Ray Korte Chevrolet v. Simmons

Citations: 571 P.2d 699; 117 Ariz. 202; 1977 Ariz. App. LEXIS 721Docket: 1 CA-CIV 3465

Court: Court of Appeals of Arizona; September 15, 1977; Arizona; State Appellate Court

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Ray Korte Chevrolet (Korte) appealed a jury verdict awarding Caroline F. Simmons $671,520 in a personal injury case stemming from a May 3, 1971, accident where Korte's salesman, James L. Stone, collided head-on with Simmons' vehicle, resulting in Stone's death and Simmons' severe injuries. Korte raised multiple issues on appeal, including the trial court's jurisdiction, liability findings, evidence admissibility, closing arguments, and jury instructions. The court affirmed the judgment, concluding there was no error.

The jurisdictional issue centered on whether the trial court had the authority to vacate a prior summary judgment of dismissal, which Korte claimed was invalid due to the expiration of the appeal period. However, Simmons filed a motion for rehearing within the requisite timeframe, which the court granted, leading to a formal order vacating the dismissal. The appellate court referenced prior case law to affirm that such a motion could properly suspend the appeal period, thus validating the trial court's jurisdiction over the case. It also determined that the trial court correctly classified Simmons' motion as a "new trial" motion despite its labeling as a "motion for rehearing," emphasizing the importance of the motion's substance over its form.

Division One of the Court of Appeals is divided on the impact of covenants not to sue, as illustrated by various cases, including Spradling v. Rural Fire Protection Company, Matter of Estate of Balcomb, and Hegel v. O'Malley Insurance Company. In this instance, the appeal period for the judgment was suspended due to a timely motion for rehearing, which the court later vacated, affirming the jurisdiction of the trial and appeal.

A critical issue involves a covenant executed by the appellee that releases the principal tortfeasor, Stone, from litigation while reserving the right to pursue the appellant. There exists a split of authority regarding whether such a covenant impacts the liability of a party whose responsibility is solely derivative. However, the nature of this specific covenant—being one not to sue rather than a release from liability—means it does not absolve Korte of responsibility. 

Two Arizona Supreme Court rulings clarify that a covenant not to sue does not adjudicate case merits and only releases parties explicitly mentioned in the agreement. In Hovatter v. Shell Oil Company, it was noted that since the covenant reserved the right to pursue the principal, it did not release the principal from liability, aligning with the intent of the parties involved. This position was supported by an Illinois case, Holcomb v. Flaving, which distinguished between the implications of a covenant not to sue and the derivative liability of an employer based on the actions of an employee.

Ultimately, the Illinois Supreme Court later clarified that if a party is excluded from the covenant, they may still be subject to litigation, indicating the legal complexities surrounding covenants not to sue and their operational scope in liability contexts.

In Holcomb, it was noted that jurisdictions permitting actions against a principal despite a covenant not to sue the agent typically included explicit reservations allowing the covenantor to pursue claims against the principal. The current case does not require resolution of whether a covenant with the principal tortfeasor releases the secondarily liable party, as the Arizona Supreme Court in Hovatter indicated that such covenants are determined by the parties' intent. There is a clear intent here to reserve the right to sue Korte. 

The appellant's subsequent claims of error center on establishing Korte's liability, which necessitates proving that Stone was acting within the scope of his employment at the time of the accident. Testimony on this matter is conflicting and must be viewed favorably to uphold the verdict. Stone was off duty but had consumed alcohol after work before returning to make business calls and planning to pick up Mr. Urban. The appellant seeks to exclude Urban's testimony regarding his conversation with Stone, which is significant to the case as it illustrates Stone's intention to pick up Urban for business purposes. This testimony is relevant to demonstrate Stone's state of mind and his plan, aligning with Wigmore's principles on using statements of present intent as evidence, provided they were made naturally and without suspicion. A comparable case, Wibye v. United States, involved similar circumstances concerning an employee's scope of employment at the time of an accident, where a conversation was also used as evidence of intent.

The court ruled the conversation between Hadley and his mother admissible under the "state of mind exception" to the hearsay rule, which allows a person's statements about their current mental state to serve as evidence of their intent to act. Hadley's spontaneous declaration of his plans to return to Fort Lewis, via San Francisco, was deemed relevant and thus the mother's testimony was permissible. Arizona recognizes this hearsay exception, as established in cases such as Valley National Bank v. Hay and Barnett v. Hitching Post Lodge, Inc.

The appellant challenged the admissibility of evidence suggesting an agency relationship between Stone and Korte, arguing it relied on hearsay. However, the Arizona Supreme Court clarified that while declarations alone cannot establish agency, other corroborating evidence can make such statements admissible. The evidence indicated Stone worked for Korte, with testimonies confirming that he engaged in business activities beyond his assigned hours, providing sufficient grounds to infer an agency relationship.

Additionally, Stone's brother's testimony regarding a conversation with Urban was found to be admissible as it supported Urban's account of events leading up to Stone's death. The appellant's counsel attempted to impeach Urban's testimony, leading to the necessity of prior consistent statements for rehabilitation, which the Arizona courts allow when credibility is in question. The court also noted that rehabilitation testimony is admissible for its substance when used for corroboration.

Lastly, the appellant disputed the jury's determination that Stone was acting within the scope of his employment at the time of the accident. Under Arizona law, an employee may be considered within the scope of employment when performing actions authorized by their employment or reasonably related to it, as articulated in Scottsdale Jaycees v. Superior Court of Maricopa County and the Restatement (Second) of Agency.

Evidence presented indicated that Stone was likely acting within the scope of his employment during the accident. He was a regular employee of Ray Korte Chevrolet and had a history of picking up customers during off-hours to facilitate sales. Testimony revealed that Stone had contacted Mr. Urban to arrange a pickup before the accident and that the route taken was appropriate for meeting Urban. Despite the admission of a .41 blood alcohol level, conflicting evidence suggested that such a level would incapacitate most individuals, while witnesses described Stone as lucid before the accident. Consequently, the jury likely concluded that Stone did not have a .41 blood alcohol level and had not abandoned his employment.

Additionally, the appellant claimed that the conduct of the appellee's attorney during trial was prejudicial. The appellant objected to comments made in closing arguments about the absence of a key witness, a chemist, whose testimony could have challenged the blood alcohol evidence. The court generally gives trial counsel considerable leeway in arguments, and unless there is clear abuse of discretion by the trial court, its rulings are upheld. The trial court, having been present during the trial, is better positioned to assess any potential prejudice. The court found that the comments regarding the missing witness were fair, as the appellant had not called the witness, which justified the opposing counsel's remarks. The trial court did not abuse its discretion in denying a mistrial.

Appellant claims that the trial court erred by refusing to give certain requested jury instructions. Upon review, it is determined that the essential principles from these proposed instructions were adequately covered in other forms provided by the trial judge. The Arizona Supreme Court, in Porterie v. Peters, established that jury instructions must be relevant to the case's specific facts and circumstances, and no party has a right to particular phrasing in instructions, even if legally accurate. The instructions given were deemed fair and comprehensive regarding the applicable law, leading to the conclusion that there was no error, and the judgment is affirmed.

The excerpt also includes a covenant from Caroline F. Simmons, who agrees to refrain from suing James L. Stone and others in exchange for $10,747, while reserving the right to pursue claims against Ray Korte Chevrolet and others related to the accident.

Additionally, multiple requested jury instructions from the appellant relate to the scope of employment, emphasizing that an employee's actions must be within the control of the employer and relevant to the employment context. Specific instructions clarify that an employer can be held liable for employee negligence only if the employee was acting within the scope of employment at the time of the incident. Factors for determining this scope include the nature of the employee's conduct, the timing and location of the actions, the employer's expectations, and whether the employee was under the influence of alcohol.