ANTHONY GENE YATES v. NEW SOUTH PIZZA, LTD., D/B/A DOMINO‘S PIZZA
No. 176PA91
IN THE SUPREME COURT OF NORTH CAROLINA
Filed 31 January 1992
330 N.C. 790 (1992)
Affirmed in part, reversed in part, and remanded.
Justice WEBB dissents.
No. 176PA91
(Filed 31 January 1992)
Torts § 7.6 (NCI3d) - covenant not to sue employee - employer not released under respondeat superior
For purposes of section 1B-4 of the Uniform Contribution Among Tortfeasors Act, a “tortfeasor” is one who is liable in tort and thus includes a vicariously liable employer. Therefore, an injured plaintiff was entitled to proceed against an employer on the theory of respondeat superior after having executed a covenant not to sue the employee or the employee‘s insurer.
Am Jur 2d, Contribution §§ 41, 68; Master and Servant §§ 408, 409; Release § 38; Torts § 69.
Release of (or covenant not to sue) master or principal as affecting liability of servant or agent to tort, or vice versa. 92 ALR2d 533.
Justice MEYER dissenting.
Chief Justice EXUM and Justice WHICHARD join in this dissenting opinion.
ON discretionary review pursuant to
Womble, Carlyle, Sandridge & Rice, by Allan R. Gitter, Gary W. Jackson, and James R. Morgan, Jr., for defendant-appellee.
Ferguson, Stein, Watt, Wallas, Adkins & Gresham, P.A., by Adam Stein, for North Carolina Academy of Trial Lawyers; Grover C. McCain, Jr., and Bree Andrew, amici curiae.
FRYE, Justice.
On 5 September 1985, plaintiff was a passenger in an automobile owned by Franklin Hobert Simmons and operated by Lisa Dawn Simmons. Donald Lee Powell, a delivery person for defendant, New South Pizza, Ltd., d/b/a Domino‘s Pizza, ran a stop sign and collided with the Simmons car. As a result of the collision, plaintiff suffered injuries to his head and right wrist, and permanent damage to his left hip. On 26 August 1987, plaintiff executed a covenant not to sue Powell or his insurer in exchange for $25,000 consideration, the amount of coverage under Powell‘s insurance policy. The covenant expressly reserved all rights to proceed against defendant, Powell‘s employer, and reads in relevant part:
It is understood that [plaintiff] contends there are joint tortfeasors in this matter; to wit, Donald Lee Powell and Domino‘s Pizza, Inc., said joint tortfeasor relationship arising out of the servant-master relationships and [plaintiff] expressly reserves and maintains his right to pursue any and all claims against Domino‘s Pizza, Inc. arising out of the incident and that [plaintiff] agrees only not to sue Donald Lee Powell and INA/Action, his vehicular insurance carrier.
The issue before this Court is whether an injured plaintiff is entitled to proceed against an employer on the theory of respondeat superior after having executed, for valuable consideration, a covenant not to sue the negligent employee or his insurer. We hold that such a plaintiff may proceed.
At trial, the employer (defendant) admitted that the employee (Powell) was acting within the scope of his employment when the collision occurred but denied that Powell was negligent in causing the collision. Defendant also moved for summary judgment, arguing that the settlement between plaintiff and Powell operated to release defendant from liability as a matter of law. The trial court granted the motion. The Court of Appeals affirmed the trial court, con-
Plaintiff contends that the Court of Appeals erred in holding that the Act does not apply to the present case. Plaintiff argues that the plain language of the Act includes employer-employee liability, and thus a covenant not to sue the employee does not release the employer pursuant to section 1B-4 of the Act. Defendant contends that the Act is irrelevant to the disposition of this case because, inter alia, an employer is not a tort-feasor within the meaning of the Act.
We agree with plaintiff that section 1B-4 of the Act controls the disposition of this case. Section 1B-4 of the Act provides:
When a release or a covenant not to sue or not to enforce judgment is given in good faith to one 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.
We recognize that at common law this Court held that the release of or covenant not to sue the servant also served to release the master. Smith v. R.R., 151 N.C. 479, 66 S.E. 435 (1909). Since the decision in Smith, our legislature has adopted the Uniform Contribution Among Tort-feasors Act. 1967 N.C. Sess. Laws. ch. 847, § 1. The question becomes, therefore, whether the Act changes this holding in Smith. Defendant argues that the Act is not applicable to the present situation because a vicariously liable master is not a wrongdoer and therefore not a “tort-feasor.” Although defendant‘s argument finds support in our case law prior to the adoption of the Uniform Act, see Smith, 151 N.C. at 481-82, 66 S.E. at 436, we believe the Act broadens the definition of “tort-
An analysis of the 1939 Act and its 1955 revision supports our conclusion. The 1939 Act defined “joint tort-feasors” broadly:
For the purposes of this chapter[,] the term ‘joint tort-feasors’ means two or more persons jointly, or severally liable in tort for the same injury to person or property, whether or not judgment has been recovered against all or some of them.
Raparot, 101 R.I. at 567, 225 A.2d at 667 (quoting section 1 of the 1939 version of the Act) (our emphasis). This language clearly includes master-servant vicarious liability. See id. (“That [definition] is plain and unambiguous. It declares its own sensible meaning and leaves no room for judicial construction.“). Although this definition was omitted from the 1955 Act,2 we believe the 1955 Act is consistent with this broad definition. For example, section 1B-1(a) provides as follows:
Except as otherwise provided in this Article, where two or more persons become jointly or severally liable in tort for the same injury to person or property or for the same wrongful death, there is a right of contribution among them even though judgment has not been recovered against any or all of them.
Defendant also suggests that section 1B-1(f) of the Act excludes indemnity actions. We disagree. Section 1B-1(f) reads:
This Article does not impair any right of indemnity under existing law. Where one tort-feasor is entitled to indemnity from another, the right of the indemnity obligee is for indemnity and not contribution, and the indemnity obligor is not entitled to contribution from the obligee for any portion of his indemnity obligation.
In its opinion, the Court of Appeals noted that because a right of indemnity remains against a servant who has settled with the injured party, the servant effectively gains nothing. Yates, 102 N.C. App. at 71, 401 S.E.2d at 383. Thus, the underlying policy of the statute to encourage settlements is undermined. Id. We do not agree. Although the Court of Appeals is correct that the servant remains liable to the master, in practice, the master may elect not to seek indemnification. This is especially true in cases such as this one where the servant‘s settlement was for the entire amount of his insurance coverage. Given that the master may choose not to seek indemnity from his servant, who in many cases may be judgment proof, the servant‘s settlement with the injured party fulfills the underlying policy of the Act.
Reversed and remanded.
Justice MEYER dissenting.
I dissent from the majority opinion for the following reasons.
The majority errs when it concludes that
As an initial matter, the majority misconstrues the plain language and intent of
Such should be the case with respect to the term “tort-feasor” as used in
[T]he right to contribution does not exist unless two or more parties are joint tortfeasors. Two or more parties are joint tortfeasors when their negligent or wrongful acts are united in time or circumstance such that the two acts constitute one transaction or when two separate acts concur in point of time and place to cause a single injury.
State Farm Mut. Ins. Co. v. Holland, 324 N.C. 466, 470, 380 S.E.2d 100, 102-03 (1989) (Frye, J.) (citations omitted) (emphasis added); see also Robert E. Lee, North Carolina Law of Agency and Partnership at 32 (6th ed. 1977) (“a joint tort is not actually involved when a master is held liable on the doctrine of respondeat superior; the master has not participated“).
Cases from other jurisdictions to the same effect are numerous. In McCall v. Roper, 685 P.2d 230 (Colo. Ct. App. 1984), the Colorado Court of Appeals said:
In Hamm v. Thompson, 143 Colo. 298, 353 P.2d 73 (1960), the court stated:
“[T]he common law rule prohibiting contribution between joint tortfeasors does not apply to a master whose liability for the torts of his servant is based on respondeat superior, for even though the liability is joint and the two may be joined in one action, they are not joint tortfeasors.”
In applying the principles of Hamm v. Thompson here, we note that [defendant‘s] liability for McCall‘s injury was vicarious, based solely upon the family car doctrine. As such, this situation is no different than a respondeat superior situation in which the liability of the servant is imputed to the master. Therefore, although jointly and severally liable for McCall‘s injury, [defendant] and [defendant‘s son] are not joint tortfeasors.
“[A] joint tort is not actually involved when a master or a principal is held liable respectively for his servant‘s or agent‘s wrong . . . . The master or principal has not participated in the planning or the consummation of the tort; his liability is based instead on the doctrine of respondeat superior, which is grounded in the law of agency.”
In Bristow v. Griffitts Constr. Co., 140 Ill. App. 3d 191, 488 N.E.2d 332 (1986), the Illinois Court of Appeals said:
The resolution of this case depends upon the meaning of the word “tortfeasors” . . . . The plaintiffs maintain the word is synonymous with the phrase “one or more persons liable in tort arising out of the same injury.” A tortfeasor has also been defined as a “wrong-doer; one who commits or is guilty of a tort.” Under the doctrine of vicarious liability, the employer is held liable as a matter of policy, but he is not a wrongdoer. The liability of the master and servant for the acts of the servant is deemed that of one tortfeasor and is a consolidated or unified one. The master, therefore, would not be “any of the other tortfeasors.”
. . . .
. . . We, therefore, find a party whose liability is solely derivative is not “any of the other tortfeasors” . . . . [T]he covenant not to sue the employee discharged the employer‘s vicarious liability.
Id. at 193-94, 198-99, 488 N.E.2d at 334-35, 338 (citations omitted).
In Elias v. Unisys Corp., 410 Mass. 479, 573 N.E.2d 946 (1991), the Massachusetts Supreme Judicial Court said:
The [contribution among tortfeasors] statute relied on by the plaintiffs applies only to joint tortfeasors, those “jointly liable in tort” for an injury. We have defined joint tortfeasors as “two or more wrong-doers [who] negligently contribute to the personal injury of another by their several acts.” The plaintiffs acknowledge that Unisys, whose liability is based
solely on the theory of respondeat superior, is not a joint tortfeasor with its employee. It follows that the statute, by its express terms, does not apply to the case.
The plaintiffs urge, however, that we invoke common law decision-making to apply the principles stated in the statute to their situation. They claim essentially that Unisys and its negligent employee should be treated like joint tortfeasors, thus permitting the plaintiffs . . . to maintain an action against Unisys after having released its employee from liability. Because the principles of joint liability which underlie the statute are distinct from the principles of vicarious liability, we decline to extend the statute in the manner requested by the plaintiffs.
. . . .
. . . The outcome sought by the plaintiffs would tend to obliterate the distinctions discussed above and unsettle principles of well-established law.
Id. at 480-81, 483, 573 N.E.2d at 947, 948 (citations omitted) (footnote omitted).
In Theophelis v. Lansing General Hosp., 430 Mich. 473, 424 N.W.2d 478 (1988), the Michigan Supreme Court said this:
Plaintiffs argue that the word “tortfeasors” in the statute includes persons whose liability is based solely upon the theory of respondeat superior, as in the case of principal and agent. We disagree.
The Michigan contribution act does not include a definition of the terms “1 of 2 or more persons liable in tort,” or “other tort-feasors,” as used in . . . § 2925d [of the Michigan act]. The Uniform Contribution Among Tortfeasors Act, 12 ULA 63, § 4 (1955 rev), upon which the Michigan act is based, likewise fails to define the term “tortfeasor.” Hence, the present question has arisen, and a split has developed among the jurisdictions as to whether a vicariously liable principal is a “tort-feasor” for purposes of § 2925d.
. . . .
. . . The principal, having committed no tortious act, is not a “tortfeasor” as that term is commonly defined.
. . . [T]he statute did not abrogate the common-law rule that release of an agent discharges the principal.
. . . .
Section 2925d of the contribution act which is invoked by the plaintiff in this case makes clear that a release or a covenant not to sue given to A would not discharge the “other tortfeasors” (B and C) from liability. However, the statute says no more, leaving in place the deep-rooted common-law principle that the release of A would discharge his principal. Any other result would be illogical and unjust because release of the agent removes the only basis for imputing liability to the principal.
Id. at 481-82, 483, 484, 491, 424 N.W.2d at 481-82, 483, 486 (citations omitted) (footnotes omitted).
In Kinetics, Inc. v. El Paso Products Co., 99 N.M. 22, 653 P.2d 522 (Ct. App. 1982), the New Mexico Court of Appeals said:
In the case at bar, the liability of El Paso Products was, if at all, vicarious. Because the respondeat superior form of vicarious liability is imposed upon one party through a legal fiction, the parties are not joint tortfeasors. If the parties are not joint tortfeasors, it is elementary that the Uniform Contribution Among Tortfeasors Act does not apply.
Id. at 28, 653 P.2d at 528 (citations omitted).
In Mamalis v. Atlas Van Lines, Inc., 522 Pa. 214, 560 A.2d 1380 (1989), the Supreme Court of Pennsylvania related:
[A]n agent and its principal are not joint tortfeasors under UCATA [the Uniform Contribution Among Tortfeasors Act] when the liability of the principal is vicarious liability and is not based upon the principal‘s independent actionable fault.
In Craven v. Lawson, 534 S.W.2d 653 (Tenn. 1976), the Supreme Court of Tennessee said:
[P]laintiff reasons that the language of the Act embraces vicarious tort-feasors as well as joint tort-feasors and active-passive tort-feasors by the use of the language “one (1) of two (2) or more persons liable in tort for the same injury.”
The argument is persuasive; however, our research convinces us that it was not the intent of the Commissioners on Uniform State Laws nor of our Legislature to embrace the derivative or vicarious liability of masters or principals within the scope of [the Act].
Id. at 655-56 (citations omitted).
In abrogating the long-held definition of “tort-feasor,” the majority blurs the important distinction between vicarious and direct liability, legal principles that undergird the law of torts. This crucial distinction has been recognized by courts elsewhere in their consideration of the same matter faced by the Court today.
In Bristow the Illinois Court of Appeals said:
[T]he doctrine of vicarious liability is not based upon fault but upon a policy of proper allocation of the risk. As between the master and the innocent third party, the doctrine requires the master to bear any loss for his servant‘s negligence. The master, however, is not at fault; rather, the servant‘s negligence is imputed to the master. As between the master and the servant, it is the servant who should bear the entire loss. In the case of vicarious liability, therefore, there is a sound basis for indemnity but not for any apportionment of damages between the master and servant.
. . . Applying the Act in situations where one party‘s liability is derivative would be repugnant to the central purpose of the Act.
Bristow, 140 Ill. App. 3d at 198, 488 N.E.2d at 337-38.
In Elias, the Massachusetts Supreme Judicial Court said:
Underlying the concept of joint liability is the principle that all joint (or concurrent) tortfeasors are independently at fault for their wrongful acts. . . . [The Act] permits a plaintiff to bring an action against one joint tortfeasor after having released another joint tortfeasor from liability. By contrast, the principles of vicarious liability apply where only the agent has committed a wrongful act. The principal is without fault. The liability of the principal arises simply by the operation of law and is only derivative of the wrongful act of the agent. Because of this, established case law holds that a general release given to an agent will preclude a subsequent action against
his principal. In asking us to change this rule of law, the plaintiffs would have us ignore the basic and significant distinctions between vicarious and joint liability . . . .
Elias, 410 Mass. at 481-82, 573 N.E.2d at 947-48.
In Kinetics, Inc., the New Mexico Court of Appeals said:
The definition of vicarious liability is indirect legal responsibility. In Dessauer v. Memorial General Hospital, 96 N.M. 92, 628 P.2d 337 (Ct.App.1981), the following definition of vicarious liability is provided:
Vicarious liability is based on a relationship between the parties, irrespective of participation, either by act or omission, of the one vicariously liable, under which it has been determined as a matter of policy that one person should be liable for the act of the other. Its true basis is largely one of public or social policy under which it has been determined that, irrespective of fault, a party should be held to respond for the acts of another.
Kinetics, Inc., 99 N.M. at 27, 653 P.2d at 527 (Ct. App.) (quoting Dessauer v. Memorial Gen. Hosp., 96 N.M. 92, 108, 628 P.2d 337, 353 (Ct. App. 1981) (Sutin, J., concurring)).
In Mamalis, the Supreme Court of Pennsylvania stated:
The Superior Court succinctly summarized the distinction between the concept of liability vicariously imposed by law and the purpose behind UCATA, stating,
The rules of vicarious liability respond to a specific need in the law of torts: how to fully compensate an injury caused by the act of a single tortfeasor. Upon a showing of agency, vicarious liability increases the likelihood that an injury will be compensated, by providing two funds from which a plaintiff may recover. If the ultimately responsible agent is unavailable or lacks the ability to pay, the innocent victim has recourse against the principal. If the agent is available or has means to pay, invocation of the doctrine is unnecessary because the injured party has a fund from which to recover.
The system of contribution among joint tortfeasors, of which the Uniform Act‘s apportionment rules are a
key component, has arisen completely apart from the system of vicarious liability and indemnity and meets an entirely distinct problem: how to compensate an injury inflicted by the acts of more than one tortfeasor. Unlike the [indirect or derivative] liability of a principal, the liability of a joint tortfeasor is direct (because the tortfeasor actually contributed to the plaintiff‘s injury) and divisible (since the conduct of at least one other also contributed to the injury).
Mamalis v. Atlas Van Lines, Inc. et al., 364 Pa.Super. 360, 365-366, 528 A.2d 198, 200-201 (1987).
We hold that absent any showing of an affirmative act, or failure to act when required to do so, by the principal, termination of the claim against the agent extinguishes the derivative claim against the principal. A claim of vicarious liability is inseparable from the claim against the agent since any cause of action is based on the acts of only one tortfeasor. There was no evidence introduced to establish acts of the principal that would make Atlas‘s liability anything other than vicarious. We find that UCATA is inapplicable to the factual circumstances of this case.
Mamalis, 522 Pa. at 220-21, 560 A.2d at 1383.
In short, the majority‘s conclusion that a vicariously liable defendant is a “tort-feasor” exists in stark contrast to North Carolina law as it has existed for over ninety years as well as in contrast to the law of many other states. The conclusion that New South Pizza, an employer derivatively liable under only the doctrine of respondeat superior, is a “tort-feasor” blurs the significant distinction between vicarious and joint liability and is completely unsupportable given our understanding of that term.
Similarly, the majority errs in its construction of
We are obligated to interpret all acts of the legislature so as to give meaning to all language used. Domestic Elec. Service, Inc. v. City of Rocky Mount, 285 N.C. 135, 203 S.E.2d 838 (1974). If we do not give some meaning to the term “tort-feasor” other than merely a “person liable in tort,” the term becomes superfluous, and we have not given meaning to all the language used. The majority‘s view that
Also, it is plain from the nature of
The majority cites eight cases for the proposition that, under the Uniform Act, a release of the servant does not release the master. Three of the cases, Blackshear v. Clark, 391 A.2d 747 (Del. 1978), Smith v. Raparot, 101 R.I. 565, 225 A.2d 666 (1967), and Krukiewicz v. Draper, 725 P.2d 1349 (Utah 1986), interpret the 1939 Model Act, which contained the “joint tortfeasor” language not contained in the 1955 Act or in our Act. Two cases cited, Harris v. Aluminum Co. of America, 550 F. Supp. 1024 (W.D. Va. 1982), and Thurston Metals & Supply Co. v. Taylor, 230 Va. 475, 339 S.E.2d 538 (1986), interpreted a contribution statute not containing the important indemnity provision contained in ours. A sixth case, Brady v. Prairie Material Sales, Inc., 190 III. App. 3d 571, 546 N.E.2d 802 (1989), is from a jurisdiction in which the circuit courts are divided on this issue. See Bristow v. Griffitts Constr. Co., 140 Ill. App. 3d 191, 488 N.E.2d 332. There are a substantial number of cases that hold to the contrary. See, e.g., McCall v. Roper, 685 P.2d 230 (Colo. Ct. App.) (vicarious liability theory of family car doctrine, like master-servant, does not make defendants joint tort-feasors); Bristow v. Griffitts Constr. Co., 140 Ill. App. 3d 191, 488 N.E.2d 332 (respondeat superior theory involving employer-employee as defendants does not make defendants joint tort-feasors); Elias v. Unisys Corp., 410 Mass. 479, 573 N.E.2d 946 (same); Theophelis v. Lansing General Hosp., 430 Mich. 473, 424 N.W.2d 478 (same); Kinetics, Inc. v. El Paso Products Co., 99 N.M. 22, 653 P.2d 522 (Ct. App.) (same); Mamalis v. Atlas Van Lines, Inc., 522 Pa. 214, 560 A.2d 1380 (respondeat superior theory involving principal-agent does not make defendants joint tort-feasors); and Craven v. Lawson, 534 S.W.2d 653 (Tenn.) (vicarious liability theory involving driver and owner of car does not make defendants joint tort-feasors). Thus, our 1909 case of Smith v. R.R. is followed by the better-reasoned modern cases from other jurisdictions. See also 53 Am. Jur. 2d Master and Servant § 408 (1970); Vitauts N. Gulbis, Annotation, Release of, or Covenant Not to Sue, One Primarily Liable for Tort, but Expressly Reserving Rights Against
Furthermore, the majority is wrong when it states that its interpretation serves the policy and ends of
The majority‘s decision to impose liability on a vicariously liable principal when the agent has been discharged from liability promotes neither of these goals. The avowed interest in avoiding injustice is already well served by
After recognizing that North Carolina adopted the 1955 version of the Uniform Act, and further admitting that the term “joint tortfeasor(s)” was deleted from the 1955 Act and does not appear in our Act, the majority relies almost entirely upon the 1939 Act to declare that, “for purposes of this Act, a ‘tort-feasor’ is one who is liable in tort.”
This focus upon the 1939 Act once again points up the error in the majority opinion. The 1939 Act not only contained the “joint
Further, the majority‘s consideration of what amounts to the legislative history of
Finally, I am unpersuaded by the majority‘s assertion that
Here, as in Smith, there is no evidence that defendant New South Pizza “actively participated in the alleged wrong.” Therefore, the majority‘s superficial conclusion that New South Pizza remains liable lacks support in the law. Implicit in the majority‘s opinion is the view that the legislature in enacting
Moreover, even if the majority were correct in its assertion that somehow
For the foregoing reasons, I respectfully dissent from the opinion of the majority.
Chief Justice EXUM and Justice WHICHARD join in this dissenting opinion.
Notes
T. Merritt Bumpass, Jr., Comment, North Carolina Legislation: An Act Providing for Contribution Among Joint Tort-Feasors and Joint Obligors, 5 Wake Forest Intra. L. Rev. 160 (citing Uniform Act, section 1, Commissioner‘s Note Subsection (a)). The term “joint tort-feasor” was replaced with “tort-feasor.” Neither the 1955 Uniform Act nor the North Carolina statute defines “tort-feasor.”The term ‘joint tort-feasors’ was not used in the Uniform Act in order to avoid confusion in those jurisdictions where persons who act independently, and not in concert, cannot always be joined as defendants.