Schlossberg v. Epstein

ROBERT M. BELL, Judge. This appeal by appellant, Roger Schlossberg, Trustee in Bankruptcy for the Estate of Jorgen L. Larsen, Bankrupt, seeks reversal of the judgment of the Circuit Court for Prince George’s County granting motions for summary judgment filed by Philip E. Epstein, Marvin B. Miller, and State Farm Mutual Automobile Insurance Company, appellees. Appellant’s action against appellee State Farm was based upon State Farm’s alleged negligent and bad faith failure or refusal to settle an underlying tort action, which resulted in a judgment in excess of Larsen’s automobile insurance policy limits. His action against appellees Miller and Epstein sounded in professional malpractice.

The trial judge’s stated reason for granting the motions for summary judgment is that Larsen’s election to file bankruptcy, rather than assign his causes of action to the plaintiff in the underlying tort action, as a matter of law, constituted a failure to mitigate damages. On appeal, appellant, of course, challenges the stated basis for granting the motions, but he also challenges whether, given the facts of this case and the issues presented, summary judgment should have been granted on any basis. In his view, failure to mitigate damages is not a proper basis for granting summary judgment and, in any event, there are disputed issues of material fact as to all of the defenses interposed by appellees. 1 ⁴²⁰ Mitigation of Damages In order to address whether failure to mitigate damages is, in this case, a proper issue to be resolved by summary judgment, it is necessary to put this case in procedural context. The predicate for appellant’s actions against appellees is a wrongful death action which was filed by Mr. and Mrs. Thomas J. Sexton, Jr., the parents of Thomas J. Sexton, III, the decedent, against Larsen and another driver.

Larsen was defended in that action by appellee Miller. Miller was employed by appellee State Farm, which carried Larsen’s automobile liability insurance. Since the Sextons sought damages that exceeded Larsen’s $50,000.00 liability coverage, Larsen was advised by State Farm to seek private counsel to handle the case to the extent of the potential overage. Appellee Epstein was retained by Larsen to represent him in connection with traffic charges arising out of the accident, and to prosecute a cross-claim against the other driver for injuries he sustained in that accident.

Whether Epstein was also retained to represent Larsen as to the potential overage is a matter in dispute. Attempts by the Sextons to settle the action for the policy limits before trial were rejected. The case proceeded to trial before a jury, which returned verdicts against Larsen and the other driver in an amount in excess of $500,000.00. Judgments on the verdicts were entered by the Circuit Court for Prince George’s County and affirmed by this Court.

See Larsen v. Sexton, et ux. (September Term 1982, No. 1624, filed August 30, 1983), unreported. While the appeal to this Court was pending, Larsen was offered an opportunity, by the Sextons, to assign to them any cause of action he might have against State Farm and any other responsible parties for negligent and bad faith refusal to settle. In exchange for the assignment, they offered: to forego efforts to execute or to initiate garnishment procedures on the judgment; if they were successful in prosecut ⁴²¹ ing a bad faith action, to give Larsen credit for all sums recovered; and to file an order of satisfaction if the full amount of the judgment were recovered.

Larsen refused to execute an assignment and, shortly after our mandate issued, filed for bankruptcy. Thereafter, while Larsen’s petition in bankruptcy was pending, a second attempt to obtain an assignment from Larsen was made. The terms of that assignment were more favorable to Larsen than were the last. 2 Once again, Larsen refused to execute an assignment. The doctrine of minimization of damages is not a defense to a plaintiff’s cause of action, whether that cause of action be one based in negligence or contract; rather, it is a “disability on (or a ‘no right’ to) recovery of reasonably avoidable damages.” 22 Am.Jur.2d Damages § 30.

The doctrine serves to reduce the amount of damages to which a ⁴²² plaintiff might otherwise have been entitled had he or she used all reasonable efforts to minimize the loss he or she sustained as a result of a breach of duty by the defendant. Sergeant Co. v. Pickett, 285 Md. 186, 203 , 401 A.2d 651 (1979); M & R Builders, Inc. v. Michael, 215 Md. 340, 354-55 , 138 A.2d 350 (1958); Garbis v. Apatoff, 192 Md. 12, 20 , 63 A.2d 307 (1949); Groh v. South, 119 Md. 297, 301 , 86 A. 1036 (1913). Because it is aimed primarily at benefitting a defendant, the burden of proving that a loss could have been avoided by the exercise of reasonable effort on the part of the plaintiff is upon the defendant, whose breach of duty caused the damages suffered by the plaintiff. Sergeant Co., 285 Md. at 203 , 401 A.2d 651 ; M & R Builders, 215 Md. at 356 , 138 A.2d 350 .

Thus, it is clear that the doctrine does not place any duty on a plaintiff or create an affirmative right in anyone. 22 Am.Jur.2d Damages § 30. See Restatement 2d Torts § 918, Avoidable Consequences, Comment a, where it is said: ... It is not true that the injured person has a duty to act, nor that the conduct of the tortfeasor ceases to be a legal cause of the ultimate harm; but recovery for the harm is denied because it is in part the result of the injured person’s lack of care, and public policy requires that persons should be discouraged from wasting their resources, both physical and economic. Thus, in order for the doctrine of minimization of damages to apply, there must first have been a breach of duty on the part of the defendant, Sergeant Co., 285 Md. at 203 , 401 A.2d 651 , who then raises an issue as to the propriety of the losses or damages claimed by the plaintiff.

Even when it is determined that the doctrine applies, the question before the Court becomes whether the plaintiff took reasonable steps to minimize the amount or extent of his or her damages. That is ordinarily a jury issue. See Loch Hill Construction Company, Inc. v. Fricke, 284 Md. 708, 715 , 399 A.2d 883 (1979); Myerberg, Sawyer & Rue v. Agee, 51 Md.App. 711, 724 , 446 A.2d 69 (1982). This is true even though, as is often the case, the facts upon which the ⁴²³ resolution of the issue depends are undisputed.

Where the question involves the reasonableness of an action, it must be determined by choosing from among the inferences which the undisputed facts permit. See DiGrazia v. County Exec, for Montgomery County, 288 Md. 437, 445 , 418 A.2d 1191 (1980); Townsend v. L.W.M. Management, Inc., 64 Md.App. 55, 64 , 494 A.2d 239 , cert. denied, 304 Md. 300 , 498 A.2d 1186 (1985). Moreover, necessarily involved in the resolution of such an issue is the motive or intent of the actor, which is “generally ill-suited for summary judgment”. Berkey v. Delia, 287 Md. 302, 304 , 413 A.2d 170 (1980).

Summary judgment should be granted only “if the pleadings, depositions, answers to interrogatories, admissions, and affidavits show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.” Brady v. Ralph Parsons Company, 308 Md. 486, 495 , 520 A.2d 717, 722 (1987), quoting Md.Rule 2-501(e). It is not a substitute for trial or a vehicle to decide disputed facts. Coffey v. Derby Steel Company, Inc., 291 Md. 241, 247 , 434 A.2d 564 (1981); Berkey v. Delia, 287 Md. at 304 , 413 A.2d 170 ; May Department Stores v. Harryman, 65 Md.App. 534, 538 , 501 A.2d 468 (1985), aff'd, 307 Md. 692 , 517 A.2d 71 (1986). In reviewing a ruling by the lower court on a motion for summary judgment, we, like the lower court, must resolve all inferences against the moving party and determine whether there is a genuine dispute as to any material fact and “whether the moving party is entitled to judgment as a matter of law.” Brady v. Ralph Parsons Company, 308 Md. at 496 , 520 A.2d 717 .

Applying this test to the case sub judice and, in particular, to the issue of propriety of the grant of summary judgment for failure to mitigate damages, we hold that the trial court erred. Although the facts are largely undisputed, more than one inference as to the reasonableness of Larsen’s efforts to mitigate damages may be drawn from those facts. The issue was therefore one for the jury. ⁴²⁴ The trial court also erred for another reason. In granting appellees’ motion for summary judgment, the trial court, as did appellees, stressed that had Larsen assigned his cause of action to the Sextons he would have thereby insulated himself from any damages as a result of the excess verdict.

In other words, the focus was upon the effect the assignment would have had on Larsen; it was not upon its effect on appellees. It is, however, the latter effect upon which focus more appropriately should have been directed. Whether Larsen assigned his cause of action to the Sextons or filed for bankruptcy, as he did, appellees’ exposure, and the legal position with respect to an action for damages based on bad faith refusal to settle and professional malpractice, were not affected one bit. The only thing that would have been changed had Larsen assigned his cause of action to the Sextons instead of filing for bankruptcy is the named plaintiff in this case 3 : rather than the plaintiff being the Trustee in Bankruptcy, as is the case now, the plaintiffs would have been the Sextons.

Although Larsen might have improved his position by executing the assignment, we fail to perceive how his refusal to do so worsened or, in any way, prejudiced appellees’ position. Appellees have not provided us with an answer in their brief and they failed to do so at oral argument. As we see it, if Larsen’s refusal to execute the assignment had any effect on appellees’ position below, it was to improve that position since it afforded appellees the opportunity to make the argument on which the lower court relied. We hold that neither assigning the cause of action to the Sextons nor filing bankruptcy affects either the fact or extent of appellees’ liability for negligent or bad faith refusal to settle.

Therefore, the grant of summary judgment was, as a matter of law, error. ⁴²⁵ Alternative Contentions Anticipating the possibility that we might reject the trial court’s stated reason for granting summary judgment, appellees proffer alternative arguments which they contend demonstrate the correctness of the trial court’s ruling. Appellees Epstein and Miller essentially argue that, as a matter of law, they are not liable because the uncontradicted facts do not establish the elements necessary to prove malpractice. State Farm, on the other hand, contends that the record supports the conclusion that, as a matter of law, it acted in good faith in refusing to settle the Sexton’s claim within policy limits. Each of the appellees places great emphasis on the contention that the undisputed facts in the record reveal that Larsen did not wish the case to be settled and insisted upon the case being tried so as to clear his name.

Thus, each of the appellees maintains that any damage Larsen may have suffered was attributable to his, not their, conduct. 4 We will address each of these arguments after we have set forth such facts as are necessary to place them in context. Appellant’s action against appellees Epstein and Miller alleged, in pertinent part, that they: a. ... failed to properly and competently investigate the underlying facts surrounding the collision; b. ... failed to properly and competently locate and interview the numerous witnesses to the collision and its aftermath; c. ... failed to properly and competently protect and represent Mr. Larsen by insisting, demanding, and directing the State Farm Automobile Mutual Insurance Company to comply with its contractual and common law duty to ⁴²⁶ Mr. Larsen to in good faith investigate and settle the case brought against Mr. Larsen by the Sextons____ These same allegations, plus one other—that “State Farm Mutual Automobile Insurance Company failed to protect Mr. Larsen by consulting or locating any expert witnesses for Mr. Larsen or deposing or interviewing any of the expert witnesses against Mr. Larsen ... ”—were made against State Farm. The allegations were prompted by the following pretrial activities. The other defendant in the Sextons’ tort action having offered to settle for policy limits, the Sextons sent a demand letter to State Farm on October 14, 1981, offering to settle the case for the combined policy limits of both drivers.

The offer was rejected by State Farm by letter, dated October 20, 1981, from State Farm’s claim superintendent. In addition to denying the Sextons’ claim, he asserted “a refusal to participate in any settlement discussions.” A second attempt to settle the case on the same basis occurred at a pretrial conference on June 28, 1982. The Sextons’ last attempt to settle the case with State Farm took the form of a demand letter, dated July 1, 1982, from the Sextons’ attorney to appellee Miller. Set forth in that letter was not only the status of the settlement negotiations, but also the basis for the Sextons’ willingness to settle: This will confirm our meeting at the Pre-trial conference before the Honorable Jacob S. Levin in the Circuit Court for Prince George’s County on June 28, 1982.

At that Pre-trial conference, it was the position of Mr. Larsen and State Farm Insurance Company that no money would be offered to the Sextons for compromise of their claim. You will likewise recall that the position of the Sextons at that time, and for some time prior to the Pre-trial conference, was that they were willing to accept the applicable policy limits of both Mr. Watkins’ and Mr. Larsen’s insurance policies or the sum of $350,000.00, whichever sum was the lesser. ⁴²⁷ After my prior communication to Mr. Manley, there is some concern as to my failure to discuss the facts in my demand letter. You have been in possession of a report from an expert in the field of accident reconstruction for several weeks. In addition, I have outlined more thoroughly in my Pre-trial Statement the contents of that expert’s opinion as well as the opinion of an expert in the field of toxicology with respect to the facts in this case.

I might add that the interrogatories that were forwarded to me required no disclosure of either of these experts unless a written report was rendered. I requested a written report from the accident reconstructionist solely for the purpose of permitting you and State Farm to be in a position to evaluate the facts of the case. It is clear that Mr. Larsen had more than ample opportunity to avoid this accident with the exercise of the slightest degree of care on his part. As is noted in the accident reconstructionist’s report, if Mr. Larsen had simply applied his brakes, there would have been no accident.

Further, he had ample time and opportunity to move to the right by only a few feet in order to avoid this accident. As you know, this is exactly what was done by the witness traveling directly behind Mr. Larsen and who was, in turn, successful in avoiding the collision. Further, Mr. Larsen, by the account of three police officers or deputy sheriffs at the scene of the accident as well as the toxicologist, was operating his vehicle while under the influence of alcohol. While I am not unwilling to discuss in more detail the facts which demonstrate Mr. Larsen’s negligence and liability, I am of the view that you and State Farm have made it quite clear that to do so would be to no avail.

Accordingly, the purpose of this communication is to once again convey to you my authority from Mr. and Mrs. Sexton to accept in full settlement and compromise of this case the sum of $350,000.00 or the combined total of the applicable policy limits of both Mr. Watkins’ and Mr. Larsen’s liability insurance policies in effect at the time of ⁴²⁸ the accident, whichever sum is the lesser. This offer of settlement will remain open until Thursday, July 15, 1982, at 5:00 p.m., at which time the offer will be automatically withdrawn and no further settlement discussions will take place concerning this case. I have thoroughly explained and detailed the reasons that Mr. and Mrs. Sexton desire to have an end to this matter in my communication to Mr. Manley of October 14, 1981. As I have already indicated, I have attached a copy of that communication to this letter for your convenience. * * * * * * Appellee Miller responded, rejecting the settlement demand on the dual bases that Larsen was not responsible for the accident and a jury verdict might be less than $20,000.00.

The matter proceeded to trial, at which the following facts were established: ... the Sexton youth was invited by appellant Larsen’s son, Eric, to accompany him on a fishing trip to Point Lookout in St. Mary’s County. Enroute to their destination, Larsen purchased a pint of whiskey while his two sons and Tommy Sexton were getting soft drinks. During the afternoon and early evening, Larsen, consumed part of the alcohol; six ounces by his estimate, over ten ounces by the testimony of others. At 6:30 p.m., appellant and the three boys started home.

Tommy Sexton was seated in the back seat on the right side of the 1980 Mustang. Larsen was proceeding north on State Route 2/4, a two lane highway. Watkins, the driver of the second car, was proceeding south on highway 2/4. He had spent the afternoon drinking beer and whiskey at a tavern four miles from the collision site.

Watkins, by his estimate, had three “boilermakers”; his blood alcohol content shortly after the collision, was consistent with eight to fifteen ounces of alcohol. The roadway at the place of impact curved from right to left proceeding north and from left to right in a southerly direction. The northbound lane was 11'3" wide with a dirt shoulder measuring 8'1". The southbound lane was ⁴²⁹ lO'lO" wide a dirt shoulder 8'3" wide.

Watkins, proceeding south, drove through the curve into the northbound lane of traffic and Larsen swerved to his left at the same time Watkins was attempting to get back into the southbound lane. The impact occurred at the center line with the right front fender of the Watkins’ vehicle striking the right rear side of the Larsen car. Watkins said he was changing the radio station when he realized he had driven through the curve into the northbound lane. Larsen stated that he did not see Watkins, due to the curve, until they were twenty feet apart.

Reconstruction experts established, however, that the sight distance available to either driver was over 700 feet and the distance at which Larsen could have determined that Watkins was totally in the wrong lane was 480 feet. Larsen refused a breathalizer test offered by the police at the hospital. Three police officers testified that Larsen was under the influence of alcohol. An expert in the field of toxicology stated that Larsen was under the influence of alcohol when the accident occurred and his condition significantly impaired his ability to operate a motor vehicle.

Watkins, according to the police officers and experts, was also under the influence which impaired his driving ability; the breathalizer test indicated Watkins’ blood alcohol content to be .25. He later entered a guilty plea to a charge of driving while