APPEAL from the Appellate Court for the Fifth District; heard
in that court on appeal from the Circuit Court of
MR. JUSTICE SOLFISBURG DELIVERED THE OPINION OF THE COURT:
Plaintiff Jack C. Holcomb appealed to the Appellate Court, Fifth District, from a judgment of the circuit court of Madison County entered upon the granting of motions for summary judgment filed by defendants, Virginia Flavin and Pulitzer Publishing Company. The appellate court reversed the judgment of the trial court and remanded the cause for further proceedings. (Holcomb v. Flavin, 62 Ill. App.2d 245.) The defendants petitioned for leave to appeal which was granted. As this case has been to the appellate court twice, it is necessary to set forth the chronology of events.
Plaintiff suffered an injury as a result of a collision between his automobile and one driven by Wilbur Barnard, Jr. on June 7, 1958. Plaintiff filed suit against Barnard in the circuit court of Madison County, but upon payment of $16,000 plaintiff executed a covenant not to sue Barnard and dismissed the suit. Thereafter on February 5, 1960, plaintiff filed suit against the defendants, Flavin, Pulitzer Publishing Company, and Olga Frank, alleging that they were employers of Barnard who was the driver of the vehicle involved in the collision. The complaint did not charge active negligence on the part of the defendants, but was drawn on the theory that Barnard at the time of the occurrence was the agent, servant or employee of the defendants. The defendants filed answers denying the allegations of the complaint, and as additional defenses pleaded the execution of the covenant not to sue, stating the covenant released plaintiff's cause of action as to them.
Defendants Flavin and Pulitzer also filed third-party complaints against Barnard. Both Barnard and plaintiff filed motions to dismiss the third-party complaints and upon allowance of the motions the defendants appealed to the appellate court of the then Fourth District. (Holcomb v. Flavin, 37 Ill. App.2d 359.) The appellate court held that the acts and omissions alleged were only those of the servant and, therefore, the basis of the responsibility of the defendants is solely that of respondeat superior. The court therefore concluded that the judgment order entered below dismissing the third-party complaints was improper, reversed the decision of the trial court and remanded with directions to reinstate the third-party complaints.
Prior to the trial court's dismissal of the third-party complaints and the subsequent appeal, defendant Frank had filed a motion for summary judgment which was still pending. After the remandment, the third-party defendant Barnard also filed a motion for summary judgment and asked that an order be entered enjoining the plaintiff from further proceeding against the defendants. These motions were denied. The trial commenced but was terminated by the granting of a mistrial for reasons not material here.
Thereafter defendants Flavin and Pulitzer filed motions for summary judgment on the ground that their liability, if any, is derivative, arising from Barnard's acts or omissions through the doctrine of respondeat superior; that the defendants, if held liable, can recover over against Barnard, and that the covenant not to sue has the effect of discharging Barnard, the employee or agent, and also discharging these defendants as employers. The trial court granted the motion, holding that since the liability of the defendants is derivative or secondary, resting solely on the doctrine of respondeat superior, the covenant extinguishes the cause of action against these defendants. Judgment was thereupon entered in favor of these defendants.
On appeal from that judgment the Appellate Court, Fifth District, (Holcomb v. Flavin, 62 Ill. App.2d 245,) correctly stated the issue as follows: "Since all parties have construed the agreement to be a covenant not to sue, the sole issue before this court is whether the execution of a covenant not to sue an agent or servant, serves to extinguish a claim against his principal or employer, whose liability, if any, arises under the doctrine of respondeat superior." The appellate court reversed the trial court and remanded the cause on the ground that the legal effect of the covenant involved is not to release either the defendants or Barnard but only to bar legal action against the covenantee.
In its opinion the appellate court stated:
"We differ with the conclusion reached by the trial court. The fallacy common to the cases above cited [referring to the cases cited in the trial judge's opinion] is best illustrated by the language of the opinion in Bacon v. United States [321 F.2d 880] wherein the court at page 884, stated that when the servant is not liable, the master should not be liable and that it matters little how the servant was released from liability. In our opinion it matters greatly how the servant's liability was extinguished. Where the master's liability rests solely on respondeat superior, if the servant is exonerated by trial on the merits, then, of course, the master cannot be held liable, but there is no logical or legal basis for extending the rule to situations where a servant terminates his liability by obtaining a covenant not to sue. This difference is clearly demonstrated in the well reasoned opinion of the District Court of Appeal of California in Ellis v. Jewett Rhodes Motor Co. 29 Cal.App.2d 395, 84 P.2d 791, wherein the court held that the covenant served to bar any further action against the covenantee, and did not exonerate the principal whose liability was predicated upon the doctrine of respondeat superior. To the same effect are Boucher v. Thomsen (Michigan Supreme Court), 43 N.W.2d 866, 20 A.L.R.2d 1038; Gomez v. City Transp. Co. of Dallas, 262 S.W.2d 417; and Wilson v. City of New York, 131 N.Y.S.2d 47.
"In each of the above cases the covenantor specifically reserved the right to proceed against the master or principal. Defendants, in their brief, make reference to the fact that there is no such reservation in the covenant here involved, but do not contend that the document is a release, rather than a covenant. The absence of a reservation of the right to sue the employer is not here material for the reason that the legal effect of a covenant not to sue is not to release the covenantee but to bar further action against him. City of Chicago v. Babcock, 143 Ill. 358.
"Barnard, at the time of paying the money in exchange for the covenant not to sue is likewise presumed to know that if plaintiff recovered from defendants, they, in turn, would seek indemnity from him. If he sought to avert this possibility, he should have required plaintiff to agree that he would not seek damages from defendants. As was stated above, the instrument is a covenant, not a release, and its legal effect is not to release either the defendants or Barnard, but to bar legal action against the covenantee. City of Chicago v. Babcock, 143 Ill. 358."
No Illinois case has been cited nor has the appellate court or this court found an Illinois decision considering the precise question presented here. As pointed out in its opinion, four of the cases cited by the appellate court in support of its conclusion involved covenants containing specific reservations of the right to proceed against the master.
The only Illinois case relied upon by the appellate court, City of Chicago v. Babcock, 143 Ill. 358, merely announced the well recognized doctrine that a covenant not to sue did not release a joint tort-feasor. Additional cases have been cited on this appeal but they concern covenants with the master and not with the servant, and are obviously inapposite here since the liability of the master is derivative while the liability of the servant is primary and direct. The master's action over against the servant is clearly unavailable to the servant who commits the wrong.
The covenant herein is a standard covenant not to sue containing no reservations of rights against others and provides that "this instrument is and shall be construed as a covenant not to sue as distinguished from a release." No mention is made in the covenant of the defendants in this suit.
The appellate court specifically rejected the view recognized by a number of cases from other jurisdictions. In those cases the courts, although recognizing the distinction between a release and a covenant not to sue as applied to joint tort-feasors generally, have taken the view that where the only liability of a master or principal arises under the doctrine of respondeat superior, the injured person's covenant not to sue the servant operates to release the master or principal from liability. The rationale of these cases is based either upon the theory that such a result will avoid circuitry of action or that since the liability of the master or principal is ...