FIFTH DIVISION March 19, 2010
No. 1-08-2986
BERTRAM GIBBS, ) Appeal from the ) Circuit Court of Plaintiff-Appellant, ) Cook County. ) v. ) ) TOP GUN DELIVERY AND MOVING SERVICES, ) INC., KEVIN DUNIGAN, and HARLEM ) FURNITURE, INC., ) Honorable ) Dennis J. Burke, Defendants-Appellees. ) 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
capacity as an agent of Top Gun while operating the truck. In
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
Dunigan was an employee at the time of the accident. Although
Enterprise admitted it owned the truck Dunigan was operating,
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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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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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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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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
In his response to Harlem’s motion to dismiss, plaintiff
contended the covenant between plaintiff and Safeco did not
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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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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 2-
619 motion to dismiss de novo. Valdovinos, 394 Ill. App. 3d at
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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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.” 740 ILCS
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
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.” American National Bank & Trust Co.,
154 Ill. 2d at 354. 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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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
Bristow, 140 Ill. App. 3d at 193. After determining an agent
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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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,
the court held the decision would apply prospectively. Gilbert,
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–-that is, its
alleged employment relationship with Dunigan--and not on any
fault of its own. Therefore, the central issue in this case is
whether the covenant agreement constituted a settlement
sufficient to release Harlem--an alleged principal of Top Gun and
Dunigan--from vicarious liability.
Under the terms of the covenant not to execute in this case,
plaintiff agreed he would:
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However, the covenant also provided:
Plaintiff contends the terms of the covenant agreement
indicate there was never an intention to “release” or “dismiss”
Dunigan and Top Gun from liability; nor was the covenant intended
to shield Dunigan and Top Gun from any subsequent indemnification
claim by Harlem. Instead, plaintiff contends Dunigan and Top Gun
entered into the covenant agreement to ensure they received the
full benefit of the contested Safeco insurance policy, which in
effect greatly reduced both their potential liability to
plaintiff in the underlying action and in any possible implied
indemnity action by Harlem. Plaintiff also contends a covenant
not to enforce a judgment does not constitute a “settlement”
under Illinois law because it does not “release” the defendant
from liability.
Contrary to plaintiff’s contention, Illinois courts have
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recognized covenants not to enforce judgments as “settlements”
under section 2 of the Contribution Act. See Simpson v.
Matthews, 339 Ill. App. 3d 322, 329, 790 N.E.2d 401 (2003)
(“Despite Simpson’s and Reynold’s adamancy that the agreement
does not constitute a settlement, it clearly contains a promise
that Simpson will not enforce a judgment against Reynolds in an
amount in excess of $50,000–‘you have agreed to accept that
amount of money [policy limits] in full compensation of any
settlement or judgment that might be rendered against my client,
Alan Reynolds.’ We find that the language of the agreement leaves
little doubt that the agreement is a covenant not to enforce a
judgment, thereby falling within section 2 of the Contribution
Act”). Plaintiff has provided no authority to suggest a covenant
not to enforce judgment cannot be considered a “settlement” under
Illinois law.
Moreover, although we recognize the covenant agreement
itself does not use the term “settlement,” we note both plaintiff
and Dunigan specifically referred to the covenant agreement as a
“partial settlement” of the underlying action in their motions in
support of a good-faith finding under the Contribution Act.
When construing a settlement agreement, our duty is to
effectuate the intent of the parties to the agreement. Henderson
v. Roadway Express, 308 Ill. App. 3d 546, 548, 720 N.E.2d 1108
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(1999). “The intent of the parties must be determined from the
plain and ordinary meaning of the language of the contract,
unless the contract is ambiguous.” Henderson, 308 Ill. App. 3d
at 548.
If plaintiff obtained a judgment against Harlem under the
theory of respondeat superior in this case, Harlem would be
entitled to indemnification from Dunigan and Top Gun under the
common law theory of quasi-contractual implied indemnity. See
American National Bank & Trust Co., 154 Ill. 2d at 353-54.
Although plaintiff contends the covenant agreement was not
intended to shield Dunigan and Top Gun from any subsequent
indemnification claim, plaintiff specifically agreed to provide
Dunigan and Top Gun a standard satisfaction of judgment “for any
judgment and in any amount whatsoever that may be entered at the
conclusion of case No. 01 L 16192 and/or any refiling of the
same.” (Emphasis added.) Nothing in the language of the
covenant agreement itself suggests Dunigan and Top Gun intended
or agreed to remain liable to Harlem in an implied indemnity
action following the conclusion of the underlying case. In
support of our conclusion, we note that in their reply brief in
support of a motion for a good-faith finding, Dunigan and Top Gun
specifically argued:
“There is no doubt that Dunigan and Top Gun
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are paying an exorbitant sum of money
($730,000-almost the full insurance policy
available to them) in consideration for an
agreement to dismiss them after judgment.
Such an agreement allows Top Gun and Dunigan
to buy peace of mind and secure their
personal assets from recovery.” (Emphasis
added.)
Under the plain language of the covenant agreement, Top Gun
and Dunigan would be entitled to a satisfaction of judgment from
plaintiff “for any judgment and in any amount whatsoever” at the
conclusion of the underlying case. Allowing Top Gun and Dunigan
to remain liable to Harlem in an implied indemnity action after
plaintiff reached a settlement with the agent-defendants in the
underlying case is the exact type of “catch 22" situation Gilbert
intended to prevent. See Gilbert, 156 Ill. 2d at 528. Because “
‘any settlement between the agent and the plaintiff must also
extinguish the principal’s vicarious liability,’ ” we find the
trial court did not err in granting Harlem’s motion to dismiss.
(Emphasis added.) Gilbert, 156 Ill. 2d at 527, quoting American
National Bank & Trust Co., 154 Ill. 2d at 355. To find otherwise
would leave the agent-defendants’ personal assets at risk
following the conclusion of the underlying case, depriving them
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of the full benefit of their covenant. See Gilbert, 156 Ill. 2d
at 528-29. The American National Bank & Trust Co. rule applies
despite the fact that the covenant agreement specifically
provided the settlement did not affect plaintiff’s cause of
action against Harlem. See Gilbert, 156 Ill. 2d at 528-29 (the
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”); Brouillette, 389 Ill. App. 3d at
605.
II. Waiver/Estoppel
Notwithstanding, plaintiff contends the relief requested by
Citizens, Harlem’s insurer, in a separately filed declaratory
judgment action waived any possible benefit Harlem may be
entitled to under the American National Bank & Trust Co./Gilbert
rule. Specifically, plaintiff contends count III of Citizens'
declaratory action sought a declaration that Safeco owed a duty
to defend and indemnify Dunigan for the claims asserted in
plaintiff’s negligence action. Plaintiff contends that after the
covenant agreement was created, Citizens dismissed count III of
the declaratory judgment action. Plaintiff contends that because
the covenant agreement achieves the same result sought by
Citizens in the declaratory judgment action, Harlem--Citizens’
privy--has “impliedly waived or is equitably estopped from the
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relief requested.”
“[W]aiver applies when a party intentionally relinquishes a
known right or his consent warrants an inference of such
relinquishment.” Northern Trust Co. v. Oxford Speaker Co., 109
Ill. App. 3d 433, 438, 440 N.E.2d 968 (1982). “Equitable
estoppel is defined as the effect of the voluntary conduct of a
party whereby he is absolutely precluded, both at law and in
chancery, from asserting rights which might otherwise have
existed as against another person who has, on good faith, relied
upon such conduct and has been led thereby to change his position
for the worse.” Northern Trust Co., 109 Ill. App. 3d at 438-39.
We fail to see how either waiver or estoppel applies in this
case. We see no reason why Harlem should be precluded from
arguing the American National Bank & Trust Co. rule applied to
the covenant agreement in this case and extinguished Harlem’s
liability simply because Harlem’s insurer, without Harlem’s
direct involvement, sought a declaration in a separately filed
declaratory judgment action that Safeco had a duty to defend and
indemnify Dunigan. We find plaintiff’s estoppel and waiver
contentions are without merit.
III. Dismissal of Dunigan and Top Gun
Plaintiff also contends the trial court erred in dismissing
Dunigan and Top Gun from the suit. We note, however, that under
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the terms of the covenant agreement, plaintiff agreed he would:
(Emphasis added.)
Section 2-619(a)(9) provides involuntary dismissal is
appropriate where “the claim asserted against defendant is barred
by other affirmative matter avoiding the legal effect of or
defeating the claim.” 735 ILCS 5/2-619(a)(9) (West 2008).
As the trial court properly noted, the covenant not to
execute or enforce judgment at issue in this case essentially
released defendants Dunigan and Top Gun from any liability in the
underlying negligence suit in exchange for $735,000. Plaintiff
specifically agreed “not to assign any right to recover or
execute any judgment against” Safeco, Dunigan, and Top Gun under
the terms of the covenant. In effect, the covenant terminated
all matters in controversy in the negligence action between
Gibbs, Safeco, Dunigan, and Top Gun. After the trial court
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properly determined Harlem’s vicarious liability for Dunigan’s
conduct was also extinguished by the covenant agreement under the
American National Bank & Trust Co./Gilbert rule, a trial based
solely on Top Gun’s and Dunigan’s potential individual liability
in the negligence action would have proved meaningless.
Because any potential judgment plaintiff could have obtained
against either Dunigan or Top Gun individually as defendants in
the underlying suit would have been automatically satisfied by
the terms of the covenant agreement in this case, we find the
trial court did not err in granting Harlem’s motion to dismiss
the case in its entirety under section 2-619(a)(9).
CONCLUSION
We affirm the trial court’s judgment.
Affirmed.
TOOMIN, P.J., and LAVIN, J., concur.
-19- 1-08-2986 REPORTER OF DECISIONS - ILLINOIS APPELLATE COURT (Front Sheet to be Attached to Each Case)
Please use BERTRAM GIBBS, following form: Plaintiff-Appellant,
Complete v. TITLE of Case TOP GUN DELIVERY AND MOVING SERVICES, INC., KEVIN DUNIGAN, and HARLEM FURNITURE, INC., Defendants-Appellees.
Docket Nos. No. 1-08-2986
COURT Appellate Court of Illinois First District, 5th Division Opinion Filed March 19, 2010
(Give month, day and year)
JUSTICES JUSTICE HOWSE delivered the opinion of the court:
APPEAL from the Lower Court and Trial Judge(s) in form indicated in margin: Circuit Court of Cook County; the Appeal from the Circuit Court of Cook County. Hon.___________, Judge Presiding. The Hon. Dennis J. Burke, Judge Presiding.
For APPELLANTS, Indicate if attorney represents APPELLANTS or APPELLEES and John Doe, of include attorneys of counsel. Indicate the word NONE if Chicago. not represented.
For APPELLEES, For Appellant, CAREN SCHULMAN, ESQ., of Chicago. Smith and Smith, of Chicago. For Appellee, LAW OFFICES OF LORETTA M. GRIFFIN Joseph Brown, of Chicago. (Loretta M. Griffin, of Counsel). of Counsel).
Also add attor- neys for third- party appellants and/or appellees. (USE REVERSE SIDE IF NEEDED)
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