Pickett v. Stephens-Nelsen, Inc.

• Decision Date: 01 April 1986
• Docket Number: No. 6837-4-III,INC,STEPHENS-NELSE,6837-4-III
• Citation: 43 Wn.App. 326,717 P.2d 277
• Parties: Jean PICKETT, dba the Paper Trail Establishment, Respondent, v., a Washington corporation, Appellant, and Terry Croskrey, Defendant.
• Court: Washington Court of Appeals

Page 326

43 Wn.App. 326

717 P.2d 277

Jean PICKETT, dba the Paper Trail Establishment, Respondent, v. STEPHENS-NELSEN, INC., a Washington corporation, Appellant, and Terry Croskrey, Defendant.

No. 6837-4-III.

Court of Appeals of Washington,

Division 3, Panel Four.

April 1, 1986.

Mark J. Conlin, Spokane, for appellant.

Edward J. Goss, Goss, Moe & Sampson, Spokane, for respondent.

Bryan P. Harnetiaux, Robert H. Whaley, Winston & Cashatt, Spokane, Susan R. Davis, Burns, Schneiderman & Davis, Seattle, for amicus curiae Wash. State Trial Lawyers Assn THOMPSON, Judge.

Stephens-Nelsen, Inc., appeals the reasonableness of a settlement releasing Terry Croskrey, a codefendant, in a misrepresentation and breach of contract action brought by Jean Pickett, d/b/a The Paper Trail Establishment. We affirm.

In 1982, Mrs. Pickett, who operated an accounting and word processing service, became interested in expanding her business through the acquisition of computer equipment and programs. Mrs. Pickett met and consulted with Mr. Croskrey, a Computerland, Inc., employee. Subsequently, Mr. Croskrey advised Mrs. Pickett that the necessary items could be obtained from Stephens-Nelsen; Mr. Croskrey also informed Mrs. Pickett that he was leaving Computerland for employment with Stephens-Nelsen.

Mrs. Pickett was then taken by Mr. Croskrey to meet Ron Fitzgerald, Stephens-Nelsen's sales manager. Both Mr. Croskrey and Mr. Fitzgerald assured Mrs. Pickett their equipment and programs were what she needed. Mrs. Pickett purchased the system by obtaining a $20,817 mortgage on her home. Although the equipment was installed, it never functioned properly, and was later found incapable of performing the functions specified by Mr. Fitzgerald and Mr. Croskrey.

On May 13, 1983, Mrs. Pickett commenced an action against Stephens-Nelsen and Mr. Croskrey alleging misrepresentation, breach of contract, breach of warranties, and Consumer Protection Act violations. Stephens-Nelsen and its counsel were notified on June 15, 1984 of a pending settlement wherein Mrs. Pickett was going to release Mr. Croskrey for $3,500. A hearing to determine the reasonableness of the settlement was set for June 19, 1984. Following this hearing, the court issued findings of fact and conclusions of law approving the settlement as reasonable. Trial that same day resulted in a judgment against Stephens-Nelsen for $26,646.49, plus costs and attorney fees. This figure includes the $3,500 credit for Mrs. Pickett's release of Mr. Croskrey pursuant to RCW 4.22.060(2).

Stephens-Nelsen claims it received inadequate notice of the reasonableness hearing, the settlement acted as a release of Stephens-Nelsen, and the settlement was unreasonable. We have permitted the Washington State Trial Lawyers Association (WSTLA) to file an amicus curiae brief in this appeal.

RCW 4.22.060(1) provides:

Effect of settlement agreement. (1) A party prior to entering into a release, covenant not to sue, covenant not to enforce judgment, or similar agreement with a claimant shall give five days' written notice of such intent to all other parties and the court. The court may for good cause authorize a shorter notice period. The notice shall contain a copy of the proposed agreement. A hearing shall be held on the issue of the reasonableness of the amount to be paid with all parties afforded an opportunity to present evidence. A determination by the court that the amount to be paid is reasonable must be secured. If an agreement was entered into prior to the filing of the action, a hearing on the issue of the reasonableness of the amount paid at the time it was entered into may be held at any time prior to final judgment upon motion of a party.

Although Stephens-Nelsen contends the notice provisions of this statute were not satisfied, the record indicates that Mr. Croskrey's attorney told Stephens-Nelsen's attorney on May 29 and 30, 1984 that Mr. Croskrey and Mrs. Pickett were negotiating a settlement and "were very close to an agreed amount", and if necessary, a reasonableness hearing would be held at the time of trial. On June 7, 1984, Mr. Croskrey's counsel informed Stephens-Nelsen that Mrs. Pickett and Mr. Croskrey had agreed to settle for $3,500. Therefore, Stephens-Nelsen had actual notice of the hearing more than the required 5 days in advance.

In addition, the statute permits the notice period to be reduced by the court for good cause. RCW 4.22.060(1). Although Stephens-Nelsen claims the court's authorization for a shortened notice period must be evidenced by a written court order, no such language appears in the statute. The statute merely states: "[t]he court may for good cause authorize a shorter notice period". Although the record does not reflect the specific reasons for the shortened notice period, the court did state at the reasonableness hearing:

Mr. Conlin, I recognize the fact that financial affidavits and etcetera have not been supplied to us. However, I am aware as in talking to you, that this matter was discussed of earlier date, and I do feel under the circumstances, again, that $3,500.00 as an offer under reasonableness, is acceptable and will permit it.

Finally, Stephens-Nelsen did not ask for additional time to prepare nor did it object to the notice period at the hearing. A party may waive the right to assert noncompliance with this statute, providing no prejudice ensues. Zamora v. Mobil Oil Corp., 104 Wash.2d 211, 222-23, 704 P.2d 591 (1985). There is neither an assertion nor indication from the record that Stephens-Nelsen was prejudiced by the shortened notice period. Consequently, we hold the notice received by Stephens-Nelsen satisfied RCW 4.22.060(1).

Next, Stephens-Nelsen contends it was also released by the settlement. We disagree. The Legislature overruled the common law and established a right of contribution between joint tortfeasors with the enactment of the Tort Reform Act in 1981. Laws of 1981, ch. 27, § 12, codified as RCW 4.22.040; ¹ Scott v. Cascade Structures, 100 Wash.2d 537, 541, 673 P.2d 179 (1983); Glover v. Tacoma Gen. Hosp., 98 Wash.2d 708, 711, 658 P.2d 1230 (1983). RCW 4.22.060(2) provides:

A release, covenant not to sue, covenant not to enforce judgment, or similar agreement entered into by a claimant and a person liable discharges that person from all liability for contribution, but it does not discharge any other persons liable upon the same claim unless it so provides. However, the claim of the releasing person against other persons is reduced by the amount paid pursuant to the agreement unless the amount paid was unreasonable at the time of the agreement in which case the claim shall be reduced by an amount determined by the court to be reasonable.

Generally, claims against a principal and an agent are treated as separate claims only when the plaintiff settles with an agent who is financially unable to compensate the plaintiff. Glover, at 724, 658 P.2d 1230. Plaintiffs may protect their right to proceed against the principal by asking the judge to state on the record at the reasonableness hearing that in approving the settlement the fact full compensation was unlikely to be obtained from the settling defendant was considered. Glover, at 724 n.4, 658 P.2d 1230. Here, both the findings of fact and the report of proceedings reflect the trial judge considered evidence regarding Mr. Croskrey's ability to fully compensate Mrs. Pickett:

IV.

Defendant TERRY CROSKREY apparently has no liability insurance with which to respond to plaintiff's potential judgment for damages.

V.

Defendant TERRY CROSKREY is a resident of the State of Alaska which could pose difficulties to plaintiff in enforcing a potential judgment against defendant TERRY CROSKREY.

VI.

Defendant TERRY CROSKREY has insufficient personal assets with which to respond to a potential judgment against him by plaintiff JEAN PICKETT.

VII.

The $3,500 offered in settlement by defendant TERRY CROSKREY would not fully compensate plaintiff for her alleged damages, but is acceptable to plaintiff due to TERRY CROSKREY's financial limitations.

Additionally, release of Mr. Croskrey did not affect Stephens-Nelsen's liability for the wrongdoing of its agent Mr. Fitzgerald. Finally, Stephens-Nelsen attacks the trial court's factual determination that Mr. Croskrey would be unable to fully compensate Mrs. Pickett. However, since Stephens-Nelsen offered no evidence on this issue, the record contains only uncontroverted evidence. Consequently, there is no basis to disturb this factual determination on appeal. Glover, at 718, 658 P.2d 1230.

Next, Stephens-Nelsen claims the court erred in determining the settlement was reasonable. Both Mrs. Pickett and amicus urge this court to adopt rules for handling a reasonableness hearing, including a rebuttable presumption that a settlement is reasonable where there is no collusion between the settling parties.

A finding of reasonableness is a factual determination which will not be disturbed on appeal when supported by substantial evidence. Glover, at 718, 658 P.2d 1230. Thus, review is limited to determining whether "[t]he findings are amply sustained by the proofs". Thorndike v. Hesperian Orchards, Inc., 54 Wash.2d 570, 575, 343 P.2d 183 (1959).

At the hearing, Stephens-Nelsen objected to the findings prepared by Mrs. Pickett claiming neither "the plaintiff nor her attorney has provided any information or material or evidence to prove or substantiate those findings". However, Stephens-Nelsen presented no evidence to controvert Mrs. Pickett's affidavits and the testimony of Mr. Croskrey's attorney that there was neither liability insurance nor other assets from which to satisfy a judgment, and enforcement of any judgment would be difficult since Mr. Croskrey now resided in Alaska. It is incumbent upon a party having a significant interest in seeing that the settlement is found to be unreasonable to present some evidence to controvert the settling...