State Farm Mut. Auto. Ins. Co. v. Continental Cas. Co.

• Decision Date: 03 July 1953
• Citation: 59 N.W.2d 425,264 Wis. 493
• Parties: STATE FARM MUT. AUTO. INS. CO. v. CONTINENTAL CAS. CO.
• Court: Wisconsin Supreme Court

Page 425

59 N.W.2d 425

264 Wis. 493

STATE FARM MUT. AUTO. INS. CO. v. CONTINENTAL CAS. CO.

Supreme Court of Wisconsin.

July 3, 1953.

Rehearing Denied Sept. 11, 1953.

Dougherty, Arnold & Waters, Beyer & Sonnenberg, Milwaukee, for appellant.

Roberts, Roe, Boardman, Suhr & Bjork, Madison, for respondent.

CURRIE, Justice.

This appeal presents the question of whether the release executed in this instance by the injured party to one of two joint tort-feasors and the latter's insurance carrier, precludes the insurance carrier of the second joint tort-feasor, who later had made a reasonable settlement with the injured person, from recovering contribution from the insurance carrier of the first joint tort-feasor.

Although the conception of the common law in most jurisdictions is to the contrary, the right to contribution between tort-feasors in Wisconsin, as in a few other states, has been recognized as a common-law right. Ellis v. Chicago & N. W. R. Co., 1918, 167 Wis. 392, 16 N.W. 1048. Moreover, it is a right based upon principles of equity, as appears from the following quotation from our recent decision in Ainsworth v. Berg, 1948, 253 Wis. 438, 444, 34 N.W.2d 790, 792, 35 N.W.2d 911:

'The rule of law has been stated to be that the right of contribution arises from the application of equitable rules, and that where one joint tort-feasor pays more than his just share he has an equitable right to proceed against the other joint tort-feasor for contribution. It is similar to the right of contribution which exists between cosureties.'

The right of contribution arises from common liability and ripens into a cause of action upon payment by reason of a judgment, or pursuant to a reasonable settlement made with the injured. Western Casualty & Surety Co. v. Milwaukee General Const. Co., 1933, 213 Wis. 302, 251 N.W. 491.

The pleadings in the instant case raise the issue of whether there was common liability on the part of Gateway and Johnson, which issue under the order of the trial court denying defendant's motion for summary judgment will have to be tried out. However, we will assume for the purposes of this decision that the joint negligence of Gateway's employee and Johnson caused the accident resulting in Mrs. Wilson's injuries so as to make Gateway and Johnson joint tort-feasors.

Mrs. Wilson, by her release, in consideration of the $15 paid to her by the defendant, absolutely released both Gateway and its insurance carrier (the defendant). The general rule at common law is that a release by an injured party of one of two tort-feasors released the other tort-feasor even though the release attempted to reserve a right of action against such other joint tort-feasor. 45 Am.Jur., Release, p. 701, sec. 37; Prosser, Joint Torts and Several Liability, 25 California Law Review 413, 423; and Bolton v. Ziegler, D.C., 1953, 111 F.Supp. 516, 523. However, Wisconsin, as early as 1880, in the case of Ellis v. Esson, 50 Wis. 138, 6 N.W. 518, 522, held that a release of one joint tort-feasor with reservation of rights against the other joint tort-feasor was not a true release which operated to discharge from liability both joint tort-feasors, but was in the nature of a covenant not to sue. In its decision in such case this court stated:

'* * * when it is apparent that it was not the intention of the parties to discharge or satisfy the debt or claim, but only to relieve one party from all liability to pay the same, the courts have usually avoided the difficulty by construing such contract as a simple contract not to sue the party discharged, and permit the action to proceed against all the parties notwithstanding the contract, leaving the discharged party to his action against the plaintiff for any damage he may sustain by reason of his being sued contrary to the conditions of such contract.'

The result reached in Ellis v. Esson, supra, was followed by this court in its later decision in Kropidlowski v. Pfister & Vogel Leather Co., 1912, 149 Wis. 421, at page 427, 135 N.W. 839, at page 841, 39 L.R.A.,N.S., 509, and in its decision in the latter case it was stated:

'Neither do we think that what is at best manifestly intended to be a partial release should be held to be a complete one, because the word 'release,' which has a technical meaning in the law, happens to be used. If a release implies full satisfaction, then it is apparent that there has not been full satisfaction, and consequently there has been no release in the technical sense, and that the intention of the parties will be best carried out by treating the agreement as a covenant not to sue.'

On the basis of the decisions in Ellis v. Esson, supra, and Kropidlowski v. Pfister & Vogel Leather Co., supra, the learned trial court, in his able memorandum opinion, construed the release, which Mrs. Wilson executed to Gateway and the defendant insurance company in return for the $15 payment, to be in the nature of a covenant not to sue, and therefore such instrument did not bar plaintiff's right to contribution.

Counsel for the defendant point out that the trial court based his decision, that the release given by Mrs. Wilson to Gateway and defendant constituted a covenant not to sue, upon the decisions in Ellis v. Esson, supra, and Kropidlowski v. Pfister & Vogel Leather Co., supra, which were decided before the Wisconsin legislature adopted the Uniform Joint Obligations Act in 1927 now constituting ch. 113, Stats. Upon referring to ch. 113, Stats., we find that only three sections, viz., secs. 113.03, 113.04, and 113.05 deal with the law of releases. These statutes provide as follows:

'113.03 Recoveries credited, limitation. The amount or value of any consideration received by the obligee from one or more of several obligors, or from one or more of joint, or of joint and several obligors, in whole or in partial satisfaction of their obligations, shall be credited to the extent of the amount received on the obligations of all co-obligors to whom the obligor or obligors giving the consideration did not stand in the relation of a surety.

'113.04 Release of some, effect. Subject to the provisions of section 113.03, the obligee's release or discharge of one or more of several obligors, or of one or more of joint, or of joint and several obligors shall not discharge co-obligors, against whom the obligee in writing and as part of the same transaction as the release or discharge, expressly reserves his rights; and in the absence of such reservation of such rights shall discharge co-obligors only to the extent provided in section 113.05.

'113.05 Release of some; co-obligors protected. (1) If an obligee releasing or discharging an obligor without express reservation of rights against a co-obligor, then knows or has reason to know that the obligor released or discharged did not pay so much of the claim as he was bound by his contract or relation with that co-obligor to pay, the obligee's claim against the co-obligor shall be satisfied to the amount which the obligee knew or had reason to know that the released or discharged obligor was bound to such co-obligor to pay.

'(2) If an obligee so releasing or discharging an obligor has not then such knowledge or reason to know, the obligee's claim against the co-obligor shall be satisfied to the extent of the lesser of two amounts, namely (1) the amount of the fractional share of the obligor released or discharged, or (2) the amount that such obligor was bound by his contract or relation with the co-obligor to pay.'

The provisions of sec. 113.04, rather than those of sec. 113.05, are applicable to the release the defendant secured from Mrs. Wilson for $15. While the term 'covenant not to sue' is not employed in sec. 113.04, nevertheless, this section seems to accomplish nothing more than to put into statutory form the rule which this state had previously adopted by court decision in Ellis v. Esson, supra. In other words, a release of one joint tort-feasor reserving rights against the other joint tort-feasor (or joint tort-feasors) under sec. 113.04 is synonymous with covenants not to sue which have received wide use in this state in settling claims for personal injuries and property damage arising out of automobile accidents caused by the concurring negligence of two or more parties.

However, in spite of such wide use of covenants not to sue, this is the first case in which this court has been called upon to pass upon the question of whether a releasee under such a covenant may be called upon to respond in contribution upon the suit of another joint tort-feasor, or his insurance carrier.

We had the reverse of this problem before us in Van Gilder v. Gugel, 1936, 220 Wis. 612, 265 N.W. 706, 105 A.L.R. 824, wherein it was held that the releasees under a covenant not to sue would be entitled to contribution against the non-settling joint tort-feasors in the event it developed that such releasees had paid more than their equitable share (in that case one-half) of the damages recovered by plaintiff against the non-settling joint tort-feasors. It would seem to logically follow from our holding in Van Gilder v. Gugel, supra, that if a settling joint tort-feasor, under a covenant not to sue, paid less than his equitable share of the damages sustained by the injured person, the other joint tort-feasor, who thereafter as...