State Auto Property and Casualty v. Al-Ko Kober, and Kaufman Trailer of N.C.

STATE OF WEST VIRGINIA
SUPREME COURT OF APPEALS
State Auto Property and Casualty Insurance Company,
FILED
June 10, 2015
as subrogee of Randall Buckley d/b/a Randy’s released at 3:00 p.m.
RORY L. PERRY II, CLERK
Contracting Service, Plaintiff Below, Petitioner SUPREME COURT OF APPEALS
OF WEST VIRGINIA
vs) No. 14-0556 (Hampshire County 13-C-113)
Al-Ko Kober, and Kaufman Trailer of N.C., Inc.,
Defendants Below, Respondents
MEMORANDUM DECISION
The petitioner herein and plaintiff below, State Auto Property and Casualty
Insurance Company (“State Auto”), as subrogee of Randall Buckley d/b/a Randy’s
Contracting Service (“Randy’s Contracting”), appeals the May 1, 2014, order of the
Circuit Court of Hampshire County, dismissing State Auto’s claims against the
respondents herein and defendants below, Al-Ko Kober and Kaufman Trailer of N.C.,
Inc. (“Kaufman Trailer”), pursuant to Rule 12(b)(6) of the West Virginia Rules of Civil
Procedure (“Rule 12(b)(6)”) for failure to state a claim for which relief could be granted.
State Auto, by counsel, Trevor K. Taylor and Tiffany A. Cropp, filed a brief with this
Court. Al-Ko Kober, through counsel, Scott L. Summers, and Kaufman Trailer, through
counsel, Timothy R. Linkous and J. Robert Russell, filed responses. State Auto, by
counsel, filed a reply.
This Court has considered the record on appeal, the parties’ briefs, and their oral
arguments. Upon our review, we believe that this case satisfies the “limited
circumstances” requirement of Rule 21(d) of the Rules of Appellate Procedure and is
appropriate for a memorandum decision reversing the circuit court’s order. For the
reasons expressed below, the May 1, 2014, order is reversed and this matter is remanded
for further proceedings.
On August 8, 2011, Eric Connell, an employee of Randy’s Contracting, was
involved in a car accident on U.S. Route 50 in Hampshire County, West Virginia. At the
time, Connell was driving a 2000 F-250 Ford truck towing a 2009 Kaufman utility trailer
manufactured by defendant Kaufman Trailer. Both the truck and the trailer were owned
by Randy’s Contracting. State Auto alleges that the accident occurred when an axle
manufactured by defendant Al-Ko Kober failed, causing the trailer to lose a wheel. The
trailer fishtailed into oncoming traffic, and it was struck by a 2002 F-250 Ford truck
driven by James Coleman. State Auto contends that Coleman suffered both personal
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injuries and property damage as a result of the accident and that Randy’s Contracting
sustained property damage.
Randy’s Contracting is insured by petitioner State Auto. According to State Auto,
the policy of insurance issued to Randy’s Contracting provides liability insurance for
vehicles owned and operated by Randy’s Contracting. Prior to the initiation of any law
suits, State Auto avers that it paid Coleman for the personal injuries and property damage
he incurred as a result of the accident. State Auto also claims to have paid its insured,
Randy’s Contracting, for its property damage arising from the accident. Al-Ko Kober and
Kaufman Trailer were not apprised of and were not party to these settlements.
In initiating this claim, State Auto contends that it has a contractual right of
subrogation arising from the insurance policy it issued to Randy’s Contracting, permitting
it to recover from the defendants not only the money it paid to Randy’s Contracting, but
also the money it paid to Coleman. State Auto, acting as subrogee, filed a complaint
against Al-Ko Kober and Kaufman Trailer, alleging that the trailer and axle were
defectively designed, tested, manufactured, and distributed, and that as a direct and
proximate cause of those defects, both of the defendants are strictly liable to State Auto
for the money it paid to Coleman and Randy’s Contracting. State Auto also claimed that
the defendants were negligent in the design, testing, manufacture, and distribution of the
trailer and axle and that the defendants are similarly liable to State Auto for this
negligence.
In response to the complaint, the defendants filed answers and Rule 12(b)(6)
motions to dismiss. Characterizing the claims as claims for contribution, the defendants
asserted that State Auto’s suit is barred by syllabus point 6 of Charleston Area Medical
Center, Inc. v. Parke-Davis, 217 W. Va. 15, 614 S.E.2d 15 (2005) (“CAMC”), because
State Auto did not apprise the defendants of the settlements with Randy’s Contracting
and Coleman. Syllabus point 6 of CAMC provides:
The inchoate right of contribution recognized by this state can only
be asserted by means of third-party impleader in an action brought by the
injured party against a tortfeasor. Consequently, a tortfeasor who negotiates
and consummates a settlement with an injured party on behalf of itself
before any lawsuit is filed cannot subsequently bring an action seeking
contribution from a tortfeasor who was not apprised of and not a party to
the settlement negotiations and agreement.
State Auto argued in response to the motions to dismiss that while a cause of
action for contribution against the defendants may be barred for failure to provide notice
of the settlements, “State Auto’s complaint clearly alleges cognizable claims against
Kaufman Trailer and Al-Ko Kober . . . for implied indemnification.” During oral
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argument, State Auto’s counsel advised the Court that State Auto is seeking
indemnification, not contribution.
By order entered May 1, 2014, the circuit court ruled in favor of the defendants
and dismissed State Auto’s case for failing to state a claim for which relief can be
granted. The order provided, “Whether in the form of negligence or strict liability, the
Plaintiff’s independent cause of action for indemnification was extinguished when the
Plaintiff failed to give notice to the Defendants or to make them a party to any settlement
or litigation.” (Emphasis added). State Auto appeals this order.
When presented with a Rule 12(b)(6) motion to dismiss for failure to state a claim
upon which relief can be granted, the trial court must construe the complaint in the light
most favorable to the plaintiff and presume all of the allegations therein are true. Sedlock
v. Moyle, 222 W. Va. 547, 550, 668 S.E.2d 176, 179 (2008). “The trial court, in
appraising the sufficiency of a complaint on a Rule 12(b)(6) motion, should not dismiss
the complaint unless it appears beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45­
46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).” Syl. pt. 3, Chapman v. Kane Transfer Co., Inc.,
160 W. Va. 530, 236 S.E.2d 207 (1977).
On appeal of a circuit court’s order granting a 12(b)(6) motion, this Court makes
the same presumptions of the complaint and applies a de novo standard of review. Syl. pt.
2, State ex rel. McGraw v. Scott Runyan Pontiac–Buick, Inc., 194 W. Va. 770, 461 S.E.2d
516 (1995) (“Appellate review of a circuit court’s order granting a motion to dismiss a
complaint is de novo.”); syl. pt. 2, Hill v. Stowers, 224 W. Va. 51, 680 S.E.2d 66 (2009)
(same).
State Auto’s first assignment of error is that the circuit court applied an improper
notice requirement when dismissing State Auto’s subrogation claim for implied
indemnity. The defendants both argue that the circuit court’s decision was not in error
and that State Auto’s claim is one for inchoate contribution, requiring notice.
While syllabus point 6 of CAMC requires that a tortfeasor provide notice to other
tortfeasors of settlement negotiation and consummation with an injured party to recover
contribution from the other tortfeasors, the same notice requirement is not required for a
tortfeasor to maintain a claim for implied indemnity. Syllabus point 4 of Hill v. Joseph T.
Ryerson & Son, Inc., 165 W. Va. 22, 268 S.E.2d 296 (1980), holds:
Lack of notice by the indemnitee to the indemnitor concerning the
injured plaintiff’s claim will not defeat an implied indemnity action that is
timely filed. If, however, the indemnitor has received no notice and has not
been impleaded by the indemnitee into the original suit brought against the
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indemnitee by the plaintiff, then the indemnitor is not bound by the
judgment rendered against the indemnitee in the plaintiff’s action.
(Emphasis added).
Pursuant to syllabus point 4 of Hill, State Auto was not required to provide notice
to the defendants of the settlement negotiation and consummation with Coleman to
maintain its claim for indemnity. Therefore, upon our de novo review, we determine that
the circuit court has erred by dismissing State Auto’s subrogation claim for indemnity for
lack of notice.1
In State Auto’s second assignment of error, it contends that the circuit court
improperly dismissed its subrogation claim to recover from the defendants what it paid
out to its insured, Randy’s Contracting. Insofar as the circuit court did not provide a
separate ground for dismissing the claim of subrogation for Randy’s Contracting, we
assume that it also relied upon the erroneous notice requirement to dispose of this claim.
Consequently, we find it was error to dismiss the subrogation claim for Randy’s
Contracting for the reasons cited regarding the Coleman indemnification claim.
Because the circuit court’s May 1, 2014, order dismissing State Auto’s indemnity
and subrogation claims was in error, we reverse that order and remand the case for further
proceedings consistent with this decision.
Reversed and remanded.
1
In addition to arguing that the circuit court had correctly dismissed the case for
lack of notice, the defendants also argued that State Auto may not maintain its implied
indemnity claim because it “did not plead an implied indemnity claim on behalf of its
insured, Randy’s Contracting.” This argument was not presented in the defendants’
motions to dismiss, and the circuit court’s order did not consider whether the requisite
elements of an implied indemnity claim are satisfied in this case. See syl. pt. 4, Harvest
Capital v. W. Va. Dep’t of Energy, 211 W. Va. 34, 560 S.E.2d 509 (2002) (“The requisite
elements of an implied indemnity claim in West Virginia are a showing that: (1) an injury
was sustained by a third party; (2) for which a putative indemnitee has become subject to
liability because of a positive duty created by statute or common law, but whose
independent actions did not contribute to the injury; and (3) for which a putative
indemnitor should bear fault for causing because of the relationship the indemnitor and
indemnitee share.”). Although “it is permissible for us to affirm the granting of
[dismissal] on bases different or grounds other than those relied upon by the circuit
court,” Gentry v. Magnum, 195 W. Va. 512, 519, 466 S.E.2d 171, 178 (1995), we believe
that under the specific facts of this case, the interests of justice will best be served if we
remand the case to the circuit court for its consideration of this issue.
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ISSUED: June 10, 2015
CONCURRED IN BY:
Chief Justice Margaret L. Workman
Justice Robin Jean Davis
Justice Brent D. Benjamin
CONCURRING AND WRITING SEPARATELY:
Justice Menis E. Ketchum
Justice Allen H. Loughry II
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LOUGHRY, Justice, concurring, with KETCHUM, Justice, joining:
I fully concur in the majority’s conclusion that no notice requirement exists for
purposes of advancing an implied indemnification claim. State Auto, as subrogee of
Randall Buckley, d/b/a Randy’s Contracting Service, may pursue an implied
indemnification claim against a party it believes is one-hundred percent liable for the
subject accident. Nonetheless, I write separately to restate my fervent belief that this
Court should revisit the holding in Charleston Area Medical Center, Inc. v. Parke-Davis,
217 W.Va. 15, 614 S.E.2d 15 (2005). Although Parke-Davis addressed contribution, not
implied indemnity, State Auto has represented that it forewent the pursuit of a claim for
contribution because of the holding in Parke-Davis.2
The Court held in Parke-Davis that a tortfeasor who settles with an injured person
before a lawsuit is filed cannot bring a contribution claim against a joint tortfeasor who
was not a participant in the settlement agreement. Id. at 17-18, 614 S.E.2d at 17-18, syl.
pt. 6. A contribution claim can only be brought when a lawsuit is first initiated by the
injured party:
To permit the inchoate right of contribution to be successfully
asserted, the injured party must bring a cause of action against
an alleged tortfeasor who then joins additional non-named
tortfeasors by means of third-party joinder, following which a
judgment is rendered that establishes a common obligation
owed by the joint tortfeasors to the injured party. Absent
compliance with this procedural mechanism for asserting
contribution in advance of the rendering of a joint judgment,
there is no right of contribution outside the statutory rights
provided by West Virginia Code § 55-7-13.
Id. at 24, 614 S.E.2d at 24.
As more fully explained in my concurrence to Modular Building Consultants of
West Virginia, Inc. v. Poerio, Inc., No. 14-0158, 2015 WL 3386820 (W.Va. May 21,
2015) (Loughry, J., concurring), Parke-Davis was wrongly decided. Without any legal or
common-sense justification, it discourages tortfeasors and insurance companies from
promptly resolving claims. Injured persons are forced to file suit just so a tortfeasor may
protect the possibility of a subsequent award of contribution. This is disadvantageous to
2
It is notable that, unlike implied indemnity, a party need not be totally without
fault to pursue a claim for contribution.
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both plaintiffs and defendants and is contrary to our long-standing precept that “[t]he law
favors and encourages the resolution of controversies by contracts of compromise and
settlement rather than by litigation[.]” Syl. Pt. 1, in part, Sanders v. Roselawn Mem’l
Gardens, 152 W.Va. 91, 159 S.E.2d 784 (1968).
I do not advocate piecemeal litigation for purposes of pursuing contribution or
indemnity. Where an action is filed, all claims should be brought therein via impleader
or consolidation. However, where an injured person does not sue because he received
full satisfaction from a single tortfeasor, and a proper release is obtained,3 there is no
legal or rational justification for precluding the settling tortfeasor from pursuing joint
tortfeasors to achieve an equitable apportionment of damages. If the alleged joint
tortfeasors should dispute their liability or the reasonableness of the settlement amount,
they could challenge these with the same evidence that would have been offered if the
injured person had initiated the suit and they were made party defendants.
State Auto should be applauded for promptly undertaking the entire cost of
settlement in the instant case, rather than refusing to settle with an injured person who
ostensibly bears no fault for the accident and dragging him along while the products
liability claim is investigated and litigated. This Court should encourage such claims
settlement practices. Now, as subrogee to its insured, and if the claims are properly pled
and supported by a release from Mr. Coleman, State Auto should be permitted to pursue
claims for both implied indemnity and contribution. This case provides a ready
opportunity to overrule Parke-Davis—perhaps one of the few opportunities this Court
will have, inasmuch as tortfeasors will undoubtedly be reluctant to risk running afoul of
the Parke-Davis holding. Unfortunately, the majority of this Court has declined to
pursue the opportunity to revisit a misguided ruling that clearly warrants correction.
Accordingly, I respectfully concur.
3
The terms of the release executed by Mr. Coleman are not in the appendix record.
However, as explained in the Modular Building Consultants majority opinion, an injured
person must release all of the joint tortfeasors in order to preserve the settling tortfeasor’s
right of contribution. 2015 WL 3386820 at * __, syl. pt. 9.
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