Opinion
No. 24538-1-III.
November 16, 2006.
Appeal from a judgment of the Superior Court for Franklin County, No. 03-2-50942-9, Robert G. Swisher, J., entered September 6, 2005.
Counsel for Respondent(s), Diehl Randall Rettig, Attorney at Law, Kennewick, WA.
John P. Raekes, Attorney at Law, Kennewick, WA.
Counsel for Appellant Intervenor(s), Michael G. Brady, Attorney at Law, Boise, ID.
Affirmed by unpublished opinion per Schultheis, A.C.J., concurred in by Brown and Kulik, JJ.
Clemente and Rosalva Ezquivel entered into a settlement agreement with Hayles, Inc. wherein Hayles stipulated to a judgment for the Ezquivels in the sum of $424,157. In return, the Ezquivels agreed to execute judgment only against Hayles's insurer, Nationwide Mutual Insurance Company. Nationwide moved for a reasonableness hearing under RCW 4.22.060. Following review of the evidence, the Franklin County Superior Court deemed the settlement reasonable and enforceable.
Nationwide now appeals, contending the superior court erred in concluding that the settlement agreement met the necessary standards of reasonableness. Because we conclude that the trial court properly determined the Ezquivels met their burden of proving that the settlement was reasonable, we affirm.
Facts
In February 2003, the Ezquivels leased a 110-acre irrigated field from Hayles to grow onions. Under the terms of the lease, Hayles would maintain the irrigation system and would irrigate the onion crop whenever the Ezquivels requested. According to the Ezquivels and another witness, some time in early August 2003 they told Bartolo Herrera, a Hayles employee, to stop irrigating in mid-August so the onions could dry in the field before harvest. Later that month, after the onion crop had matured and dried, Mr. Herrera's employer, Scott Hayles, allegedly turned on the irrigation again. The Ezquivels claim that the soaked onions developed rot, causing substantial crop loss.
The Ezquivels filed a suit for damages due to breach of contract and negligence against Hayles in December 2003. Trial was set for December 2004, but was continued on Hayles's motion to February 23, 2005. Later, Hayles successfully moved for an additional 30-day continuance. Originally, Hayles was represented by attorney John Schultz. However, in early 2004 Nationwide hired attorney Roland Skala under an assignment of rights to defend Hayles pursuant to the insurance policy. Mr. Schultz then represented Hayles in its counterclaim for unpaid rent.
On March 7, 2005, the parties agreed to mediate. Attorneys Skala and Schultz represented Hayles at mediation, with Mr. Skala communicating by telephone with a Nationwide adjuster during the process. Just before the date set for trial, the parties entered into a mediated settlement agreement in which they stipulated that the Ezquivels would take judgment against Hayles for $424,157 and would not execute on the judgment except against Nationwide. The stipulated judgment was signed by the parties and filed on March 28, 2005.
In April 2005, Nationwide moved to intervene and to request a reasonableness hearing pursuant to RCW 4.22.060. The motion was granted and the hearing was held on June 27, 2005. After hearing the arguments of both parties, the superior court filed a memorandum opinion on August 11, 2005 concluding that the negotiated settlement was reasonable. Findings of fact and conclusions of law were filed the following month. Nationwide timely appealed to this court.
Reasonableness of the Settlement
Pursuant to RCW 4.22.060(1), a party who intends to enter into a release, a covenant not to sue, a covenant not to enforce judgment, or a similar agreement with a claimant must give written notice to all other parties and the court. A hearing is then held on the reasonableness of the settlement, with all parties afforded an opportunity to present evidence. RCW 4.22.060(1). The party requesting the settlement carries the burden of proof regarding the reasonableness of the settlement. Id.
RCW 4.22.060 was adopted to address settlements of filed lawsuits involving joint tortfeasors. Leader Nat'l Ins. Co. v. Torres, 113 Wn.2d 366, 373, 779 P.2d 722 (1989). Although the statute was not intended to protect insurers, id., case law has extended its coverage to the determination of a settlement's reasonableness when an insurer refuses to settle a claim and the insured and the claimant negotiate a settlement on their own. Red Oaks Condo. Owners Ass'n v. Sundquist Holdings, Inc., 128 Wn. App. 317, 322, 116 P.3d 404 (2005); Chaussee v. Md. Cas. Co., 60 Wn. App. 504, 509-10, 803 P.2d 1339 (1991). Recognizing that an insured may settle for an inflated amount in exchange for immunity from personal liability, and that the insurer may then be liable for that amount, courts have set reasonableness hearings pursuant to RCW 4.22.060 to determine whether the settlement amount is reasonable. Red Oaks, 128 Wn. App. at 322; Chaussee, 60 Wn. App. at 510-11. The same principles support a reasonableness hearing when an insurer that has not refused to settle a claim successfully moves to intervene, as happened here. When the insured enters into a covenant not to execute along with a settlement, the specter of collusion or fraud is raised, and the insurer is liable only for reasonable settlements paid in good faith. Besel v. Viking Ins. Co. of Wis., 146 Wn.2d 730, 738, 49 P.3d 887 (2002).
The question before this court is whether the trial court properly concluded that the settlement reached by the Ezquivels and Hayles was reasonable. In determining whether a settlement is reasonable, the trial court considers the nine factors adopted by Chaussee, 60 Wn. App. at 512, from Glover v. Tacoma General Hospital, 98 Wn.2d 708, 717, 658 P.2d 1230 (1983), overruled on other grounds by Crown Controls, Inc. v. Smiley, 110 Wn.2d 695, 756 P.2d 717 (1988):
1. The damages of the releasing party;
2. the merits of the releasing party's case;
3. the merits of the released party's defense;
4. the relative fault of the released party;
5. the risks and expenses of continued litigation;
6. the released party's ability to pay damages;
7. evidence of bad faith, fraud, or collusion;
8. how much the releasing party has investigated and prepared for the case; and
9. the interests of the parties that are not being released.
See also Besel, 146 Wn.2d at 738; Schmidt v. Cornerstone Invs., Inc., 115 Wn.2d 148, 158, 795 P.2d 1143 (1990); Red Oaks, 128 Wn. App. at 322. No one factor controls, and trial courts must have discretion to weigh each case individually. Howard v. Royal Specialty Underwriting, Inc., 121 Wn. App. 372, 380, 89 P.3d 265 (2004); Chaussee, 60 Wn. App. at 512.
This court reviews the trial court's determination of reasonableness for abuse of discretion. Werlinger v. Warner, 126 Wn. App. 342, 349, 109 P.3d 22, review denied, 155 Wn.2d 1025 (2005). Abuse of discretion occurs when a decision rests on untenable grounds or is manifestly unreasonable. Mayer v. Sto Indus., Inc., 156 Wn.2d 677, 684, 132 P.3d 115 (2006). In determining reasonableness under RCW 4.22.060, the trial court makes factual determinations that will not be disturbed on appeal when supported by substantial evidence. Schmidt, 115 Wn.2d at 158; Howard, 121 Wn. App. at 380.
In this case, the trial court carefully examined each of the nine Chaussee/Glover factors and set out the facts supporting its decision. Nationwide challenges all of the trial court's findings, asserting that the court either ignored the evidence or misapplied the law. As shown in the following discussion, the trial court's findings are supported by substantial evidence and in turn support its conclusion that the settlement agreement was reasonable.
1. The damages of the releasing party. The trial court accepted the testimony of two of the Ezquivels' witnesses that the gross yield of the onion field was at least 37 tons per acre. One of those witnesses was Shannon McKay, the president of Olympic Produce, Inc., which packed and shipped the Ezquivels' onions. The other witness was Sam Clayton, a fertilizer field man. Both of these witnesses had observed the development of the onion field.
Nationwide's expert, William Partin, is a certified public accountant who projected the yield of the onion field as 28.5 tons per acre. Mr. Partin's projection was based in part on the opinion of another witness, Dr. Dale Rush, an agronomist who cited what he understood to be the average production of various types of onions in the state. Dr. Rush also testified in a declaration filed just before the reasonableness hearing that the yield would be low due to the high weed content of the field and rot due to overhead irrigation. Because this declaration was produced after the settlement, and the reasonableness of the settlement must be considered in light of the posture of the case at the time it was settled, the trial court properly declined to consider it. Mavroudis v. Pittsburgh-Corning Corp., 86 Wn. App. 22, 38, 935 P.2d 684 (1997). At any rate, Dr. Rush's opinion on the weeds and overhead irrigation was expressed by other witnesses.
The trial court then applied the actual "grade pack-out" for the field and the actual sale price and packaging charges to calculate the damages. Clerk's Papers at 71. Nationwide's witnesses based their pricing on averages from other fields in the region. Nationwide also challenged the Ezquivels' assertion that they would have left at least half of the onions in storage to sell later for a higher price. Noting that the Ezquivels typically sold their crop immediately to cover debts, Nationwide insisted the damages should have been calculated using the sale price at the time the onions were harvested. The trial court noted that the Ezquivels and Mr. McKay testified that the crop was planted with the original intent to place all of the onions in storage, but compromised on this element of damages at mediation.
Credibility determinations are solely for the trier of fact and will not be reviewed on appeal. Morse v. Antonellis, 149 Wn.2d 572, 574, 70 P.3d 125 (2003). Because the damage estimate compiled by the Ezquivels was based on actual observations of the field during the growth and harvest period and on actual prices, the trial court found that the Ezquivels produced the best evidence. This finding is supported by substantial evidence.
2 3. The merits of the releasing party's case versus the released party's defense. Determination of these factors rests entirely on conflicting testimony by the various witnesses. The Ezquivels (the releasing party) and their witnesses testified that they had told Hayles's employee, Mr. Herrera, to shut off the water in mid-August. Witnesses for Hayles (the released party) testified that Mr. Herrera was not told to shut off the water. Mr. Herrera never actually testified because he had left the state. Another of Hayles's witnesses, an agronomist named Dr. William Cobb, also did not testify. His opinion came in through Mr. Hayles, who testified that Dr. Cobb did not think the damage to the onions was caused by irrigation water. Here again, the trial court was in the better position to evaluate the credibility of the witnesses. Fisher Props., Inc. v. Arden-Mayfair, Inc., 115 Wn.2d 364, 369-70, 798 P.2d 799 (1990). Substantial evidence supports its conclusion that the Ezquivels' claim for liability was clearly supported by the evidence.
4. The relative fault of the released party. Nationwide claims that the damages to the onions were due at least in part to the farming practices of the Ezquivels. It argues that the Ezquivels were told to give their water requests only to Mr. Hayles, that the onion field was extremely weedy, and that they were negligent in their upkeep and management of the field. The trial court had already found that the yield of the onion field was not appreciably affected by weeds. It noted that accusations of negligence cut both ways in this case, because Hayles had accepted requests to water the field from people other than the Ezquivels. Accordingly, the trial court found that the Ezquivels were not more at fault than Hayles. This finding is supported by substantial evidence.
5. The risks and expenses of continued litigation. Nationwide contends the expenses of proceeding to trial were minimal at the time of the settlement, because trial was only days away and all discovery had taken place. The trial court found that by obtaining a settlement, Hayles avoided further expense in litigation of the issue of insurance coverage and recovery for unpaid rent. Based on the Ezquivels' contention that the onion crop was originally intended for storage and a higher price, the court also found that settlement eliminated a risk that the Ezquivels could have obtained a higher judgment after trial. This finding is also supported by substantial evidence.
6. The released party's ability to pay. The trial court found that Hayles likely was unable to pay the settlement amount.
Although a released party's inability to pay may be a reason to reduce the settlement amount (see Werlinger, 126 Wn. App. at 351 (because the released party was bankrupt, nothing could be collected from him personally, so the trial court found that the settlement above policy limits was unreasonable)), no one factor is dispositive. Chaussee, 60 Wn. App. at 512. An insured is rarely able to pay for liability personally; hence the need for insurance coverage. Even considering this factor, the trial court found the settlement reasonable.
7. Evidence of bad faith, collusion, or fraud. Nationwide contends the trial court failed to consider the risk of bad faith, collusion, or fraud. On the contrary, the trial court found no evidence that the settlement was negotiated in bad faith, and noted that none of the parties had alleged bad faith, collusion, or fraud. This finding is supported by the record.
8. The extent of the releasing party's investigation and preparation of the case. As discussed above and in the trial court's memorandum opinion, settlement occurred just before trial, when numerous depositions had been taken and the parties were prepared for trial.
9. The interest of the party that was not released. Nationwide, as Hayles's insurer, is liable for the settlement amount if the insurance policy covers the loss. Although Nationwide contends the trial court found that attorney Skala represented Nationwide's interests at mediation, the record does not support that contention. The trial court merely found that Mr. Skala kept Nationwide apprised of the mediation negotiations. Mr. Skala's participation had no effect on the trial court's determination of reasonableness.
To summarize, the trial court found that most of the Chaussee/Glover factors supported the reasonableness of the settlement reached between the Ezquivels and Hayles. Each of the findings is supported by substantial evidence. Although Nationwide provided conflicting evidence, in a "`battle of experts,'" this court is not at liberty to ignore the trial court's findings. Backlund v. Univ. of Wash., 137 Wn.2d 651, 669 n. 6, 975 P.2d 950 (1999). On balance, we must conclude that the trial court did not abuse its discretion in concluding that the settlement was reasonable and enforceable.
Affirmed.
A majority of the panel has determined that this opinion will not be printed in the Washington Appellate Reports but it will be filed for public record pursuant to RCW 2.06.040.
BROWN and KULIK, JJ., concur.