Cox v. Pearl Investment Co.
450 P.2d 60 (1969)
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Rule of Law:
A settlement document that releases one joint tortfeasor but expressly reserves the right to sue others will be treated as a covenant not to sue, not a complete release, and will not bar claims against other joint tortfeasors.
Facts:
- Mrs. Cox was injured when she fell on property owned by Pearl Investment Company.
- Goodwill Industries was a tenant on the property where the fall occurred.
- The Coxes made a claim for damages against both Goodwill Industries and Pearl Investment Company.
- Goodwill Industries paid the Coxes $2,500.
- In exchange for the payment, the Coxes executed a document in favor of Goodwill Industries titled 'Covenant Not to Proceed with Suit'.
- This document expressly reserved the Coxes' right to sue any other person or entity for damages arising from the same accident.
Procedural Posture:
- Mr. and Mrs. Cox (plaintiffs) sued Pearl Investment Company (defendant) in the trial court for negligence.
- Pearl Investment Company filed an answer asserting affirmative defenses.
- Pearl Investment Company then moved for summary judgment, arguing the plaintiffs' claim was barred because they had executed a release in favor of a joint tortfeasor, Goodwill Industries.
- The trial court granted summary judgment for Pearl Investment Company, ruling that the document was a release that, under existing law, released all joint tortfeasors.
- The Coxes (plaintiffs-appellants) appealed the summary judgment to the state's highest court.
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Issue:
Does a document titled 'Covenant Not to Proceed with Suit,' which releases one alleged tortfeasor but expressly reserves the right to sue others, operate as a full release that bars a claim against a joint tortfeasor under the common law?
Opinions:
Majority - Mr. Justice Hodges
No. A document releasing one tortfeasor but expressly reserving the right to sue others does not bar claims against other joint tortfeasors because the manifest intent of the parties governs the contract's effect. The court overturned its prior precedent which held that the release of one joint tortfeasor automatically releases all others, deeming that rule 'harsh and illogical.' The court reasoned that fundamental contract law requires giving effect to the parties' clear intent, and an express reservation of rights clause demonstrates the parties did not intend the settlement to be full compensation or to release other potentially liable parties. This approach prevents a wrongdoer from receiving 'refuge and absolution' and does not prejudice the non-settling tortfeasor, who is entitled to have any subsequent judgment reduced by the amount already paid by the settling tortfeasor. This decision aligns Colorado with the modern majority rule and the Restatement of Torts.
Analysis:
This decision marks a significant shift in Colorado tort law, abrogating the rigid common law rule that the release of one joint tortfeasor releases all. The court replaces this formalistic doctrine with a modern approach centered on the manifest intent of the contracting parties. This ruling promotes partial settlements by allowing plaintiffs to resolve claims with one party without forfeiting their rights against others. It also ensures fairness by preventing double recovery for plaintiffs and protecting non-settling defendants through the mechanism of a set-off, thereby encouraging equitable resolution of multi-party tort claims.
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