Opinion ID: 1981374
Heading Depth: 1
Heading Rank: 4

Heading: the release contravenes south dakota public policy and the uniform contribution among joint tort-feasors act

Text: Rodenburg was insured by State Farm for the injuries complained of to the extent of $100,000 per claim, for a total of $200,000 per accident. The release given by Schick to State Farm provides $85,000 in immediate payments to Schick, with a guarantee of an additional $115,000 in payments to Schick if he will sue Chrysler and Ford. As such, State Farm has guaranteed Schick a total recovery of at least $200,000, [2] the full extent of its insurance limits. The release in question is a type of guaranteed verdict agreement. Guaranteed verdict agreements generally fall into three categories: (1) Mary Carter [3] agreements; (2) Gallagher [4] agreements; and (3) loan receipt agreements. The latter type has been devised as a form of guaranteed verdict agreement in cases involving joint tort-feasors. They are distinguishable from both Mary Carter and Gallagher agreements because the settling defendant in a loan receipt agreement promises to loan the plaintiff an amount of money before trial to be repaid out of any ultimate recovery the plaintiff makes against the nonsettling defendant. The first nine paragraphs of this release provide: (1) Upon execution of the agreement, Schick will be paid $85,000 as a loan which is to be repaid to State Farm if Schick effects a recovery in excess of $200,000 in the anticipated lawsuit against Chrysler and Ford. (2) If there is no recovery against Chrysler or Ford, or if the recovery is less than $200,000, the loan payment need not be repaid. (3) If there is no recovery against Chrysler or Ford, State Farm will pay Schick an additional sum of $115,000. (4) If there is a recovery against Chrysler or Ford but it is in a gross amount of less than $200,000, State Farm will make an additional payment to Schick bringing his gross recovery up to $200,000. Paragraph 10 of the release provides that if Willis Rodenburg and Chrysler or Ford are determined to be joint tort-feasors, then the first nine paragraphs do not apply. Paragraph 10c. provides that the nonsettling parties, (Chrysler and/or Ford), are entitled to a reduction of Schick's claim in the greater of the amount of the consideration State Farm paid for the release, i.e., $200,000, or the settling party's (Willis Rodenburg's) pro rata share of the total liability to Schick, whichever is greater. Paragraph 10e. provides for the application of a Pierringer [5] agreement. Under the Pierringer agreement, Schick would have no repayment obligation, State Farm would pay the future contingent payments, and Rodenburg would be released in accordance with the guidelines set forth in Frey v. Snelgrove, 269 N.W.2d 918 (Minn.1978), and paragraph 10 of the agreement. Finally, paragraph 12 provides that Illinois law governs the interpretation of the release agreement. South Dakota has adopted the provisions of the Uniform Contribution Among Joint Tort-Feasors Act (UCAJTA), in SDCL §§ 15-8-11 to 15-8-22, inclusive. SDCL 15-8-17 provides: A release by the injured person of one joint tort-feasor, whether before or after judgment, does not discharge the other tort-feasors unless the release so provides; but reduces the claim against the other tort-feasors in the amount of the consideration paid for the release, or in any amount or proportion by which the release provides that the total claim shall be reduced, if greater than the consideration paid. In Degen v. Bayman, 90 S.D. 400, 408-409, 241 N.W.2d 703, 707-708 (1976), (Degen II), we held that the amount received in settlement from a party should be deducted from the judgment even though the settling party has never been judicially determined to be a joint tort-feasor. In Degen II, we adopted the view stated by the Supreme Court of North Dakota in Levi v. Montgomery, [6] 120 N.W.2d 383 (N.D.1963), to the effect that the court will consider the issues as framed by the pleadings in determining the question of whether a party is a joint tort-feasor. Id. In Duncan v. Pennington County H.A., 283 N.W.2d 546, 550 (S.D.1979), we affirmed the Degen II ruling and stated: This treatment of the settlement amount paid by a defendant later found not liable to the plaintiff is the stance taken by a majority of courts. `The prevailing view, with some authority to the contrary, is that [the settlement amount] must be so credited [against the judgment] even where the person released was not in fact a joint tort-feasor, or was not liable to the plaintiff at all.' (citations omitted). Id. at 551. Similarly, in Carr v. Korkow, 610 F.Supp. 25 (D.S.D.1985), vacated on other grounds, 788 F.2d 485 (8th Cir.1986) (requiring pro tanto, not pro rata reduction, where there was no adjudication of relative fault of all defendants), the court stated that if a plaintiff sues defendants as joint tort-feasors and settles with them, they are joint tort-feasors. Id. at 28. Thus, for purposes of applying the UCAJTA, a settling party can become a joint tort-feasor even though he has never been judicially determined to be liable or at fault. Therefore, the Carr holding provides that the settling parties, without additional findings, are joint tort-feasors for all purposes including the application of SDCL 15-8-17. Id. Implicit in the pleadings and expressly stated in paragraph 10 of the Schick/State Farm release, is the allegation that Rodenburg (the settling party) is a joint tort-feasor with Chrysler and Ford (the nonsettling parties). Paragraph 5 provides that the agreement does not release the other alleged tort-feasors, but rather reserves Schick's right to sue them. As such, SDCL 15-8-17 is applicable. The Degen, Duncan, and Carr cases assume that once the allegation is made that one or more parties are or may be joint tort-feasors, and settlement is made with one of them, then any ultimate verdict against the nonsettling parties must be reduced by the amount of the settlement, regardless of whether the settler was liable to the plaintiff or not. Therefore, in reliance on SDCL 15-8-17 and the above authorities, we find that Chrysler and Ford as nonsettling parties are entitled to credit for the greater of the settlement State Farm made on behalf of Rodenburg, or Rodenburg's percentage of liability as ultimately determined, regardless of whether or not Rodenburg is adjudicated a joint tort-feasor. As mentioned previously, the law of South Dakota governs the interpretation of this release. Although the State of Illinois has approved the use of both Mary Carter and loan receipt agreements, [7] this court has yet to expressly rule on what effect, if any, these types of agreements have upon the rights of nonsettling defendants. [8] However, in Degen v. Bayman, 86 S.D. 598, 200 N.W.2d 134 (1972) (Degen I), we considered a guaranteed verdict agreement in which the plaintiff gave the settling defendant a loan receipt agreement which provided that, (1) the settling party would pay the plaintiff $65,000, and (2) the settling party could recover his $65,000 payment by indemnification from the nonsettling defendant. Id. 86 S.D. at 605-606, 200 N.W.2d at 138. We wrote: To accomplish this, it was necessary to persuade the jury that plaintiff was entitled to recover at least $65,000 damages and that [the nonsettling defendant] was primarily liable. Plaintiff and [the settling defendant] thus shared a mutual interest adverse to [the nonsettling defendant]. This, of course, opened attractive opportunities to cross-examine friendly witnesses. Id. In Duncan, supra, we quoted with approval from the New Jersey Supreme Court for the rule that there should be but one satisfaction for a wrong because of the strong policy against unjust enrichment. 283 N.W.2d at 552, quoting Theobald v. Angelos, 44 N.J. 228, 208 A.2d 129, 135 (1965). Therefore, paragraph 10e., of the release that provides for the application of a Pierringer agreement which in turn permits a double recovery under the laws of Wisconsin and Minnesota, contravenes South Dakota public policy.