Gibbs v. Top Gun Delivery and Moving Services, Inc.

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
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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

2008)).

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:

“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

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L 16192 and/or any refiling of said action.”

However, the covenant also provided:

“Nothing is [sic] this agreement is intended

to preclude Bertram Gibbs, his heirs or

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.”

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:

“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.”

(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.

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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:

TOOMIN, P.J., and LAVIN, J., concur.

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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