McConal Aviation, Inc. v. Commercial Aviation Ins. Co.

• Decision Date: 10 October 1990
• Docket Number: No. 18466,18466
• Citation: 799 P.2d 133,1990 NMSC 93,110 N.M. 697
• Parties: McCONAL AVIATION, INC., Plaintiff-Appellee, v. COMMERCIAL AVIATION INSURANCE COMPANY, Defendant-Appellant.
• Court: New Mexico Supreme Court

Page 133

799 P.2d 133

110 N.M. 697

McCONAL AVIATION, INC., Plaintiff-Appellee, v. COMMERCIAL AVIATION INSURANCE COMPANY, Defendant-Appellant.

No. 18466.

Supreme Court of New Mexico.

Oct. 10, 1990.

[110 NM 698] Carpenter, Crout & Olmsted, Rebecca Dempsey, Santa Fe, McClure & Eyler, Richard R. Eyler, Ann C. Rice, Denver, Colo., for defendant-appellant.

Hinkle, Cox, Eaton, Coffield & Hensley, Nancy S. Cusack, Albert L. Pitts, Roswell, for plaintiff-appellee.

OPINION

WILSON, Justice.

Defendant Commercial Aviation Insurance Company, Inc. (Commercial) appeals a trial court judgment awarding Plaintiff McConal Aviation, Inc. (McConal) $65,000 in damages plus interest and costs, without credit for amounts paid by another settling defendant. We affirm the trial court.

FACTS

In October 1984 Falcon Insurance Agency (Falcon) and McConal agreed that Falcon would obtain property insurance for an aircraft owned by McConal. McConal executed an installment contract to pay for the insurance and Falcon indicated that the policy was effective beginning October 12, 1984. Falcon then contacted Aviation General Insurance Company, Inc. (Aviation), an insurance broker, to obtain an insurance binder for McConal's policy. At Aviation's request Commercial issued a binder for a thirty-day period, ending November 12, 1984. Commercial then sent Aviation a letter requesting that McConal fill out an application for insurance and return it before the binder expired. Although Aviation apparently received a timely completed application and subsequently forwarded it to Commercial, Commercial did not receive it until November 25, 1984, thirteen days after the binder expired.

McConal was unaware that its aircraft was insured for only one month. On November 21, 1984 the aircraft was involved in a crash and sustained $47,369.30 in damages. When McConal requested monies to repair the aircraft, Falcon disclosed that the insurance was not in effect at the time of the crash and refused to pay.

On August 26, 1985 McConal sued Falcon, Aviation, and Commercial alleging breach of contract, negligence, bad faith, and deceptive trade practices. Specifically, McConal alleged: (1) Falcon breached its contractual duty to procure property insurance for the aircraft; (2) Falcon was Commercial's agent and Commercial was thus liable as its principal; and (3) Aviation was negligent in failing to forward to Commercial the information necessary to continue McConal's policy. McConal sought compensatory damages, punitive damages, and treble damages pursuant to the Unfair Trade Practices Act, NMSA 1978, Section 57-12-1 et seq.

Falcon never appeared in the action. A week prior to trial, Aviation settled with McConal for $40,000 and trial was held solely against Commercial. The trial court granted Commercial's motion for a directed verdict as to the negligence count, and McConal withdrew the deceptive trade practices claim. Thus the only claim remaining for the jury was for breach of contract against Commercial.

Among the proposed jury instructions Commercial submitted was a modified version of SCRA 1986, 13-1825 (UJI 1825), which the court rejected on grounds that the jury was not entitled to be informed of a prior settlement. The jury was not told of the other original defendants and was merely instructed as to McConal's damages. The jury returned a $65,000 verdict in McConal's favor.

After the verdict, Commercial argued that it should receive a $40,000 credit towards the judgment, representing the amount of Aviation's settlement with McConal. The trial court denied Commercial's motion for a credit for the settlement amount and entered judgment against Commercial for $65,000. Commercial appeals the trial court's judgment.

ISSUES

On appeal Commercial claims the trial court erred in: (1) refusing to submit Commercial's requested jury instruction based on UJI 1825, and (2) refusing to credit the amount of Aviation's settlement with McConal toward the judgment against Commercial. We address each issue in turn.

DISCUSSION

1. Jury Instruction

Commercial first claims the trial court erred by refusing to submit its modified version of the uniform jury instruction on contribution among tortfeasors.

The directions for use of UJI 1825 state that "[t]his instruction is to be used only where a joint tortfeasor has been released in conformity with the Uniform Contribution Among Tortfeasors Act, 41-3-1, NMSA 1978 * * * * " (emphasis added). For purposes of the Contribution Among Tortfeasors Act, "the term 'joint tortfeasors' means two or more persons jointly or severally liable in tort for the same injury to person or property, whether or not judgment has been recovered against all or some of them." NMSA 1978, 41-3-1 (Repl.Pamp.1989) (emphasis added).

In this case Commercial successfully obtained a dismissal of the complaint of negligence and the matter went to the jury only on the breach of contract claim. Therefore, the jury was not deciding a tort claim but a contract claim. Also, there was never a determination of liability against Aviation, so there has been no finding that any defendant is a tortfeasor. Thus the trial court did not err; the instruction was properly refused.

2. Credit of McConal's Settlement

Commercial contends that the trial court committed reversible error by refusing to credit the amount paid in settlement by Aviation to the verdict entered against Commercial. Commercial asserts that the failure to credit the amount paid by Aviation results in an impermissible double recovery by McConal. The argument is based on the contention that "McConal sued several Defendants to redress the one wrong which it suffered. It was clearly seeking only one recovery arising from the one incident." We cannot agree.

The jury found that a valid contract existed between McConal and Commercial and then found damages of $65,000 resulted from Commercial's breach of the contract. The claim against Aviation was for negligence in failing to forward the application. Had that claim also gone to the jury it might well have awarded McConal additional damages caused by Aviation's negligence. That would not have represented double recovery for the same wrong, and this fact is not changed by Aviation's decision to settle any claims against it.

McConal, on the other hand, asserts that the settlement with Aviation falls squarely within the confines of Exum v. Ferguson, 97 N.M. 122, 637 P.2d 553 (1981), and therefore should not be credited against the jury award against Commercial. We agree that Exum controls in this case.

In Exum the plaintiff sued two defendants, one of whom settled with the plaintiff prior to trial. The case proceeded against the remaining defendant based on a breach of contract claim. The defendant requested that the amount of the settlement be credited against the jury award, based on the Uniform Contribution Among Tortfeasors Act. The trial court refused to credit the settlement amount against the damages awarded by the jury for breach of contract. This court upheld the trial court, pointing out that no tort claim had been made against the remaining defendant. We held that "[b]ecause Occidental's and Ferguson's suits were based on different theories of liability, they are not joint tort-feasors and Ferguson is not entitled to a credit of Occidental's settlement." Id. at 125, 637 P.2d at 556. Likewise, this case was not tried under a tort theory. Therefore, Commercial and Aviation are not joint tortfeasors, and Commercial is not entitled to credit for the settlement paid by Aviation.

Commercial attempts to distinguish Exum by pointing out that in that case it was the insurer that had settled with the plaintiff on a breach of contract claim and the case proceeded to trial on tort claims against another defendant, whereas in this case an alleged tortfeasor settled with McConal and only the breach of contract suit against the insurer was tried. We find this distinction to be irrelevant. As in Exum, there are no joint tortfeasors involved in this case.

Commercial also argues that in New Mexico a plaintiff cannot recover more than his actual losses. While this is a correct statement of the general rule, an exception is the collateral source rule. The collateral source rule allows a plaintiff to recover his full losses from the responsible defendant, even though he may have recovered part of his losses from a collateral source.

As a general rule, benefits received by the plaintiff from a source collateral to the tortfeasor or contract breacher may not be used to reduce the defendant's liability for damages. This rule holds even though the benefits are payable to the plaintiff because of the defendant's actionable conduct and even though the benefits are measured by the plaintiff's losses.

D. Dobbs, Handbook on the Law of Remedies Sec. 3.6, at 185 (1973).

We find persuasive the case of Rose v. Hakim, 335 F.Supp. 1221 (D.D.C.1971) cited by McConal. The Hakim case involved a malpractice claim where the plaintiff settled with two of the medical practitioners for the sum of $270,000 and then took the defendant hospital to trial, recovering a jury verdict of $294,777.25, representing full compensation to the plaintiff. After the jury verdict the defendant hospital claimed the right to credit for the $270,000 paid by the settling defendants.

In rejecting the hospital's claim, the court noted that the settling defendants were found to be free of fault by the jury and that they were therefore not tortfeasors, as they had committed no tort. The amounts paid by the settling defendants were, "in the legal sense, voluntary. They were, in legal terminology, collateral sources." Id. at 1236. The court then quoted Hudson v. Lazarus, 217 F.2d 344, 346 (D.C.Cir.1954):

"In general the law seeks to award compensation, and no more, for personal injuries negligently inflicted. Yet an injured person may usually recover in full from a wrongdoer regardless of anything he...