Price v. Baker

Decision Date07 December 1959
Docket NumberNo. 18348,18348
Citation143 Colo. 264,352 P.2d 90
PartiesR. P. PRICE and H. P. Kusserow, Plaintiffs in Error, v. Charles L. BAKER, Defendant in Error.
CourtColorado Supreme Court

Calkins, Rodden & Kramer, Denver, for plaintiffs in error.

Alden T. Hill, Ralph H. Coyte, Fort Collins, for defendant in error.

SUTTON, Justice.

This writ of error involves the question of whether a so-called covenant not to sue, as hereinafter described, is to be construed as a release in a tort action. The parties appear here in the same order as in the trial court where the court entered a judgment of dismissal in favor of defendant Baker upon his motion for summary judgment. We shall hereafter refer to Price and Kusserow by name or as plaintiffs and to the defendants by name. It appears that one of the defendants below, Charles L. Baker & Company, is insolvent and does not appear as a party to this writ of error.

Plaintiffs brought an action for damages for fraud and deceit against Charles L. Baker & Company, Charles L. Baker and C. M. Howell, based upon alleged false representations in connection with the sale of stock for $2,500 each to Price and Kusserow and certain employment of the plaintiffs by Charles L. Baker & Company.

After the matter was at issue in the trial court Howell, in consideration of $1,500, entered into an agreement with Price and Kusserow entitled 'Covenant', in which they agreed not to sue Howell for either of the matters then in issue, and in which Howell expressly denied liability and any admission of liability. The covenant stated that plaintiffs further '* * * expressly reserves (sic) the right to sue and continue to sue any other person or persons against whom they may have or assert any claim for loss or damage * * *.' arising out of the above mentioned transactions. Specific reference was then made to the reservation of the right to prosecute the suit against the other two defendants. The covenant then provided:

'It is further expressly understood and agreed that as against undersigned, their heirs, executors, administrators and assigns, this instrument may be pleaded as a defense in bar or abatement of any action of any kind whatsoever, brought, instituted or taken by or on behalf of the undersigned on account of said supposed claim or claims against the said C. M. Howell.'

A stipulation to dismiss as to Howell without prejudice was then filed with the trial court; the covenant was presented to the court by the remaining defendants, who were then permitted to amend their answer and move for the summary judgment, which motion was granted.

Plaintiffs assert that there is a split in the authorities on the question involved and urge that we adopt what they describe as the 'modern trend' as expressed in some jurisdictions, which is to give full effect to the intention of the parties as revealed by such document and that the tendency of some courts is to also consider whether the injured party has been fully compensated for his loss or damages caused by the joint tort-feasors. They cite as authority Matheson v. O'Kane, 1912, 211 Mass. 91, 97 N.E. 638, 39 L.R.A.,N.S., 475, Ann.Cas.1913B, 267; Harmon v. Givens, 1953, 88 Ga.App. 629, 77 S.E.2d 233; and Gronquist v. Olson, 1954, 242 Minn. 119, 64 N.W.2d 159; and refer to discussions in 148 A.L.R. 1281; 1 Harper and James, The Law of Torst, § 10.1 (1956).

For the reasons hereinafter set forth we believe the so-called modern trend to be wanting in reason and logic and we are not inclined to accept it as the rule of decision here. On the contrary we believe that the trial court was correct in its interpretation of this particular instrument and that the authorities cited by plaintiffs approving this type of instrument as a covenant not to sue are not persuasive or acceptable in Colorado.

This state has long followed the universal rule that the release of one joint tort-feasor is a release of all. Morris v. Diers, 1956, 134 Colo. 39, 298 P.2d 957; also see Rust v. Schlaitzer, 1933, 175 Wash. 331, 27 P.2d 571; 20 A.L.R.2d 1044. And the intention of the parties has no bearing upon the legal effect of a release. Morris supra. Clearly an instrument designated a 'release' and fully discharging one joint tort-feasor would release, as a matter of law, his fellow wrongdoers even if the same instrument expressly attempted to reserve the injured person's claims or right to sue others. Morris supra; Rust supra. The same is true of a covenant not to sue which goes beyond the agreement not to sue to the point where it has the effect of a release. Clark v. Union Electric Light & Power Co., 1919, 279 Mo. 69, 213 S.W. 851.

In Roper v. Florida Public Utilities Co., 1938, 131 Fla. 709, 179 So. 904, and in Byrd v. Crowder, 1933, 166 Tenn. 215, 60 S.W.2d 171, it was held that the indivisible joint liability was extinguished by using any wording that permits the instrument to be set up as a defense; thus any clause reserving the right to sue others, where the covenant states it is a bar or may so be used, is a fortiori held to be repugnant and thus void.

In Morris it was also pointed out that the rule widely followed is that an injured party can have only one satisfaction for his damages.

In Haney v. Cheatham, 1941, 8 Wash.2d 310, 111 P.2d 1003, 1004, it was held following the reasoning in Rust supra that where an instrument is executed for the benefit of one joint tort-feasor, it is a 'covenant not to sue' if it gives to the joint tort-feasor nothing more than a right of action against the covenantor in event of breach of such agreement by the institution of an action in return for payment made by him, but it is a 'release' if it may be pleaded as a defense to defeat the action brought by covenantor.

Another reason for the rule, as we perceive it, is that liability for a tort is not a fixed and definitive sum, and the law concludes that the consideration paid, whatever it may be, extinguishes the claim itself, for who knows better than a plaintiff at what price he truly values his loss or injuries.

A corollary to the reason for the rule could well be that the injured party should not be permitted to create degrees of liability as between wrongdoers. For example--in the case at bar--that one defendant may be able to discharge his liability for only a part of the claimed damage, when in law if he is liable at all he is liable for the total damage, as are the other defendants. It is true that these plaintiffs could have sued only defendant Baker in the first instance and make their total recovery, if any, from him, but this they did not do, and having made their election to sue the other defendants in the same action, are bound by the rules applicable thereto.

Covenants not to sue have a recognized status in the American system of jurisprudence though sometimes the difference between releases and such covenants is nebulous indeed and very difficult to distinguish with precision. See 4 Restatement, Torts, § 885 and 20 A.L.R.2d 1044. Also see Walling v. Warren, 1874, 2 Colo. 434, 435, wherein such instruments are implicitly recognized and we are in full accord with that decision when covenants are properly drawn so as not to extinguish the cause of action.

As we view the problem, the determinative point here is not what did the parties intend, nor what was the consideration, but what was the legal effect of the instrument entered into with Howell? This is so because no matter what the contracting parties may label a document of this type, the courts will look at its substance rather than its form. Rust supra.

In the case at bar the wording quoted has the effect of a release. See Rust supra; Roper supra, and Byrd supra, which so held upon almost identical wording. The document goes further than a covenant not to sue for the breach of which Price and Kusserow would in turn be liable for damages. The clause in question allows the instrument to 'be pleaded as a defense in bar or abatement of any action of any kind whatever * * *.' These words effectively extinguish the indivisible right the plaintiffs had to proceed against Howell, and in our view could be no more effective than if the words 'hereby release and forever discharge said claims' had been used. See Clark supra. The use of the latter words would unquestionably release the other joint tort-feasors, and the use of the language in the so-called covenant not to sue, if distinguishable at all, is without a difference.

Prosser in 'The Law of Torts', 2d ed. pp. 244, note 24, intimates that the philosophy of Rust supra has been rejected by the Supreme Court of Washington because of the holding and comments appearing in Richardson v. Pacific Power & Light Co., 1941, 11 Wash.2d 288, 118 P.2d 985. In passing we note that Prosser erroneously gives the citation of Richardson as being 160 P.2d 783, the latter case being in fact Pellett v. Sonotone Corp., 1945, 26 Cal.2d 705, 160 P.2d 783, 160 A.L.R. 863, which is discussed infra.

In Richardson a telephone company lineman was electrocuted by a fallen power line. One of the issues was as to his possible contributory negligence. Another was whether a 'Receipt and Release' which the widow signed and thereby acknowledged receipt from the 'phone company of full payment under its 'benefit plan', had discharged it from all claims and demands and whether it was in fact a release of her tort claim for culpability against the company. It was properly held that the instrument was not such a discharge and was not intended as such. It is to be noted that in Richardson the court cited Rust supra with approval as well as Haney v. Cheatham, 1941, 8 Wash.2d 310, 111 P.2d 1003, both cited by Prosser as probably not to be further followed. The court in Richardson, 11 Wash.2d at page 317, 118 P.2d at page 998, said the trial court in considering the question should '* * * [look] to its consideration, its effect, and the...

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12 cases
  • Bjork v. Chrysler Corp.
    • United States
    • Wyoming Supreme Court
    • 27 Junio 1985
    ...is a satisfaction of the injury and a release of the cause of action. Cocke v. Jennor (K.B. 1614), 80 Eng.Rep. 214; Price v. Baker (1959), 143 Colo. 264, 352 P.2d 90 (overruled in part by Cox v. Pearl Investment Co. [1969], 168 Colo. 67, 450 P.2d 60); Dougherty v. California Kettleman Oil R......
  • Neves v. Potter
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    • Colorado Supreme Court
    • 13 Febrero 1989
    ...served to release all other joint tortfeasors. E.g., Cox v. Pearl Inv. Co., 168 Colo. 67, 450 P.2d 60 (1969); Price v. Baker, 143 Colo. 264, 352 P.2d 90 (1959); Morris v. Diers, 134 Colo. 39, 298 P.2d 957 (1956). The traditional rationale given for this rule was that where two or more tortf......
  • Kussman v. City and County of Denver
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    • Colorado Supreme Court
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    ...to the claimant. See, e.g., Cingoranelli v. St. Paul Fire & Marine Casualty Insurance Co., 658 P.2d 863 (Colo.1983); Price v. Baker, 143 Colo. 264, 352 P.2d 90 (1959) (common law rule that release of one releases all). Third, the Act codifies the Colorado principle that monies received by t......
  • Whitt v. Hutchison
    • United States
    • Ohio Supreme Court
    • 2 Julio 1975
    ...is a satisfaction of the injury and a release of the cause of action. Cocke v. Jennor (K. B. 1614), 80 Eng.Rep. 214; Price v. Baker (1959), 143 Colo. 264, 352 P.2d 90 (overruled in part by Cox v. Pearl Investment Co. (1969), 168 Colo. 67, 450 P.2d 60); Dougherty v. California Kettleman Oil ......
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2 books & journal articles
  • Colorado's Contribution Among Tortfeasors Act
    • United States
    • Colorado Bar Association Colorado Lawyer No. 6-9, September 1977
    • Invalid date
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    • United States
    • Colorado Bar Association Colorado Lawyer No. 21-7, July 1992
    • Invalid date
    ...St. Paul Fire & Marine Ins., 658 P.2d 863 (Colo. 1983); Mills v. Standard Title Insurance Co., 577 P.2d 756 (Colo. 1978); Price v. Baker, 352 P.2d 90 (Colo. 1959); Denver and Rio Grande Railroad Co. v. Sullivan, 21 Colo. 302, 41 P. 501 (1895). 3. Cingoranelli, supra, note 2 at 866. 4. Id., ......

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