City of Tucson v. Superior Court In and For County of Pima

• Citation: 798 P.2d 374,165 Ariz. 236
• Decision Date: 18 September 1990
• Docket Number: No. CV-89-0236-PR,CV-89-0236-PR
• Parties: CITY OF TUCSON, Petitioner, v. SUPERIOR COURT of the State of Arizona, In and For the COUNTY OF PIMA; Honorable John G. Hawkins, a Judge thereof, Respondents, and COTTONWOOD DEVELOPMENT CO., INC.; George P. Mehl Construction Co., Inc.; Bear Canyon Shopping Center: dba Cottonwood Properties Inc.; Cottonwood Development, Inc.; Bear Canyon Shopping Center, and/or George P. Mehl Construction Co.; Pima County, a governmental organization in the State of Arizona; Osborn, Petterson, Walbert & Assoc. Engineering and Surveying, an Arizona corporation; R.E. Miller Paving and Construction, Inc.; The Superior Court of Arizona, In and For the County of Pima; and John G. Hawkins, a Judge thereof, Real Parties in Interest.
• Court: Arizona Supreme Court

Page 374

798 P.2d 374

165 Ariz. 236

CITY OF TUCSON, Petitioner, v. SUPERIOR COURT of the State of Arizona, In and For the COUNTY OF PIMA; Honorable John G. Hawkins, a Judge thereof, Respondents, and COTTONWOOD DEVELOPMENT CO., INC.; George P. Mehl Construction Co., Inc.; Bear Canyon Shopping Center: dba Cottonwood Properties Inc.; Cottonwood Development, Inc.; Bear Canyon Shopping Center, and/or George P. Mehl Construction Co.; Pima County, a governmental organization in the State of Arizona; Osborn, Petterson, Walbert & Assoc. Engineering and Surveying, an Arizona corporation; R.E. Miller Paving and Construction, Inc.; The Superior Court of Arizona, In and For the County of Pima; and John G. Hawkins, a Judge thereof, Real Parties in Interest.

No. CV-89-0236-PR.

Supreme Court of Arizona, In Banc.

Sept. 18, 1990.

[165 Ariz. 239] Kimble, Gothreau & Nelson by Michael P. Morrison, Michael J. Gothreau, Tucson, for petitioner.

Murphy, Goering, Roberts & Holt, P.C. by Michael F. McNamara, David L. Berkman, Tucson, for respondents.

OPINION

FELDMAN, Vice Chief Justice.

This is an action in which one joint tortfeasor seeks contribution from another for amounts paid to the injured party. See A.R.S. § 12-2501 et seq. We granted review to determine whether a non-settling tortfeasor is bound by the amount of damages that the settling tortfeasors paid in "good faith" to obtain the injured parties' complete release of all defendants. See Rule 23, Ariz.R.Civ.App.P., 17B A.R.S. We have jurisdiction under Ariz. Const. art. 6, § 5(3), and A.R.S. § 12-120.24.

FACTS

This case arises from an automobile accident and resulting actions for death and personal injury brought by various individuals (tort claimants) against the City of Tucson (City) and a number of other defendants. The tort claimants alleged that the City and the other defendants were negligent in designing, building, or maintaining a public street in Tucson.

In 1987, the tort claimants settled with all defendants except the City. In a January 19, 1987 minute order, the trial judge listed the terms of settlement, including the amount to be paid to each claimant and the portion thereof to be paid by each settling defendant. Those defendants petitioned the trial court for a formal determination that the settlement was made in "good faith." See Rule 16.1, Ariz.R.Civ.P., 16 A.R.S. (hereafter Rule 16.1). The City opposed that motion, but after considering the affidavits submitted, the trial court found the settlement was made in good faith. The tort claimants dismissed their actions with prejudice, giving a complete release of all claims, thus also releasing the City from any further liability.

The settling defendants then brought an action against the City seeking contribution for those settlement amounts paid the tort claimants "in excess of [the settling defendants'] actual pro rata shares of potential liability." See City of Tucson v. Superior Court, 161 Ariz. 441, 442, 778 P.2d 1337, 1339 (Ct.App.1989); see also A.R.S. § 12-2501(B). The settling defendants moved for summary judgment, arguing that the trial court's finding that the settlement was made in good faith collaterally estopped the City from relitigating in the contribution action issues pertaining to the amount of damages sustained by each of the tort claimants. They further contended that the damage issues, together with the pro rata share "owed" by each tortfeasor, had been concluded by the good faith settlement. In the contribution action, therefore, the only question remaining to be litigated was the proportionate share of fault attributable to the City. When that percentage was determined and applied to the settlement amount, the product would be the sum the City owed for its contribution as a joint tortfeasor.

The trial judge granted the motion over the objections of the City and entered judgment for contribution against the City. The City then filed a special action ¹ in the court of appeals, claiming the trial court exceeded its jurisdiction by precluding it from litigating the amount of damages sustained by the claimants. The court of appeals accepted jurisdiction of the special action and granted relief, holding that the trial judge had exceeded his authority by granting the settling defendants' motion for summary judgment. City of Tucson, 161 Ariz. at 442-43, 778 P.2d at 1338-39. The court held that the City was not precluded from contesting the amount of damages, even though the settling defendants had settled in good faith. The court stated that "[t]he issue of damages, like the issue of liability, raises questions of fact which only the trier of fact may resolve" in the contribution action. Id. at 446, 778 P.2d at 1342.

The settling defendants then petitioned this court for review. Because the interpretation of the statutes is a matter of statewide importance and the issue one of first impression, we granted review. See Rule 23(f), Ariz.R.Civ.App.P., 17B A.R.S.

The sole issue before us is whether the trial court's Rule 16.1 finding of "good faith" precludes the City from disputing the amount of damages that were due to the tort claimants.

CONTRIBUTION

Prior to 1984, Arizona law did not recognize an action for contribution among joint tortfeasors. Holmes v. Hoemako Hospital, 117 Ariz. 403, 405, 573 P.2d 477, 479 (1977); see also Note, Denying Contribution Between Tortfeasors in Arizona; a Call for Change, 1977 ARIZ.ST.L.J. 673. A negligent tortfeasor was liable to pay the entire damages and had no right to contribution from any joint tortfeasor. See Note, supra, 1977 ARIZ.ST.L.J. at 674. This regime changed in 1984 when the legislature both recognized the action for contribution between joint tortfeasors and enacted the doctrine of comparative negligence. See A.R.S. §§ 12-2501, 12-2505, and 12-2506. ²

The legislature created an action for contribution with the following language:

A. ... [I]f two or more persons become jointly or severally liable in tort for the same injury ... there is a right of contribution among them even though judgment has not been recovered against all of them.

B. The right of contribution exists only in favor of a tortfeasor who has paid more than his pro rata share of the common liability, and his total recovery is limited to the amount paid by him in excess of his pro rata share.

* * * * * *

D. A tortfeasor who enters into a settlement with a claimant is not entitled to recover contribution from another tortfeasor ... in respect to any amount paid in a settlement which is in excess of what was reasonable.

A.R.S. § 12-2501. It is important to note that nothing in the statute purports to bind a non-settling defendant from litigating the three issues that determine its liability for contribution to a settlement, namely: (1) its liability for the tort (§ 12-2501(A)); (2) the pro rata shares of liability of both the party seeking contribution and the party alleged to be liable for contribution (§ 12-2501(B)); and (3) in the case of settlements, whether the amount the settling party paid was reasonable (§ 12-2501(D)).

The policy behind the Uniform Contribution Among Tortfeasors Act, upon which Arizona's contribution statute is based, is to encourage settlements. See Commissioner's Comment to section 1(d) of the Uniform Contribution Among Tortfeasor's Act, 12 U.L.A. § 1 (1959), Master Edition (1975). Once a tortfeasor discharges the entire obligation, he is entitled to contribution from the non-settling tortfeasors. Because the statute requires the settlement to be reasonable, it follows that the issues of damages as well as total liability may be litigated in the contribution action. Id.; see also S. Butler and G. Gage, Comparative Negligence and Uniform Contribution: New Arizona Law, 20 ARIZ. BAR J. 16 (1984) (defendants in a contribution action retain the right to challenge reasonableness of the amount of settlement as well as right to dispute liability to the plaintiff).

There being no express statement in the contribution statute, if the non-settling defendant is to be bound by some form of issue preclusion, such a result must flow from something other than that statute. The preclusion claimed here arises from the trial court's finding that the settlement was made in good faith. This argument is based on the language of A.R.S. § 12-2504, which provides as follows:

If a release or covenant not to sue ... is given in good faith to one of two or more [joint tortfeasors] both of the following apply:

1. It does not discharge any of the other tortfeasors from liability ... unless its terms so provide, but it reduces the claim against the others....

2. It discharges the tortfeasor to whom it is given from all liability for contribution to any other tortfeasor.

(Emphasis added.)

The statute does not define the term "good faith" nor provide any mechanism by which its existence could be established. To accomplish the latter, the State Bar of Arizona proposed and this court adopted a rule that permits the trial court to make a "formal determination whether the settlement is made in good faith." Rule 16.1(a). Various subsections of the rule provide for an adjudicative procedure including the use of affidavits, filing of objections, and a hearing.

In our view, neither A.R.S. § 12-2504 nor the rule promulgated to implement that statute is relevant to the issues in this case. By the express words of A.R.S. § 12-2504, the finding that a settlement was made in "good faith" is only relevant and necessary to discharge a settling tortfeasor from liability for claims by other joint tortfeasors seeking contribution from him. In other words, a settling joint tortfeasor may raise the finding of "good faith" as a defense to a contribution action brought against him by other tortfeasors. It is not an element that a settling tortfeasor must show as a sine qua non to maintain his contribution action against non-settling tortfeasors. ³

As the court of appeals pointed...