General Motors Corp. v. Lahocki

• Decision Date: 30 January 1980
• Docket Number: No. 38,38
• Citation: 286 Md. 714,410 A.2d 1039
• Parties: GENERAL MOTORS CORPORATION v. George E. LAHOCKI et al. George E. LAHOCKI et al. v. CONTEE SAND & GRAVEL CO., INC., et al.
• Court: Maryland Court of Appeals

Page 714

286 Md. 714

410 A.2d 1039

GENERAL MOTORS CORPORATION v. George E. LAHOCKI et al.

George E. LAHOCKI et al. v. CONTEE SAND & GRAVEL CO., INC., et al.

No. 38.

Court of Appeals of Maryland.

Jan. 30, 1980.

Francis B. Burch, Jr. and Edward S. Digges, Jr., Baltimore (Joseph G. Finnerty, Jr., Robert Dale Klein, Piper & Marbury, Baltimore, Otis M. Smith, Gen. Counsel, John P. Raleigh and Douglas E. Brown, Detroit, Mich., on brief), for General Motors Corp.

Ronald S. Schimel, Columbia (Paul S. Warshowsky, Carol B. O'Keefe and Levan & Schimel, Columbia, and Joseph M. Bryan, Hyattsville, on brief), for George E. and Doris Lahocki.

Laidler B. Mackall, Washington, D. C. (Loren Kieve, Steptoe & Johnson, Washington, D. C., William N. Zifchak and Sasscer, Clagett, Channing & Bucher, Upper Marlboro, on brief), for Contee Sand & Gravel Co., Inc.

Argued before MURPHY, C. J., and SMITH, ELDRIDGE, ORTH, ^* COLE and DAVIDSON, JJ.

SMITH, Judge.

In this case we shall hold that a trial court erred in its handling of an agreement between certain of the parties to litigation before it and also erred in not permitting one aspect of the case to go to the jury. Hence, we shall reverse the judgment of the Court of Special Appeals in Lahocki v. Contee Sand & Gravel Co., 41 Md.App. 579, 398 A.2d 490 (1979).

This litigation is the result of an accident on University Boulevard in the College Park area of Prince George's County. Appellant George E. Lahocki sustained a paralyzing back injury when the vehicle in which he was riding, a van manufactured by General Motors Corporation (GM), collided with heavy timber barricades placed by a contractor, Contee Sand & Gravel Co., Inc., in connection with work it was then doing on the highway.

Lahocki and his wife initially sued the driver of the van, the owner of the van (who was Lahocki's employer), and Contee. Contee filed a third party claim against GM, alleging that the van was uncrashworthy. Ultimately, the Lahockis made GM a defendant on the basis of an alleged defect in the van said to have enhanced Lahocki's injuries.

Summary judgment on the basis of the Workmen's Compensation Act was entered in favor of Lahocki's employer. An agreement was reached between the Lahockis and the driver of the van as a result of which they received $300,000 and executed a release pursuant to the Uniform Contribution Among Tort-Feasors Act, Maryland Code (1957) Art. 50, §§ 16-23.

At trial the parties stipulated that the driver was negligent and that his negligence caused the accident. He was then dismissed from the action. A mistrial ultimately ensued.

A pretrial conference was held in advance of the first trial. There the trial judge directed that any settlements effected between any of the parties were to be disclosed promptly to all counsel. GM made a motion at the outset of the second trial "to compel the disclosure and/or production of any agreement or settlement between the (Lahockis) and the defendant Contee," stating its counsel had "information that such an agreement either ha(d) been reached or (was) imminent . . . ." We shall have more to say about those proceedings and the agreement later.

The trial judge granted Contee's motion for a directed verdict in its favor made at the conclusion of all the evidence. The jury rendered a verdict against GM in favor of Lahocki in the amount of $1,200,000 and against GM in favor of him and his wife in the amount of $300,000. Upon motion of GM, the ultimate judgment was reduced by one-half based upon the existence and terms of the release between the Lahockis and the driver of the vehicle. GM and the Lahockis appealed to the Court of Special Appeals. It affirmed.

We granted GM's petition for a writ of certiorari to address the question, "Is GM entitled to a new trial because a pretrial settlement agreement between the plaintiffs and the co-defendant was not disclosed to GM promptly and because it was not admitted in evidence at the trial?" The Lahockis also sought a writ of certiorari, which we granted. One of the questions contained in their petition has been settled. The two remaining questions are: (1) "Whether the Court of Special Appeals' rationale in affirming Contee's motion for directed verdict is in direct conflict with the principle that a wrongdoer is liable for all the foreseeable consequences of his act," and (2) "Whether the trial court erred in granting Contee's motion for directed verdict by misconstruing and misapplying the holding in Stitzel v. Kurz, 18 Md.App. 525 (, 308 A.2d 430) (1973)."

I The Lahocki-Contee Agreement

As we have indicated, when the case was called for trial GM sought to compel disclosure of any agreement between the Lahockis and Contee. GM's attorneys suggested that they had information that such an agreement had been reached. The trial judge indicated he presumed that any pro rata type settlement agreement should be made known before trial, but said he was "not sure about any other type of settlement, a high-low settlement agreement, whether or not (GM was) entitled to this." He asked counsel specifically, "Are there any other settlements that should be disclosed, or settlement agreements?" To this the reply was made, "In the context of Your Honor's last statement, there isn't." Further discussion ensued and he was told, "There are no settlements, Your Honor. You made a statement that distinguished between settlements and high-low agreements." The judge responded, "Isn't a settlement a high-low agreement?" Ultimately counsel for GM were excused from the courtroom at their suggestion. It then was disclosed that an agreement had been reached between the Lahockis and Contee.

The agreement provided that after trial Contee would pay the Lahockis $150,000 except in three circumstances: (1) If Contee's pro rata share of a judgment against it was in excess of $150,000, then Contee would pay this pro rata share to the Lahockis up to $250,000. (2) If final judgment was entered against GM alone, then Contee would pay nothing to the Lahockis, even if the Lahockis and GM thereafter settled the case. (3) If the Lahockis settled with GM, then the sum to be paid by Contee to the Lahockis was to be but $100,000. It will be perceived upon analysis that the effect of this agreement was that if Contee were to succeed in obtaining a defendant's verdict at the trial of the Lahockis' claim against Contee and GM, then Contee would still be obligated to pay the Lahockis $150,000 if the jury also returned a verdict for GM. ¹

GM sought an order declaring the agreement void. This was denied. It then moved the court to permit disclosure of the agreement to the jury. That likewise was denied.

GM argues that this is a "Mary Carter Agreement," a term used by the court in Maule Industries, Inc. v. Rountree, 264 So.2d 445 (Fla.Dist.App.1972), Rev'd 284 So.2d 389 (Fla.1973), referring to the agreement in Booth v. Mary Carter Paint Company, 202 So.2d 8 (Fla.Dist.App.1967). That court said:

The term arises from the agreement popularized by the case of Booth v. Mary Carter Paint Co., Fla.App.1967, 202 So.2d 8, and now appears to be used rather generally to apply to any agreement between the plaintiff and some (but less than all) defendants whereby the parties place limitations on the financial responsibility of the agreeing defendants, the amount of which is variable and usually in some inverse ratio to the amount of recovery which the plaintiff is able to make against the nonagreeing defendant or defendants. (Id. at 446, n. 1.)

It is probably safe to say that no two pacts dubbed "Mary Carter Agreement" have been alike. However, three basic features seem to be contained in each: (1) The agreeing defendant is to remain a party and is to defend himself in court. However, his liability is limited by the agreement. In some instances this will call for increased liability on the part of other co-defendants. (2) The agreement is secret. (3) The agreeing defendant guarantees to the plaintiff that he will receive a certain amount, notwithstanding the fact that he may not recover a judgment against the agreeing defendant or that the verdict may be less than that specified in the agreement. See, e. g., Ward v. Ochoa, 284 So.2d 385, 387 (Fla.1973); Freedman, The Expected Demise of "Mary Carter": She Never Was Well! 633 Ins.L.J. 602, 603-04 (October 1975); Note, The Mary Carter Agreement Solving the Problems of Collusive Settlements in Joint Tort Actions, 47 So.Cal.L.R. 1393, 1396-97 (1974); Comment, Blending Mary Carter's Colors: A Tainted Covenant, 12 Gonzaga L.Rev. 266, 268-69 (1977); and Annot., 65 A.L.R.3d 602, 605-06 (1975).

On the issue of secrecy, the Florida Supreme Court said in Ward:

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." (Id. 284 So.2d at 387.)

The A.L.R. annotation points out that an injured plaintiff may be motivated to enter into such an agreement because it will assure a minimum recovery without "unequivocally releas(ing) the agreeing defendant." Comment is then made:

On the other hand, an agreeing defendant who is clearly culpable might enter such an agreement because it defines the outer perimeters of his liability, usually the limits of his insurance coverage, while his insurer will favor the arrangement since it tends to negate the possibility of eventually being held liable for an amount in excess of policy limits on the basis of a bad-faith failure to settle. (Id. at 606.)

Further discussion of such agreements is found in Scoby, Loan Receipts and Guaranty Agreements, 10...