Poston by Poston v. Barnes

• Citation: 294 S.C. 261,363 S.E.2d 888
• Decision Date: 23 March 1987
• Docket Number: No. 22784,22784
• Court: South Carolina Supreme Court
• Parties: , 44 Ed. Law Rep. 796 Gerald Scott POSTON, by his Guardian ad Litem, Gloria Lee POSTON, Respondent, v. Norvell BARNES and Florence County School District # 2, Defendants, of whom Florence County School District # 2 is Appellant. Appeal of FLORENCE COUNTY SCHOOL DISTRICT # 2. . Heard

Page 888

363 S.E.2d 888

294 S.C. 261, 44 Ed. Law Rep. 796

Gerald Scott POSTON, by his Guardian ad Litem, Gloria Lee

POSTON, Respondent, v. Norvell BARNES and Florence County School District # 2, Defendants, of whom Florence County School District # 2 is Appellant.

Appeal of FLORENCE COUNTY SCHOOL DISTRICT # 2.

No. 22784.

Supreme Court of South Carolina.

Heard March 23, 1987.

Decided Oct. 12, 1987.

C. Dexter Powers, of Wright, Powers & McIntosh, Florence, for appellant.

Ronald J. Jebaily, George D. Jebaily, Jebaily & Glass, and Mary Layton Wells, Florence, for respondent.

David W. Keller, Jr., of McGowan, Keller, Eaton, Brodie & Elmore, Florence, for defendant Barnes.

FINNEY, Justice:

This is a personal injury action arising out of a three-vehicle accident. The minor plaintiff Gerald Poston (Poston), respondent, and defendant Norvell Barnes (Barnes), prior to trial, entered into a Covenant Not To Execute or Proceed. This agreement was not disclosed to the jury despite attempts by the appellant, Florence County School District # 2 (School District), to require its disclosure. The jury returned a $375,000 verdict against the defendant and the appellant. We affirm in part, reverse in part and remand for a new trial.

Gerald Poston, a student at Hannah-Pamplico High School, was a passenger in a van owned by Florence School District # 2, and was being transported to Florence as part of his class curriculum. As the van traveled through an intersection, the defendant's automobile collided with the van, causing the van to collide with another vehicle and overturn. The minor respondent was ejected from the van and sustained serious bodily injuries.

While the minor respondent's suit was pending against the defendant and the appellant, a settlement which they designated an "Agreement and Covenant Not to Execute or Proceed Against Norvell Barnes" ¹ was entered into by Barnes, her insurance carrier and Poston. The agreement provided that Barnes would pay Poston $180,000 over a period of years, remain a party defendant, and that Poston would not execute on any judgment against Barnes for any amount in excess of $500 above the $180,000 settlement. The School District's pretrial motion to introduce the settlement agreement was denied as well as its subsequent tender of the agreement into evidence at the trial. The jury returned a verdict of $375,000 against both the defendant Barnes and the appellant School District. The record reflects that the respondent had stipulated that the School District would be entitled to a set-off for the present value of the settlement.

First, appellant alleges the lower court erred in refusing appellant's pretrial and trial motions that the "Agreement and Covenant Not to Execute Against Norvell Barnes" be introduced into evidence. Appellant specifically alleges that the agreement's nondisclosure to the jury made Norvell Barnes a "sham" defendant, thereby deceiving the jury and resulted in an unfair and inequitable verdict.

Our review indicates that determining the legal import of a Covenant Not To Execute or Proceed is a novel issue in this jurisdiction. Other jurisdictions hold that a Covenant Not To Execute is not a satisfaction or a release and that its legal effect is similar to that of a Covenant Not To Sue because it does not operate to release other joint tortfeasors. See, Land v. United States, 231 F.Supp. 883 (N.D.Okla.1964); see also, Ayers v. Pastime Amusement Co., 259 F.Supp. 358 (D.S.C.1966); Rager v. Superior Coach Sales & Service of Ariz., 110 Ariz. 188, 516 P.2d 324 (1974). A Covenant Not To Execute is a promise not to enforce a right of action or execute a judgment when one had such a right at the time of entering into the agreement. See e.g., Ayers v. Pastime Amusement Co., 259 F.Supp. 358; Mercantile Nat. Bank v. Founders Life Assur. Co. of Florida, 236 Ga. 71, 222 S.E.2d 368 (1976). A Covenant Not to Sue and a Covenant Not to Execute are so closely akin that a major distinguishing factor is that the latter is normally executed when a settlement occurs after the filing of a lawsuit, while the former is entered into before a lawsuit is filed. Land v. United States, 231 F.Supp. 883. In South Carolina when a Covenant Not To Sue has been entered into, usually the covenanting tortfeasor is no longer a party to the litigation. See generally, Bartholomew v. McCartha, 255 S.C. 489, 179 S.E.2d 912 (1971).

We are cognizant that litigants are free to devise a settlement agreement in any manner that does not contravene public policy or the law. In fact, this Court encourages such compromise agreements because they avoid costly litigation and delay to an injured party. However, these settlement agreements must be carefully scrutinized in order to determine their efficiency and impact upon the integrity of the judicial process.

In Ward v. Ochoa, 284 So.2d 385 (1973), the Florida Supreme Court was confronted with a similar problem and held that the trial court erred in denying appellant's pretrial and post-trial motions for an order requiring plaintiffs to produce the agreement. The Court stated:

The search for the truth, in order to give justice to the litigants, is the primary duty of the courts. Secret agreements between plaintiffs and one or more of several multiple defendants can tend to mislead judges and juries, and border on collusion. To prevent such deception, we are compelled to hold that such agreements must be produced for examination before trial, when sought to be discovered under appropriate rules of procedure ... 284 So.2d at 387.

The Florida court's reasoning is persuasive. We are of the opinion that any settlement device which does not fully release a defendant, while purporting to do so, is subject to disclosure to the jury. ²

We hold that the settlement agreement's legal designation as a Covenant Not To Execute or Proceed is not a binding determinant of its true nature. ³ Barnes and the School District were being sued as co-tortfeasors and would have been jointly and severally liable. The settlement agreement's label was essentially a facade allowing Barnes to remain a party defendant while...