Gibbs v. Top Gun Delivery and Moving Services, Inc.

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State: Illinois

Court: 1st District Appellate

Docket No: 1-08-2986 Rel

Case Date: 03/19/2010

Preview:FIFTH DIVISION March 19, 2010

No. 1-08-2986 BERTRAM GIBBS, Plaintiff-Appellant, v. TOP GUN DELIVERY AND MOVING SERVICES, INC., KEVIN DUNIGAN, and HARLEM FURNITURE, INC., Defendants-Appellees. ) ) ) ) ) ) ) ) ) ) ) Appeal from the Circuit Court of Cook County.

Honorable Dennis J. Burke, Judge Presiding.

JUSTICE HOWSE delivered the opinion of the court: Plaintiff Bertram Gibbs filed a negligence action against defendants Kevin Dunigan, Top Gun Delivery and Moving Services, Inc. (Top Gun), and Harlem Furniture, Inc. (Harlem), contending they were liable for injuries plaintiff suffered when a truck Dunigan was operating crossed the centerline and struck plaintiff's vehicle. Plaintiff alleged Dunigan was acting in his In

capacity as an agent of Top Gun while operating the truck. his second amended complaint, plaintiff alleged Harlem was

vicariously liable for Dunigan's actions because Dunigan, as an employee of Top Gun, was delivering furniture for Harlem pursuant to a written contract between Harlem and Top Gun. After

plaintiff entered into a covenant not to enforce a judgment against either Top Gun or Dunigan with Safeco, Top Gun's and

1-08-2986 Dunigan's primary insurer, the trial court granted Harlem's motion to dismiss the entire action on the basis that "any settlement between the agent and the plaintiff must also extinguish the principal's vicarious liability." See American

National Bank & Trust Co. v. Columbus-Cuneo-Cabrini Medical Center, 154 Ill. 2d 347, 355, 609 N.E.2d 285 (1993). On appeal, plaintiff contends: (1) the trial court erred in applying the American National Bank & Trust Co. rule to the covenant not to enforce judgment agreement created in this case; (2) Harlem has waived or is estopped from asserting that the covenant agreement extinguished his liability; and (3) the trial erred in dismissing Top Gun and Dunigan from the suit. For the

reasons that follow, we affirm the trial court's judgment. BACKGROUND On December 17, 2001, plaintiff Bertram Gibbs filed a complaint against defendants Kevin Dunigan, Enterprise Leasing Co., and Top Gun, alleging plaintiff was injured when the truck Dunigan was driving crossed the center line and struck plaintiff's vehicle. Plaintiff alleged in the original complaint

that Dunigan was acting in his capacity as an agent of Enterprise and/or Top Gun while operating the truck. Top Gun admitted Although

Dunigan was an employee at the time of the accident.

Enterprise admitted it owned the truck Dunigan was operating,

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1-08-2986 Enterprise was granted summary judgment in an agreed order on March 18, 2003, on the basis that the vehicle was leased to Top Gun and under its control when the accident occurred. On May 29, 2003, plaintiff was granted leave to file an amended complaint to add Harlem Furniture, Inc. (Harlem), as an additional defendant. At the time of the accident, Dunigan, as

an employee of Top Gun, was delivering furniture for Harlem pursuant to a written contract between Harlem and Top Gun. Plaintiff alleged Harlem was vicariously liable for Dunigan's actions. On October 6, 2003, Harlem filed its answer to

plaintiff's second amended complaint, denying Dunigan was an agent or subagent of Harlem. Harlem did not raise a right to

implied indemnification from Dunigan or Top Gun in its answer. On January 23, 2008, Top Gun and Dunigan filed a motion for good-faith finding. The motion alleged that plaintiff and Safeco

Insurance Co. of Illinois (Safeco), as insurers for Dunigan and Top Gun, had entered into an agreement whereby Safeco would pay $735,000 to plaintiff in exchange for a covenant not to execute or enforce judgment above $735,000 against either Safeco or the insureds. The motion noted the total liability policy limit

available to Dunigan and Top Gun under the Safeco policy was $750,000. Safeco agreed to pay the remainder of the policy,

$15,000, to Enterprise to settle the property damage portion of

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1-08-2986 this claim. Top Gun and Dunigan alleged the agreement was given

in good faith within the meaning of the Illinois Joint Tortfeasor Contribution Act (Contribution Act) (740 ILCS 100/2(c) (West 2008)). Attached to the motion was a document entitled "Covenant Not to Execute or Enforce Judgment." Under the terms of the covenant

agreement, Safeco, as Top Gun's and Dunigan's insurer, agreed to pay plaintiff $735,000. In consideration for the payment,

plaintiff agreed "not to execute any judgment" or "assign any right to recover or execute any judgment" against Safeco, Dunigan, or Top Gun. The covenant provided that upon execution

of the agreement, plaintiff would: "execute a standard Satisfaction of Judgment [on Dunigan's and Top Gun's behalf] for any judgment and in any amount whatsoever that may be entered at the conclusion of case No. O1 L 16192 and/or any refiling of the same. Said satisfaction shall be executed and delivered upon entry of judgment in case #01 L 16192 and/or any refiling of said action." The covenant also provided: "Nothing is [sic] this agreement is intended to preclude Bertram Gibbs, his heirs or

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1-08-2986 assigns, from executing against Defendant Harlem Furniture and/or its Insurer, Citizens Insurance on any judgment in excess of the [$735,000] paid as consideration for this agreement." Harlem filed a response to the motion for a good-faith finding, contending it was a named "Additional Insured" under the Safeco policy. Harlem contended Safeco, as Harlem's insurer,

owed a fiduciary duty of good faith not to act contrary to Harlem's interests. Harlem contended that although the covenant

agreement sought to protect the interests of its named insured and Dunigan, the agreement failed to protect Harlem's interests as an additional insured. On February 14, 2008, plaintiff filed a reply brief in support of the motion for a good-faith finding. Plaintiff

contended that he offered to accept Safeco's policy limits in exchange for a covenant not to execute on any judgment against defendants' Top Gun and Dunigan. Plaintiff explained the

agreement came about after plaintiff advised Safeco that if Safeco did not offer its single limits and judgment was entered against the defendants in excess of said limits, plaintiff would attempt to satisfy such excess from Top Gun's or Dunigan's personal assets. Plaintiff contended the good-faith finding

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1-08-2986 sought by Safeco "only protects the insurer from an action by the Plaintiff seeking to satisfy a judgment in excess of Safeco's policy limits." Plaintiff contended Harlem received the full

benefit of its status under the Safeco policy, noting "the agreed payment of the policy limits reduces any recovery Plaintiff may make against Defendant Harlem by that amount (740 ILCS 100/2(c))." On February 19, 2008, Harlem filed an amended response to the motion for a good-faith finding, requesting entry of a dismissal order. Harlem contended the covenant agreement

constituted a settlement agreement whereby plaintiff specifically agreed not to enforce any judgment against Dunigan and Top Gun beyond $735,000 in exchange for a payment in that amount. Relying on Gilbert v. Sycamore Municipal Hospital, 156 Ill. 2d 511, 622 N.E.2d 788 (1993), Harlem contended plaintiff's covenant not to enforce a judgment against Dunigan is by law an agreement not to enforce any judgment against Harlem in excess of $735,000, extinguishing Harlem's liability. Harlem was granted leave by

the trial court to file a motion to dismiss under section 2-619 of the Illinois Code of Civil Procedure (735 ILCS 5/2-619 (West 2008)). In his response to Harlem's motion to dismiss, plaintiff contended the covenant between plaintiff and Safeco did not

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1-08-2986 constitute a settlement. Plaintiff contended nothing in the

covenant agreement limited the liability of Dunigan or Top Gun to Harlem for the full amount of any potential judgment, less set off, under the common law theory of quasi-contractual implied indemnity. Plaintiff stressed that the covenant did not release

either Dunigan or Top Gun from liability. Following a hearing, the trial court granted Harlem's motion to dismiss. The trial court found that, in effect, "the Covenant

released Safeco and Defendants Dunigan and Top Gun, but attempted to preserve Plaintiff's right to pursue Defendant Harlem as Defendant Dunigan's principal," in violation of the rule established in Gilbert. On July 22, 2008, the court dismissed

the entire cause of action. Plaintiff filed a motion to reconsider, contending the trial court failed to comprehend the difference between a covenant not to sue and a covenant not to execute. In support of the motion,

plaintiff attached documents from a separate three-count declaratory judgment action filed by Harlem's insurer, Citizens Insurance Co. of America, against Safeco, Top Gun, and Dunigan. The trial court denied plaintiff's motion to reconsider. Plaintiff appeals. ANALYSIS A section 2-619 motion to dismiss admits the legal

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1-08-2986 sufficiency of the complaint and raises defects, defenses, or other affirmative matters that defeat the claims. 735 ILCS 5/2-

619(a)(9) (West 2008); Valdovinos v. Tomita, 394 Ill. App. 3d 14, 17, 914 N.E.2d 221 (2009). The question on review is whether a

genuine issue of material fact precludes dismissal or whether dismissal is proper as a matter of law. Fuller Family Holdings,

LLC v. Northern Trust Co., 371 Ill. App. 3d 605, 613, 863 N.E.2d 743 (2007). We review a trial court's judgment on a section 2Valdovinos, 394 Ill. App. 3d at

619 motion to dismiss de novo. 18.

I. American National Bank & Trust Co./Gilbert Rule Plaintiff contends the trial court erred in dismissing the case based on the covenant not to enforce judgment agreement between plaintiff and Safeco. Specifically, plaintiff contends

the covenant agreement did not constitute a settlement that extinguished Top Gun's or Dunigan's liability in this case. Section 2(c) of the Illinois Contribution Act provides: "When a release or covenant not to sue or not to enforce judgment is given in good faith to one or more persons liable in tort arising out of the same injury or the same wrongful death, it does not discharge any of the other tortfeasors from liability for the

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1-08-2986 injury or wrongful death unless its terms so provide but it reduces the recovery on any claim against the others to the extent that any amount stated in the release or covenant, or in the amount of consideration actually paid for it, whichever is greater." 100/2(c) (West 2008). In American National Bank & Trust Co., our supreme court noted that in vicarious liability cases, there is no apportionment of damages between the principal and the agent; instead, the principal has an implied, quasi-contractual right to indemnification against the agent. In light of a principal's 740 ILCS

right to identification, the supreme court held that "if implied indemnity against an agent is not barred by a plaintiff's settlement with the agent, there is little to encourage the agent's desire to settle." 154 Ill. 2d at 354. American National Bank & Trust Co.,

Accordingly, the court held that where a

plaintiff brings a respondeat superior claim against a principal, "any settlement between the agent and the plaintiff must also extinguish the principal's vicarious liability." American

National Bank & Trust Co., 154 Ill. 2d at 355, citing Bristow v. Griffitts Construction Co., 140 Ill. App. 3d 191, 488 N.E.2d 332 (1986).

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1-08-2986 In Gilbert, our supreme court recognized that although its decision in American National Bank & Trust Co. held a plaintiff's settlement with an agent extinguishes the principal's vicarious liability, its prior holding in Edgar County Bank & Trust Co. v. Paris Hospital, Inc., 57 Ill. 2d 298, 312 N.E.2d 259 (1974), still renewed the principal's liability if the covenant not to sue the agent expressly reserved the plaintiff's right to seek recovery from the principal. The Gilbert court noted Edgar

County Bank's result appeared to deny the employee the benefit of his covenant because he would still remain liable to the employer for indemnification. Gilbert, 156 Ill. 2d at 528, citing After determining an agent

Bristow, 140 Ill. App. 3d at 193.

would gain nothing for settling with a plaintiff unless the covenant not to sue also extinguished the principal's vicarious liability, the court held it could not allow this "catch 22" to remain unreconciled. Gilbert, 156 Ill. 2d at 528.

The court determined the American National Bank & Trust Co. rule "stands regardless of whether the plaintiff's covenant not to sue the agent expressly reserves the plaintiff's right to seek recovery from the principal," overruling Edgar County Bank and its progeny. Gilbert, 156 Ill. 2d at 528-29. See also Doe v.

Brouillette, 389 Ill. App. 3d 595, 605, 906 N.E.2d 105 (2009) ("The fact that the settlement orders in this case provided that

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1-08-2986 the settlements did not affect the plaintiff's causes of action against [the principal] did not preserve them"); Casey v. Forest Health System, Inc., 291 Ill. App. 3d 261, 264, 683 N.E.2d 936 (1997). In order to avert any possible injustice or hardship, Gilbert,

the court held the decision would apply prospectively. 156 Ill. 2d at 529-30.

Similar to the principals in Gilbert and American National Bank & Trust Co., Harlem's liability in this case depends solely on the common law doctrine of respondeat superior

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