Thomas v. Solberg

• Decision Date: 14 June 1989
• Docket Number: No. 88-1092,88-1092
• Citation: 442 N.W.2d 73
• Parties: Cynthia THOMAS, Appellee, v. Diane SOLBERG, Appellant.
• Court: Iowa Supreme Court

Page 73

442 N.W.2d 73

Cynthia THOMAS, Appellee, v. Diane SOLBERG, Appellant.

No. 88-1092.

Supreme Court of Iowa.

June 14, 1989.

Michael J. Coyle and Norman J. Wangberg of Fuerste, Carew, Coyle, Juergens & Sudmeier, P.C., Dubuque, for appellant.

T. Todd Becker of the Tom Riley Law Firm, P.C., Cedar Rapids, for appellee.

Considered by HARRIS, P.J., and LARSON, SCHULTZ, LAVORATO, and NEUMAN, JJ.

LAVORATO, Justice.

In a partial settlement of a comparative fault case with two of three defendants, the plaintiff received $75,000. The jury ultimately found that the settling defendants were liable for less than this amount. In these circumstances does Iowa Code chapter 668 (1985) (comparative fault) permit the district court to apply the pro tanto credit rule thereby allowing the nonsettling defendant the benefit of the favorable settlement? The district court did not think so, nor do we. We affirm.

I. On November 16, 1985, Cynthia Thomas, the plaintiff, was injured in a three-car collision. Following the collision, Thomas sued Diane Solberg and Steven White, the drivers of the other two cars. She also sued Sheila White, the owner of the car Steven was driving.

Before trial Thomas settled with the Whites for $75,000. Thomas then proceeded to trial against Solberg only.

The jury assigned 49% of the fault to Steven White and 51% to Solberg, and fixed Thomas's damages at $108,117.31. Apparently, Steven and Sheila White were treated as one party for purposes of allocating fault. See Iowa Code § 668.3(2)(b).

On November 10, 1987, the district court entered judgment against Solberg in the amount of $55,139.83 (51% X $108,117.31) together with interest from the date of the petition. After the court had ruled on posttrial motions, Solberg tried to satisfy this judgment by paying $43,994.28 into the clerk's office. This last amount was calculated as follows:

                      $108,117.31  Total damages fixed by jury
                less    75,000.00  Credit for settlement with the
                                   Whites
                      -----------
                       $33,117.31
                plus    10,876.97  Accrued interest on $55,139.83
                                   judgment from filing of petition
                      -----------
                       $43,994.28  Amount paid into clerk's office
                

Thus, Solberg attempted to apply a dollar-for-dollar credit for the settlement with the Whites against the total damages, thereby reducing the judgment against her.

Thomas accepted the $43,994.28 but, instead of filing a full satisfaction of judgment, she filed only a partial satisfaction. In the partial satisfaction document, Thomas stated that as of January 16, 1988, $22,008.47 together with court costs and interest remained unsatisfied. She calculated the unsatisfied portion as follows:

                      $55,139.83  Judgment against Solberg only
                plus   10,862.92  Accrued interest on $55,139.83
                                  judgment from filing of petition
                      ----------
                      $66,002.75  Total
                less   43,994.28  Payment by Solberg
                      ----------
                      $22,008.47  Portion of judgment unsatisfied
                

Solberg then filed a motion pursuant to Iowa Rule of Civil Procedure 256, seeking an order that would require a full satisfaction of judgment according to her calculations. In her brief in support of the motion, Solberg contended that the pro tanto credit rule was still the law, notwithstanding enactment of Iowa Code chapter 668, Iowa's comparative fault statute.

The district court denied the motion, concluding that the Iowa legislature had intended to eliminate the pro tanto credit rule in comparative fault cases. The court then applied what is known as the proportionate credit rule. Solberg appeals from this ruling. She again contends that the pro tanto credit rule applies to comparative fault cases, at least in those cases in which a settlement results in the plaintiff receiving more than the verdict.

II. Had there been no settlement, Thomas's recovery would have been $108,117.31, the amount of damages fixed by the jury against all the defendants. According to the district court's ruling, Thomas would receive $130,139.83, or about $22,000 more than the jury allowed.

Solberg contends that she, rather than Thomas, should receive the benefit of this favorable settlement; otherwise, our long standing policy reflected in the pro tanto credit rule would be frustrated. That policy provides that the plaintiff should receive no more than has been lost as the result of some tortious act. See Greiner v. Hicks, 231 Iowa 141, 146-47, 300 N.W. 727, 730-31 (1941). In effect the policy is seen as prohibiting more than one recovery. Thus, according to the pro tanto credit rule every dollar of settlement should be credited to any recovery against a nonsettling defendant. Id.; accord Wadle v. Jones, 312 N.W.2d 510, 512 (Iowa 1981).

The narrow question we are to decide is whether Thomas or Solberg is entitled to the benefit of the favorable settlement with the Whites. The answer depends upon whether Iowa Code chapter 668 permits us to apply the pro tanto credit rule thereby denying Thomas the benefit of the favorable settlement. For the reasons that follow, we conclude that it does not.

As the commentators have pointed out, the states have not uniformly defined the effects of a partial tort settlement, which we have here. See, e.g., Harris, Washington's Unique Approach to Partial Tort Settlements: The Modified Pro Tanto Credit and the Reasonableness Hearing Requirement, 20 Gonz.L.Rev. 69, 73 (1984/85). It has been suggested that any jurisdiction enforcing joint and several liability and contribution among joint tortfeasors must address the following four fundamental issues in the context of partial settlements:

1. The amount of the nonsettling defendant's credit that reduces the [plaintiff's] award against [that defendant];

2. Whether the settling defendant is discharged from all future liability for contribution;

3. Whether the settling defendant's right to seek contribution from a nonsettling defendant survives the settlement. If it survives, the manner of determining the gross amount that the later contribution action will apportion;

4. Whether either the settling defendant or nonsettling defendant retains the right to assert a vicarious liability claim, or other type [of] indemnity claim, against the other.

Harris, 20 Gonz.L.Rev. at 73-74. Chapter 668 has a modified joint and several liability provision and allows contribution among joint tortfeasors. See Iowa Code § 668.4 (joint and several liability does not apply to defendants found to bear less than 50% of total fault assigned to all parties); id. § 668.5 (right to contribution allowed). Thus, all four issues are relevant in any discussion of the effects of partial settlements of comparative fault cases in Iowa.

The first issue--the amount of the nonsettling defendant's credit that reduces the plaintiff's award against that defendant--is squarely before us. To resolve it, states have devised credit rules based upon pro rata, pro tanto, or proportionate reductions of the plaintiff's ultimate recovery. No one rule, however, is a panacea, and each has substantial disadvantages. Harris, 20 Gonz.L.Rev. at 74.

As to the second issue, the enlightened approach is to recognize that the settling defendant must be discharged from all liability for contribution. Id. Our comparative fault statute is in accord with this approach. See Iowa Code § 668.7 (release, covenant not to sue, or similar agreement between claimant and a liable party discharges liable party from liability for contribution).

The suggested approach to the third issue is to allow the settling defendant who secures a release of a nonsettling defendant to assert a right of contribution against that defendant. Harris, 20 Gonz.L.Rev. at 74-75. Iowa has such a provision but allows the settling defendant to assert contribution only to the extent that the amount paid in settlement was reasonable. See Iowa Code § 668.5(2).

The fourth issue, which deals with the viability and postsettlement survival of defendants' indemnity claims, has generated various approaches, none of which, it is claimed, are adequate. Harris, 20 Gonz.L.Rev. at 75. Chapter 668 does not speak to this issue.

Returning to the three credit rules, we note that the pro rata credit rule reduces the nonsettling defendants' liability by an amount equal to the number of settling defendants divided by the total number of defendants. Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 430 (Tex.1984). For example, when a plaintiff settles with one defendant in a two-defendant case, the plaintiff's ultimate recovery is reduced by one-half. Similarly, in a three-defendant case, settlement with two defendants reduces the recovery by two-thirds.

In those jurisdictions applying the pro tanto credit rule, the plaintiff's recovery is reduced by the amount paid by the settling defendant. See Greiner, 231 Iowa at 146-47, 300 N.W. at 730-31; accord Wadle, 312 N.W.2d at 512. If, for example, the settling defendant pays $25,000 to settle, any subsequent recovery against the nonsettling defendant is reduced by that amount.

According to the proportionate credit rule, the plaintiff's recovery against a nonsettling defendant is reduced by the percentage of fault attributed to the settling defendant. See Duncan, 665 S.W.2d at 430. If the jury, for example, assesses total damages of $100,000 and assigns a percentage of fault of 25% to the settling defendant, the $100,000 is reduced by 25%.

In Glidden v. German, 360 N.W.2d 716, 718 (Iowa 1984), and in subsequent cases we have, we think, correctly labeled one rule as "pro tanto" and have contrasted it with one that we have perhaps incorrectly labeled as the "pro rata" rule. The label "pro rata" properly applies to the rule described by the Texas court in Duncan, 665 S.W.2d at 430. The rule we called "pro rata" in Glidden and in subsequent cases should more properly be called the "proportionate credit" rule, since the advent of comparative fault. As has been suggested,

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