Graber v. City of Ankeny

• Decision Date: 07 September 2000
• Docket Number: No. 98-1176.,98-1176.
• Citation: 616 N.W.2d 633
• Parties: Judith Kay GRABER, Appellant, v. CITY OF ANKENY, Iowa, Appellee.
• Court: Iowa Supreme Court

616 N.W.2d 633

Judith Kay GRABER, Appellant, v. CITY OF ANKENY, Iowa, Appellee.

No. 98-1176.

Supreme Court of Iowa.

September 7, 2000.

Mary S. Bernabe, Des Moines, for appellant.

Chester C. Woodburn, III, of Hansen, McClintock & Riley, Des Moines, appellee.

Considered en banc.

TERNUS, Justice.

The appellant, Judith Graber, was injured in an automobile accident that occurred at an intersection located within the city limits of the appellee, City of Ankeny. She brought an action against the City, which resulted in an adverse jury verdict. In her appeal, she makes several claims: (1) the court abused its discretion in admitting evidence of her settlement with the other party involved in the accident; (2) the court erroneously instructed the jury on several issues; (3) Iowa Code chapter 668 (1997) violates her rights to due process and equal protection; (4) the court erred in failing to grant the plaintiff's motion for new trial; (5) the court erred in failing to sustain her objections to the defendant's questioning of her expert witness; and (6) the court erred in allowing the defendant's witness to give expert testimony when he had not been designated as an expert witness. We conclude that the court's admission of evidence of the plaintiff's settlement with a released party constitutes reversible error. Accordingly, we reverse and remand for a new trial.

I. Background Facts and Proceedings.

On the morning of July 13, 1996, the plaintiff was traveling north on State Street, south of Ankeny, Iowa, approaching the intersection of State Street and Oralabor Road, another main thoroughfare bordering the City to the south and running east and west. The speed limit on this section of Oralabor was 55 miles per hour.

The plaintiff entered the intersection of State Street and Oralabor on the green light, intending to turn left. As she did so, she was struck broadside by Kristie Allen. Allen was traveling east on Oralabor and admitted she entered the intersection on a red light. The plaintiff sustained extensive and serious injuries.

Initially, the plaintiff brought suit against Allen and against Allen's boyfriend, Brook Hansen, who owned the car Allen was driving at the time of the accident. Allen and Hansen sought leave to file a cross-petition against the City, who, they asserted, was negligent in its operation of the traffic control signals at the intersection. Subsequently, the plaintiff amended her petition to add the City as a defendant. She alleged the City was negligent in failing to properly maintain and properly set the timing of the traffic lights at the intersection. The plaintiff asserted that the City's improper timing of the traffic signals confused drivers because they were not allowed sufficient time to clear the intersection before cross-traffic received a green light.

Sometime after the City was joined as a defendant, the plaintiff settled with Allen and Hansen. In a pre-trial ruling, the court held that the City could introduce evidence of the settlement, but not the amount paid by Allen and Hansen. The case proceeded to trial, and the jury returned a verdict in favor of the City, finding it was not at fault. The plaintiff's post-trial motions were overruled and she filed this appeal.

II. Did the Trial Court Err in Admitting Evidence of the Settlement Between the Plaintiff and the Released Parties?

During cross-examination of Allen, the defendant elicited testimony that Allen and Hansen had been dismissed from the lawsuit "because some deal had been cut and money paid on [their] behalf." The plaintiff's objection on the basis of lack of relevancy was overruled.

A. General principles and scope of review. Irrelevant evidence is not admissible. See Iowa R. Evid. 402. The converse proposition—that relevant evidence is admissible—is not automatically true. See id. committee comment—1983 ("Statutes, rules of procedure, constitutional and policy considerations may require the exclusion of otherwise relevant evidence."). Even relevant evidence should not be admitted when "its probative value is substantially outweighed by the danger of unfair prejudice, confusion of issues, or misleading the jury...." Iowa R. Evid. 403. Therefore, the decision to admit evidence requires a two-step inquiry: (1) is the evidence relevant? and (2) if so, is its probative value substantially outweighed by the danger of prejudice or confusion?

Evidence is relevant if it has "any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." Iowa R. Evid. 401. A determination of the probative value of relevant evidence focuses on the strength and force of the tendency of the evidence "to make a consequential fact more or less probable." McClure v. Walgreen Co., 613 N.W.2d 225, 235 (Iowa 2000). "Unfair prejudice arises when the evidence prompts the jury to make a decision on an improper basis...." Waits v. United Fire & Cas. Co., 572 N.W.2d 565, 569 (Iowa 1997).

We review the court's decision to admit relevant evidence for an abuse of discretion. See McClure, 613 N.W.2d at 235; see also State v. Brewer, 247 N.W.2d 205, 214 (Iowa 1976) (holding that once evidence was determined to be relevant, "trial court was obliged to exercise its discretion and determine whether its probative value was outweighed by its prejudicial effect"). An abuse of discretion occurs when "the court exercise[s] [its] discretion on grounds or for reasons clearly untenable or to an extent clearly unreasonable." Waits, 572 N.W.2d at 569 (quoting State v. Maghee, 573 N.W.2d 1, 5 (Iowa 1997)). A ground or reason is untenable when it is not supported by substantial evidence or when it is based on an erroneous application of the law. See id.

Not every erroneous admission of evidence requires reversal. See McClure, 613 N.W.2d at 235. Only when "a substantial right of the party is affected" is reversal warranted. Id. (quoting Iowa R. Evid. 103(a)). We presume prejudice from the admission of irrelevant evidence. See Lewis v. Kennison, 278 N.W.2d 12, 15 (Iowa 1979). Accordingly, reversal is required unless the record shows a lack of prejudice. See McClure, 613 N.W.2d at 235. Thus, despite the discretionary nature of the trial court's decision to admit evidence, we do not hesitate to reverse "when the jury was allowed to consider plainly irrelevant and prejudicial evidence." State v. Oppedal, 232 N.W.2d 517, 520 (Iowa 1975).

B. Legal principles governing the admission of evidence of settlement. Iowa Rule of Evidence 408 deals specifically with the relevancy of settlement evidence:

[E]vidence of ... accepting ... 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.... This rule does not require exclusion when the evidence is offered for another purpose, such as proving bias or prejudice of a witness....

Iowa R. Evid. 408. This language is taken verbatim from Federal Rule of Evidence 408. The advisory committee notes that accompanied the federal rule when it was proposed gave this explanation of the rule:

[E]xclusion may be based on two grounds[:] (1)[t]he evidence is irrelevant, since the offer may be motivated by a desire for peace rather than from any concession of weakness of position ... [and] (2) ... [the] promotion of the public policy favoring the compromise and settlement of disputes.... While the rule is ordinarily phrased in terms of offers of compromise, it is apparent that a similar attitude must be taken with respect to completed compromises when offered against a party thereto. This latter situation will not, of course, ordinarily occur except when a party to the present litigation has compromised with a third person.

Fed.R.Evid. 408 advisory committee's note; accord Miller v. Component Homes, Inc., 356 N.W.2d 213, 216 (Iowa 1984) (noting, as reasons for excluding evidence of compromise, that offer of compromise implies merely a desire for peace, not a concession of wrong doing, and public policy favoring settlement of disputes). The committee comments to the Iowa rule state that the Iowa rule is in accord with the federal rule. See Iowa R. Evid. 408 committee comment—1983.

In McHann v. Firestone Tire & Rubber Co., the Fifth Circuit Court of Appeals reversed a trial court ruling allowing into evidence the fact that the plaintiff had settled with a third party. 713 F.2d 161, 165-66 (5th Cir.1983). The court gave the following explanation of the reasons underlying the rule:

Our concern is that the Covenant Not to Sue would have led the jury to deny [the plaintiff's] claim against Firestone based on the perception that [the third party] would not have paid the substantial sum of $27,500 if it ... were not the party at fault. Excluding evidence of the Covenant will eliminate this possible source of prejudice to [the plaintiff], and will carry out the policy of Rule 408 to encourage out-of-court settlements.... [T]he incentive for parties to settle cases involving many [parties] would be undermined if their settlement with one... could come back to haunt them in later suits.

Id. at 166-67 (citations omitted). These reasons are equally valid under Iowa Rule of Evidence 408. See Lewis, 278 N.W.2d at 14 ("It is generally held that offers to compromise disputed claims are inadmissible because they are irrelevant and because policy considerations require their exclusion.").

C. Application of law to present case. In the case before us, the City asserts that the evidence of settlement was relevant to Allen's credibility. Allen testified at trial that the light turned red too fast given the speed of the cars on Oralabor. This testimony supported the plaintiff's claim that the City was negligent, as well as the plaintiff's claim that Allen had a legal excuse for being in the...