Damron v. Sledge

• Decision Date: 06 November 1969
• Docket Number: No. 9662,9662
• Citation: 105 Ariz. 151,460 P.2d 997
• Parties: Clyde DAMRON and Eileen Damron, his wife, Appellants, v. Ples SLEDGE and Jane Doe Sledge, and Perel Polk and John Doe Polk, Appellees.
• Court: Arizona Supreme Court

Page 997

460 P.2d 997

105 Ariz. 151

Clyde DAMRON and Eileen Damron, his wife, Appellants, v. Ples SLEDGE and Jane Doe Sledge, and Perel Polk and John Doe Polk, Appellees.

No. 9662.

Supreme Court of Arizona, In Division.

Nov. 6, 1969.

David Dietz, Harrison, Strick, Myers, & Singer, by Mark I. Harrison and Robert D. Myers, Phoenix, for appellants.

Mangum, Christensen & Wall, by H. K. Mangum, Flagstaff, for appellees.

McFARLAND, Justice:

Clyde and Eileen Damron, hereinafter referred to as plaintiffs, brought an action against Ples Sledge (hereinafter referred to as Defendant Sledge) and Perel Polk (hereinafter referred to as Defendant Polk) to recover damages for personal injuries 'allegedly sustained as the result of an automobile collision wherein Defendant Sledge negligently and carelessly drove Defendant Polk's vehicle into plaintiffs' vehicle.' From a written order of the trial court granting Defendant Polk's motion to dismiss plaintiffs' complaint, plaintiffs appeal.

Plaintiffs' complaint alleged that Defendant Sledge was negligent and that he was driving Defendant Polk's vehicle with her permission and acquiescence. Defendant Polk was represented by the attorney for National Union Insurance Company which insured her car. Defendant Sledge's insurance company, State Farm, secured attorneys who answered for him.

According to statements made by the attorneys for the parties on the day of trial, no insurance coverage is available for the acts of Defendant Sledge under the policies involved in the instant case if in fact Defendant Sledge was driving without the permission of Defendant Polk. On the basis of their assumption that Defendant Sledge was driving without permission, neither insurance company believed that it had a duty to defend him.

Evidently for this reason the attorneys for Sledge's insurance company withdrew, and Sledge thereafter was represented by his own attorney. In the pre-trial stages, Sledge's attorney soon found that he was putting in time, and advancing costs, and was not going to be able to collect any fee. He therefore applied to the court for permission to withdraw, and this was refused. On two occasions he made a request to the attorney for Defendant Polk that the insurance company pay his attorney's fees.

On the date set for trial, various motions were discussed in the trial judge's chambers. During the course of the argument, the substance of telephone calls, letters and conversations between all of the parties and their attorneys (as understood by the attorneys) since the time of the accident were related to the court. In particular, the following occurrences were related:

(1) Plaintiffs' attorney executed a covenant not to execute against Defendant Sledge; and (2) Plaintiffs gave a note to the attorney for Defendant Sledge in the sum of $2,000.00 as payment of his attorney's fees; and

(3) In consideration therefor, Defendant Sledge assigned to plaintiffs whatever claim he had against the insurance companies for bad faith in failing to defend.

We are presented with the question of the validity of the prejudgment assignment which is claimed to be collusive and fraudulent.

It is well established that a claim by an insured against his insurer for failure of the insurer to defend may be assigned to the injured party. Hatfield v. State, Okl. Cr., 325 P.2d 972; Critz v. Farmers Insurance Group, 230 Cal.App.2d 788, 41 Cal.Rptr. 401, 12 A.L.R.3d 1142. The objection in the instant case arises because the assignment was completed before judgment was taken against the insured. This type of prejudgment assignment of a claim against an insurance company for failure to defend was exhaustively considered in the California case of Critz v. Farmers Insurance Group, supra. We believe the Critz case comes the closest to the procedure followed by the parties in the case now before us. The California Court approved of the procedure followed in Critz, stating:

'* * * When the insurer breaches its obligation of good faith settlement, it exposes its policyholder to the sharp thrust of personal liability. At that point, there is an acute change in the relationship between policyholder and insurer. The change does not or should not affect the policyholder's obligation to appear as defendant and to testify to the truth. He need not indulge in financial masochism, however. Whatever may be his obligation to the carrier, it does not demand that he bare his breast to the continued danger of personal liability. By executing the assignment, he attempts only to shield himself from the danger to which the company has exposed him. He is doubtless less friendly to his insurer than he might otherwise have been. The absence of cordiality is attributable not to the assignment, but to his fear that the insurer has callously exposed him to extensive personal liability. * * *'

In holding that the prejudgment assignment and covenant not to execute upon the judgment did not impart a collusive character to the personal-injury suit, the California court stated as follows:

'* * * To uphold an equitable assignment under such circumstances does not supply the injured party with a disproportionate or unfair advantage. In our opinion, the present assignment is not violative of public policy if in fact a bad faith rejection had already occurred. If, on the other hand, the carrier was not guilty of bad faith, the plaintiff-assignee will lose the lawsuit regardless of the public policy aspects of the assignment.'

Accordingly, we hold that the assignment in the instant case was not ipso facto collusive.

When the trial date arrived, plaintiffs moved to amend their complaint by dismissing with prejudice against Polk. Defendant Polk's attorney thereupon made strenuous objection to the requested dismissal with prejudice against his client. He argued that the arrangement was 'tainted with conspiracy, chicanery, and fraud, and all they need do now is to get the court to approve of it and they have accomplished a fraudulent miscarriage of justice. * * * the plaintiffs buy out the entire lawsuit for the sole purpose of sticking a couple of insurance companies.' It was the theory of Defendant Polk's attorney that he had a right to object to the dismissal against Polk, so that he could continue as an attorney in the trial, and thus be able to rebut evidence of any severe injury that he expected plaintiffs to try to prove.

Defendant Polk's attorney based his argument upon Rule 41, Rules of Civil Procedure, 16 A.R.S., which relates to voluntary dismissals. This rule, however, pertains only to dismissals Without prejudice. Any time a plaintiff offers to dismiss with prejudice, the attorney for the party against whom the dismissal is sought has no grounds for objecting when his client's rights are protected. In fact, when a lawyer is retained by a client to defend a lawsuit, his ultimate aim is to procure a dismissal with prejudice or a favorable verdict. We therefore hold a plaintiff has an Absolute right to a voluntary dismissal of his complaint with prejudice. Smoot v. Fox, 6 Cir., 340 F.2d 301.

The attorney for Defendant Sledge made no attempt to conceal his arrangement, and frankly reported it to the court. During the course of the discussion, he stated that he intended to withdraw the answer of Defendant Sledge and allow a default to be taken. He also stated that he had not discussed this...