General Motors Corp. v. Simmons

• Citation: 558 S.W.2d 855
• Decision Date: 09 November 1977
• Docket Number: No. B-6604,B-6604
• Parties: GENERAL MOTORS CORPORATION, Petitioner, v. Curtis Lee SIMMONS et al., Respondents.
• Court: Texas Supreme Court

Page 855

558 S.W.2d 855

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.

Vinson, Elkins, Searls, Connally & Smith, Harry M. Reasoner, Eleanor Swift Glass and Alan Schulman, Houston, Gus M. Hodges, Austin, Frazier F. Hilder, Thomas W. Watkins and Diane L. Kaye, Detroit, Mich., for petitioner.

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 drove Feld's truck into the left front door of Simmons' 1962 Chevrolet. The impact bent the frame of the door on Simmons' car, causing the laminated glass in the car window to explode into Simmons' eyes and blind him.

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 a financial stake in the plaintiff's recovery have been called "Mary Carter" agreements since the 1967 Florida decision of Booth v. Mary Carter Paint Co., 202 So.2d 8 (Fla.App.1967). Some courts have wholly voided the agreements as against public policy. Lum v. Stinnett, 87 Nev. 402, 488 P.2d 347 (1971); Trampe v. Wisconsin Telephone Co., 214 Wis. 210, 252 N.W. 675 (1934). There is no contention in this case that the settlement agreement was void. Most courts that have addressed the issue, while not declaring these agreements void, have permitted the disclosure of the contracts to the jury when offered by a nonsettling defendant. See, e. g., Hemet Dodge v. Gryder, 23 Ariz.App. 523, 534 P.2d 454 (1975); Ward v. Ochoa, 284 So.2d 385 (Fla.1973); Gatto v. Walgreen Drug Co., 61 Ill.2d 513, 337 N.E.2d 23 (1975); Burkett v. Crulo Trucking Co., 355 N.E.2d 253 (Ind.App.1976); Grillo v. Burke's Paint Co., 275 Or. 421, 551 P.2d 449 (1976); but see Klotz v. Lee, 36 N.J.Super. 6, 114 A.2d 746 (1955), appeal dismissed, 21 N.J. 148, 121 A.2d 369 (1956).

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 agreements ¹ 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 Motors. That kind of interest is a proper subject of cross-examination and proof. Trinity County Lumber Co. v. Denham, 88 Tex. 203, 30 S.W. 856 (1895); Robertson Tank Lines, Inc. v. Watson, 491 S.W.2d 706, 709 (Tex.Civ.App.1973, writ ref'd n. r. e.). The exclusion of the evidence was harmful error and the judgment must be reversed for that reason.

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...