Welsh v. Gerber Products, Inc.

Decision Date01 September 1987
Docket NumberNo. 19,19
Citation315 Md. 510,555 A.2d 486
PartiesMichael WELSH et al. v. GERBER PRODUCTS, INC. et al. Misc.,
CourtMaryland Court of Appeals

Robert Allen Rohrbaugh (Rohrbaugh & Abbondanza, P.C., both on brief), Rockville, for appellants.

Deborah Sweet (Louis G. Close, Jr., Ann MacNeille, Whiteford, Taylor & Preston, all on brief), Baltimore, for appellees.

Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS and BLACKWELL, JJ.

McAULIFFE, Judge.

We address a question certified to us by the United States Court of Appeals for the Fourth Circuit pursuant to the Maryland Uniform Certification of Questions of Law Act. 1 The question involves the scope and reach of nonmutual, defensive, collateral estoppel following the entry of a consent judgment, and affects the rights of parties in a joint tort-feasor situation. Because the question fashioned by the certifying court is fact-specific, we first set forth the facts as given to us.

I.

"On January 26, 1983, a station wagon occupied by [Michael Welsh, a minor, and his parents, Kathleen and Patrick Welsh] was struck by a van driven by James Voigt, II. All three members of the family were hurt, but Michael suffered head injuries that were of a particularly severe and permanent nature. At the time of the accident, Michael was sitting in a Century 200 car seat manufactured by Gerber [Products Inc.]. For reasons yet unsettled, the seat failed to restrain the child and he was thrown forward by the force of the accident.

"On February 9, 1984, the Welshes brought a negligence action in the Circuit Court of Maryland for Montgomery County against Voigt. The parties subsequently agreed on June 18, 1985, to settle the litigation for a payment equal to the policy limits of Voigt's automobile insurance coverage. The proposed settlement was announced in open court with plaintiffs' counsel stating that 'We are accepting the policy limits without prejudice to any rights we have against other individuals, or insurance carriers.' The court approved the settlement subject to the preparation of an order and directed that a docket entry be made reflecting that the case had been terminated by settlement. No such entry, however, was ever made.

"On July 25, 1986, the parties executed a written copy of their agreement which provided for a payment of $290,423.00 by Voigt's insurance carrier to Continental Casualty Company (Continental). Continental, as payor of a 'structured' payout arrangement, was to make both immediate and deferred payments to Michael Welsh. 2 The Welshes also executed a release in favor of Voigt which purported to retain all claims against other tort-feasors subject to the pro rata reduction provided in the Maryland Uniform Contribution Among Tort-feasors Act, Md.Ann. Code Art. 50 §§ 16-24.

"It appears, however, that Voigt was unwilling to terminate the case purely by agreement with Kathleen and Patrick Welsh, thereby risking additional litigation when Michael Welsh reached maturity. Accordingly, Voigt insisted that a judgment be entered that would fully terminate any liability he might have arising from the accident.

"On July 26, 1985, the parties filed a joint motion for approval of the negotiated settlement agreement. The court approved the agreement. Then, with the consent of the parties, the court signed an order entering judgment against James Voigt and in favor of the Welshes. The parties filed a 'Statement of Satisfaction of Judgment' reflecting the fact that Voigt's insurance carrier had made the agreed payment to Continental. Finally, the clerk entered the judgment 'PAID AND SATISFIED' on the docket sheet and assessed costs against Voigt.

"On January 21, 1986, the Welshes filed [an] action [in the United States District Court for the District of Maryland against Gerber, Century Products Inc., and Sears Roebuck & Company], alleging that the car seat in which Michael was seated at the time of the accident failed to restrain him and thus was the proximate cause of the injuries sustained. 3 The defendants moved for summary judgment on the ground that the satisfied state judgment against Voigt precluded, as a matter of law, any effort to recover damages on behalf of Michael for the same injury. The district court agreed and summary judgment was granted."

II.

The Welshes presented two lines of argument to the United States Court of Appeals. First, they argued that the judgment entered by the Circuit Court for Montgomery County had not been fully satisfied because payments remained to be made, and the mere entry of a judgment against one tort-feasor did not release other joint tort-feasors. See Art. 50, § 18, Maryland Code (1957, 1986 Repl. Vol.); Trieschman v. Eaton, 224 Md. 111, 166 A.2d 892 (1961). The Fourth Circuit rejected this argument, noting that the judgment in favor of the Welshes against Voigt had been satisfied by full payment made by Voigt's insurer, and the fact that the payment had been made to a third party for purchase of an annuity to effectuate a "structured" settlement did not alter the legal effect of the payment as full satisfaction of the judgment. Welsh v. Gerber Products Inc., 839 F.2d 1035, 1038 (4th Cir.1988).

The Welshes' second argument was that their settlement with Voigt was not intended to represent an evaluation of the full measure of their injuries, but was simply an acceptance of the amount of Voigt's insurance coverage in return for the release of Voigt. The Welshes point out that in their agreement with Voigt they expressly reserved the right to proceed against others in an attempt to recover the balance of the money they believed was due them. Thus, they submit, the rule that there may be but one full satisfaction for one injury does not apply, because they made it clear, and Voigt agreed, that their recovery from Voigt was not considered to be, and was not to be treated as, adequate compensation for their injuries.

Gerber's response is that the Welshes' argument would have been entirely valid had their settlement with Voigt been fully accomplished by the exercise of the joint tort-feasor release. When they went beyond that, says Gerber, and secured the entry of a judgment, they placed on record a judicial determination of the value of the claim, and when that judgment was satisfied, the Welshes were precluded from seeking further compensation from anyone.

The United States Court of Appeals, noting that the language of several of our earlier cases appeared to favor Gerber's position, 4 but that we had recently expressed a certain dissatisfaction with the mechanical application of the law in joint tort-feasor cases when it conflicted with the unambiguous contrary intent of the parties, 5 certified this question to us:

Under Maryland law does the entry of a satisfied judgment order in Welsh v. Voigt in the Circuit Court for Montgomery County, Maryland, preclude as a matter of law, any further claims by the Welshes against Gerber et al. for injuries suffered by Michael Welsh in the January 23, 1983, automobile accident?

We answer the question "no." A consent judgment does not necessarily include an actual adjudication of the issue of damages, and in appropriate circumstances a subsequent inquiry should be made to determine what the parties intended and whether the consent judgment represents an actual adjudication of a particular issue. We explain.

Gerber's principal argument is that a judgment occupies a very special place in the eyes of the law and carries with it a cloak of conclusiveness and finality that rarely should be lifted. Without disagreeing with this concept, we point out that the binding consequences of a judgment take several forms. First, and perhaps foremost in terms of the desirability of finality, is the impact that a judgment has upon the claims at issue between the parties to the proceeding. The governing principle there, which is generally referred to as res judicata, or perhaps more precisely as the claim preclusion arm of res judicata, is that:

[A] judgment between the same parties and their privies is a final bar to any other suit upon the same cause of action and is conclusive, not only as to all matters that have been decided in the original suit, but as to all matters which with propriety could have been litigated in the first suit....

MPC, Inc. v. Kenny, 279 Md. 29, 32, 367 A.2d 486 (1977), quoting Alvey v. Alvey, 225 Md. 386, 390, 171 A.2d 92 (1961) (emphasis in original).

See generally, Kent County Bd. of Educ. v. Bilbrough, 309 Md. 487, 525 A.2d 232 (1987).

A second aspect of the finality of judgments between the parties is the concept of issue preclusion. This principle, known as collateral estoppel, is that in a second suit between the same parties, even if the cause of action is different, any determination of fact that was actually litigated and was essential to a valid and final judgment is conclusive. See Kent County Bd. of Educ., supra, 309 Md. at 490, 525 A.2d 232; MPC, Inc., supra, 279 Md. at 32, 367 A.2d 486; Sterling v. Local 438, etc., 207 Md. 132, 143, 113 A.2d 389, cert. denied, 350 U.S. 875, 76 S.Ct. 119, 100 L.Ed. 773 (1955); Frontier Van Lines v. Md. B. & Tr. Co., 274 Md. 621, 624, 336 A.2d 778 (1975); Travelers Insur. Co. v. Godsey, 260 Md. 669, 676, 273 A.2d 431 (1971).

The case before us presents no challenge to the sanctity of these rules of finality. Rather, it deals with a developing area of the law that addresses the desirability of granting or imposing the benefit or burden of issue preclusion in situations where there is not a complete identity of parties. This principle, known as nonmutual collateral estoppel, is almost as simple in concept as it is difficult in application. Conceptually, there will be instances in which a party who has had the benefit of a full and fair adjudication of an issue should be bound by that adjudication, even in a subsequent proceeding involving a different party. The...

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