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Ballard v. Ocean Accident & Guarantee Co.

November 20, 1936


Appeal from the District Court of the United States for the Western District of Wisconsin; Patrick T. Stone, Judge.

Author: Lindley

Before EVANS, Circuit Judge, and LINDLEY and BRIGGLE, District Judges.

LINDLEY, District Judge.

Appellant sued in the District Court to recover from appellee the difference between $5,000, the amount of its policy issued to him, and a judgment for $9,179 obtained against him in a suit brought by Mike Spagl and Mary Spagl against both appellant and appellee for damages for injuries incurred in a collision with appellant's automobile, on the ground that appellee had negligently and carelessly failed to prepare for trial and defend the same. The District Court directed a verdict for defendant and entered judgment accordingly. This appeal followed.

On March 16, 1930, Spagl and his wife were proceeding easterly in a truck on a street in La Cross approaching State Highway 16, where there was a stop sign. Spagl was driving slowly, but whether he stopped for the crossing is disputed, though the evidence tends to a finding that he did not. He proceeded easterly across the highway. Appellant was then driving southerly on the state highway at approximately 35 miles an hour, on the wrong side of the road. He swung to the right, but not quickly or soon enough to avoid crashing into the Spagl truck and injuring Mrs. Spagl. She was taken to a physician, who, upon X-ray examination, found that one of the cervical vertebrae was broken. She had previously been a strong young woman, working both in the house and in the field. Apparently, thereafter, according to the evidence submitted to the trial court, she was unable to use one arm, was partially paralyzed on one side, and could do no work in the field and very little in the house. She testified that movement of her head was very limited and that she suffered pain constantly from the date of the accident until the trial in May, 1931.

Appellee carried $5,000 in insurance for appellant, who, promptly after the accident, notified appellee of the same. Its claim adjuster, Neilson, admitted to the bar, ten days later went to La Crosse, got a report from the company's local agent, and consulted the physician who had treated Mrs. Spagl. The doctor said the vertebra was broken and reported to appellee that Mrs. Spagl would undoubtedly have partial permanent disability. Neilson proceeded to the home of the Spagls and obtained a written statement from the husband in which the latter claimed to have stopped at the highway; but, according to the adjuster, Spagl admitted that he probably did not stop and that the accident was "fifty per cent." his fault. Neilson at that time procured a release from both, giving them a check for $275. Spagl could barely read and write; his wife had reached only the third grade in school.

Mrs. Spagl felt that $275 was not enough, did not cash the check, and consulted an attorney, who, on April 4, 1930, advised appellee that his clients had been fraudulently tricked into signing a release but indicated his willingness to reopen the matter for adjustment. He agreed to an immediate physical examination, under oath, of both Mary Spagl and Mike Spagl. The examination was made on July 17, 1930, and at approximately that time, the lawyer offered to settle the claim of both for $800. No reply was received, and suit was begun. Thereafter plaintiff offered to settle for $1,500. No reply was made, and the cause was finally set for trial. Directly before the day set, Spagl's attorney again offered to settle, this time for $4,500, saying that he thought he should have more, but that, in order to achieve a settlement, he was willing to accept $500 less than the amount for which the insurance company was liable. The offer was rejected.

At the trial counsel for appellee defended for both appellant and appellee. They waived the defense of contributory negligence, admitted negligence on the part of appellant, and defended solely upon the ground of validity of the release. The jury returned special verdicts, finding that the release had been obtained by fraud on the part of the adjuster and, as stipulated by counsel, that Ballard was guilty of negligence causing the injury, and returned a verdict of $9,080 and costs.

Appellant moved for a new trial upon the ground that Mrs. Spagl had falsely testified as to her injuries. Appellee promptly obtained affidavits of some eleven persons, who claimed to have seen Mrs. Spagl doing work in the field between the date of the injury and that of the trial. The court, however, denied the motion for new trial, obviously, to any one who has sat as a trial judge, because appellee had shown lack of diligence in failing to procure the evidence before the trial instead of thereafter. Equally as obvious, offers to settle for constantly increasing demands, as the date of trial approached, were red flags announcing growing strength of plaintiff's complaint of disability, and creating all the more reason for investigation as to plaintiff's injuries among her friends and neighbors. The motion for new trial was denied, judgment entered, and Spagl's attorney again offered to settle for $4,500. Again the offer was refused. An appeal was taken to the Supreme Court, which, without opinion, affirmed. Spagl v. Ballard, 208 Wis. 689, 242 N.W. 425. Appellee paid the amount of its liability of $5,000, leaving a deficiency judgment against appellant of some $4,200.

Thereupon appellant brought this suit to recover the deficiency, upon the ground that the appellee was negligent, first, in preparing the defense; second, in waiving the defense of contributory negligence, in admitting negligence on the part of appellant and in relying solely upon the question of validity of the release, obtained for $275; and, third, in failing to settle the case before trial or for $4,500 after judgment had been entered.

At the trial of the present cause, the attorney for appellee, who defended the personal injury action, testified that plaintiff's attorney attempted to settle with him before trial for $1,500; that at that time he knew what each of the doctors had reported; that he believed the woman was on the road to recovery and that no jury would give her more than $3,500; that he waived the defense of contributory negligence and all defense against the charge of negligence against appellant; that he relied solely upon the release; that there was absolutely no chance to save appellant from a finding of negligence; that upon appellant's own statement, made in the examination before the trial, any defense of negligence "had flown out of the window." Thus, when the cause came to trial, defendant's counsel had been advised by two reputable physicians that a vertebra in the cervical region was broken; he knew that there was a probable permanent disability, at least partial in character, and that he had no defense to the charge of negligence of appellant. He was convinced that he had no defense in the way of contributory negligence on the part of plaintiff and waived that defense. He felt that a jury might go as high as $3,500 and maybe further. His sole defense was the validity of a release for $275, against damages probably amounting to $3,500. In this situation he declined all offers of settlement and proceeded to trial. In our opinion these undisputed facts, taken from his own statement, raised a question for the jury as to whether or not he was negligent and failing in good faith in his defense of the cause.

Furthermore, there was a serious question as to whether he was justified in waiving the defense of contributory negligence. The only eyewitness, other than the parties themselves, made a written statement to the effect that Spagl did not stop before reaching the highway. Neilson, the adjuster, had been told by Spagl that he did not know whether he stopped but that he thought it was a case of "fifty-fifty." Appellant himself testified that he saw Spagl coming; that he assumed Spagl would stop; that he never saw him stop and that he (appellant) tried to avoid the accident. There was serious doubt of any action upon the part of Mrs. Spagl negativing contributory negligence.

These facts, it seems to us, raised a question for the jury as to negligence in the defense. If counsel was justified in his position that there was no defense to the charge of negligence; that there was no substantial evidence of contributory negligence; if, as he said, he believed plaintiff's action would probably result in a verdict of $3,500 and knew that he could settle for $1,500 rather than submit the trial to a jury upon the validity of a release for an inadequate consideration, then the question of his good faith or negligence in proceeding to trial under such circumstances was a question for the jury.

Bearing upon counsel's frame of mind, it should be observed that he testified that he did not think the case was worth more than $3,500, but that he was "not interested in the ...

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