Auto Village, Inc. v. Sipe

ALPERT, Judge. A Baltimore County jury decided that certain defective automobile repairs caused two vehicles to collide, resulting in serious personal injuries. This appeal followed and five issues are raised, the most controversial of which concerns “Mary Carter” settlement agreements. Appellant, who was found liable to two sets of plaintiffs in a consolidated trial, contends that the trial court I. erred in excluding evidence of a settlement agreement between plaintiffs-appellees Sipes and the Grosses, who at the time of settlement were defendants in the Sipes action; II. should have struck the testimony of the plaintiffs expert because his opinion was not based upon facts submitted in evidence; III. should have granted appellant’s motion for a directed verdict; IV. erred in failing to limit its instruction to the jury to a defective distributor cap; and V. erred in refusing to rule as a matter of law that plaintiffs-appellees Gross were guilty of contributory negligence and/or assumption of risks.

After a review of the record and applicable case law, we hold that the trial judge did not err. FACTS In November, 1979, appellee, Juliette Gross, purchased an American Motors Corp. (“AMC”) Eagle from appellant, ²⁸⁴ Auto Village, Inc. 1 In the winter of 1979-80 Mrs. Gross had experienced some trouble with the vehicle in that it would stall on cold mornings. In June, 1980, Mrs. Gross experienced more difficulty with the vehicle in that it would lose power, the engine would shut off and it became difficult to steer and/or apply the vehicle’s brakes. During the last week in June and the first week of July, 1980, the vehicle lost power and stopped approximately five times. 2 On July 7, 1980, when Mrs. Gross took the vehicle to appellant for repair, appellant’s mechanic allegedly repaired the vehicle and returned it to her stating that it was fixed.

The mechanic stated that the problem was a loose wire and a loose screw; at the same time he pointed to the area of the vehicle’s distributor. Mrs. Gross experienced additional problems with the vehicle five days later. On July 12th, while she and her husband, also an appellee, drove to York, Pennsylvania, the vehicle lost power and stalled once. On the return trip it stalled “six or seven times” while Mrs. Gross was driving and “once or twice” after Mr. Gross took over the driving.

The last time the vehicle stalled it crossed the center lane of York Road and struck the vehicle owned and being operated by appellee, Richard Sipe, whose wife, Paula, also an appellee, was a passenger at the time. As a result of the collision both the Sipes and Grosses suffered severe injuries. Two suits were then filed in the Circuit Court for Baltimore County. Richard and Paula Sipe sued Harry and Juliette Gross, Auto Village, Inc. (the dealer) and AMC (the manufacturer); Harry and Juliette Gross sued Auto Village and AMC.

The cases were consolidated for trial and tried by a Baltimore County jury (Kinkel, J., presiding). ²⁸⁵ Prior to trial the Sipes settled with the Grosses and dismissed them as defendants in their action. The agreement, which was disclosed to Auto Village and AMC just prior to trial, provided that the Grosses would pay the Sipes $50,000.00 plus 20% of whatever they recovered in their suit against Auto Village and AMC. In return, the Sipes dismissed the Grosses as defendants in their action. After the dismissal of the Grosses, the parties were aligned in the following manner: Richard and Paula Sipe v. Auto Village, Inc. and AMC.

Harry and Juliette Gross v. Auto Village, Inc. and AMC. The jury returned verdicts in both cases in favor of the defendant AMC and in favor of the plaintiffs against appellant. I. Initially, appellant alleges error in the trial court’s exclusion of any evidence on the existence of the pre-trial settlement agreement between the Sipes and the Grosses. According to appellant, the Sipe-Gross agreement is a “Mary Carter” 3 agreement and, consequently, the jury should have been apprised of its existence.

A “Mary Carter” agreement is a partial settlement between the plaintiff in a case and some but not all defendnats. See Note, 47 S.Cal.L.Rev. 1393, 1397 (1974). While the variety of Mary Carter agreements is unlimited, there are three basic features: 1. the agreeing defendant remains a defendant in the suit and defends self at trial; 2. the agreement is secret; and 3. the agreeing defendant guarantees that he will pay the plaintiff a certain sum of money and partakes an interest in plaintiff’s recovery against the non-settling defendants. ²⁸⁶ See General Motors v. Lahocki, 286 Md. 714 , 410 A.2d 1039 (1980). See also Freedman, “The Expected Demise of ‘Mary Carter’: She Never Was Well,” 1975 Ins.LJ. 602, 610; Note, 47 S.Cal.L.Rev. 1393 (1974); Annot., 65 A.L.R.3d 602 (1975) and cases cited therein.

At first blush, it is apparent to us that the agreement in the case sub judice satisfies only the second criterion. Neither appellant nor AMC was aware of the agreement prior to the Sipes’ dismissal of the Grosses. Hence, the issue is whether the first and third criterion are satisfied. While appellant acknowledges that the Grosses were dismissed as defendants, it argues that the first criterion is satisfied by virtue of the fact that the Sipes’ and Gross’ suits were consolidated for trial.

It appears to us, however, that in order to satisfy this prong, the settling defendant must remain as a party defendant. See Freedman, supra at 609-10. See also City of Tucson v. Gallagher, 108 Ariz. 140 , 493 P.2d 1197 (1972); Cox v. Kelsey-Hayes Co., 594 P.2d 354 (Okla.1979); Bristol-Myers Co. v. Gonzales, 561 S.W.2d 801 (Texas 1978). Compare Reese v. Chicago, Burlington and Quincy Railroad Co., 55 Ill.2d 356 , 303 N.E.2d 382 (1973) (witness of settling defendant who was dismissed should be permitted to be cross-examined on existence of loan agreement wherein settling defendant loaned plaintiff $57,500.00 and plaintiff, in turn, agreed to repay loan if she received judgments against non-settling defendant) and General Motors Corp. v. Simmons, 558 S.W.2d 855 (Texas 1977) (witness, not a party, in turn, agreed not to sue witness and agreed to give witness 50% of everything recovered from the defendant over $200,000.00).

It is in his capacity as a defendant that the settling defendant aids the plaintiff’s case. As the Court of Appeals observed in Lahocki , it is in this capacity that the settling defendant can “cross-examine nonadverse witnesses” and reiterate testimony harmful to the non-settling co-defendant. 286 Md. at 724 , 410 A.2d 1039 . ²⁸⁷ In the case sub judice while the Grosses remained participants in the consolidated trial, we do not believe the dangers addressed by Lahocki are present. The Grosses could not lead the Sipes’ witnesses through “cross-examination.” We also believe that, by virtue of the alignment of parties with both the Sipes and Grosses as plaintiffs, the jury was aware that both had a financial interest in the cases and there was no danger of creating a non-adversarial situation between the plaintiffs and defendants. Also conspiciously absent in the Sipe-Gross agreement is the guarantee clause.

The guarantee clause in a “Mary Carter” agreement not only guarantees to the plaintiff a minimum recovery but also usually provides that the agreeing defendant’s liability will, in some way, be proportionately reduced by any judgment against the non-agreeing defendant. See Wyller v. Fairchild Hiller Co., 503 F.2d 506 (9th Cir.1974) (agreeing defendant will be reimbursed for loan to plaintiff if plaintiff recovers from non-agreeing defendant); City of Tucson v. Gallagher, 108 Ariz. 140 , 493 P.2d 1197 (1972) (agreeing defendant need not pay plaintiff if recovery from non-agreeing defendant exceeds $10,-000.00); Reese v. Chicago, Burlington and Quincey Railroad Co., 55 Ill.2d 356 , 303 N.E.2d 382 (1973) (same as Wyller); General Motors Corp. v. Lahocki, 286 Md. 714 , 410 A.2d 1039 (1980) (agreeing defendant need not pay plaintiff guaranteed sum if recovery against all defendants or non-settling defendant); Cox v. Kelsey-Hayes Co., 594 P.2d 354 (Okla.1979) (agreeing defendant need not pay if judgment rendered against defendants; if recovery from non-agreeing defendant exceeds $250,000.00 agreeing defendant to be reimbursed 50% of monies paid to plaintiff); Bristol-Myers Co. v. Gonzales, 561 S.W.2d 801 (Texas 1978) (same as Wyller); General Motors Corp. v. Simmons, 558 S.W.2d 855 (Texas 1977) (agreeing defendant to get 50% of everything received from non-agreeing defendant in excess of $200,000.00). ²⁸⁸ In the case sub judice the Sipe-Gross agreement does not provide the Grosses with any “refund” or cancel their obligation to pay if the Sipes recovered from either appellant or AMC. Under the terms of the agreement the Grosses agreed to and did pay the Sipes $50,000.00 and in return the Sipes agreed to and did dismiss their action against the Grosses. That the Grosses also agreed to pay the Sipes an additional 20% of their recovery, as plaintiffs, against appellant and AMC does not operate to give the Grosses any financial stake in the Sipes’ recovery.

The jury was already aware that the Grosses, by virtue of their own claim against appellant and AMC, had a financial interest in holding appellant liable. See Wyller v. Fairchild Hiller Corp., 503 F.2d 506 (9th Cir.1974). Contrary to what appellant suggests, the agreement here rings less of “Mary Carter” and more of that type addressed by the Court of Appeals in Brooks v. Daley, 242 Md. 185 , 218 A.2d 184 (1965). In Brooks the plaintiff sued the defendants separately; the actions, however, were consolidated for trial.

Prior to trial, the plaintiff settled one of the claims and dismissed the suit against that defendant. The non-settling defendant wanted the jury apprised of the settlement and the court refused. On appeal, the