Hager v. Marshall

• Decision Date: 18 June 1998
• Docket Number: No. 24746.,24746.
• Citation: 505 S.E.2d 640,202 W.Va. 577
• Court: West Virginia Supreme Court
• Parties: Sidney HAGER and Sandra Hager, his Wife and Attorney-in-Fact; Joshua C. Parks, an Infant Under the Age of Eighteen Years Who Sues By His Guardian, Father and Next Friend, Ronny L. Parks, and Ronny L. Parks; and Holley Beth Myers, an Infant Under the Age of Eighteen Years Who Sues By Her Guardian, Mother and Next Friend, Cynthia Phillips, and Cynthia Phillips, Plaintiffs Below, Appellees, v. James MARSHALL, Defendant Below, Appellee, v. The EQUITABLE INSURANCE COMPANY, a Foreign Corporation; Equitable Variable Life Insurance Company (EVLICO), a Subsidiary of the Equitable; Equico Securities, Inc., a Subsidiary of the Equitable Insurance Company; and Joe V. Funderburk, Third-Party Plaintiffs Below, Appellants, v. PACIFIC FIDELITY INSURANCE COMPANY, General Services Life Insurance Company, Kennesaw Life & Accident Insurance Company, Old Colony Life Insurance Company, Anchor Brokerage Centre, Inc., Aegon USA, Bankers United Life Assurance Company, and Aetna Life Insurance and Annuity Company, Third-Party Defendants Below, Appellees.

505 S.E.2d 640

202 W.Va. 577

Sidney HAGER and Sandra Hager, his Wife and Attorney-in-Fact; Joshua C. Parks, an Infant Under the Age of Eighteen Years Who Sues By His Guardian, Father and Next Friend, Ronny L. Parks, and Ronny L. Parks; and Holley Beth Myers, an Infant Under the Age of Eighteen Years Who Sues By Her Guardian, Mother and Next Friend, Cynthia Phillips, and Cynthia Phillips, Plaintiffs Below, Appellees, v. James MARSHALL, Defendant Below, Appellee, v. The EQUITABLE INSURANCE COMPANY, a Foreign Corporation; Equitable Variable Life Insurance Company (EVLICO), a Subsidiary of the Equitable; Equico Securities, Inc., a Subsidiary of the Equitable Insurance Company; and Joe V. Funderburk, Third-Party Plaintiffs Below, Appellants, v. PACIFIC FIDELITY INSURANCE COMPANY, General Services Life Insurance Company, Kennesaw Life & Accident Insurance Company, Old Colony Life Insurance Company, Anchor Brokerage Centre, Inc., Aegon USA, Bankers United Life Assurance Company, and Aetna Life Insurance and Annuity Company, Third-Party Defendants Below, Appellees.

No. 24746.

Supreme Court of Appeals of West Virginia.

Submitted May 13, 1998.

Decided June 18, 1998.

Martin J. Glasser, John A.W. Lohmann, Lewis, Friedberg, Glasser, Casey & Rollins, Charleston, Carl S. Kravitz, Caplin & Drysdale, Washington, D.C., for Hager, et al.

John M. Slack, III, Mychal S. Schulz, Jackson & Kelly, Charleston, for Equitable, EVLICO & Funderburk.

Tammy R. Harvey, Robert P. Martin, Bastien & Martin, Charleston, for Pacific Fidelity, General Services Life, Aegon & Bankers United.

Thomas V. Flaherty, Christopher W. Jones, Flaherty, Sensabaugh & Bonasso, Charleston, for Anchor Brokerage Centre, Inc. MAYNARD, Justice:

This case is before this Court upon appeal of two orders of the Circuit Court of Boone County entered upon April 15, 1997, and April 17, 1997. The appellants, The Equitable Insurance Company, Equitable Variable Life Insurance Company, Equico Securities, Inc., and Joe V. Funderburk [hereinafter "Equitable"] contend that the circuit court erred in finding that a settlement between the plaintiffs below and the third-party defendants, Pacific Fidelity Life Insurance [hereinafter "Pacific Fidelity"], General Services Life Insurance Company [hereinafter "General Services"], Bankers United Life Assurance Company [hereinafter "Bankers United"], and Aegon USA [hereinafter Aegon] was in good faith. Equitable also contends that the circuit court erred in dismissing its claims for implied indemnity because of the settlement. Equitable further asserts that the circuit court erred in granting summary judgment to third-party defendant Anchor Brokerage Centre, Inc. [hereinafter "Anchor Brokerage"].

This Court has before it the petition for appeal, the designated record, and the briefs and argument of counsel. For the reasons set forth below, we affirm the orders of the circuit court.

I

In July 1994, Sidney and Sandra Hager, Ronny L. Parks, individually, and on behalf of Joshua C. Parks, and Cynthia Phillips, individually, and on behalf of Holley Beth Myers [hereinafter "plaintiffs"], filed suit against Equitable and James Marshall. The complaint alleged that Mr. Marshall had sold annuities to the plaintiffs, all of whom had received large personal injury settlements. The complaint further alleged that Mr. Marshall began to steal money from some of the annuities and to "twist or churn" other annuities to his benefit.¹ As a result, the plaintiffs claimed that they suffered losses in excess of $642,000.00.

The plaintiffs maintained that Mr. Marshall presented himself as an agent of Equitable with actual and apparent authority and represented that he was selling them Equitable products. His office, as well as his stationary and business cards, bore Equitable's name. Therefore, plaintiffs asserted that Equitable was liable for the losses caused by Mr. Marshall's fraudulent conduct.²

In response to the complaint, Equitable asserted that Mr. Marshall diverted business from Equitable while acting as the agent of Pacific Fidelity and General Services. While a contract existed between Mr. Marshall and Equitable providing that he was an agent of Equitable, Mr. Marshall was also apparently an agent for twenty-six different companies. Of the nine fraudulent annuity transactions in this case, seven of the annuities Mr. Marshall sold to the plaintiffs were products of Pacific Fidelity and General Services. Equitable claimed that it had no knowledge of the various sales and transactions regarding the other companies' products. Accordingly, in June 1996, Equitable filed a third-party complaint against Pacific Fidelity, General Services, Bankers United, Aegon, and Anchor Brokerage³ alleging that Mr. Marshall was an agent of the third-party defendants and that they knew or should have known of his wrongful and/or negligent acts.

On November 27, 1996, the plaintiffs entered into a settlement with Pacific Fidelity, General Services, Bankers United, and Aegon in the amount $27,500.00. In exchange, the plaintiffs agreed to release the settling third-party defendants from any and all claims the plaintiffs had or may have had resulting from and relating to the allegations set forth in the complaint. Thereafter, Equitable contested the settlement on the grounds that it was not made in good faith.

On April 15, 1997, the circuit court entered an order finding that the settlement was in good faith. The circuit court also dismissed Equitable's claims for contribution and implied indemnity against the settling third-party defendants because of the settlement. At the same time, the circuit court considered a motion for summary judgment filed by Anchor Brokerage, the other third-party defendant. Anchor Brokerage claimed that it merely performed a clerical role in facilitating certain transactions between Mr. Marshall and some of the companies. Equitable asserted Mr. Marshall was actually an agent of Anchor Brokerage, and therefore, it was liable to the plaintiffs and/or the third-party plaintiffs for its negligence, breach of duties, and/or wrongful conduct. By order entered on April 17, 1997, the circuit court granted summary judgment in favor of Anchorage Brokerage and dismissed it from the suit.

Subsequently, the plaintiffs settled their claims with Equitable for $2,000,000.00. The third-party defendants declined to contribute toward the settlement. This appeal followed.

II

As its first assignment of error, Equitable contends that the circuit court erred in finding that the settlement agreement reached between the plaintiffs and the settling third-party defendants was in good faith. When we review challenges to the findings and conclusions of a trial court, we apply a two-prong standard of review. The final order and the ultimate disposition are reviewed under an abuse of discretion standard while the circuit court's underlying factual findings are reviewed under a clearly erroneous standard. Questions of law are subject to a de novo review. Phillips v. Fox, 193 W.Va. 657, 661, 458 S.E.2d 327, 331 (1995). See also Syllabus Point 1, Burnside v. Burnside, 194 W.Va. 263, 460 S.E.2d 264 (1995).

With regard to whether a settlement was made in good faith, we have specifically held that:

The determination of whether a settlement has been made in good faith rests in the sound discretion of the trial court. The focus of the trial court's determination is not whether the settlement fell within a "reasonable range" of the settling tortfeasor's proportional share of comparative liability, but whether the circumstances indicate that the non-settling tortfeasor was substantially deprived of a fair trial because of corrupt behavior on the part of the plaintiff and the settling tortfeasor or tortfeasors. The determination of the trial court may be based on such evidence as its deems appropriate in the circumstances. In many (if not most) cases, a review of discovery documents and affidavits from counsel will be sufficient. The trial court may, in its discretion, conduct a hearing on the issue, but it is not required to do so.

Syllabus Point 7 of Smith v. Monongahela Power Co., 189 W.Va. 237, 429 S.E.2d 643 (1993).

In Smith, we developed the definition of a "good faith settlement" in West Virginia. In Syllabus Point 5, we stated:

Settlements are presumptively made in good faith. A defendant seeking to establish that a settlement made by a plaintiff and a joint tortfeasor lacks good faith has the burden of doing so by clear and convincing evidence. Because the primary consideration is whether the settlement arrangement substantially impairs the ability of remaining defendants to receive a fair trial, a settlement lacks good faith only upon a showing of corrupt intent by the settling plaintiff and joint tortfeasor, in that the settlement involved collusion, dishonesty, fraud or other tortious conduct.

With this standard in mind, we then set forth several factors for the trial court to consider when making the determination of whether a settlement was in good faith. In Syllabus Point 6 of Smith, we provided:

Some factors that may be relevant to determining whether a settlement lacks good faith are: (1) the amount of the settlement in comparison to the potential liability of the settling tortfeasor at the time of settlement, in view of such considerations as (a) a recognition that a tortfeasor should pay less in settlement than after an unfavorable trial verdict, (b) the expense of litigation, (c) the probability that the plaintiff would win at trial, and (d) the insurance limits and solvency of all joint tortfeasors; (2) whether the settlement is supported b consideration; (3) whether the motivation of the settling plaintiff and settling tortfeasor was to single out a non-settling defendant or defendants for wrongful tactical gain; and (4) whether there exists a relationship, such as family ties or an employer-employee relationship, naturally conducive to

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