Fahrbach v. Diamond Shamrock, Inc.
| Decision Date | 25 October 1996 |
| Docket Number | No. 22276,22276 |
| Citation | 928 P.2d 269,122 N.M. 543,1996 NMSC 63 |
| Court | New Mexico Supreme Court |
| Parties | Ruth FAHRBACH, Plaintiff-Appellant, and Stewart Foreman and Brett Michael Foreman, Intervenors-Plaintiffs-Appellants, v. DIAMOND SHAMROCK, INC., Phillips Petroleum Company, Petrolane Gas Services, Ltd., and/or Petrolane Incorporated, Defendants-Appellees. |
Plaintiffs Ruth Fahrbach, Stewart Foreman, and Brett Michael Foreman (collectively "Plaintiffs") appeal from a defense verdict in a personal injury action. Plaintiffs had sued several defendants in tort and breach of warranty arising from a gas explosion at the Thunderbird Lodge in the Taos Ski Valley in 1992 and had settled with three defendants prior to trial. On appeal Plaintiffs contend that the trial court erred in instructing the jury because (1) the trial court informed the jury that a settlement had been reached prior to trial; and (2) the trial court instructed the jury to consider the fault of a nonparty not listed in the pretrial order. We hold that the trial court may inform the jury of the fact of settlement if the court has reason to believe (a) that it should do so in order to assist the jurors in understanding their responsibilities, and (b) that it can do so without prejudice to any party. We review the trial court's decision to instruct the jury on the fact of settlement for abuse of discretion, and we hold that in this case no abuse occurred. We also conclude that, on the facts of this case, Plaintiffs were not on sufficient notice of the nonparty's potential liability, and the trial court erred in instructing the jury to consider that party's fault. However, we conclude that the error was harmless. We therefore affirm the judgment of the trial court.
Plaintiffs were injured when leaking gas from a line servicing a neighboring business, Terry Sports, Inc., drifted downhill into the Thunderbird Lodge, causing an explosion. The propane gas line was found to be exposed several inches above the ground for a span of some ten feet, despite gas industry regulations and New Mexico law requiring propane gas lines to be buried. Plaintiffs sued Petrolane Gas Services ("Petrolane"), the supplier of propane to Terry Sports; Terry Sports, Inc.; New Mexico Propane/Heritage; the Thunderbird Lodge, Inc.; Diamond Shamrock, Inc., the purchaser of the ethyl mercaptan (a substance used to odorize propane), who injected it into the propane sold to Petrolane; and Phillips Petroleum Company, the manufacturer of the ethyl mercaptan.
Prior to trial, Plaintiffs settled with New Mexico Propane/Heritage, Terry Sports, and the Thunderbird Lodge. During a pretrial hearing in this case, the trial court indicated its intention to inform the jury that three former co-defendants had settled with Plaintiffs. The trial court explained that jurors find it confusing to be asked to allocate liability among tortfeasors when, without explanation, some of the tortfeasors are not present in court.
THE COURT: [T]he last trial that I did ... ended up being one where there were great debates about whether or not to inform the jury that other parties had settled out, about not to consider that, because they are going to get to assess their own fault. And I think it was confusing to the jury not to tell them--not the specifics of what went on, but some of how this case started and where it stood now.
Accordingly, prior to voir dire, the trial court informed the jury that Plaintiffs had originally sued three additional parties and that these parties had settled with Plaintiffs prior to trial. The court stated as follows:
I'll also advise you that in addition to the Defendants present in the courtroom today, the Plaintiffs originally sued New Mexico Propane of Taos, Incorporated, the Thunderbird Lodge, and Terry Sports. Those parties have settled the Plaintiffs' claims and they will not be participating in this action, although you will hear evidence concerning their conduct and you will have an opportunity, if selected as a juror, to assess fault concerning some or all of those parties.
The trial proceeded with the three remaining defendants, Phillips Petroleum Company, Diamond Shamrock, and Petrolane Gas Services (collectively "Defendants"). During trial Plaintiffs argued, among other things, that Petrolane was negligent in adequately warning its own employees concerning the possibility of odor fade, odor confusion, and other characteristics of propane odorized with ethyl mercaptan in conjunction with propane line maintenance. Plaintiffs presented two witnesses to testify, respectively, about the scope of instruction and Petrolane's alleged failure to warn its local district managers of the hazards inherent in maintaining propane gas lines. The two witnesses were David Archuleta, Petrolane's Taos district manager, and James Myers, an employee of Suburban Propane. The testimony of these witnesses indicated that Suburban Propane had trained Petrolane employees in propane line maintenance. Other testimony revealed that Suburban Propane or one of its parent corporations formerly owned Petrolane.
Plaintiffs had not named Suburban Propane in their complaint. None of the defendants specifically pleaded Suburban Propane's liability in their answers, although the liability of "others" was asserted as a general defense. Additionally, the pretrial order did not list Suburban Propane as being potentially liable.
After presentation of the evidence, at a hearing to finalize the jury instructions, Defendants asked the court to instruct the jury to consider whether Plaintiffs' injuries were caused by Suburban Propane's negligence in failing to properly train Petrolane employees. Plaintiffs objected, contending that Suburban Propane and Petrolane were not separate entities. The trial court overruled the objection and instructed the jury on several theories of liability, including the theory that Suburban Propane had failed to adequately train Petrolane employees. The special verdict form first asked, "Question No. 1: was any defendant, Diamond Shamrock Refining and Marketing Company, Phillips Petroleum Company or Petrolane negligent?" If the jury answered affirmatively, it was instructed to answer several questions about the allocation of fault. Suburban Propane was subsequently listed as one of the parties to whom the jury was authorized to allocate fault, but only if the jury determined any of the three named defendants had been negligent and that the negligence of a named defendant contributed to Plaintiffs' injuries.
During deliberation the jury posed the following question to the court: The court responded:
The jury ultimately returned the verdict form with an answer to the first question indicating that none of the three named defendants had been negligent. The jury also found that the product at issue was not defective. Following the verdict, Plaintiffs moved for a new trial alleging that (1) the trial court erred in informing the jury that three defendants named in the complaint had settled with Plaintiffs prior to trial; and (2) the trial court abused its discretion in instructing the jury regarding Suburban Propane's fault, a defense which had not been included in the pretrial order. After a hearing on the merits the trial court denied the motion, holding that Rule 11-408 NMRA 1996 did not preclude the court from informing jurors that some former defendants had settled with Plaintiffs, and that there was sufficient evidence introduced at trial to support a separate instruction of Suburban Propane's alleged negligence.
Plaintiffs appeal from the judgment on the verdict, raising the same two issues argued before the court in their motion for a new trial. Plaintiffs have since settled with both Phillips Petroleum Co. and Diamond Shamrock. Petrolane is the sole remaining defendant on appeal.
Plaintiffs argue on appeal that the trial court gave the jury advice that was inconsistent with Rule 408 of the New Mexico Rules of Evidence. Rule 11-408 NMRA 1996, states as follows:
Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for or invalidity of the claim or its amount. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require the exclusion of any evidence otherwise discoverable merely because it is presented in the course of compromise negotiations. This rule also does not require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negativing a contention of undue delay or proving an effort to obstruct a criminal investigation or prosecution.
Plaintiffs reason that Rule 11-408 NMRA 1996 promotes a public policy favoring compromise and settlement, that it achieves this goal by insulating parties against inferences of liability due to their conduct or statements during settlement negotiations, and that it should be construed to prevent juries from drawing equally improper inferences of liability from the fact of...
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