Mi-Jack Products, Inc. v. Braneff

• Decision Date: 12 March 1992
• Docket Number: MI-JACK,No. 01-90-00002-CV,01-90-00002-CV
• Citation: 827 S.W.2d 493
• Parties: PRODUCTS, INC. and Mi-Jack Intermodel, Appellant, v. Thomas BRANEFF, Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 493

827 S.W.2d 493

MI-JACK PRODUCTS, INC. and Mi-Jack Intermodel, Appellant, v. Thomas BRANEFF, Appellee.

No. 01-90-00002-CV.

Court of Appeals of Texas Houston (1st Dist.).

March 12, 1992.

Robert M. Roach, Jr., David W. Holman, Solace H. Kirkland, Houston, for appellant.

Larry P. Boyd, Richard L. Lagarde, Houston, for appellee.

Before DUGGAN, COHEN and DYESS, ¹ JJ.

OPINION

DUGGAN, Justice.

This is an appeal from a judgment awarding damages on a jury verdict in favor of the plaintiff in a personal injury case. The controlling issue concerns the application of rule 408 of the Texas Rules of Civil Evidence in determining the admissibility of a "Mary Carter" agreement. ² We hold, in the circumstances of the case, that evidence of the agreement should have been admitted to prove the interests of the settling parties.

On October 20, 1982, appellee Thomas Braneff's right leg was crushed by a Travelift gantry crane. The extent of the injury necessitated amputation of his leg below the knee. Braneff sued three defendants, alleging theories of negligence and products liability: Southern Pacific Railroad Company ("Southern Pacific" or "SP"), the owner of the crane; Mi-Jack Products, Inc. and Mi-Jack Intermodel, a division of Mi-Jack Products, (collectively "Mi-Jack"), the assembler and distributor of the crane; and J.I. Case ("Case"), the manufacturer of the crane. Mi-Jack filed cross-actions for contribution and indemnity against SP and Case.

The morning of trial, Braneff entered into a settlement agreement with SP and Case. However, Braneff did not nonsuit these defendants. Neither did Mi-Jack move to sever its cross action against them. Under the terms of the unwritten agreement, ³ Southern Pacific and Case each limited its liability to Braneff to $100,000. In addition, the two defendants' liability would be completely extinguished if Braneff's recovery against Mi-Jack exceeded $400,000. Braneff also agreed to indemnify SP and Case from further liability. By virtue of these terms, SP and Case acquired a financial interest in Braneff's recovery from Mi-Jack. However, Braneff states that there was no agreement that Southern Pacific or Case would cooperate with Braneff or "go easy on him" in the trial of the case. Nevertheless, based upon the terms of the agreement, the interests of the two settling defendants clearly were contrary to those of Mi-Jack, the remaining defendant at trial.

The case was tried to a jury which unanimously found both Southern Pacific and Mi-Jack negligent, attributing 65 percent of the responsibility for Braneff's injuries to SP and 35 percent to Mi-Jack. The jury's $2,002,000 damage award was reduced by 65 percent, and judgment was entered against Mi-Jack on the jury's verdict for total damages in the amount of $700,700 plus prejudgment interest. Therefore, under the terms of the Mary Carter agreement, Southern Pacific's and Case's liability was extinguished, and Braneff would recover nothing from those defendants.

On appeal, Mi-Jack raises six points of error. First, Mi-Jack challenges the trial court's exclusion of all evidence of the Mary Carter agreement between Braneff and the settling defendants. (Point one.) Mi-Jack also challenges the trial court's decision permitting the settling defendants to participate at trial. (Point two.) Mi-Jack also attacks both the legal and factual sufficiency of the evidence to support the jury's failure to find that Braneff was contributorily negligent. (Points three and four.) In conjunction with this complaint, Mi-Jack contends that the trial court erred in its instruction to the jury concerning Braneff's failure to discover or guard against a product defect. (Point five.) Finally, Mi-Jack claims that the evidence was factually insufficient to support the jury's finding that Mi-Jack was negligent. (Point six.)

The threshold question presented is whether, under the circumstances that existed in this case, evidence of the Mary Carter agreement should have been admitted at trial even though Mi-Jack, the non settling defendant, was unable to demonstrate bias or prejudice on the part of any testifying witness that warranted impeachment. Because we conclude that the court's exclusion of the evidence was harmful error, we sustain Mi-Jack's first point of error and reverse and remand for a new trial.

When a settling defendant acquires, by way of a Mary Carter agreement, a financial interest in the plaintiff's recovery against a non settling defendant, the settling defendant is no longer aligned against the plaintiff in a traditional sense with the non settling defendant. The settling party has an obvious incentive to assist the plaintiff's case against the non settling defendant, because the Mary Carter agreement provides for a reduction of its own liability, depending on the size of the total verdict. The more successful the plaintiff is against the non settling defendant, the less the settling defendant will have to pay.

Courts have consistently presumed under these circumstances that the shift in the settling defendant's position in relation to the other parties will in some way alter the manner of his participation at trial. For example, even though a non settling defendant would be expected to point the finger at a co-defendant on the issue of liability, that same defendant, because of its own continuing potential liability, will also seek generally to minimize the amount of the plaintiff's recovery. On the other hand, it is highly likely that a Mary Carter defendant will seek to increase the amount of the plaintiff's recovery against the non settling defendant.

In its first point of error, Mi-Jack argues that the trial court committed reversible error in completely excluding evidence of the Mary Carter agreement. Mi-Jack contends that the agreement was admissible under TEX.R.CIV.EVID. 408 to show the bias, prejudice, or interest of SP and Case, and argues that the jury must have been confused by the settling defendants' "lack of zeal" in cross-examination and their "pattern of lackluster challenges" to Braneff's evidence. Further, according to Mi-Jack, the closing arguments by the lawyers for the settling defendants were necessarily misleading and dealt a "devastating blow" to the real defendant, Mi-Jack, because they urged the jury to believe Braneff's testimony and to sympathize with the extent of his injuries. ⁴ Mi-Jack contends the alleged error resulted in an improper verdict.

Braneff and Mi-Jack agree that under Texas law the jury may be entitled to know about the existence of a Mary Carter agreement. However, the parties are sharply divided on the proper method of admitting the evidence and the circumstances warranting its admission.

While Mi-Jack insists that admission is not so narrowly restricted, Braneff contends that evidence of a Mary Carter agreement is admissible only on cross-examination for purposes of impeachment of a witness shown to be biased by it. Therefore, according to Braneff, the trial court properly excluded the evidence in this case because Mi-Jack was unable to demonstrate bias on the part of any witness that would have warranted introduction of the evidence for impeachment.

Braneff points out specifically that Mi-Jack attempted to introduce the agreement in four instances, all of which allegedly were improper:

(1) During voir dire, Mi-Jack argued that the agreement could be disclosed upon a showing of anticipation that there will be bias or prejudice of witnesses during the trial. ⁵ Braneff argued that the agreement was not admissible during voir dire; ⁶ its admission would be proper only for purposes of impeachment if the settling defendants called witnesses to participate and assist Braneff in presenting his case or if Braneff called the settling defendants' witnesses.

(2) Outside the presence of the jury, Mi-Jack attempted to impeach Braneff's expert witness, Dr. Johnson, with the agreement. Mi-Jack was unable to establish that Dr. Johnson knew of the agreement or that his testimony was affected by it in any way.

(3) Even though Braneff did not testify about Mi-Jack on direct examination, Mi-Jack attempted to establish a basis for impeaching him with the agreement. Mi-Jack's bill of exceptions indicates that Braneff knew very little about the agreement ("I just know something about a hundred thousand dollars.") and understood even less ("I heard them talking, you know, some kind. That's all I know. If it had been discussed, I didn't understand it.").

(4) After SP's attorney made his closing argument, Mi-Jack again urged disclosure of the agreement, arguing that the tenor of SP's argument was calculated to increase the plaintiff's damages and, therefore, warranted informing the jury of the true alignment of the parties.

In each of these instances, according to Braneff, the trial court correctly refused to admit evidence of the agreement. Mi-Jack insists, on the other hand, that the refusal was reversible error. Resolution of this issue is controlled by the supreme court's holding in General Motors Corp. v. Simmons, 558 S.W.2d 855, 857 (Tex.1977), and the language and the intent of rule 408 of the Texas Rules of Civil Evidence.

The Admissibility of Mary Carter Agreements under General Motors Corp. v. Simmons

The Texas Supreme Court first addressed the question of admissibility of Mary Carter agreements in General Motors Corp. v. Simmons, 558 S.W.2d 855, 857 (Tex.1977), a case that predates the adoption of rule 408 by six years.

Simmons involved the first Mary Carter agreement to reach the Texas Supreme Court. In that case, Simmons was involved in a collision with a truck owned by Feld Leasing and operated by its employee, Johnston. Simmons was blinded by flying glass when his car window shattered on impact. He sued Feld and Johnston in negligence, and he sued General Motors Corporation in products liability, contending that the glass in his automobile was defective. The defendants filed...