J & J Timber Company v. Rembert J. Broome

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2004-IA-01914-SCT
J & J TIMBER COMPANY, A MISSISSIPPI
CORPORATION
v.
REMBERT J. BROOME, SON AND NEXT
FRIEND OF JAMES C. BROOME, DECEASED,
AND REMBERT J. BROOME, FATHER AND
NEXT FRIEND OF SARAH M. BROOME, A
MINOR, DECEASED
DATE OF JUDGMENT: 09/13/2004
TRIAL JUDGE: HON. MICHAEL R. EUBANKS
COURT FROM WHICH APPEALED: MARION COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANT: WILLIAM W. McKINLEY, JR.
DORRANCE AULTMAN
ATTORNEY FOR APPELLEE: T. JACKSON LYONS
NATURE OF THE CASE: CIVIL - PERSONAL INJURY
DISPOSITION: REVERSED AND RENDERED - 05/04/2006
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE SMITH, C.J., CARLSON AND DICKINSON, JJ.
DICKINSON, JUSTICE, FOR THE COURT:
¶1. This wrongful death suit arises out of an accident between a log truck and a bus. As
part of a settlement, the plaintiffs released the driver of the log truck from all liability and
agreed to indemnify him against third-party claims. The question presented is whether the
plaintiffs’ settlement with the driver of the log truck precludes recovery against his employer
under a vicarious liability theory. While the Appellant raises two additional issues, the
disposition of this initial question renders the remaining two moot.
BACKGROUND FACTS AND PROCEEDINGS
¶2. Jim Smith Trucking (“Smith”), a business engaged in hauling logs from timber
vendors’ yards to timber mills, hired Brent Galatas (“Galatas”) to drive its hauling truck.
Approximately three to four months before the accident at issue, Smith contracted with J&J
Timber Company (“J&J Timber”) to haul its logs. J&J Timber specified the species, type,
length, cut, and amount of timber to be hauled to particular mills by Smith’s driver, Galatas.
¶3. On November 27, 1999, Galatas delivered two loads of J&J Timber’s logs to its
specified timber yard. After hauling and unloading the second load, Galatas was driving
back to Smith’s house in the unloaded truck when he collided with a bus occupied by a
family of gospel singers on their way to perform a concert. The collision disintegrated the
front of the bus, and two people, James C. Broome (“James”) and Sarah M. Broome
(“Sarah”), were killed.
¶4. Prior to instituting litigation, the wrongful death beneficiaries of James and Sarah,
including the Appellee Rembert J. Broome (“Broome”), reached a settlement with Galatas
and Smith. The settlement included two documents entitled, “RECEIPT, RELEASE AND
INDEMNITY AGREEMENT,” representing the respective interests of James’ and Sarah’s
beneficiaries. Both agreements contained similar language, quoted in relevant part below:
The term “RELEASED PARTIES” as used in this RECEIPT, RELEASE
AND INDEMNITY AGREEMENT, shall include the following: James “Jim”
Smith, Brent Galatas, and American Reliable Insurance Company . . . .
[The wrongful death beneficiaries] . . . do hereby RELEASE, ACQUIT AND
FOREVER DISCHARGE, all of the said RELEASED PARTIES,
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collectively and individually, from any and all actions and/or causes of
action . . . [resulting] from injuries and/or damages we received . . . [in the
incident] . . . .
[The wrongful death beneficiaries] . . . do understand that this Agreement
effects a RELEASE AND DISCHARGE of all our claims . . . arising out of,
or in any way related to the accident . . . .
Notwithstanding anything else contained herein to the contrary, it is agreed,
understood, and stipulated that [the wrongful death beneficiaries] . . . are
specifically and expressly reserving, and not releasing, any and all claims
we may have of any kind and type whatsoever relating to the incident
against J&J Timber . . . .
[The wrongful death beneficiaries] do warrant that we are the only parties
entitled to claim and recover damages or otherwise make any recovery
whatsoever resulting from or arising out of [the incident] and we agree to
defend, indemnify, and hold harmless the Releasees from any and all
claims and damages, including third-party claims for damages resulting
from or in any way arising out of the injuries, damages, and/or death of
[the deceased persons] which may be made by any other person(s),
party(s), entity(s), or concern(s), whatsoever. . . .
(Emphasis added).
¶5. On November 27, 2001, Broome filed a wrongful death action against J&J Timber,
charging it with vicarious liability for the negligence of its employee, Galatas. At the
conclusion of testimony, the issue submitted to the jury was whether J&J Timber could be
held vicariously liable for Galatas’ negligence in causing the crash. To reach that issue, the
jury was first required to determine whether Galatas was J&J Timber’s employee.
¶6. The jury returned a unanimous verdict in favor of J&J Timber. However, the trial
court granted Broome a new trial, stating it had misinstructed the jury and improperly
restricted Broome by forcing him to abandon what the trial court concluded was a viable dual
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employment theory of liability. On October 22, 2004, we granted interlocutory appeal and
stayed further proceedings.
¶7. Of the three issues presented by J&J Timber, we shall address only the first,1 which
we find dispositive of the case. The issue presented is whether, as a matter of law, the
release of a tortfeasor also serves as a release of the tortfeasor’s employer from claims of
vicarious liability, despite an attempt by the releasor to preserve the right 2 to pursue such
claims.
DISCUSSION
¶8. When reviewing issues of law, this Court engages in de novo review. Sealy v.
Goddard, 910 So. 2d 502, 506 (Miss. 2005) (citing Ellis v. Anderson Tully Co., 727 So. 2d
716, 718 (Miss. 1998)); Ostrander v. State, 803 So. 2d 1172, 1174 (Miss. 2002) (citing Dep’t
of Human Servs. v. Gaddis, 730 So. 2d 1116, 1117 (Miss. 1998)).
¶9. J&J Timber argues that Broome’s release of Galatas and agreement to indemnify him
against all third-party claims effectively preclude Broome from pursuing an action against
J&J Timber based on vicariously liability. J&J Timber further contends that when an injured
1
The second issue certified for interlocutory appeal is whether the trial court erred in denying
J&J Timber’s peremptory instruction. The third issue certified for interlocutory appeal is whether
the trial court erred in granting Broome’s motion for a new trial.
2
Because we conclude there can be no vicarious liability in this case, we need not reach the
question of Galatas’ employment status. Our analysis proceeds on the assumption arguendo that
Galatas was J&J Timber’s employee, even though J&J Timber has not conceded that point. Broome
makes no claim that the company was independently negligent.
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party releases the only negligent actor from liability, a derivative claim of liability against the
employer is extinguished.
¶10. J&J Timber asserts that, should Broome succeed in pursuing a claim of vicarious
liability, a “circle of indemnity” will result. J&J Timber points out that it has a common law
right of indemnification against Galatas, who was the only actively negligent party. Thus,
Broome would seek reimbursement from Galatas of any judgement against it. Galatas in turn
would seek reimbursement from Broome pursuant to the indemnification agreement. Thus,
in effect, Broome would be ultimately responsible for the payment of any judgment,
rendering moot Broome’s suit against J&J Timber. J&J Timber argues that such “circuity
of action” can only be avoided by holding that the release of an employee bars all vicarious
liability claims against the employer.
¶11. Broome argues that Mississippi law permits a third party injured by an employee to
elect to sue the employee, the employer, or both. Accordingly, Broome says, the employee
and employer are jointly liable for any damages to the injured party. Broome contends that
under Mississippi Code Annotated Section 85-5-1, a wrongful death beneficiary’s settlement
with one party does not operate to release any other party at fault. Additionally, Broome
points out that he released Galatas only in his individual capacity because the agreement
expressly reserved the right to pursue a claim against J&J Timber as Galatas’ employer.
Broome contends the only way to harmonize the provisions of the release is to interpret them
in a way that allows him to bring an action against J&J Timber. Notably, Broome never
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argues that we should uphold our previous determination of this issue from W.J. Runyon &
Sons, Inc. v. Davis, 605 So. 2d 38 (Miss. 1992) (hereinafter Runyon), overruled on other
grounds by Richardson v. APAC-Mississippi, Inc., 631 So. 2d 143 (Miss. 1994).
Runyon and Richardson
¶12. Although Runyon holds that the release of an agent has no effect on the principal’s
vicarious liability, 605 So. 2d at 43, J&J Timber points to a statement in dicta in Richardson
indicating that the release of an employee bars claims of vicarious liability against the
employer, 631 So. 2d at 151 fn.7. J&J Timber advocates the further overruling of Runyon
and adoption of Richardson’s dicta position on this issue.
¶13. In Runyon, the plaintiff, Davis, was injured when he collided with an asphalt truck
obscured by the thick cloud of dust it created. 605 So. 2d at 40-41. One issue before the
Court was whether Davis could sue the truck driver’s putative employer, Runyon, even after
Davis settled with the driver and released him. Id. at 43. Runyon argued that the settlement
effected a full recovery by Davis, and allowing Davis to pursue a claim against it would lead
to unjust enrichment. Id. The Court noted that Davis had reserved his rights against the
company in the release agreement, and we focused on the favorable public policy of
encouraging settlements, stating “[t]here are all sorts of rational reasons why our law should
allow a plaintiff to settle with less than all of multiple defendants and proceed against the
remaining defendant or defendants.” Id. Finally, we found that because no language in the
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release claimed that the settlement with the driver fully compensated him, Davis could
proceed against Runyon. Id.
¶14. This Court also held that Runyon could be found independently negligent, not merely
vicariously liable, for its actions leading to the crash. Id. at 42. While we held that the
release of the driver did not preclude an action against Runyon, we blurred the distinction
between maintaining an action against the employer on the basis of negligence directly
attributable to the employer and negligence based solely on vicarious liability. This is the
key inquiry in this case and the distinction discussed in dicta in Richardson.
¶15. Finally, the Runyon Court held that the employee/independent contractor analysis
boils down to a single question: “whether the project owner maintains a significant de jure
right or de facto power of control over the performance of aspects of the work from which
the injury has arisen or to which it is reasonably incident.” Id. at 46. Disposing of the
traditional factor-based analysis, we held, as a matter of law, the driver was Runyon’s
employee, thus making Runyon vicariously liable for the driver’s negligence. Id. at 47.
¶16. In Richardson, this Court took express exception to the last holding in Runyon.
Because Runyon incorrectly analyzed the employment relationships involved, we overruled
the case as to its independent contractor analysis. Richardson, 631 So. 2d at 152. However,
we did not expressly overrule Runyon as to its declaration, notably unsupported by any
Mississippi authorities, that the release of an agent does not affect claims of vicarious
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liability against the principal. In dicta, though, we indicated that this holding in Runyon was
suspect:
While an employer and his employee are jointly and severally liable for
injuries caused by the employee in the course of his employment, may be sued
jointly or severally, and we have held that where both are sued, the jury may
be instructed it can return a verdict against them both or either of them, they
are not joint tortfeasors. Joint tortfeasor claims arise where the separate
wrongful conduct of two or more individuals combine to cause an injury,
and each because of his conduct bears some responsibility for the injury.
There is a good reason to permit plaintiff to settle as to one of the joint
tortfeasors, reserving the right to proceed against the other wrongdoer. Where
the principal is sought to be held liable for acts of his agent, as here,
however, only one, the employee, has committed any wrong. Settlement
with one and then proceeding against the other in this kind of case bears
far greater scrutiny than settling with a joint tortfeasor and proceeding
against the other. We are not required to address this question in the case,
however.
Id. at 151 fn. 7 (emphasis added; citation omitted).
¶17. Prior to the Runyon decision, we held in Granquist v. Crystal Springs Lumber Co.,
1 So. 2d 216, 218 (Miss. 1941), that where a plaintiff recovered a judgment against the sole
tortfeasor, a subsequent suit against his employer was barred because the wrong was legally
satisfied.3 The Court stated:
It further follows as a logical legal consequence of what has been said that
when the third person, with the full knowledge alleged in the quoted plea, has
by suit or action had a recovery against the agent or employee for the wrong
committed by the agent or employee as the sole actor in the commission of the
3
The Runyon Court cited Granquist only once, and that was for the proposition that the
employer, Runyon, had a right of indemnity of and from its employee, the driver. Runyon, 605
So. 2d at 48. The Runyon Court never considered Granquist at any point during its discussion of
how the release of the sole tortfeasor should affect claims of vicarious liability against the employer.
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wrong, the liability of the principal or master which was solely a derivative
of, or a dependency from, and identical with the tort of the agent or
servant, becomes merged into the judgment recovered against the agent
or servant if that judgment be collectible, for that the wrong has then been
legally satisfied and no subsequent or separate action against the principal
or master will be allowed.
Id. (Emphasis added). Of course, in Granquist, the plaintiff first sued the negligent
employee, received a judgment, and then pursued an action against the employer based on
vicarious liability. Id. at 218. In the instant case, Broome settled with the negligent
employee and received compensation before filing suit, and then pursued an action against
J&J Timber based on vicarious liability. Nonetheless, Granquist’s principles are applicable
to the case at bar.
¶18. We reached a similar result in Lowery v. Statewide Healthcare Services, Inc., 585
So. 2d 778, 779 (Miss. 1991). In Lowery, this Court held that a statute of limitations bar
against a nurse in a medical malpractice case also barred suit against the nurse’s employer
where the employer’s “liability was predicated solely upon the doctrine of respondeat
superior.” Id. We noted the general rule “that a suit barred by a statute of limitation against
an agent will likewise bar the same claim against the principal whose liability is based solely
upon the principal and agent relationship, and not some act or conduct of the principal
separate and apart from the act or conduct of the agent.” Id. at 780.
¶19. An action against an employer based on the doctrine of respondeat superior is a
derivative claim arising solely out of the negligent conduct of its employee within the scope
of his or her employment. Loss of consortium is similarly derivative, and Mississippi law
9
dictates that if the underlying personal injury claim is disposed of, the loss of consortium
claim cannot be maintained on its own. McCoy v. Colonial Banking Co., Inc., 572 So. 2d
850, 852 (Miss. 1990). While Broome did not have his claims against Galatas thrown out,
he voluntarily settled them and released Galatas from the threat of any further action. The
principles precluding a loss of consortium claim when the underlying action is gone apply
equally to this case with respect to an employer’s vicarious liability. Once Broome
discharged Galatas, the purely derivative vicarious liability claim against J&J Timber became
barred.
¶20. Having settled with Galatas and released him from liability, and absent allegations of
independent negligence on the part of J&J Timber, Broome may not maintain an action
against the company. The Iowa Supreme Court has adeptly stated the reasoning behind this
principle:
The “percentage of negligence” attributable to the conduct of the servant
constitutes the entire “single share” of liability attributable jointly to the master
and servant . . . . Because this percentage of negligence represents the “single
share” of liability covered by the common liability of the master and servant,
the master is necessarily released from vicarious liability for the released
servant’s misconduct.
Biddle v. Sartori Mem’l Hosp., 518 N.W.2d 795, 798 (Iowa 1994) (citing Horjesi v.
Anderson, 353 N.W.2d 316, 318 (N.D. 1984)). The court stated that, “because vicarious
liability derives solely from the principal’s legal relation to the wrongdoer, settlement with
the tortfeasor removes the basis for any additional recovery from the principal upon the same
10
acts of negligence.” Biddle, 518 N.W.2d at 798 (citing Copeland v. Humana of Ky., Inc.,
769 S.W.2d 67, 70 (Ky. Ct. App. 1989)).
¶21. Where a party’s suit against an employer is based on respondeat superior, the
vicarious liability claim itself is extinguished when the solely negligent employee is released.
There can be no assessment of damages against the employer when no action can be brought
against the only negligent party - the employee. To the extent that Runyon holds that a
vicarious liability claim can be maintained against the employer after the employee is
released, without an allegation of independent negligence by the employer, that case is
overruled.
The “Circle of Indemnity”
¶22. We now address J&J Timber’s “circle of indemnity” argument. Should Broome
succeed in his suit against J&J Timber, the company claims it would assert its common law
right of indemnity against Galatas. This common law right of indemnity would allow J&J
Timber to recover all the damages it must pay to Broome as a result of the actions of Galatas,
the only actively negligent party. See Granquist, 1 So. 2d at 218.
¶23. In turn, Galatas could rely on his contractual indemnity rights arising from the releases
signed by Broome. The releases state, in relevant part:
[The wrongful death beneficiaries] agree to defend, indemnify, and hold
harmless the Releasees [Galatas] from any and all claims and damages,
including third-party claims for damages resulting from or in any way arising
out of the injuries, damages, and/or death of [the deceased persons] which may
be made by any other person(s), party(s), entity(s), or concern(s), whatsoever.
11
¶24. Following the circle of indemnity to its eventual conclusion, a hypothetical judgement
of $1,000 would be collected by Broome from J&J Timber, who in turn would seek
reimbursement of the $1,000 from Galatas, who would in turn seek reimbursement from
Broome. In the final analysis, all three parties would be right back where they started. Stated
differently, the “circle of indemnity” renders Broome’s claims moot because he would, in
affect, pay his own judgement. See Dennis v. Southeastern Kansas Gas Co., Inc., 610 P.2d
627, 633 (Kan. 1980).
¶25. Contrary to this Court’s assertion in Runyon, 605 So. 2d at 43, eliminating the circuity
of action that arises from an injured party’s vicarious liability claim against an employer
when the negligent employee has been released actually encourages settlement and promotes
finality in actions. As the Supreme Court of South Dakota noted, “[t]he rationales of
preventing circuity of action and encouragement of settlement complement one another. The
complementary aspects of both rationales serve another important goal: finality. Public
policy favors finality, thus avoiding circuity of action that is merely derivative and
secondary.” Estate of Williams v. Vandeberg, 620 N.W.2d 187, 190 (S.D. 2000). See also
Theophelis v. Lansing Gen. Hosp., 424 N.W.2d 478, 480 (Mich. 1988).
¶26. A majority of states have adopted the position that the release of a tortfeasor thereby
releases the tortfeasor’s principal for all claims of vicarious liability, despite any reservation
of rights. See, e.g., Alvarez v. New Haven Register, Inc., 735 A.2d 306, 315 (Conn. 1999);
Gilbert v. Sycamore Mun. Hosp., 622 N.E.2d 788, 797 (Ill. 1993); 480; Biddle, 518 N.W.2d
12
at 799; Atkinson v. Wichita Clinic, P.A., 763 P.2d 1085, 1091-92 (Kan. 1988); Copeland,
769 S.W.2d at 70; Kelly v. Avon Tape, Inc., 631 N.E.2d 1013, 1015 (Mass. 1994);
Theophelis, 424 N.W.2d at 480; Reedon of Faribault, Inc. v. Fidelity & Guar. Ins.
Underwriters, Inc., 418 N.W.2d 488, 491 (Minn. 1988); Pioneer Animal Clinic v. Garry,
436 N.W.2d 184, 188 (Neb. 1989); Horjesi, 353 N.W.2d at 318; Mamalis v. Atlas Van
Lines, Inc., 560 A.2d 1380, 1383 (Pa. 1989); Vandeberg, 620 N.W.2d at 191. We adopt the
position advocated by these courts that the injured party’s release of an employee
extinguishes all claims of vicarious liability against the employer, despite any reservation of
rights.
Mississippi Code Annotated Section 85-5-1
¶27. Broome contends that the right of an injured person to settle with and release one
tortfeasor while reserving his right to proceed against others who may be legally responsible
has been upheld in a long line of cases. While this may be a correct argument, it is inapposite
here. Galatas and J&J Timber may be jointly liable, but they are not joint tortfeasors. See
Granquist, 1 So. 2d at 218. “Joint tortfeasor claims arise where the separate wrongful
conduct of two or more individuals combine to cause an injury, and each because of his
conduct bears some responsibility for the injury.” Richardson, 631 So. 2d at 151 fn. 7 (citing
Granquist, 1 So. 2d at 218)(emphasis added). Here, Galatas is the sole tortfeasor. There is
no apportionment of fault required in this case because the only person who committed any
wrong was Galatas.
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¶28. Broome points to Mississippi Code Annotated Section 85-5-1 as support for his
position. The portion of the provision relied on by Broome states:
In all cases of joint or joint and several indebtedness, the creditor may settle
or compromise with and release any one or more of such debtors; and the
settlement or release shall not affect the right or remedy of the creditor against
the other debtors for the amount remaining due and unpaid, and shall not
operate to release any of the others of the said debtors.
Miss. Code Ann. § 85-5-1 (1972). However, the statute addresses, and the cases cited by
Broome involve, claimants settling with one joint tortfeasor and then pursuing a remedy
against another joint tortfeasor who caused the wrong, not one tortfeasor and a vicariously
liable employer as in this case. See Country Club of Jackson v. Saucier, 498 So. 2d 337
(Miss. 1986) (release of driver did not release country club as country club and driver were
independently liable tortfeasors - driver negligently operated car, country club served alcohol
to visibly intoxicated host); Smith v. Falke, 474 So. 2d 1044 (Miss. 1985) (release of one
following driver did not release second following driver in rear-ender action - both drivers
were independently liable for contributing to the accident); Medley v. Webb, 288 So. 2d 846
(Miss. 1974) (plaintiff may sue two or more drivers who contributed to the accident, but
plaintiff may only collect damages once); Lee v. Wiley Buntin Adjuster, Inc., 204 So. 2d 479
(Miss. 1967) (release of insurer did not release adjuster as insurer and adjuster were
independently liable tortfeasors - insurer failed to pay claim, adjuster made
misrepresentations). As such, Section 85-5-1 is inapposite.
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Reservation of Rights Against the Employer
¶29. Broome also claims that the release executed in favor of Galatas only released Galatas
in his individual capacity and not as the employee of J&J Timber. In accordance with our
holding above, the release of a negligent employee, in any capacity, bars all claims of
vicarious liability against the employer, despite a reservation of rights. Broome suggests that
the public policy of encouraging settlements would be damaged if he could not sue J&J
Timber after settling with and releasing Galatas. Broome cites a discussion of settlements
and Section 85-5-1 from McBride v. Chevron U.S.A., 673 So. 2d 372, 379-80 (Miss. 1996),
a case that has been statutorily overruled by Mississippi Code Annotated Section 85-5-7. In
a case involving joint tortfeasors, this Court stated, “a defendant whose negligence has been
found to have proximately caused injury to another person should not be allowed to escape
liability for his negligence by the fortuity that a co-defendant has settled prior to trial.”
McBride, 673 So. 2d at 380. However, this case involves neither joint tortfeasors nor the
need for apportionment of fault. As such, the cases and statutes cited by Broome are
irrelevant.
CONCLUSION
¶30. We hold today that the release of a tortfeasor operates to bar claims predicated on
vicarious liability against the tortfeasor’s employer. To the extent Runyon holds otherwise,
it is overruled. Our holding has no impact on the release of one tortfeasor when joint
tortfeasors are involved, and it does not affect claims against an employer who was
15
independently negligent, rather than solely derivatively negligent. Accordingly, we dismiss
Broome’s vicarious liability claim against J&J Timber.
¶31. REVERSED AND RENDERED.
SMITH, C.J., WALLER AND COBB, P.JJ. AND CARLSON, J., CONCUR.
EASLEY AND GRAVES, JJ., DISSENT WITHOUT SEPARATE WRITTEN
OPINION. DIAZ AND RANDOLPH, JJ., NOT PARTICIPATING.
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