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Peerless Division v. U.S. Special Hydraulic
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Decision:1999 ME 189
Argued:	November 4, 1999
Decided:	December 17, 1999




	[¶1]  United States Special Hydraulic Cylinders Corp. a/k/a Hunger
Hydraulics (Hunger) appeals from a judgment entered in the Superior Court
(Penobscot County, Delahanty, J.) in favor of Peerless Division, Lear Siegler,
Inc. (Peerless) on its cross-claim seeking indemnification from Hunger.  The
judgment was rendered in the context of a personal injury action brought by
Arthur Mann against Peerless and Hunger.  On appeal, Hunger contends that
the court erred in denying its motion for satisfaction of judgment, in finding
that it was liable under an indemnity agreement, and in denying its request
to amend its answer to the Peerless cross-claim.  Because we disagree with
the court's analysis of Hunger's liability and conclude that Peerless made no
payment attributable to Hunger's negligence, we vacate the judgment.
	[¶2]  The facts in this case are complex, although largely undisputed,
and may be summarized as follows:  Arthur Mann and his wife, Sandra,
commenced a personal injury action against Peerless and Hunger.{2}  Mann
had been injured in the course of attempting to repair a 500 inch hydraulic
cylinder that had been sold to Mann's employer, Wheelabrator.  During the
repair, "there was an explosion and fire" that injured Mann.  The Manns'
claims at trial were that Peerless and Hunger had negligently provided
repair information and that the accident resulted in significant damages.
	[¶3]  The hydraulic cylinder in question was initially purchased by
Hunger from the manufacturer.  Hunger then resold the cylinder to Peerless
in 1985.  The transaction between Hunger and Peerless was initiated by a
telephone order from Peerless.  Peerless  installed the cylinder on a
platform designed to unload trucks carrying wood chips.  The unloading
platform was then sold to Wheelabrator.  Following the order, Peerless sent
Hunger a purchase order that contained in small print, on its reverse side,
fourteen provisions, two of which purported to require Hunger to indemnify
Peerless for any losses arising from a breach of warranty or "from the
delivery or use" of the equipment purchased.
	[¶4]  Prior to trial on the Manns' complaint, Peerless filed a cross-
claim seeking indemnification from Hunger for any losses it might sustain
that were  attributable to Hunger's negligence.  In its answer, Hunger
admitted that it had agreed to the two indemnification provisions in the
purchase order.  It moved for summary judgment, however, contending that
the Manns' allegations did not trigger either provision.  The court denied
Hunger's motion.  At approximately the same time, Hunger negotiated a
settlement with the Manns, who executed a Pierringer release and
indemnity agreement in exchange for a $500,000 payment.{3}  This
agreement, however, did not apply to "that portion of a cross-claim . . . filed
for contractual indemnity based upon a purchase order between" Hunger
and Peerless.  As a result of the release, the Manns dismissed their action
against Hunger.
	[¶5]  At trial, Hunger and Peerless agreed that the cross-claim would
be decided by the court, based on findings made by the jury in the Manns'
underlying personal injury action against Peerless.  The jury found that
Arthur Mann's total damages were $2,885,000 and that Sandra Mann's
damages for loss of consortium were $900,000, for a total of $3,785,000 in
damages.  The court entered judgment against Peerless for the entire
verdict.  In a special verdict, the jury found both Hunger and Peerless
negligent and apportioned the fault between them at 40% for Hunger and
60% for Peerless.  Peerless moved to amend the judgment, arguing that the
Manns' verdict should be reduced by Hunger's $500,000 settlement and
40% share of fault, with a resulting liability for Peerless of $1,771,000. 
Before the court acted on that motion, however, Peerless negotiated a
settlement with the Manns, who executed a satisfaction of the judgment
against Peerless in return for payment of $1,770,000.{4}  
	[¶6]  Following the judgment in favor of the Manns, the court entered
a judgment on the Peerless cross-claim, ruling that the indemnification
provisions were unenforceable under the Uniform Commercial Code. 
Peerless immediately filed a motion to amend or alter the judgment, arguing
that because Hunger had never challenged the enforceability of the
indemnity provision, this theory could not form the basis of the court's
judgment.  The court agreed, vacated the prior judgment, and entered
judgment for Peerless.  The court rejected Hunger's contention that Mann's
injuries did not fall under the indemnification provisions and ordered
Hunger to indemnify Peerless for "that portion of the [Manns'] judgment
and damages paid attributable to the negligence of Hunger, 40 percent."  
	[¶7]  Hunger moved to amend its pleadings to challenge the
enforceability of the indemnification provisions and requested that the court
either alter its judgment or grant Hunger a new trial on the cross-claim to
prove that the agreement was unenforceable.  Hunger also moved for the
entry of satisfaction of judgment, arguing that Peerless had not paid any
portion of the Mann judgment attributable to Hunger's negligence.  In
response, Peerless requested that Hunger's responsibility be fixed at 40% of
the jury verdict.  The court denied Hunger's motions.  In rejecting the
motion for satisfaction of judgment, the court found that the Peerless
settlement of $1,770,000 replaced the jury verdict as the amount of
common liability and that Hunger was liable to Peerless for 40% of the
settlement, namely $508,000.{5}  Hunger appeals from this judgment.
	[¶8]  Hunger argues on appeal that the jury verdict is the proper
measure of common liability to the Manns; because Peerless has not paid
more than 60% of that verdict, Peerless has suffered no loss attributable to
Hunger's negligence.  Hunger's assertion is based on its motion for
satisfaction of judgment pursuant to M.R. Civ. P. 60(b)(5).  We review a denial
of a motion for relief from judgment for abuse of discretion and will "vacate
a judgment only when the denial of the Rule 60(b) motion works a plain and
unmistakable injustice against the defendant."  McKeen and Assoc. v.
Department of Transp., 1997 ME 73, ¶ 4, 692 A.2d 924, 925.  Rule 60(b)(5)
allows a court "upon such terms as are just [to] relieve a party . . . from a
final judgment [if] (5) the judgment has been satisfied, released, or
discharged . . . ."  M.R. Civ. P. 60(b)(5).
	[¶9] A determination of the respective liabilities of joint tortfeasors, as
between themselves, requires a determination of the extent of their
common liability.  When two tortfeasors cause a single injury through their
independent tortious acts, the victim has the option to recover full damages
from either or both. See Robinson v. LeSage, 145 Me. 300, 301, 75 A.2d
447, 449 (1950).  In the present case, the injury to Mann was caused by the
joint negligence of Hunger and Peerless who were each subject to joint and
several liability.  See 14 M.R.S.A. § 156 (1980).{6}  Absent the settlement with
Hunger, the measure of the common liability of Hunger and Peerless would
have been the jury verdict, and either could have been required to pay the
full verdict to the Manns.  See, e.g., Baker v. Jandreau, 642 A.2d 1354, 1355
(Me. 1994) (holding defendant liable for full judgment despite jury verdict
that he was only 10% negligent; no other party to the case was found
negligent, so defendant had to bear the entire burden).  If the Manns had
chosen to proceed against either Hunger or Peerless for the full amount of
the verdict, the defendant thus singled out could not have used the jury's
apportionment of fault to escape payment to the Manns of the entire verdict.  
	[¶10] When Hunger settled with the Manns, they executed a
Pierringer release in which the Manns relinquished, among other things,
their right to proceed directly against Hunger.  The Manns also agreed to
indemnify Hunger should it be required to contribute money to Peerless,
unless that requirement arose from the contractual indemnification
agreement.  Three effects relevant to the joint and several liability of
Peerless and Hunger flow from the Manns' release.  The first is statutory: 
Peerless's liability to the Manns on the full jury verdict is reduced by the
amount of the Hunger settlement.  See 14 M.R.S.A. § 163 (1980);{7} Hewitt v.
Bahmueller, 584 A.2d 664, 666 (Me. 1991) (holding that the section 163
reduction was mandatory).  
	[¶11]  The second effect of the Pierringer release is that it indirectly
limits Peerless's exposure on the jury verdict.  In theory, Peerless would
remain liable for the full verdict, but Hunger could be required, in an action
for contribution, to pay Peerless all sums over Peerless's 60% share.{8}  See
Lavoie v. Celotex Corp., 505 A.2d 481, 482-83 (Me. 1986) ("[T]he amount
recoverable in an action for contribution is based on the proportion of
contributive fault of each joint tortfeasor to the damages suffered by the
plaintiff.").  The Pierringer release would then allow Hunger to recover from
the Manns any money paid in contribution to Peerless.{9}  In the present case,
however, the Pierringer release specifically excluded the Manns from any
responsibility for payments by Hunger to Peerless on the basis of the
contractual indemnity agreement, thus eliminating any direct or indirect
barrier to recovery of the full verdict by the Manns from Peerless.  If the
Manns had been paid the full verdict by Peerless, Peerless would have
sought payment from Hunger through its indemnity agreement.{10}  By virtue
of the exemption contained in the Pierringer release, Hunger would have no
recourse against the Manns. 
	[¶12]  Finally, it is the third effect of the Pierringer release that is
determinative in this case.  At a bare minimum, the release shields Hunger
from any direct liability on the jury verdict. Other jurisdictions that have
examined the common liability of co-defendants have held that a settlement,
negotiated by a party in the position of Peerless, replaces a jury verdict only
when the settlement extinguishes the liability of both defendants on the
verdict.  See, e.g., Vermeer Carolinas', Inc. v. Woodchuck Chipper Corp., 518
S.E.2d 301, 309 (S.C. Ct. App. 1999) (interpreting S.C. Code Ann. § 15-38-
40(D) (Supp. 1998)); Pietz v. Indermuehle, 949 P.2d 449, 456 (Wash. Ct.
App. 1998) (interpreting Wash. Rev. Code § 4.22.040(2) (1998)); Ziarko v.
Soo Line Railroad, 641 N.E.2d 402, 411-12 (Ill. 1994) (noting that
settlement agreement specifically eliminated liability as to both defendants
and thus prevented the plaintiff from proceeding against the non-settling
defendant for the balance of judgment).  We agree with this rule; the
Peerless settlement could only become the measure of common liability if it
also eliminated Hunger's liability on the jury verdict.
	[¶13] The Peerless settlement affects no rights the Manns could have
asserted directly against Hunger.  Those rights had previously been
eliminated by the Pierringer release.  The Peerless settlement is a measure
of Peerless's liability alone and does not replace the verdict.  The jury was
charged to determine the combined lability of both defendants.{11}  Only the
jury verdict encompasses the common liability of both Peerless and Hunger. 
	[¶14]  Having determined the correct measure of common liability, we
next must quantify Hunger's liability on the cross-claim.  Peerless argues
that, if the jury verdict is the proper measure of damages, it is entitled to a
payment of 40% of $3,785,000.{12}  Their argument is at odds with settled
indemnification law.{13}  "There must be loss, not merely liability, before
indemnity is due.  No money judgment may be rendered for indemnity until
the party seeking indemnity has suffered an actual loss." Larson Machine,
Inc. v. Wallace, 600 S.W.2d 1, 13 (Ark. 1980) (internal citations omitted). 
See also Cherry v. Tanda, Inc., 940 S.W.2d 457, 461 (Ark. 1997).{14}
Peerless's request for a compensation tied to the jury verdict is an attempt
to gain recovery for liability rather than loss; Peerless has not yet paid any
money attributable to Hunger's negligence as determined by the jury.  There
is no authority that would justify deviating from this established rule.{15} 
Because Peerless paid $1,770,000, a sum less than its proportionate share
of the jury verdict, namely, $2,271,000, it has not paid any amount
attributable to Hunger's negligence and has no basis for a recovery under the
indemnification agreement.
	[¶15]  Hunger raises two further arguments on appeal:  It argues that
the Peerless purchase order does not require it to indemnify Peerless and
that, even if it did, the court erred when it refused to allow Hunger to
amend its pleadings to assert that the indemnification agreement was not
enforceable.  Because we conclude that Peerless did not pay any amount
recoverable from Hunger even if it were liable under the indemnification
provisions in the purchase order, we have no reason to reach these issues.
	The entry is:

Judgment vacated.  Remanded to the Superior Court
with instructions to enter a judgment consistent
with the opinion herein.

Attorneys for appellant: Jon A. Haddow, Esq., (orally) Farrell, Rosenblatt & Russell P O Box 738 Bangor, ME 04402-0738 and Charles E. Bloom, Esq. Herschel, Accettola, Bloom & Mills 615 Adams Street Toledo, OH 43604 Attorneys for appellee: Frederick J. Badger Jr., Esq. (orally) Richardson, Whitman, Large & Badger, P.C. P O Box 2429 Bangor, ME 04402-2429 and Mark A. Kircher, Esq. Quarles & Brady 411 East Wisconsin Ave. Milwaukee, WI 53202-4497 Plaintiffs Mann did not participate in this appeal.
FOOTNOTES******************************** {1} . This appeal concerns a cross-claim between two defendants in a personal injury action. The caption reflects the parties in interest on appeal. {2} . Two other defendants were named in the complaint, but the Manns' claims against them were dismissed. {3} . For a discussion of the origins of Pierringer releases and their general effect, see Thurston v. 3K Kamper KO., Inc., 482 A.2d 837, 839, n.1 (Me. 1984). See also Arlyn H. Weeks, The Unsettling Effect of Maine Law on Settlement in Cases Involving Multiple Tortfeasors, 48 Me. L. Rev. 77 (1996) for general background on Maine law of contribution and settlement. {4} . A 60% share of the $3,785,000 verdict is $2,271,000. {5} . Even if the Peerless settlement were the proper measure of the common liability of the defendants, the correct determination of Hunger's proportion would require a payment to Peerless of $210,800 rather than $508,000. The latter figure is reached by applying the Hunger settlement as a set off first, and then computing Hunger's share of the balance. We have previously rejected this method of computation. See Dongo v. Banks, 448 A.2d 885, 894 (Me. 1982). The proper calculation of Hunger's share of the Peerless settlement would be 40% of the Peerless settlement ($1,770,000 x .40 = $710,800) reduced by Hunger's settlement ($500,000) resulting in a payment of $210,800 to Peerless. {6} . The statute provides that: In a case involving multi-party defendants, each defendant shall be jointly and severally liable to the plaintiff for the full amount of the plaintiff's damages. However, any defendant shall have the right through the use of special interrogatories to request of the jury the percentage of fault contributed by each defendant. 14 M.R.S.A. § 156 (1980). {7} . The statute provides that: After the jury has returned its verdict, the trial judge shall inquire of the attorneys for the parties whether such a settlement or release has occurred. If such settlement or release has occurred, the trial judge shall reduce the verdict by an amount equal to the settlement with or the consideration for the release of the other persons. 14 M.R.S.A. § 163 (1980). {8} . In all cases, Hunger's settlement ultimately returns to its benefit. If, after having paid the verdict less Hunger's settlement, Peerless did maintain a contribution action against Hunger, the common liability would remain the full verdict. See Dongo, 448 A.2d at 894. Hunger, however, would be able to deduct the $500,000 settlement from its contribution obligation to Peerless. See id. Peerless would not be able to use the Hunger settlement to reduce its 60% share of the common liability. To do otherwise would allow Peerless to receive "the benefit of a settlement that it did not pay." Id. {9} . The rule of joint and several liability places the risk of an insolvent defendant upon its co-defendant rather than upon the plaintiff. {10} . The indemnification agreement does not alter the relative obligations of the parties which continue to be determined by the proportionate fault of each defendant. The court found that "[t]here is nothing in the contract or other evidence to suggest that Peerless intended or expected protection for its own negligence." This finding is not challenged on appeal and requires that Peerless pay more than its proportionate share of the common liability before indemnification is implicated. {11} . Ultimately, the Manns rejected the verdict and negotiated a separate determination of liability, but they did so with each defendant separately--they agreed before trial that the Hunger damages were $500,000 and after trial that the Peerless damages were $1,770,000. {12} . Peerless cross-appealed from the judgment in order to preserve this argument in the event that the jury verdict formed the common liability of the parties. {13} . Peerless maintains that its position is equitable because "Hunger should not be allowed the benefit of Peerless' [sic] post-verdict negotiated bargain." Peerless did get the benefit of its bargain with the Manns; it was potentially liable for $2,271,000 but only paid $1,770,000. Causing the settlement to become the judgment, on the other hand, took away from Hunger any benefit it had from settling before trial, with a corresponding windfall to Peerless. If a defendant wishes to limit its exposure, the proper time to do so is before trial. {14} . The parties have agreed that a choice of law clause contained on the reverse side of the purchase order requires that Arkansas law governs interpretation of the indemnification agreement. {15} . Under the Peerless analysis, the non-settling, more negligent defendant could actually make money from its decision to go to trial, if it were judicious in its post-trial settlement. In the present case, if Peerless were to get 40% of the jury verdict, it would have paid only $756,000 ($1,770,000 settlement - $1,014,000 indemnity from Hunger) while Hunger would have paid $1,014,000 to Peerless alone ($3,785,000 x .40 = $1,514,000 - $500,000) and $1,514,000 in total damages. Had Peerless settled for $1,000,000, Peerless would make $14,000 from the trial ($1,014,000 payment from Hunger - $1,000,000 settlement), despite the fact that Hunger never agreed to indemnify Peerless for Peerless's own negligence. We have rejected such inequitable distributions in the past. See Dongo, 448 A.2d at 894.