Progressive Max Ins. Co. v. Floating Caps, Inc.

• Decision Date: 07 August 2013
• Docket Number: No. 27293.,27293.
• Citation: 747 S.E.2d 178,405 S.C. 35
• Court: South Carolina Supreme Court
• Parties: PROGRESSIVE MAX INSURANCE COMPANY, Appellant, v. FLOATING CAPS, INC., d/b/a Silver Dollar Cafe, Respondent. Appellate Case No. 2011–196906.

405 S.C. 35

747 S.E.2d 178

PROGRESSIVE MAX INSURANCE COMPANY, Appellant,

v.FLOATING CAPS, INC., d/b/a Silver Dollar Cafe, Respondent.

Appellate Case No. 2011–196906.

No. 27293.

Supreme Court of South Carolina.

Heard April 16, 2013.

Decided Aug. 7, 2013.

John Martin Grantland, Adam J. Neil, and Timothy J. Newton, all of Murphy & Grantland, of Columbia, for Appellant.

Francis Marion Ervin, II, of Rogers Townsend & Thomas, of Charleston, for Respondent.

Justice BEATTY.

Progressive Max Insurance Co. (Progressive), an automobile insurer, brought this contribution action against Floating Caps, Inc., d/b/a Silver Dollar Cafe (Silver Dollar), a Charleston bar, pursuant to South Carolina's Uniform Contribution Among Tortfeasors Act (UCATA) after Progressive settled a tort action involving a Silver Dollar patron. The circuit court found the contribution claim was not preserved and granted summary judgment to the Silver Dollar. This Court certified the case for review in accordance with Rule 204(b), SCACR. We affirm.

I. FACTS

Robert M. Witherspoon, IV (Witherspoon) brought separate tort actions in federal court against Ryan McGuire (a minor under the age of 21) and McGuire's parents for injuries he sustained in the early morning hours of November 17, 2003, when McGuire drove into Witherspoon as he stood on King Street outside the Silver Dollar. Witherspoon asserted a negligence claim against McGuire and a negligent entrustment action against McGuire's parents, who were the owners of the vehicle McGuire was driving. The actions were consolidated. Witherspoon did not bring an action against the Silver Dollar.¹

The McGuires had automobile insurance coverage with Progressive, which agreed to defend and indemnify them pursuant to the terms of the insurance policy. On April 7, 2007, Witherspoon settled his tort claims against the McGuires for a total of $200,000. Witherspoon intended thereafter to pursue underinsured motorist (UIM) coverage.

In settling the tort action, the parties entered into a “Covenant Not to Execute” (First Covenant) dated April 20, 2007, approximately five months after the statute of limitations had run on Witherspoon's claims in the tort action. Witherspoon was designated the “Covenantor,” while the McGuires, Progressive, and The Cincinnati Insurance Companies (which provided an umbrella policy for the McGuires) were the declared “Covenantees.” The First Covenant provided that, in consideration of a total sum of $200,000, of which $180,000 was paid by Progressive and $20,000 was paid by The Cincinnati Insurance Companies, the parties agreed that, in the event Witherspoon was unable to resolve his claim for any UIM coverage or liability coverage that might be applicable, Witherspoon “shall have the right to bring suit against the Covenantees, Kevin McGuire, Betty McGuire and Ryan McGuire, and prosecute same to final judgment.” The parties further agreed that, “[n]otwithstanding any judgment that may be rendered in said suit, it is the express intent of the parties that the Covenantees, their respective heirs and assigns, shall never at any time, be liable to the Covenantor ... beyond the consideration expressed herein....”

The First Covenant further provided that it was not a release of any other persons or entities:

3. Covenantor and Covenantees expressly reserve all rights of action, claims, demands or other legal remedies against all firms and persons except as modified by the terms of this Covenant. This Covenant is not a release, nor shall it be construed as a release of any party, person, firm or corporation.

4. Covenantor will fully and forever prevent and bar the collection of any additional payments of any kind, nature or description against the Covenantees ... with the exception of underinsured motorist coverage.

(Emphasis added.)

Thereafter, on May 8, 2007, Witherspoon's tort action was dismissed by the federal district court in Charleston. By that time, Witherspoon's UIM claim reportedly had been resolved.

Upon realizing the First Covenant did not mention the Silver Dollar or extinguish its potential liability, Witherspoon, the McGuires, and Progressive entered into another “CovenantNot to Execute” (Second Covenant) on July 31, 2007. The Second Covenant included an acknowledgement by Witherspoon that he had a cause of action against the Silver Dollar and that the Covenantees were “desirous of pursuing a claim for contribution against [t]he Silver Dollar” pursuant to UCATA. Missing from the Second Covenant, however, was an explicit statement that the Second Covenant served either to release or to discharge any liability of the Silver Dollar in the underlying tort matter. To the contrary, it reiterated, “This Covenant is not a release, nor shall it be construed as a release of any party, person, firm or corporation.” (Emphasis added.)

In September 2007, Progressive filed this contribution action against the Silver Dollar. Progressive alleged the Silver Dollar was jointly liable because it served the underage McGuire alcohol on November 17, 2003, both during regular business hours and after the bar had closed, and that McGuire had become intoxicated prior to the accident. Progressive stated it had settled the case on behalf of all potentially liable parties, including the Silver Dollar, and that Witherspoon had released the McGuires and the Silver Dollar, but the Silver Dollar did not pay its pro-rata share of the settlement.

The Silver Dollar answered and moved for summary judgment on the ground the First Covenant failed to expressly discharge the liability of the Silver Dollar as required by UCATA in order to seek contribution. Progressive opposed summary judgment and attached an affidavit of Witherspoon's attorney stating the parties intended the settlement to extinguish any potential claim by Witherspoon against the Silver Dollar and asserting the Second Covenant “contains an express recital protecting Progressive's claim against [the] Silver Dollar,” which was “evidence of the parties' intent.” In a supporting memo, Progressive maintained the failure to include language in the First Covenant discharging the Silver Dollar's liability “was the result of a mere scrivener's error,” and it asked that the court “either allow the extrinsic evidence of intent or reform the written instrument to comport with the intent of the parties.”

The circuit court granted the Silver Dollar's motion for summary judgment, finding Progressive had failed to properly preserve its right to contribution from the Silver Dollar. The circuit court noted the First Covenant expressly stated that it did not extinguish the liability of any other persons or entities, thus Progressive had settled on behalf of only its insureds and did not pay any common liability that might exist with the Silver Dollar in order to be entitled to pursue a contribution claim against the Silver Dollar. In addition, the circuit court rejected Progressive's arguments that the Second Covenant it executed to correct this deficiency after the dismissal of the tort action should relate back so as to preserve its contribution claim, and the court denied the request for reformation of the First Covenant.

II. STANDARD OF REVIEW

Rule 56(c) of the South Carolina Rules of Civil Procedure provides a motion for summary judgment shall be granted “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” In determining whether any triable issues of fact exist, the trial court must view the evidence and all reasonable inferences that may be drawn therefrom in the light most favorable to the party opposing summary judgment. Brockbank v. Best Capital Corp., 341 S.C. 372, 534 S.E.2d 688 (2000). “An appellate court reviews the granting of summary judgment under the same standard applied by the trial court pursuant to Rule 56, SCRCP.” Id. at 379, 534 S.E.2d at 692.

III. LAW/ANALYSIS

On appeal, Progressive contends (1) the circuit court erred in ruling it could not consider extrinsic evidence of the parties' alleged intent to extinguish the Silver Dollar's liability in the settlement and obtain contribution; (2) there is, in fact, extrinsic evidence in the record of the parties' true intent, so reformation of the covenant is warranted based on mutual mistake; and (3) the covenants themselves provide evidence of the parties' intent to extinguish the liability of the Silver Dollar.

In contrast, the Silver Dollar asserts the circuit court properly granted its motion for summary judgment. It maintains the language of the First Covenant was clear and unambiguous, so a court may not look beyond the four corners of the document in assessing the parties' intent. Because the agreement did not release the Silver Dollar or any other parties from liability, the Silver Dollar argues Progressive is not entitled to contribution as it did not pay any sums on behalf of others. Further, Progressive's preparation of the Second Covenant in an attempt to correct the deficiencies in the first came after the tort action had already been dismissed, so Progressive failed to preserve its contribution rights under UCATA as a matter of law.

UCATA was enacted by the General Assembly in 1988.²SeeS.C.Code Ann. §§ 15–38–10 to –70 (2005 & Supp.2012). Section 15–38–50(1) of UCATA provides that a release or a covenant (not to execute or not to sue) involving one tortfeasor “does not discharge any of the other tortfeasors from liability for the injury or wrongful death unless its terms so provide....” S.C.Code Ann. § 15–38–50(1) (2005).

In denying Progressive's request for contribution, the circuit court noted at the outset that a tortfeasor who enters into a settlement with a claimant is not entitled to recover contribution from another tortfeasor whose liability for the injury is not...