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09/29/94 GUARDIANSHIP CLIFFORD A. BABB (GLENN P.

September 29, 1994

IN RE GUARDIANSHIP OF CLIFFORD A. BABB (GLENN P. BABB, GUARDIAN OF THE PERSON AND ESTATE OF CLIFFORD A. BABB, APPELLEE,
v.
THE CITY OF CHAMPAIGN, APPELLEE (ED ROESCH EQUIPMENT COMPANY ET AL., APPELLANTS)).



Bilandic

The opinion of the court was delivered by: Bilandic

CHIEF JUSTICE BILANDIC delivered the opinion of the court:

This appeal arises from an order that the probate division of the circuit court of Champaign County entered in a guardianship proceeding. During the guardianship proceeding, the probate court entered an order in a related matter that approved a settlement agreement entered into between the estate of Clifford Babb and the City of Champaign. The probate court also entered a separate order (hereinafter, good-faith order) finding that the settlement agreement was made in good faith as required by the Joint Tortfeasor Contribution Act (Contribution Act) (740 ILCS 100/0.01 et seq. (West 1992)). Roesch Equipment Company, a potential defendant/third-party plaintiff was allowed to intervene in the proceedings before the probate court. On appeal from the probate court's good-faith order, Reach All, Goforth Industries, Inc., Ford Motor Company, Sweeny Industries, Inc., and Parker Fluid Connectors were allowed to intervene in the appellate court proceedings. The appellate court affirmed the probate court's order approving the settlement agreement and finding that the settlement was made in good faith. (232 Ill. App. 3d 40.) We allowed the intervenors' petitions for leave to appeal (134 Ill. 2d R. 315).

FACTS

The record reveals the following facts. On September 14, 1988, Clifford Babb was trimming trees in the course of his employment with the City of Champaign (City). Babb fell 20 to 40 feet from a cherry picker when the Ford truck supporting the cherry picker caught fire. (A cherry picker is a truck equipped with a device used to elevate workers above the ground so that they can perform tasks such as servicing electrical wires, trimming trees, etc.) The City owned the cherry picker. The City had purchased the Ford truck equipped with a Reach All bucket lift in April 1979 from Ed Roesch Equipment Company (Roesch). As a result of Babb's fall, the City, Babb's employer, became liable to Babb for workers' compensation benefits in the estimated amount of $2.4 million.

Due to Babb's disabling injuries, the probate court appointed Glenn Babb, Clifford Babb's father, as his legal guardian. During the guardianship proceedings before the probate court, Babb's estate filed a petition on March 13, 1990, seeking approval of a settlement agreement with the City. The petition alleged that the City agreed to pay $400,000 to Babb's estate. The settlement agreement would then release the City from secondary liability to any third parties. The probate court entered an order approving the settlement agreement.

On March 21, 1990, Babb's estate and the City filed a petition before the probate court asking that court to find that their settlement agreement was a "good-faith settlement" pursuant to section 2(c) of the Contribution Act (740 ILCS 100/2(c) (West 1992)). Notice of the petition was sent to counsel for Roesch, the company that sold the truck to the City. Roesch then sought leave to intervene in the probate action and to object to the petition for a good-faith finding. The probate court grantedRoesch's motion to intervene and withdrew its prior order approving the settlement agreement.

On June 4, 1990, Babb's estate and the City filed a second petition before the probate court for approval of the settlement agreement and a petition for a finding of good faith. The revised settlement agreement provided that the City would pay Babb $400,000 (hereinafter, settlement monies). Of that amount, $50,000 was Babb's to keep. However, if Babb should choose to file a tort action against any third parties and successfully recover any damages against potential third parties, he was to repay the City up to $350,000 of the $400,000 settlement monies. If his recovery against third parties was less than $350,000, then Babb was required to repay the City any amount actually received from third parties.

In addition to recovering up to $350,000 of the $400,000 settlement monies from any underlying tort judgment, the City would also retain its workers' compensation lien against Babb's recovery from third parties. This statutory lien would enable the City to recover from any judgment or settlement Babb might receive in the underlying tort action against third parties up to 75% of the $2.4 million it paid to Babb in workers' compensation benefits.

Further, the terms of the settlement agreement required Babb to waive his right to retain 25% of the workers' compensation benefits which are, by statute, allocated to the payment of attorney fees and costs incurred in the prosecution of an underlying tort action against third parties. (820 ILCS 305/1 et seq. (West 1992).) Therefore, the terms of the agreement allowed the City to recover from Babb 100% of its workers' compensation benefits (lien (75%) plus waiver of fees and costs (25%)) if Babb should successfully prosecute an underlying tort action. Additionally, the settlement agreement allowed the City to recover up to $350,000 ofthe $400,000 settlement monies it paid if Babb should successfully prosecute an underlying tort action. The settlement agreement also included a clause requiring the City's consent prior to Babb's settlement with any third party. In this clause, the City was granted an unqualified right to withhold its consent to any third-party settlement unless it was fully indemnified by such agreement.

The probate court entered an order on June 7, 1990, approving the revised settlement agreement between Babb's estate and the City. In a separate order entered that same day, the court found that the settlement agreement was made in good faith for purposes of the Contribution Act. Roesch, as intervenor, filed a notice of appeal from the good-faith order on June 20, 1990.

On August 24, 1990, during the pendency of Roesch's appeal from the probate court's good-faith order, Babb fled a separate complaint in the circuit court. Babb's complaint, which sounded in products liability, named as defendants Roesch, Reach All, Goforth Industries, Inc., and Ford Motor Company. Thereafter, Sweeney Industries, Inc., Delta Mobile Testing, TBA Sales, and Parker Fluid Connectors were added as defendants. The defendants named in Babb's products liability complaint (hereinafter, tort action) filed third-party complaints against the City for contribution (hereinafter, the contribution action). The City, in turn, filed a motion to dismiss the contribution action on the ground that the settlement agreement approved by the probate court when it entered its good-faith order in the probate action relieved it of all liability for contribution to the defendants. Simultaneous to filing its motion to dismiss the contribution action, the City also filed a motion to stay proceedings in the tort action before the circuit court, pending appellate review of the probate court's good-faith order. The circuit court granted the motion and stayed the tort action proceedings. Reach All, Goforth, Ford, Sweeney, and Parker (hereafter, defendant/intervenors) sought and were granted leave to intervene as appellants in Roesch's pending appeal from the probate court's good-faith order. The appellate court affirmed the probate court's good-faith order. (232 Ill. App. 3d 56.) As stated, we allowed the defendant/intervenors' petition for leave to appeal.

ANALYSIS

I. PREFATORY NOTE

We initially note, for the sake of clarity, that the parties to this appeal are involved in three separate actions: (1) the probate action, wherein the probate court approved the settlement agreement between Babb's estate and the City and entered its good-faith order, finding that the settlement was made in good faith; (2) the tort action, which Babb instituted against eight separate defendants, six of whom also appeal from the good-faith order entered in the probate action (the defendant/appellants include Roesch, Reach All, Goforth Industries, Ford Motor Company, Sweeney Industries and Parker Fluid Connectors); and (3) the contribution action that the defendants in the tort action filed against the City. This appeal involves only the good-faith order entered in the probate action. The tort and contribution actions were stayed pending Disposition of this appeal from the probate court's good-faith order.

The issue raised in this appeal is whether the probate court properly found that the settlement agreement between Babb's estate and the City was made in good faith within the meaning of the Contribution Act. All of the defendants argue that the trial court abused its discretion in finding the proposed settlement in "good faith" within the meaning of the Contribution Act. The defendant/intervenors, who did not receive noticeof the motion for a good-faith finding or the opportunity to participate in the hearing on that motion, argue that the manner in which the settling parties obtained the good-faith order demonstrates that the proposed settlement was not a "good-faith" settlement within the meaning of the Contribution Act. The defendant/intervenors and Roesch also argue that the proposed settlement, which incorporates a "loan-receipt" agreement, violates the policies underlying the Contribution Act and was not a good-faith settlement within the meaning of the Contribution Act (740 ILCS 100/2(c) (West 1992)).

II. GOOD-FAITH SETTLEMENT

A. The Contribution Act

As stated, the probate court entered an order finding that the settlement between Babb and the City of Champaign was made in "good faith" within the meaning of the Contribution Act (740 ILCS 100/0.01 et seq. (West 1992)). That statute provides that, where two or more persons are "subject to liability in tort arising out of the same injury to person or property, or the same wrongful death, there is a right of contribution among them." (740 ILCS 100/2(a) (West 1992).) The right of contribution exists only in favor of a tortfeasor who has paid more than its pro rata share of damages to the injured party. (740 ILCS 100/2(b) (West 1992).) The Contribution Act provides, however, that a tortfeasor who settles in good faith with the injured party is discharged from contribution liability. Specifically, sections 2(c) and 2(d) of the Contribution Act provide:

"(c) 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 injury or wrongful death unless its terms so provide but it reduces therecovery on any claim against the others to the extent of any amount stated in the release or the covenant, or in the amount of the consideration actually paid for it, whichever is greater.

(d) The tortfeasor who settles with a claimant pursuant to paragraph (c) is discharged from all liability for any contribution to any other ...


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