Court Opinion

ID: 9631079
Source: CourtListenerOpinion
Date Created: 2023-08-22 10:28:46.614909+00
Date Added: 2024-06-11T18:07:48.604447
License: Public Domain

WILSON, Justice, specially concurring. I must specially concur as I agree with the result reached by the majority, but for different reasons. I believe Males should prevail in this case because the settlement agreement between Males and Watson and Home is void as against the laws and public policy of New Mexico. The district court, in an attempt to find equity in this case, determined that the settlement agreement between Males and Watson and Home created a resulting trust in favor of the latter. In my view, however, the agreement between the parties is an old fashioned “Mary Carter” agreement. This type of settlement agreement has been a growing, but not widely recognized problem in civil litigation for over twenty years. While warnings on the subject proliferate, and many courts have rendered Mary Carter agreements invalid as against public policy, frequent variations of the agreements continue to flourish under creative guises. Thus, in the case before us the district court may not have recognized the Mary Carter agreement as such and may have determined instead that a resulting trust was created. However, as admitted by Watson’s counsel during oral argument before our court, this case is on all fours with a Mary Carter agreement. I agree and disapprove of its use for a number of reasons. First, such agreements skew the trial process. As explained in Entman, Mary Carter Agreements: An Assessment of Attempted Solutions, 38 U.Fla.L.Rev. 521, 574 (1986): Mary Carter agreements are used purposely to defeat any system of equitable sharing and to shift liability to the non-settling defendant through manipulation of the trial process. One effect of a Mary Carter agreement on the trial process can be to present to the jury a sham of adversity between the plaintiff and one codefendant, while these parties are actually allied for the purpose of securing a substantial judgment for the plaintiff and, in some cases, exoneration for the settling defendant. For instance, after a plaintiff settles with one defendant before trial, that defendant is present at trial with an identity of interest in the plaintiff’s case. The possible collusion between the plaintiff and the settling defendant creates an inherently unfair trial setting for the nonsettling defendant and may lead to an inequitable attribution of guilt and damages to the latter, i.e., the settling defendant may collaborate with the plaintiff in jury selection challenges, motion objections, or trial strategy regarding evidence of comparative fault and damages. This cooperative effort between the plaintiff and the settling defendant throughout trial will work to assure a substantial damage award against the non-settling defendant and will, of course, benefit the settling defendant indirectly through the Mary Carter agreement with the plaintiff. Second, a defendant’s alignment with a plaintiff’s interests in a case may violate ethical standards of professional conduct regarding conflicting interests, unjustified litigation, and candor and fairness toward a tribunal. See Rules of Professional Conduct, SCRA 1986, 16-102(D), 16-301, 16-303, 16-304, 16-305. These ethical problems inherent in Mary Carter agreements were discussed in the case of Lum v. Stinnett, 87 Nev. 402, 410, 488 P.2d 347, 352 (1971) wherein the court stated: “ ‘A lawyer may not, in order to get decided a question of law in which he is interested, foist a fictitious controversy on the court * * * [h]e may not * * * ostensibly appear for a stooge client when he really represents others.’ ” (quoting H. Drinker, Legal Ethics 75 (1953)). Legal procedures should be honest endeavors by attorneys on behalf of their clients to accomplish justice. Mary Carter agreements are the antithesis of such honesty. Third, Mary Carter agreements are champertous and violate New Mexico rules regarding the capacity of parties in a legal action. As explicated in Lum v. Stinnett, the common law offenses of maintenance and champerty are fully resurrected by the use of Mary Carter agreements. 14 C.J.S. Champerty and Maintenance Section lb (1939) defines maintenance as “officious intermeddling in a suit that in no way belongs to one, by maintaining or assisting either party with money or otherwise, to prosecute or defend it.” Champerty is “maintenance with the additional feature of an agreement for the payment of compensation or personal profit from the subject matter of the suit.” Id. § 2. Similar to the situation in Lum v. Stinnett, in the present case Watson and Home did not have a valid concern in Males’s suit against Hobbs. Instead, Watson and Home’s interest was to reap the benefits of a substantial damage award against their codefendant, Hobbs. Watson and Home’s Mary Carter agreement with Males fits squarely within the definitions of maintenance and champerty above. Moreover, Watson and Home’s conduct contravened New Mexico Rule 1-017 of the Rules of Civil Procedure for the District Courts which requires that “[ejvery action shall be prosecuted in the name of the real party in interest.” SCRA 1986, 1-017. The test for determining the real party in interest is “ ‘whether one is the owner of the right being enforced and is in a position to discharge the defendant from the liability being asserted in the suit.’ ” Edwards v. Mesch, 107 N.M. 704, 706, 763 P.2d 1169, 1171 (1988) (quoting L.R. Property Management, Inc. v. Grebe, 96 N.M. 22, 23, 627 P.2d 864, 865 (1981)). In this case, Watson and Home could not have discharged Hobbs from the liability asserted by Males; they were not the real parties in interest at the commencement of Males’s suit, nor did such interest transfer to them upon their settlement with Males. Further, counsel for Watson and Home testified that “Mr. Males ceased to have an individual right because of the settlement, and Watson and Males had a joint right.” The real party in interest actually was a coalition of Males and Watson and Home. This kind of legal posturing stymies fair play in our judicial system. Fourth, Mary Carter agreements allow a defendant to do indirectly what is prohibited by statutory and case law. In Alder v. Garcia, 324 F.2d 483 (10th Cir.1963) the court interpreted our state tort law under the Uniform Contribution Among Tortfeasors Act, NMSA 1953, Sections 24-1-11 to 24-1-18 (the Uniform Act) in a factual situation similar to the case at bar. Garcia was injured while moving a hay elevator owned by Valley Gold Dairies. The machine was manufactured by Deere & Company. Lloyd’s was the insurer of Valley Gold Dairies. Garcia initially sued Valley Gold Dairies; this controversy was settled by payment of $40,000 from Lloyd’s to Garcia, a release of Valley Gold Dairies, and an assignment by Garcia to Lloyd’s of one-half of any recovery or settlement not to exceed $80,000 that Garcia might obtain in a future action from Deere & Company. Garcia subsequently filed suit against Deere & Company. When Deere & Company learned of Garcia’s assignment with Lloyd’s in the original suit, it settled with Garcia by payment to Garcia of $40,000. Lloyd’s then discovered this settlement between Garcia and Deere & Company and brought suit against both of them to enforce its initial settlement with Garcia. The Tenth Circuit opinion quoted Section 24-1-15 of the former Uniform Act above (identical to the current Section 41-3-5 of the Uniform Contribution Among Tortfeasors Act, NMSA 1978, Sections 41-3-1 to 41-3-8 (Repl.Pamp.1989)) and Subsection 24-1-12(3) (identical to the current Subsection 41-3~2(C)). The court went on to state: “The purpose of [the Uniform Contribution Among Tortfeasors Act, NMSA 1953, §§ 24-1-11 to 24-1-18] is to provide for a proportionate allocation of the burden among tort-feasors who are liable.” Alder, 324 F.2d at 485. Given the strict statutory prohibition against contribution from a settling tortfeasor and the enunciated policy underlying the Uniform Act’s provisions, the Tenth Circuit held that payment to Lloyd’s from Deere & Company, indirectly through the settlement assignment with Garcia, would allow Lloyd’s to benefit “in a manner contrary to the public policy of the state as expressed in the New Mexico Contribution Among Joint Tortfeasors Act.” Id. at 485. Thus, the court held the assignment by Garcia to Lloyd’s void and unenforceable. Watson and Home argue on appeal that the Alder case is no longer meaningful as precedent as it was decided at a time when the statutory right to contribution and indemnity between joint tortfeasors existed. While it is true that the law of torts has been modified since 1963 with the creation of pure comparative negligence, the public policy behind the Uniform Act stands undiminished: to apportion the burden among those liable according to the proportionate fault of each. See Alder v. Garcia, 324 F.2d 483 (10th Cir.1963); Scott v. Rizzo, 96 N.M. 682, 634 P.2d 1234 (1981). Actually, the present law of pure comparative negligence encourages Mary Carter devices. The plaintiff entering into such an agreement is, as always, guaranteed some recovery. The plaintiff also secures assistance from the settling defendant, during the trial, in placing maximum blame on the nonsettling defendant, minimum blame on the plaintiff, and a high value on the plaintiff’s injuries. In return, the settling defendant limits his liability to a specified amount, or possibly eliminates all liability if there is a verdict against the nonsettling defendant of sufficient size according to the terms of the Mary Carter agreement. The absence of joint and several liability of tortfeasors, therefore, serves only to enhance the attractiveness of Mary Carter agreements. Entman, Mary Carter Agreements: An Assessment of Attempted Solutions, 38 U.Fla.L.Rev. 521, 558 (1986). The federal court in Alder was unwilling to allow a Mary Carter agreement to circumvent New Mexico’s statutory law and its corresponding public policy. For the same reason, I am unwilling today to condone the instant settlement agreement between Males and Watson and Home. Watson and Home admit that NMSA 1978, Subsection 41-3-2(C) (Repl.Pamp. 1989) (effective since the time of Males’s settlement agreement with Watson and Home) disallows contribution to a settling defendant from another joint tortfeasor whose liability to the plaintiff is not extinguished by the settlement. Watson and Home claim, however, that NMSA 1978, Subsection 41-3A-1(F) (Repl.Pamp.1989) contravenes other sections of the statute by granting parties the right to contract for indemnity or contribution. On appeal Watson and Home argue that they are not claiming to be entitled to contribution from Hobbs; rather, they are seeking recovery through their contract with Males for indemnity pursuant to Subsection (F) of 41-3A-1. This argument is defective because the alleged contract for indemnity was contingent upon Males recovering against Hobbs. While Watson and Home had a right to contract with Males for a settlement of the issues between them, they may not recover indirectly through Males that which they cannot recover directly from Hobbs. Subsection 41-3A-1(F) does not give Watson and Home the right to do circuitously what is prohibited by statutory and case law in New Mexico. Watson and Home urge that the finding of a resulting trust was within the equitable powers of the district court. I note that equity is “a synonym of right and justice.” Ortiz v. Lane, 92 N.M. 513, 516, 590 P.2d 1168, 1171 (Ct.App.1979). It requires that “ ‘one should do unto others as, in equity and good conscience, he would have them do unto him, if their positions were reversed, [citation omitted] Its compulsion is one of fair play.’ ” Id. at 516, 590 P.2d at 1171 (quoting McNeely v. Walters, 211 N.C. 112, 113, 189 S.E. 114, 115 (1937)). “Equity has no relief for a party who, in the practice of one fraud, has become the victim of another.” Menard v. Menard, 295 Mich. 80, 84, 294 N.W. 106, 107 (1940). In the case before us, the district court attempted to find equity by determining that a resulting trust had been created in favor of Watson and Home. While I also acknowledge the inequitable results of Males’s settlement agreement with Hobbs, I cannot overlook the Mary Carter agreement made by Watson and Home and its inherent inequity towards Hobbs. As Justice Ransom pointed out in oral argument when he heard Watson and Home’s complaint of foul play: “But now it’s the other way around \i.e., now Watson and Home are suffering from an ex parte settlement by Males], and it seems as though what’s sauce for the goose is sauce for the gander.” As I find this philosophy to be the essence of Mary Carter agreements and because I believe the use of such agreements undermine a judicial system developed to fairly encourage equity and truth, I contend they are void as against the laws and public policy of New Mexico. Accordingly, I think their use should be prohibited in this state.