Smith v. Zufelt, 92SC845

• Decision Date: 12 September 1994
• Docket Number: No. 92SC845,92SC845
• Citation: 880 P.2d 1178
• Parties: Charles SMITH and Michael Smith, Petitioners/Cross-Respondents, v. Ronald ZUFELT and Katherine Zufelt, as parents and next friends of Kory Zufelt, and Kory Zufelt, Respondents/Cross-Petitioners.
• Court: Colorado Supreme Court

Page 1178

880 P.2d 1178

Charles SMITH and Michael Smith, Petitioners/Cross-Respondents, v. Ronald ZUFELT and Katherine Zufelt, as parents and next friends of Kory Zufelt, and Kory Zufelt Respondents/Cross-Petitioners.

No. 92SC845.

Supreme Court of Colorado En Banc.

Sept. 12, 1994.

Rehearing Denied Oct. 11, 1994.

Shand, McLachlan & Newbold, P.C., Michael E. McLachlan, Sheryl Rogers, Durango, for petitioners/cross-respondents.

Crane and Tejada, Alex C. Tejada, Douglas R. Ware, Bethiah Beale Crane, Dawes and Harriss, P.C., Robert C. Dawes, Gail C. Harriss, Durango, for respondents/cross-petitioners.

Fogel, Keating & Wagner, P.C., William L. Keating, Timothy F. Devereux, Denver, for amicus curiae Colo. Trial Lawyers Ass'n.

Montgomery, Green, Jarvis, Kolodny & Markusson, P.C., Dennis H. Markusson, Joyce L. Jenkins, Denver, for amicus curiae Colo. Defense Lawyers Ass'n.

Justice SCOTT delivered the Opinion of the Court.

In this case we are called upon to decide the appropriate amount of settlement proceeds, if any, that should be offset from a jury award when a plaintiff has both settled with a nonparty and successfully litigated claims for the same injury against nonsettling defendants. After a jury verdict for plaintiff, the trial court reduced the jury award by deducting an amount based on the fault attributed to the settling nonparty, which amount was less than the total settlement paid by the nonparty. The court of appeals reversed, holding that because settlement proceeds are payments from a collateral source, the total settlement amount, less that portion representing attorney fees, should be offset from the amount nonsettling defendants are to pay as damages in accordance with the jury verdict. Smith v. Zufelt, 856 P.2d 8 (Colo.App.1992).

Both parties petitioned for certiorari, and we granted defendants' petition to address the exclusion of attorney fees from the calculus and plaintiffs' cross-petition to decide the settlement proceeds setoff issue. For the reasons set forth below, we hold that an offset is appropriate but that the amount of offset should be limited by the percentage of liability attributed to the settling nonparties. Because the amount paid in settlement, less attorney fees, exceeds the liability attributed to the nonparty, it is unnecessary for us to reach, and we decline to address, the issue of whether the amounts paid as attorney fees were properly excluded from any offset. We therefore reverse in part, and remand to the court of appeals with directions that the judgment of the trial court be reinstated.

I

In January of 1988, Kory Zufelt ("Kory"), age eight, was accidentally shot in the stomach by Michael Smith, age twelve. The two boys and Kory's brother, Troy Zufelt, were hunting on land owned by Michael Smith's grandparents, Maude and Ellis Smith. Kory, his brother Troy, and his parents, Katherine and Ronald Zufelt, (collectively "the Zufelts") brought a negligence action against Michael Smith, Michael's parents Charles and Hazel Smith, and Michael's grandparents, Maude and Ellis Smith.

Prior to trial, Maude Smith and Ellis Smith settled with the Zufelts for $88,629.24. ¹ The settlement was apportioned $50,000 to Kory; $7,000 to Troy Zufelt; $2,500 to the Zufelt family; and $29,129.24 for attorneys' fees and costs. For purposes of trial, Maude and Ellis Smith were then designated as "statutory nonparties having fault" pursuant to section 13-21-111.5, 6A C.R.S. (1987 & 1993 Supp.). ²

The Zufelts tried their case against the remaining defendants, Michael Smith and his parents, Charles and Hazel Smith. The jury found in favor of the Zufelts and returned verdicts in the amount of $105,000 for Kory and $25,000 for Kory's parents. Fault was apportioned as follows: 84% to Charles Smith; 0% to Hazel Smith; 15% to Maude Smith; 0% to Ellis Smith; and 1% to Michael Smith. The trial court then reduced the verdict by an amount equivalent to the 15% fault charged to the settling nonparties, Maude and Ellis Smith. The court therefore entered a judgment ordering the defendants to pay $89,250 to Kory and $21,250 to Kory's parents, Ronald and Katherine. Kory received total compensation of $139,250--$50,000 from the settlement with Maude and Ellis Smith and $89,250 from the judgment at trial.

In Smith v. Zufelt, 856 P.2d 8 (Colo.App.1992), the court of appeals held that the settlement proceeds received by Kory were collateral to the amount to which he was entitled to be made whole and should therefore be offset from the amount which Kory was entitled to receive as determined by that jury verdict. The court reversed that part of the district court's ruling which reduced the jury's award to Kory by 15% (the amount of liability attributed to the settling nonparties, Maude and Ellis Smith), and held that the award should instead be reduced by $50,000, the total amount Kory was paid under the settlement with Maude and Ellis Smith. The court of appeals limited Kory's recovery to a total of $105,000, which represents an amount equivalent to the jury award, less the $50,000 paid in settlement.

The court of appeals' holding represents a reduction of $33,250 from the amount granted by the trial court. The court of appeals held that as a "general rule ... when the settlement amount actually received by the plaintiff exceeds the percentage of fault assigned to the settling nonparty, the total settlement is deducted from the total verdict." Zufelt, 856 P.2d at 11. ³

The court additionally determined that the attorney fees attributable to Kory's proceeds ($24,468.56) paid by Maude and Ellis Smith as part of the settlement agreement should not have been included in the offset. The court reasoned that "those proceeds were not actually collected by plaintiffs for their losses and therefore, do not constitute indemnification or compensation for the loss of the injured party, as contemplated in § 13-21-111.6." Zufelt, 856 P.2d at 11.

We granted certiorari to determine whether the jury award to Kory should be reduced by the full amount paid to Kory by the settling nonparties or by a lesser amount based on the apportioned liability of the settling nonparties as established at trial. We also granted certiorari to decide whether attorney fees and costs should be included in the amount to be offset from the jury award. ⁴ We conclude that the jury award should have been reduced only by the amount equivalent to the percentage of liability attributed to the settling nonparties. Our resolution of this issue under the facts of this case makes it unnecessary to address the issue regarding attorney fees setoff.

II

We begin our analysis with a look at the relevant statutes and a review of the prior cases which have addressed the apparent conflict between these statutes.

A

In 1977, Colorado adopted the Uniform Contribution Among Tortfeasors Act (the "Contribution Act"), §§ 13-50.5-101 to 50.5-106. See Ch. 195, sec. 1, §§ 13-50.5-101 to 50.5-106, 1977 Colo.Sess.Laws 808-810. The Contribution Act provided that a good faith release or covenant not to sue given to one tortfeasor served to reduce the claim against any other tortfeasors "to the extent of any amount stipulated by the release or the covenant, or in the amount of the consideration paid for, whichever is the greater." § 13-50.5-105, C.R.S. (1977). The Contribution Act thus required that the verdict rendered against the nonsettling party be reduced by the amount paid in settlement by the joint tortfeasor. The Contribution Act also provided that each defendant to whom some negligence was attributable was jointly and severally liable for the entire amount of the judgment.

In 1986, however, the General Assembly amended section 13-50.5-105 (the "percentage statute") to conform with the abrogation of joint and several liability. ⁵ The percentage statute was amended to its present form which provides that the good faith release of one tortfeasor

does not discharge any of the other tortfeasors from liability for their several pro rata shares of liability for the injury, death, damage, or loss unless its terms so provide; but it reduces the aggregate claim against the others to the extent of any degree or percentage of fault or negligence attributable by the finder of fact ... to the tortfeasor to whom the release or covenant not to sue is given.

§ 13-50.5-105, 6A C.R.S. (1987) (emphasis added). As with the prior version of section 13-50.5-105, the statute further states that such a release or covenant not to sue "discharges the tortfeasor to whom it is given from all liability for contribution to any other tortfeasor."

In 1986, section 13-21-111.6 was enacted (the "amount statute"), and provides as follows:

In any action ... to recover damages for a tort ... the court, after the finder of fact has returned its verdict stating the amount of damages to be awarded, shall reduce the amount of the verdict by the amount by which such person ... has been or will be wholly or partially indemnified or compensated for his loss by any other person, corporation, insurance company, or fund in relation to the injury....

§ 13-21-111.6, 6A C.R.S. (1987) (emphasis added).

The apparent conflict between these two statutes can best be illustrated by reference to the specific facts and holdings of the instant case. Here, the trial court applied the percentage statute and therefore reduced the jury award to Kory Zufelt by 15%, the amount of liability attributed to the settling nonparties. Because the jury award to Kory was $105,000, the 15% reduction by the trial court resulted in an award of $89,250. Including the settlement proceeds paid to benefit Kory, $50,000 per the "structured settlement," his total recovery under the percentage statute was $139,250. ⁶ The court of appeals, however, held that the amount statute takes precedence whenever the settlement proceeds exceed the amount equivalent to the percentage of liability attributed to the settling parties. The court of...