GENERAL MOTORS CORPORATION, Petitioner, v. Curtis Lee SIMMONS et al., Respondents.
No. B-6604.
Supreme Court of Texas.
Nov. 9, 1977.
Rehearing Denied Dec. 14, 1977.
558 S.W.2d 855
Jamail & Gano, Joseph D. Jamail Jr., S. Gus Kolius and Robert F. Stein, Baker & Botts, Finis E. Cowan and Richard Lee Josephson, Houston, for respondents.
POPE, Justice.
Curtis Lee Simmons sued General Motors alleging actions in strict liability and negligence. He pleaded that the defective glass in his vehicle exploded causing permanent damage to his eyes. Simmons also joined Feld Truck Leasing Corporation and its employee driver, Hestle Andrew Johnston, alleging that Johnston was negligent in driving the Feld Truck into Simmons’ car. Feld and Johnston sought indemnity against General Motors and General Motors prayed for contribution from Feld and Johnston. Prior to the trial, plaintiff Simmons made a settlement with Feld and Johnston, but they remained in the case as named defendants. The trial court rendered judgment on a jury verdict against General Motors for 1,000,000 dollars. The court of civil appeals reformed the judgment by granting General Motors contribution from Johnston and Feld and rendering judgment for the plaintiff for half a million dollars. 545 S.W.2d 502. Two primary questions are presented. General Motors seeks a reversal because the trial court refused to admit into evidence the terms of the “Mary Carter” settlement agreement that Simmons made with Feld and Johnston before trial. Simmons on the other hand says that Feld and Johnston should have been fully indemnified and that he should have a judgment for the entire million dollars against General Motors. We reverse the judgment of the courts below and remand the cause for another trial.
The “Mary Carter” Agreement
Hestle Andrew Johnston, Feld‘s employee, failed to stop at a traffic signal and
Prior to the trial, Simmons entered into a covenant not to sue Feld and Johnston and an indemnity agreement with those defendants. The agreement recited that Feld and Johnston had paid Simmons a sum of money, the amount of which this record does not disclose. Simmons agreed that he would not sue Feld and Johnston, and he agreed also to pay Feld fifty percent of each dollar Simmons recovered against General Motors until Feld received 200,000 dollars. At trial, General Motors tried to show during opening statement, on cross-examination and in argument the nature of the agreement between Simmons and Feld and Johnston, but the trial court refused to permit the disclosure of the agreement.
The traditional Texas rule is that settlement agreements between the plaintiff and a co-defendant should be excluded from the jury. A contrary rule would frustrate the policy favoring the settlement of lawsuits. McGuire v. Commercial Union Insurance Co., 431 S.W.2d 347 (Tex.1968). The plaintiff Simmons and also the settling defendants, Feld and Johnston, strongly insist that there was no harm in excluding the evidence or explanation about the agreement since it was made clear to General Motors, the court and the jury that Feld and Johnston were not adverse to Simmons and were adverse to General Motors. In fact the attorneys for Simmons, Feld and Johnston, and General Motors each explained to the jury that Simmons, Feld and Johnston were allies against General Motors. From this, Simmons says that there was no misunderstanding and no harm to General Motors.
The judgments of the courts below must be reversed by reason of the exclusion of General Motors’ efforts to disclose the real nature of the settlement agreement. It was not an ordinary settlement agreement. By its terms, Feld acquired a direct financial interest in Simmons’ lawsuit. The financial interest of parties and witnesses in the success of a party is a proper subject of disclosure by direct evidence or cross-examination. While the alignment of the adversaries was disclosed, the jury did not know the extent of Feld‘s interest or that it was a financial interest which depended upon the amount of the judgment for Simmons. Feld‘s direct and substantial monetary interest in the success of Simmons’ action against General Motors comes from this part of the contractual agreement Feld had with Simmons:
3. In the event the parties to this agreement are successful in their prosecution of their causes of action against General Motors and a judgment is rendered against General Motors for money damages, and thereafter paid, Feld Truck Leasing Corporation will be entitled to and will receive from the proceeds of such judgment fifty (50%) percent of each dollar recovered, up to $200,000.00. In no event shall Feld Truck Leasing Corporation be entitled to recover under this agreement more than $200,000.00. All sums not attributable to Feld Truck Leasing Corporation under this agreement shall be payable to and the property of plaintiff, Curtis Lee Simmons and his attorneys.
4. Both Curtis Lee Simmons and Feld Truck Leasing Corporation and Hestle Andrew Johnston, Jr. shall bear their own attorneys fees and litigation expense and neither party shall have any financial responsibility for the attorneys fees or litigation expense incurred by the other party.
5. No settlement of the causes of action against General Motors will be effected without the joint consent of all parties to this agreement.
Agreements with a settling defendant who remains a party at the trial and retains
The Illinois Supreme Court wrote in Reese v. Chicago, B. & Q. R.R. Co., 55 Ill.2d 356, 303 N.E.2d 382, 387 (1973), that “the use of loan agreements1 tends to undermine the adversary nature and integrity of the proceedings against the remaining defendant.” See also Kuhns v. Fenton, 288 So.2d 253 (Fla.1973); Ward v. Ochoa, 284 So.2d 387 (Fla.1973); Imperial Elevator Co. v. Cohen, 311 So.2d 732 (Fla.App.1975); General Portland Land Development Co. v. Stevens, 291 So.2d 250 (Fla.App.1974); Gatto v. Walgreen Drug Co., 61 Ill.2d 513, 337 N.E.2d 23 (1975); Michael, “Mary Carter” Agreements in Illinois, 64 Ill.B.J. 514 (1976).
In Ward v. Ochoa, supra, the Florida Supreme Court said:
Secrecy is the essence of such an arrangement, because the court or jury as trier of the facts, if apprised of this, would likely weigh differently the testimony and conduct of the signing defendant as related to the non-signing defendants. By painting a gruesome testimonial picture of the other defendant‘s misconduct or, in some cases, by admissions against himself and the other defendants, he could diminish or eliminate his own liability by use of the secret “Mary Carter Agreement.”
By analogy, there is another strong policy in Texas that one may not develop testimony that a party‘s loss was covered by insurance since that fact is not considered material to the issue of liability. Texas Co. v. Betterton, 126 Tex. 359, 88 S.W.2d 1039 (1936); Page v. Thomas, 123 Tex. 368, 71 S.W.2d 234 (1934). When, however, as in another case, an agent of an insurance company that was the real party at interest took the witness stand under the semblance of being a disinterested witness to testify against the opposing party, his connection with the insurer was not exempt from cross-examination. Aguilera v. Reynolds Well Service, 234 S.W.2d 282 (Tex.Civ.App. 1950, writ ref‘d). The court in Aguilera quoted the general rule that interest, bias, or motive on the part of a witness may be elicited on cross-examination even though it incidentally discloses that the defendant is protected by insurance.
Feld stood to recover one out of every two dollars from the first 400,000 dollars of a judgment against General Mo
Simmons’ (Plaintiff) Claim for Indemnity
Plaintiff Simmons has appealed from that part of the judgment of the court of civil appeals which denied indemnification in favor of Feld and Johnston against General Motors. That court reduced the judgment by one-half because Feld and Johnston had settled with the plaintiff. See Palestine Contractors, Inc. v. Perkins, 386 S.W.2d 764 (Tex.1964).
The jury found that the glass in the door of Simmons’ car was defective and that the defective product was a producing cause and also the sole producing cause of Simmons’ eye injuries. The jury also found that General Motors was negligent, and that its negligence was the sole proximate cause of Simmons’ injuries. Upon those findings Simmons insists that the trial court correctly denied General Motors’ claim for contribution.
We agree with the holding of the court of civil appeals that, as a matter of law, the breaking defective glass was not the sole cause of the injuries. That court detailed the basis for its holding. Co-defendants Feld and Johnston filed an amended pleading, after making their settlement with Simmons. They confessed their liability to Simmons for damages. They stipulated that the manner in which Johnston drove his truck into the side of the Simmons’ vehicle was negligence. In view of those pleadings and admissions, as a matter of law, General Motors was a joint tortfeasor, but its negligence was not the sole cause of Simmons’ injuries. C. H. Leavell & Co. v. Vilbig Bros., Inc., 160 Tex. 600, 335 S.W.2d 211, 213 (1960).
Indemnity has been defined as “the payment of all of plaintiff‘s damage by one tortfeasor to another tortfeasor who has paid it to the plaintiff.” Hodges, Contribution and Indemnity Among Tortfeasors, 26 Texas L.Rev. 150, 151 (1947). Contribution is “the payment by each tortfeasor of his proportionate share of the plaintiff‘s damages to any other tortfeasor who has paid more than his proportionate part.” Hodges, supra.
In Strakos v. Gehring, 360 S.W.2d 787 (Tex.1962), this court recognized that the method for determining whether one tortfeasor is entitled to indemnification from another tortfeasor may depend upon the nature of the case. Wheeler v. Glazer, 137 Tex. 341, 153 S.W.2d 449 (1941), was decided upon the basis of the different qualities of negligence, that is, a very high degree of care on the part of one tortfeasor and ordinary care by the other. Renfro Drug Co. v. Lewis, 149 Tex. 507, 235 S.W.2d 609 (1951), turned upon the breach of a duty which existed between the two tortfeasors. City of San Antonio v. Smith, 94 Tex. 266, 59 S.W. 1109 (1900), accorded indemnity in favor of the tortfeasor who was only vicariously liable by operation of the law. Then in Austin Road Co. v. Pope, 147 Tex. 430, 216 S.W.2d 563 (1949), this court observed that in most of the indemnity cases, one tortfeasor had breached a duty which he owed to his co-tortfeasor and to the injured plaintiff. Although both tortfeasors are liable to the injured plaintiff, the court said, as between themselves the blameless should be allowed indemnity. The court then stated this rule: “In order to determine whether the loss should be shifted from one tortfeasor to another the proper approach is to consider the one seeking indemnity as though he were a plaintiff suing the other in tort, and then determine whether such a one as plaintiff, though guilty of a wrong against a third person, is nevertheless entitled to recover against his co-tortfeasor.” The several approaches to the decision about indemnification are helpful, but it is perhaps not possible to state a single all-in-
When we view Feld as the plaintiff in an imagined suit against General Motors, we have the Feld vehicle, driven by Johnston, running into the side of the Simmons’ car, causing the defective General Motors’ glass to scatter into slivers inside the Simmons’ car. Feld‘s damage against General Motors would have to be the liability he incurred by reason of Simmons’ injuries. Feld‘s action would not be for any physical damages Feld, Johnston or their property sustained; it would be only for the liability to Simmons that they incurred. Cf. Nobility Homes v. Shivers, 557 S.W.2d 77 (Tex. 1977).
We ground our decision upon Section 402A of the Restatement Second of Torts. This court has pressed the manufacturer‘s strict non-privity liability to the outer limits of Section 402A. We have held that the manufacturer owes a duty to the user or consumer or to his property. Franklin Serum Co. v. Hoover & Son, 418 S.W.2d 482 (Tex.1967); Shamrock Fuel & Oil Sales Co. v. Tunks, 416 S.W.2d 779 (Tex.1967). We then expanded that duty to include as a “user or consumer or . . . his property” a third person who also suffered physical injury to his person or property. Darryl v. Ford Motor Company, 440 S.W.2d 630 (Tex.1969).
Section 402A and our decisions, however, have limited the seller‘s liability to the terms of the Restatement Rule which is “for physical harm thereby caused . . .” Feld and Johnston make no claim that they suffered physical harm. To extend the duty to include liability to others would mean that in all cases the seller or manufacturer is subjected to indemnity without regard to the independent torts of others. See Chamberlain v. Carborundum Co., 485 F.2d 31, 34 (3d Cir. 1973); Walters v. Hiab Hydraulics, Inc., 356 F.Supp. 1000 (N.D.Pa. 1973); Automobile Club Ins. Co. v. Toyota Motor Sales, 166 Mont. 221, 531 P.2d 1337 (1975); Northwestern Mutual Ins. Co. v. Stromme, 4 Wash.App. 85, 479 P.2d 554 (1971).
Simmons relies upon Heil Co. v. Grant, 534 S.W.2d 916 (Tex.Civ.App.1976, writ ref‘d n. r. e.), for his insistence that Feld and Johnston should be indemnified by General Motors. In Grant, the plaintiff‘s decedent, James Grant, was repairing a dump truck owned by Vernon Grant. The bed of the truck had been raised by means of the hoist mechanism. While James Grant was beneath the bed, a cable was tripped, causing the bed to fall on and kill him. James Grant‘s wife and children sued Heil Company, the manufacturer, in strict liability and Heil impleaded Vernon Grant, the decedent‘s brother who owned the truck and was assisting James in making repairs. Heil urged that Vernon was negligent in permitting his brother to work beneath the raised bed and claimed contribution and indemnity. The court of civil appeals held that even if the brother, Vernon, was negligent toward the deceased, Vernon was entitled to indemnity from Heil, the manufacturer, because “defective design constituted a breach of the Heil Company‘s duty to both Vernon Grant and [the] Decedent.” Our consideration of Heil Co. v. Grant, which we refused, no reversible error, did not include a review of the indemnity or contribution questions. The only points preserved for review concerned the exclusion of evidence and the defense of involuntary assumption of risk. Vernon Grant, to whom the court of civil appeals granted indemnity against Heil Company, was the owner, user and consumer of the truck. That situation is more analogous to the case of an innocent retailer who distributes the manufacturer‘s defective product. Though strictly liable to an injured plaintiff, the retailer has been granted indemnity against the manufacturer when he is ignorant of a latent defect not reasonably discoverable. Roberts v. Richland Mfg. Co., 260 F.Supp. 274 (W.D.Mich.1966); Hughes Provision Co. v. La Mear Poultry & Egg Co., 242 S.W.2d 285 (Mo.App.1951); 3 L. Frumer and M. Friedman, Products Liability § 44.02[3] (1970 ed.). This is another group of cases in which indemnity is approached from a different point of view. In such cases where negligence and a product defect jointly cause third party injury, whether the negligent tortfeasor knew or should have known about the defect, Essex Wire Corp. v. Salt River Project Agricultural Improvement & Power Dist., 9 Ariz.App. 295, 451 P.2d 653 (1969); Allied Mutual Casualty Corp. v. General Motors Corp., 279 F.2d 455 (10th Cir. 1960), and whether some harm would independently result from the negligence, Essex Wire Corp. v. Salt River Project Agricultural Improvement & Power Dist., supra; Schuster v. Steedley, 406 S.W.2d 387 (Ky.1966); Kenyon v. F. M. C. Corp., 286 Minn. 283, 176 N.W.2d 69 (1970), are factors influencing the award of indemnity. As stated above, indemnity was not the question presented to this court in Heil but, assuming the fact that Vernon Grant did not know about the defect, the case was correctly decided.
We refused the application for writ of error, no reversible error, in South Austin Drive-In Theatre v. Thomison, 421 S.W.2d 933 (Tex.Civ.App.1967, writ ref‘d n. r. e.). The case was factually similar to Heil, but it held the manufacturer was entitled to contribution. The injured plaintiff sued the manufacturer of the riding-type power mower for negligent design and the employer of the grounds keeper who negligently drove the power mower. The employer cross-acted for indemnity, arguing that the manufacturer had breached a duty to the user to supply a non-defective product and that the duty owed by the manufacturer to the injured boy was of a higher order than ordinary negligence. The Thomison court held that the “general duty” breached by the manufacturer to the user was not the type contemplated by Austin Road Co. v. Pope, supra, and that the higher level of duty analysis did not apply. Accordingly, the employer was denied indemnity against the manufacturer. While South Austin Drive-In Theatre v. Thomison was decided on negligence grounds, we see no reason that a manufacturer found strictly liable under the lesser standards of proof of Section 402A should be more culpable than the negligent manufacturer in Thomison.
We approve the judgment of the court of civil appeals below which denied indemnification against General Motors.
There is still the problem of contribution. This case arose on January 3, 1972, prior to the effective date of
This case is relatively simple in our application of
The judgments of the courts below are reversed, and the cause is remanded for another trial.
Dissenting opinion by SAM D. JOHNSON, J., joined by MCGEE, J.
SAM D. JOHNSON, Justice, dissenting.
This writer, in dissenting, would adopt the opinion of the court of civil appeals. 545 S.W.2d 502.
MCGEE, J., joins in this dissent.