Nelson v. Johnson

Decision Date25 August 1999
Docket NumberNo. 980324.,980324.
Citation599 N.W.2d 246,1999 ND 171
PartiesJames E. NELSON and Kathleen F. Nelson, husband and wife, individually and as the surviving parents of Matthew E. Nelson, deceased, Plaintiffs and Appellees, v. Scott W. JOHNSON, Defendant and Appellant, and William Johnson and Michel J. DuFault, Defendants.
CourtNorth Dakota Supreme Court

H. Patrick Weir, Jr., Lee Hagen Law Office, Ltd., Fargo, for plaintiffs and appellees.

Bernard E. Reynolds, Gunhus, Grinnell, Klinger, Swenson & Guy, Moorhead, for defendant and appellant.

MARING, Justice.

[¶ 1] Scott W. Johnson appealed from an amended judgment awarding James E. Nelson and Kathleen F. Nelson $825,681.47 in a wrongful death action, and from an order denying his post-trial motion to deduct from the jury's damage award $175,000 the Nelsons received from a release and settlement agreement with an additional defendant, William Johnson. We affirm.

I

[¶ 2] On November 12, 1995, Matthew Nelson, the Nelsons' eight-year-old son, died from injuries suffered in an automobile accident in West Fargo, when Scott Johnson, who was driving his father's pick-up, collided with the Nelsons' vehicle. The Nelsons brought a wrongful death action against Scott and his father, William Johnson, and against Michael J. DuFault, the driver of another vehicle who was allegedly "[r]acing" with Scott Johnson when the accident occurred.

[¶ 3] Before trial, the Nelsons entered into a settlement agreement with William Johnson. In exchange for payment of $175,000, the Nelsons released and discharged William Johnson from liability "for the acts or omissions of Scott W. Johnson." The settlement agreement further provided:

The [Nelsons] intend by this Release to only release William Johnson for vicarious liability of the type generally referred to in Keator v. Gale, 561 N.W.2d 286 (N.D.1997), and reserve all other claims against Scott W. Johnson and Michel J. DuFault as aforesaid. The [Nelsons] deny that William Johnson is a tortfeasor, joint or otherwise, with any other person regarding this claim, and they further declare this Release does not extend to any possible claim against William Johnson other than his said vicarious liability.

Scott Johnson was not a party to the settlement agreement and the agreement said nothing about deducting the settlement amount from a future jury verdict.

[¶ 4] At trial, Scott Johnson admitted liability, but contested the amount of damages claimed by the Nelsons. Scott Johnson moved for a directed verdict in his favor, arguing the Nelsons' release of William Johnson, who was vicariously liable under the family purpose doctrine, also released himself. He argued, alternatively, any damages found by the jury should be offset by the settlement proceeds paid by his father for release of his vicarious liability.

[¶ 5] The jury found Scott Johnson was negligent and his negligence was the sole proximate cause of the collision. The jury found Michel DuFault was not negligent. The jury awarded the Nelsons $810,457.96 in compensatory damages against Scott Johnson.

[¶ 6] Scott Johnson moved after trial to have the $175,000 settlement proceeds subtracted from the jury verdict. The trial court refused to subtract the settlement amount from the jury verdict, reasoning:

William Johnson is not a joint tort-feasor with Scott. Scott was not a party to the Release nor is he a beneficiary of it. The $175,000.00 paid by William was not a contribution to an award, but a settlement of a claim against him.

The court entered an amended judgment awarding the Johnsons $825,681.47. Scott Johnson appealed.

II

[¶ 7] There are no factual disputes in this appeal. The issue in this case, which involves the application and interpretation of statutes and decisional law, is a question of law fully reviewable by this Court. Narum v. Faxx Foods, Inc., 1999 ND 45, ¶ 18, 590 N.W.2d 454.

[¶ 8] William Johnson's liability was premised solely on the family purpose doctrine. That doctrine, adopted by this Court 80 years ago, is founded on the theory the driver of a family car, in pursuit of recreation or pleasure, is engaged in the owner's business and is viewed as either the agent or servant of the owner. E.g., Schobinger v. Ivey, 467 N.W.2d 728, 729 (N.D.1991)

. The respondeat superior theoretical basis for the doctrine is a fiction created in furtherance of the public policy of giving an injured party a cause of action against a financially responsible defendant. E.g., Herman v. Magnuson, 277 N.W.2d 445, 455 (N.D.1979). Under the family purpose doctrine, the owner of the vehicle is not liable for his own negligence, but is vicariously liable for the tortious acts of the driver. See Nelson v. Gillette, 1997 ND 205, ¶ 10, 571 N.W.2d 332. William Johnson paid the Nelsons $175,000 to release himself from this "vicarious liability of the type generally referred to in Keator v. Gale ...."

[¶ 9] In Keator v. Gale, 1997 ND 46, 561 N.W.2d 286, we held the release of a master's vicarious liability does not, as a matter of law, release the directly negligent servant's primary liability. We distinguished Horejsi v. Anderson, 353 N.W.2d 316, 318 (N.D.1984), in which this Court held the release of an employee constituted a release of the "single share" of liability attributable jointly to the master and servant, and thus the master's vicarious liability was also released. In Keator, 1997 ND 46, ¶¶ 11, 13-14, 561 N.W.2d 286, we rejected the argument that the release of the vicariously liable employer must also release the servant's liability, reasoning:

There are far different policy concerns presented when an actively negligent tortfeasor seeks to escape liability by a plaintiff's release of a vicariously liable master. The result in Horejsi is premised to a great degree upon the active/passive distinction between the liability of the servant and the master. A master's vicarious liability is based entirely upon the underlying wrongful conduct of the servant, not upon any active wrongdoing by the master. Thus, release of the servant "remove[s] any foundation upon which to impute negligence to the employer." Horejsi at 319 (quoting Holmstead v. Abbott G.M. Diesel, Inc., 27 Utah 2d 109, 493 P.2d 625, 628 (1972)).
....
The result in Horejsi was effectively pre-ordained by the nature of a Pierringer release and the vicariously liable master's right to indemnity against the servant. The plaintiff's agreement to indemnify the settling defendant for any subsequent claims for indemnity or contribution is an "indispensable characteristic" of a Pierringer release. Kellen [v. Mathias, 519 N.W.2d 218, 222 (Minn. Ct.App.1994)]. A vicariously liable party is entitled to indemnity from the party who directly caused the injury. Horejsi at 318-319. We thus noted in Horejsi that a circle of indemnity would be created if the release of the servant did not release the vicarious liability of the master: If the plaintiff recovered at trial from the non-settling master, the master would have a right of indemnity against the released servant, who, under the terms of the release, would have a right of indemnity against the plaintiff. Thus, the circle is completed, leaving the plaintiff with no additional recovery through the suit against the master. See Horejsi at 318-320. The release of the servant effectively precludes any meaningful recovery from the vicariously liable master. Horejsi; see also Thompson v. Brule, 37 F.3d 1297, 1301 (8th Cir.1994)

; Jakubs v. Fruehauf Corp., 435 F.Supp. 908, 908 (N.D.Ill.1977); Kellen at 222.

The result is vastly different when the master is released and the negligent servant is sued. Because the servant has no corresponding right to indemnity from the master, the circle of indemnity does not exist. Unlike the situation in Horejsi, [the employee] has no right of indemnity against his employer ... for damages he may be ordered to pay for his own negligent conduct. Thus, the policy concerns expressed in Horejsi are absent in this case.

[¶ 10] Under our analysis in Keator and Horejsi, the Nelsons' settlement with and release of William Johnson did not constitute a release of Scott Johnson.

[¶ 11] Scott Johnson makes a three-pronged argument to support his position the settlement amount should have been deducted from the jury verdict. He contends: (1) N.D.C.C. § 32-38-04(1) compels this result; (2) a refusal to deduct the settlement amount from the verdict would result in a double recovery; and (3) it would be inequitable to hold him liable in excess of the amount of damages assessed by the jury.

[¶ 12] When enacted in 1957, N.D.C.C. § 32-38-04(1) provided:

When a release or a covenant not to sue or not to enforce judgment is given in good faith to one of two or more persons liable in tort for the same injury or the same wrongful death:
1. It does not discharge any of the other tort-feasors from liability for the injury or wrongful death unless its terms so provide; but it reduces the claim against the others to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for it, whichever is the greater.

(Emphasis added).

[¶ 13] As enacted, N.D.C.C. § 32-38-04(1) might have supported Scott Johnson's position. See Levi v. Montgomery, 120 N.W.2d 383, 389 (N.D.1963)

. However, in Bartels v. City of Williston, 276 N.W.2d 113, 120-22 (N.D.1979), this Court ruled the Legislature's enactment of the comparative negligence act, N.D.C.C. § 9-10-07,1 impliedly repealed and amended N.D.C.C. § 32-38-04(1) to provide that in determining the right of a tortfeasor to contribution in a comparative negligence action, the pro rata shares of the common liability are to be determined in proportion to the percentage of negligence attributable to each tortfeasor under N.D.C.C. § 9-10-07, and not by the amount stipulated in the release or the amount of consideration paid for the release.2 The terms of N.D.C.C. § 32-38-04(1), as impliedly repealed and...

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