receive only the amount of his adjudged damages and no more, regardless of the source of the recovery. Since the principle is that there can be but one satisfaction for the same injury, whether or not the released party is in fact jointly liable with the defendant against whom a judgment is rendered is not relevant. In either case, to prevent recovery by plaintiff of more than his legitimate damages, `the amount paid for the release or covenant not to sue must reduce pro tanto the injured person's judgment against another... .' As a result, it makes little difference if Carte is or is not found to be a fiduciary under T.C.A. § 29-11-102(g). The strictures of T.C.A. § 29-11-105 clearly compel the conclusion that neither Ronald Jenkins nor his associated defendants are entitled to a release by virtue of the findings of the trial court that they were joint tort-feasors. We are compelled however to take still another view of this matter. We are of the opinion the trial court erred in finding that the liability of Jenkins and Carte was confined solely to a tort claim, and not alternatively contractual in nature. While that may have been true as to Carte, the evidence introduced at trial clearly shows that Ron Jenkins, as well as Carte, was acting in a fiduciary capacity. The record confirms they were both close and trusted friends of Mr. Cowan. Jenkins himself testified that Cowan, many years before, had loaned him the money to begin his insurance business and he had serviced both Knox-Tenn's insurance needs as well as Cowan's personal insurance since that time. Unquestionably this was a contractual relationship between the plaintiff on one hand and Ronald Jenkins and the Jenkins Insurance Company, Inc. on the other, whereby Knox-Tenn Rental Company contracted with Jenkins to provide it with policies of insurance on its business operations. This suit was based primarily on the fraudulent acts of Ronald Jenkins and his associated companies, agencies and employees in overcharging for insurance premiums in excess of half a million dollars over a period of time. This can be considered as nothing less than common fraud based on the contractual relationship which existed between them. The possibility that he may have, as he testified, entered into a conspiracy with Charles Carte to consummate the fraud in no way vitiates the fundamental evil of his actions. The general rule is that if parties to a fraud are in pari delicto the law will leave them where it finds them. The principle of contribution does not apply. Where the parties to a suit have been guilty of fraud in connection with the subject matter of litigation and are in pari delicto, the court of equity, in the application of the principle of unclean hands, will leave them as it finds them, refusing its aid to either. See 37 Am.Jur.2d § 303, Fraud and Deceit, p. 400. As this Court said in New York Life Insurance Co. v. Nashville Trust Co., 292 S.W.2d 749, 754, 200 Tenn. 513 (1956), we cannot imagine how acts could be more fraudulent. Citing from Smith v. Harrison, 49 Tenn. 230 (1871), the court addressed the issue in these words: Fraud vitiates and avoids all human transactions, from the solemn judgment of a court to a private contract. It is as odious and as fatal in a court of law as in a court of equity. It is a thing indefinable by any fixed and arbitrary definition. In its multiform phases and subtle shapes, it baffles definition. It is said, indeed, that it is part of the equity doctrine of fraud not to define it, lest the craft of men should find ways of committing fraud which might evade such a definition. In its most general sense, it embraces all `acts, omissions, or concealments which involve a breach of legal and equitable duty, trust or confidence justly reposed, and are injurious to another, or by which an undue and unconscientious advantage is taken of another.' (Citations omitted). A judicial proceeding in rem, while generally binding upon all persons, is no more free from the fatal taint of fraud than a proceeding in personam, or an individual contract. When once shown to exist, it poisons alike the contract of the citizen, the treaty of the diplomat, and the solemn judgment of the court. We hold that the evidence adduced in the trial court clearly shows that Ronald Jenkins, utilizing the facilities of his insurance agency and associated corporations and companies, engaged in acts of unconscionable common fraud against the plaintiff which entitled it to recover from these defendants. The fact that he engaged in these fraudulent acts through a conspiracy with Charles Carte does not alter his liability to the plaintiff any more than does the release entered into between Carte and the plaintiff. According to the evidence they were co-conspirators involved in a scheme to defraud the plaintiff. In such a case they are protected neither by law or by equity and the courts will leave them where they find them. See Gibson Suits in Chancery, Crownover, 5th Edition, 1955, § 60, p. 74. Plaintiff was entitled to proceed against Jenkins for the violation of the fiduciary relationship which existed between them regardless of the release of any other participant who may have made the fraudulent conduct possible.