Opinion
Nos. 105,349 105,748.
2013-12-27
Elizabeth PHILLIPS, et al., Appellees, v. Terry PHILLIPS and Deere & Co., Inc., Defendants, and Farm Bureau Mutual Insurance Company, Appellant.
Appeal from Labette District Court; Oliver Kent Lynch, Judge. Todd N. Thompson and Sarah E. Warner, of Thompson Ramsdell & Qualseth, P.A., of Lawrence, for appellant. Fred Spigarelli and Kala Spigarelli, of The Spigarelli Law Firm, of Pittsburg, for appellees.
Appeal from Labette District Court; Oliver Kent Lynch, Judge.
Todd N. Thompson and Sarah E. Warner, of Thompson Ramsdell & Qualseth, P.A., of Lawrence, for appellant. Fred Spigarelli and Kala Spigarelli, of The Spigarelli Law Firm, of Pittsburg, for appellees.
Before ARNOLD–BURGER, P.J., GREEN, J., and HEBERT, SJ.
MEMORANDUM OPINION
PER CURIAM:
This case arises out of a farm accident which occurred on May 7, 2005. Douglas Phillips (Doug) was working with his father, Defendant Terry Phillips, building a pasture fence. Terry was operating a John Deere 250 skid steer with a tree shear attachment. The skid steer unexpectedly tipped forward, striking Doug and trapping him under the tree shear. Doug died shortly after the accident from the injuries sustained.
Terry carried liability insurance with Farm Bureau Mutual Insurance Company (Farm Bureau). An initial settlement offer from Farm Bureau was rejected by Doug's wife, Elizabeth Phillips. She contacted legal counsel, and in July 2006, she and her children (Connor Phillips and Halee Phillips Kennett) filed suit against Terry and Deere & Company, Inc. After a protracted period of settlement negotiation and an unsuccessful mediation, Terry and the Plaintiffs entered into an agreement in December 2007 for a consent judgment accompanied by an assignment to Plaintiffs of Terry's rights against Farm Bureau in exchange for a covenant not to execute the judgment against Terry personally. In January 2008, Plaintiffs sought and obtained approval of the consent judgment by the district court, which entered judgment against Terry.
Plaintiffs reserved and separately pursued their wrongful death action against Deere, which resulted in a jury verdict finding no fault on the part of Deere, and no comparative fault on the part of Terry or Doug.
On July 31, 2008, Plaintiffs brought a garnishment action against Farm Bureau seeking to enforce the consent judgment. After another protracted period of negotiation and litigation, the district court filed a memorandum opinion on October 25, 2010, enforcing the judgment against Farm Bureau. In a subsequent memorandum opinion filed on February 11, 2011, the court assessed interest and attorney fees against Farm Bureau. Farm Bureau timely appealed these judgments, which are consolidated herein.
On appeal, Farm Bureau argues that the consent judgment cannot be enforced against the insurer (1) because the consent judgment was not reasonable; (2) because Farm Bureau did not act in bad faith; and (3) because Terry violated the cooperation clause of his policy. Farm Bureau also argues that the district court erred in excluding evidence regarding the jury verdict in the reserved action against Deere. Finally, Farm Bureau contests the award of interest and attorney fees.
For the reasons hereinafter set forth, we find that the consent judgment was unreasonable and, accordingly, the judgments of the district court are reversed. In light of this disposition, we need not address in detail the remaining issues raised by Farm Bureau.
The Accident
The facts surrounding the accident have never been definitively determined, essentially because Terry has no exact recollection of the events and no one observed the actual occurrence.
On the day in question, May 7, 2005, Terry and Doug were building a fence line in Doug's pasture land in LaBette, County. They were joined at some point in the early afternoon by Doug's son, plaintiff Connor Phillips, and Tyler Kennett, who was engaged to, and is now married to Doug's daughter, plaintiff Halee (Phillips) Kennett. The procedure they were using involved Doug holding a fence post in place with his arm extended. Terry would then push the post into the ground with a tree shear attached to a John Deere 250 Skid steer, using the skid steer's hydraulic force. After a post was in the ground Terry would back away and move the skid steer to the location where the next post was to be placed. Connor and Tyler would follow, clipping the strands of fence wire to the posts once they had been set.
During the course of the operation, after a post had been set, the skid steer unexpectedly tipped forward while Terry was moving to the next location. Doug was struck and was pinned under the tree shear. Terry was unaware that Doug had been struck and pinned under the tree shear because, when the skid steer tipped, Terry had been turned to watch where he was backing. Connor and Tyler were working some distance away and did not observe the skid steer tip or the tree shear strike Doug. Once they noticed that the skid steer was tipped, they began walking over to see what had happened. When they did not see Doug, they began to run and at some point realized that he was pinned under the equipment. Connor ran to get a tractor and used its bucket loader to push the rear of the skid loader down while Tyler pulled Doug out and dragged him several feet to the south. When the skid steer was righted, Terry exited and, finding Doug unconscious, attempted CPR which briefly revived Doug. Doug had a wound to the back of his head, severe chest trauma, and lapsed back into unconsciousness. He was life-flighted to a hospital where he died as a result of the injuries.
Later that same day, a number of people in the area heard about the accident and gathered together to build the remainder of the fence. Terry, Connor, and Tyler did not participate in the project after the accident. No one could remember exactly where the fence building resumed that afternoon or where the skid steer or the tractor were located when they arrived. Thus, the exact location of the accident remains unknown.
Procedural Background
Terry had liability insurance with Farm Bureau with a policy limit of $1 million The accident was reported to Farm Bureau on June 14, 2005.
The parties commenced a protracted and somewhat contentious period of investigation, correspondence, and negotiation which is set forth in detail in the district court's memorandum opinion filed October 25, 2010. This extensive discussion need not be repeated here in detail but is summarized in its essence for present purposes. Some details are set forth where necessary in the analysis of the issues hereinafter.
Terry consistently denied that he had done anything wrong in the operation of the skid steer to cause the accident. He also did not want to place any blame on Doug. Farm Bureau focused on issues of liability, comparative fault, and the paucity of direct evidence. In February 2006, an offer was extended to Elizabeth to settle the case for $200,000. This offer was not acceptable to Elizabeth, and although she expressed her belief that Terry was not at fault, she was aware of the insurance policy. Terry advised Elizabeth to obtain legal counsel, which she did.
After retaining counsel, Plaintiffs focused primarily on economic recovery and insurance coverage. From the beginning, the demand for settlement at the policy limits was coupled with the threat to enter into a consent judgment in consideration of a covenant not to execute, with an assignment of right to pursue the insurer for bad faith.
On July 24, 2006, Plaintiffs filed suit against Terry Phillips and Deere & Company, Inc. In their petition, Plaintiffs focused on the liability of Deere and made no direct claim against Terry, but they reserved the right to assert claims against him to the extent that Deere asserted his comparative fault.
Before any depositions were taken in the lawsuit, Plaintiffs again raised the issue of giving a covenant not to execute in exchange for a consent judgment. Farm Bureau had retained legal counsel for Terry, and the attorney informed Plaintiffs' counsel that such an agreement could adversely affect Terry's insurance coverage. Throughout the proceedings Terry was also represented by his personal attorney due to Plaintiffs' claims in excess of the policy limits.
The discovery proceeded in the lawsuit, and the parties remained far apart. Farm Bureau and retained counsel for Terry mulled over various scenarios wherein: Terry could be found at fault; Doug could be found in comparative fault; Deere could be found at fault or have comparative fault; or where a jury could simply find that it was an accident and there was no fault. They also considered the vagaries of a jury trial in a conservative community.
Plaintiffs obtained the services of an economic expert in determining potential loss and continued to demand settlement at, or in excess of, the policy limits. In October 2007, Plaintiffs supplemented their answers to Defendant Deere's interrogatories and set out allegations of negligence directly against Terry. Retained counsel then advised Terry to raise the issue of Doug's comparative fault in light of the claims now being made against him. Terry was reluctant to be seen as admitting any fault and continued to express his belief that neither he nor Doug had done anything wrong. Eventually, Terry agreed to raise the issue of comparative fault because he did not know where Doug was at the time of the accident.
During the discovery process, the Plaintiffs took the depositions of several expert witnesses who placed substantial fault on Deere. These opinions were conveyed by retained counsel to Farm Bureau as being very favorable to Terry's defense.
The parties were still unable to resolve their differences and, at the suggestion and request of Farm Bureau, mediation was scheduled for December 17, 2007.
Plaintiffs opened the mediation with a global demand to settle with both Terry and Deere for $3.5 million. Farm Bureau countered with an offer on behalf of Terry for $250,000, with “room to move.” Plaintiffs then countered with a global demand of $2.9 million. Farm Bureau asked the mediator to ascertain whether the Plaintiffs would be willing to settle separately with Terry, and, if so, in what amount. Farm Bureau's representatives and retained counsel then left the room while the mediator had a private discussion with Terry and his personal attorney. Upon rejoining the mediation, Farm Bureau was informed of the consent judgment proposal. Terry agreed to a $1.5 million consent judgment and assignment of his rights for any action he might have against Farm Bureau in exchange for a covenant not to execute. Farm Bureau informed Terry that the proposed consent judgment would violate the cooperation clause in his policy and void his coverage. The Farm Bureau representatives then left the mediation.
On January 3, 2008, the Plaintiffs filed a motion for approval of the consent judgment. The district court proceeded immediately to hear testimony and receive documentary evidence and found the consent judgment to be fair and reasonable. A judgment was entered on the record against Terry in the amount of $1.5 million, together with interest and attorney fees. Although the Plaintiffs had already prepared a journal entry for immediate execution, the parties had some editorial issues to work out regarding the assignment and covenant. The journal entry of judgment was filed stamped on January 16, 2008. (There appears to be some confusion as to the actual filing date since the journal entry is referred to later in the proceedings as the “Journal Entry of January 23, 2008.”)
After filing the journal entry of judgment against Terry, Plaintiffs proceeded to jury trial on the claims against Deere. As above noted, a jury verdict was rendered finding no fault on behalf of Deere and no comparative fault on behalf of either Terry or Doug.
On July 31, 2008, after the Deere verdict, Plaintiffs brought this garnishment action against Farm Bureau, seeking to enforce the consent judgment. A hearing was not commenced until October 2009, and not completed until June 2010. On October 25, 2010, the district court issued a 75–page memorandum opinion finding that Farm Bureau had acted in bad faith and that Terry had not violated the cooperation clause of his policy. The court also confirmed its prior finding that the consent judgment was reasonable and, therefore, Farm Bureau was liable for the judgment, interest, and attorney fees.
In a separate memorandum opinion filed on February 11, 2011, the district court calculated interest on the judgment from January 23, 2008, and also determined that a 40% contingency attorney fee was appropriate, bringing the total judgment against Farm Bureau to $2,499,480.89, plus accruing interest.
Farm Bureau timely appealed both the October 25, 2010, memorandum decision regarding the garnishment action and the February 11, 2011, memorandum decision addressing interest and attorney fees.
The Consent Judgment
Plaintiffs and Terry entered into an agreement whereby Terry consented to a judgment against him for $1.5 million, which was substantially in excess of his policy limits with Farm Bureau. In exchange for a covenant by Plaintiffs not to execute the judgment against his personal assets, Terry assigned to the Plaintiffs his rights to seek recovery of the judgment from Farm Bureau on the theory that Farm Bureau had acted in bad faith in failing to investigate and settle the case within policy limits. Farm Bureau did not authorize or participate in the agreement and, as noted above, advised Terry that such agreement could void his insurance coverage, resulting in no recovery by Plaintiffs. Defendant Deere was not involved in the negotiation of the consent judgment, and Plaintiffs retained their cause of action against Deere, albeit unsuccessfully.
In seeking approval from the district court for the consent judgment, the Plaintiffs specifically alleged that their motion was submitted “in conformance with the law as set forth in Glenn v. Fleming, 247 Kan. 296 (1990).”
The Plaintiffs' motion alleges how the accident occurred in two very brief sentences, then proceeds to set forth Defendant Deere's allegations of negligence against Terry, followed by Plaintiffs' allegations of negligence against Terry in virtually identical general terms. Interestingly, the motion does not set forth Plaintiffs' allegations of negligence against Deere or make any detailed reference to Terry's claim of comparative fault by Deere and/or Doug.
The motion then alleges five separate demands by Plaintiffs to Farm Bureau for payment of policy limits and refers to exhibits pertaining to those demands. The motion does not refer to the substance of Farm Bureau's responses to these demands or any counter-offers. The motion notes a sixth demand on October 10, 2007, which was rejected with “no offer” from Farm Bureau.
Plaintiffs' motion then refers to an exhibit regarding the economic report and deposition testimony of Plaintiffs' expert witness, indicating loss of wages and household services in the range of $1,535,080 to $1,662,437 amounts which are in excess of the policy limits. The motion also advised that Plaintiffs were seeking noneconomic damages totaling over $9 million.
Plaintiffs then allege that on October 24 2007, Farm Bureau rejected a proposed consent judgment and, instead, requested mediation. The motion acknowledges that Terry was raising the comparative fault of Doug but opines that Terry agreed to compare fault “out of fear of losing his coverage” by Farm Bureau.
The motion then sets forth Plaintiffs' version of the mediation process which occurred on December 17, 2007:
(a) Plaintiffs made a global demand to Terry and Deere of $3.5 million;
(b) Terry, through Farm Bureau, offered $275,000;
(c) Plaintiffs countered with a demand of $2.9 million to Terry and Deere;
(d) Terry, through Farm Bureau, requested Plaintiffs to make another offer to settle with Terry to the exclusion of Deere;
(e) Plaintiffs demanded $2 million to settle the case with Terry;
(f) Farm Bureau made no counteroffer on behalf of Terry. Terry, through his personal attorney, offered to enter a consent judgment/covenant/assignment to protect Terry from an excess judgment;
(g) Plaintiffs and Terry, through personal counsel, negotiated the $1.5 million consent judgment/covenant/assignment;
(h) Farm Bureau then rejected Plaintiffs' offer to settle for the policy limits of $1 million in lieu of the consent judgment and left the mediation.
Thereupon, Plaintiffs retained their claim against Deere and asked the district court to determine the consent judgment to be reasonable “given the damages and exposure to Terry Phillips.” The motion requested the district court to “enter judgment for the Plaintiffs” for $1.5 million with interest and any permissible attorney fees.
Contemporaneously with the filing of the motion, the district court convened a hearing on January 3, 2008. Farm Bureau was not represented at the hearing. In addition to Plaintiffs' counsel, counsel for Deere, and Terry's personal attorney, attorney Blake Hudson also appeared and advised the court that “Farm Bureau hired our law firm to represent Terry Phillips in this [litigation]. We don't represent Farm Bureau here today, but we are here on behalf of Terry Phillips.”
Prior to offering any evidence, the Plaintiffs offered, without objection, a stipulation that Terry's personal assets were in excess of $500,000. As to how the accident occurred, Plaintiffs' counsel admitted in his opening statement that “there's two versions of what happened.”
Connor Phillips testified as to his relationship with his father and as to how his father's death impacted the family emotionally and financially. He testified in some detail about the procedure which his father and Terry used to drive the fence posts with the skid steer. He also testified that he and Tyler Kennett were working some distance away from where his father and Terry were working and that they did not see the accident occur.
He described what he observed when he ran to the scene of the accident. Counsel for Terry did not cross-examine Connor. Counsel for Deere waived cross-examination on the understanding that he would have the right to cross-examine the witness at trial.
Plaintiffs proffered the deposition testimony of Tyler Kennett, and the exhibits thereto, which was admitted without objection. The deposition and report of Plaintiffs' economist, John Ward, was also admitted without objection as a proffer of what Plaintiffs would attempt to prove should the matter go to trial.
Elizabeth Phillips then testified as to her relationship with her husband, his background, education, experience, and employment, and referred to the emotional and impact upon her and the family as a result of her husband's death. Again there was no cross-examination by or on behalf of Terry.
At the conclusion of this limited, nonadversarial hearing, the district court ruled from the bench on the record that “having heard the evidence offered today and the statements of counsel the court finds that the motion to approve the consent judgment will be entered.” In the written journal entry, the court found, inter alia:
“(3) Terry Phillips was the operator of the skid steer that was involved in the death of Doug Phillips.
(4) Plaintiffs claim economic damages, as well as non-economic damages, in the sum of $10,145,978.00 (Source: Plaintiffs' interrogatories and Final Pretrial Order not yet submitted or approved by the Court).”
The journal entry notes that Connor Phillips and Elizabeth Phillips testified about the loss of advice, counseling, and guidance resulting from the loss of Doug for the limited purpose of establishing the basis for their claims of damages that exceeded $1.5 million. After referring to the stipulation that Terry had a net worth, exclusive of protected asset, in excess of $500,000, the court went on to recite:
“(8) The Court finds that the Consent Judgment was a negotiated figure arrived at through mediation.
“(9) The Court finds no evidence of collusion between Plaintiffs and Defendant Terry Phillips.
“(10) The Court finds that the Consent Judgment of 1.5 million dollars ($1,500,000.00) was less than the amount of damages to which Defendant Terry Phillips was exposed to and therefore the judgment is fair and reasonable.”
The court entered judgment against Terry in the amount of $1.5 million, together with postjudgment interest and “permissible” attorney fees. In the subsequent memorandum opinion regarding attorney fees and interest filed on February 11, 2011, the court specifically stated: “The $1,500,000 judgment entered on January 23, 2008, clearly is a final, definite adjudication of the rights of the parties as to damages.”
Analysis
The Kansas appellate courts have been cautious in their consideration of consent judgments in excess of insurance policy limits, coupled with a covenant not to execute and an assignment of rights to pursue a third-party insurer.
Glenn v. Fleming, 247 Kan. 296, 799 P.2d 79 (1990), the case specifically relied upon by Plaintiffs in submitting the consent judgment for approval, involved a personal injury claim in which the parties were unable to agree upon a pretrial settlement. The plaintiff in that case had offered to settle for the policy limit of $25,000, but the defendant's insurer, Aetna, offered only $5,500. When discovery began to develop facts indicating the defendant's liability, Aetna offered $25,000, which the plaintiff rejected. Further discovery indicated possible comparative liability on the part of the plaintiff. Plaintiff settled with several other defendants but tried his claim against Aetna's defendant and recovered a jury verdict of $1.5 million, which was reduced by a 30% comparative fault to $1.05 million. The plaintiff had not compared the fault of the other defendants who had settled for $695,000, resulting in a further reduction of the judgment to $355,000. At this point plaintiff and defendant entered into the covenant not to execute, and defendant assigned all rights against Aetna to plaintiff. Plaintiff filed a garnishment action against Aetna alleging bad faith by failing to investigate and failing to settle. The trial court ultimately granted Aetna's motion for summary judgment finding that Aetna had not acted in bad faith during the settlement process.
In considering the Glenn appeal, the Supreme Court noted: “The question of an insurer's liability for an excess judgment depends upon the circumstances of the particular case and must be determined by taking into account the various factors present rather than on the basis of any general statement or definition.” 247 Kan. at 305. The court went on to review the factual basis for the assignment and covenant not to execute and stated:
“It would be highly unusual for fraud or collusion to taint the amount of judgment when, as in the Glenn–Fleming situation, the agreement/covenant is executed after a jury verdict ... [and] the amount may be assumed to be realistic.
“We do express concern over the reasonableness of assignment/covenants in which the amount of the judgment assigned has been determined by agreement of the parties.
“In this type of consent judgment case, the settlement between the plaintiff and the insured may not represent an arms-length determination of the value of the plaintiff's claim.
“As a prescription for this concern, we adopt the burden of proof resolution put forth by the Supreme Court of New Jersey in Griggs v. Bertram, 88 N.J. 347, and endorsed in Steil v. Fla. Physicians Ins. Reciprocal, 448 So.2d 589, 592 (Fla.Dist.App.1984).
....
“ ‘We therefore hold that a settlement may be enforced against an insurer in this situation only if it is reasonable in amount and entered into in good faith. The initial burden of going forward with proof of these elements rests upon the insured and the ultimate burden of persuasion as to these elements is the responsibility of the insurer.’ “ Glenn, 247 Kan. at 317 (quoting Griggs v. Bertram, 88 N.J. 347, 368, 443 A.2d 163 [1982] ).
In adopting this two-part test, the court in Glenn followed Griggs in deviating from the rule that settlement is presumptive evidence of the insured's fault and liability.
In Bollinger v. Nuss, 202 Kan. 326, 449 P.2d 502 (1969), the Supreme Court had considered the situation where plaintiff pursued defendant's insurer pursuant to an assignment of rights following a jury verdict in which plaintiff had recovered a judgment in excess of defendant's insurance coverage. The court wrote that “[t]he value of an unlitigated claim must be determined on its own merits, or lack of them, the possibility of liability being established, and on the injuries and their extent being proven.” (Emphasis added.) 202 Kan. at 341. In Covill v. Phillips, 455 F.Supp. 485 (D.Kan.1978), the court considered a consent/assignment which was entered into after liability had been determined by a jury verdict. In Associated Wholesale Grocers, Inc. v. Americold Corp., 261 Kan. 806, 934 P.2d 65 (1997), our Supreme Court reversed a summary judgment and returned the issue of reasonableness of a consent judgment to the district court for an evidentiary hearing. The court specifically noted that “[t]he district court did not address in any depth the strength[s] or weaknesses of plaintiffs' claims and Americold's defenses in the underlying tort litigation.” 261 Kan. at 840. In Ortiz v. Biscanin, 34 Kan.App.2d 445. 465–66,122 P.3d 365 (2004), rev. denied 279 Kan. 1007 (2005), the question of the insured's liability was not in serious issue factually; nevertheless, the court was presented with evidence to support a finding of liability and specifically found that the settlement reflected a discount for decedent's percentage of fault. In Fletcher v. Anderson, 27 Kan.App.2d 276, 285–88, 3 P.3d 558 (2000), the court found that a posttrial consent judgment was unreasonable as a matter of law where a jury had found the insured defendant to be only 12% at fault and there was no possibility that he could have been found liable had the case been retried.
The liability of an insurer is premised upon some consideration and determination of liability on the part of the insured. We are cited to no case where the liability of the defendant insured was not considered in the determination of the reasonableness of a consent judgment/assignment/covenant. Nothing in Glenn would appear to relieve the plaintiff of the burden to establish the defendant's fault and liability as a threshold requirement of the burden to make a prima facie case of reasonableness of the consent judgment.
We would also note that in the instant case, the district court's approval of the consent judgment resulted in a final definitive judgment against Terry. Where the court is presented with a case involving allegations of comparative negligence, K.S.A. 60–258a(b) requires “in the absence of a jury, the court shall make special findings, determining the percentage of negligence attributable to each of the parties, and the total amount of damages sustained by each of the claimants, and the entry of judgment shall be made by the court.” This would emphasize the plaintiffs' burden to present some evidence upon which the court could premise such consideration.
The second prong of the two-part test would require the defendant/insurer to go forth with proof of unreasonableness, if the plaintiff makes a prima facie case. This would countenance some sort of an adversarial process where the adversely affected insurer would be present and have an opportunity to defend. The two-prong test does not anticipate or readily accommodate itself to a bifurcated nonadversarial hearing. We are cited to no caselaw or other authority where the reasonableness of the consent judgment was determined other than in the course of the garnishment proceeding or some other form of adversarial process. Standard of Review
Both parties disagree as to the governing standard of review of reasonableness of a consent judgment. Farm Bureau argues that reasonableness is an objective standard based on the totality of the circumstances, thus subject to de novo review applying the standard of a reasonable person. In support it cites Burkhart Through Meeks v. Kinsley Bank, 804 F.2d 588, 589–90 (10th Cir.1986), and State v. Washington, 275 Kan. 644, 661, 68 P.3d 134 (2003). Plaintiffs would distinguish these cases and suggest that the review should be limited to a determination of whether the court's conclusions are supported by substantial competent evidence. The standard for determining whether the consent judgment meets the Glenn test for reasonableness would fall somewhere between these two extremes.
While the hearing to approve the consent judgment need not rise to the level of a trial of the underlying tort action, the court in Americold held that “the proof requires, at a minimum, enough information for the district court to make an independent evaluation of the reasonableness of the settlement.” (Emphasis added.) 261 Kan. at 841. The court set forth the following factors for evaluating reasonableness:
“ ‘ “[T]he releasing person's damages; the merits of the releasing person's liability theory; the merits of the released person's defense theory; the released person's relative faults; the risks and expenses of continued litigation; the released person's ability to pay; any evidence of bad faith, collusion, or fraud; the extent of the releasing person's investigation and preparation of the case; and the interests of parties not being released.” ‘ “ Americold, 261 Kan. at 841 (quoting Claussee v. Maryland Casualty Co., 60 Wash.App. 504, 512, 803 P.2d 1139 [1991] ).
The Journal Entry of Judgment
Before proceeding to analysis applying the Americold factors to the district court's ruling, we first address a concern that Farm Bureau's argument regarding the court's failure to make sufficient findings is not properly raised. As a general rule, a litigant must object to inadequate findings of fact and conclusions of law before the trial court to preserve the issue for appeal. This provides the trial court with an opportunity to correct the findings and conclusions. See Dragon v. Vanguard Industries, 282 Kan. 349, 356, 144 P.3d 1279 (2006); K.S.A. 60–252; Supreme Court Rule 165 (2012 Kan. Ct. R. Annot. 262). An appellate court ordinarily presumes that the trial court found all facts necessary to support its judgment. Hodges v. Johnson, 288 Kan. 56, 65, 199 P.3d 1251 (2009). Here, however, the presumption is rebutted for at least two reasons. First, the district court made no findings or conclusions regarding fault and did not independently consider the relevant factors of analysis, in part because the court was presented with no evidence on several salient points. Under K.S.A. 60–252(b), a question of sufficiency of the evidence to support the findings may be raised on appeal even if no motion, request, or objection was made at the trial court level.
Second, Farm Bureau was not a party to the bifurcated consent judgment approval proceeding. Farm Bureau did not have legal representation at the hearing or the opportunity to cross-examine witnesses or present evidence. As a nonparty, Farm Bureau did not have standing to request a clarification and/or correction of the district court's findings and conclusions. Any suggestion that Farm Bureau could have, and in fact did, have the opportunity for representation, cross-examination, and presentation of evidence at the subsequent garnishment proceeding, rings somewhat hollow. By the time Farm Bureau was finally involved in the litigation as garnishee, the district court had already issued a final, definitive adjudication that the consent judgment was fair and reasonable and had entered judgment. This judgment did not simply find that Plaintiffs had made a rebuttable prima facie case. The garnishment hearing focused on the questions of Farm Bureau's alleged bad faith in the investigation and settlement process. Thus, Farm Bureau is not precluded from arguing the insufficiency of the findings of fact and conclusions of law reached by the district court.
Since the Plaintiffs chose to proceed to a bifurcated hearing, the court's determination of reasonableness of the consent judgment must stand or fall on the basis of the evidence presented and the findings and conclusions reached at that hearing and memorialized in the journal entry of judgment filed in January 2008. Any evidence adduced in the garnishment proceeding would be after the fact and relevant only to the issues of Farm Bureau's alleged bad faith.
We, therefore, look at the journal entry of judgment through the lens provided by the Americold factors to determine whether the judgment meets the Glenn test.
(1). The district court was presented with some evidence of the Plaintiffs' damages, which consideration was the essential focus of the hearing and journal entry. The journal entry, however, makes reference to interrogatories and a final pretrial order not yet submitted or approved by the court. This would appear to be going beyond the evidentiary record presented to the court at the hearing. The court made no finding as to the likelihood of Plaintiffs' recovery of such enormous damages in the event of trial.
(2). The journal entry presents no findings or discussion of the Plaintiffs' liability theories and the merits thereof. Other than noting that Terry was the operator of the skid steer, the court makes no finding or gives any suggestion of fault under which Terry would incur liability. Although the motion sets forth several suggestions of negligent operation, there was no substantial evidence presented in support of these theories. Under Glenn and Griggs, fault is not presumed from a settlement.
(3). The journal entry makes no reference to the merits of Terry's defense theories. Terry had consistently denied fault and asserted the comparative fault of Deere and/or the decedent. There was no evidence presented upon which the court could have premised any such consideration.
(4). The journal entry fails to indicate any consideration given to the risks and expenses of continued litigation, nor was any evidence presented in this regard. This is a substantial and significant omission in light of the Plaintiffs' continued litigation against Deere.
(5). The court does mention the stipulation regarding Terry's net worth, which could be construed as a consideration of his ability to pay any excess judgment which might have been rendered against him.
(6). The finding that the consent judgment was a negotiated figure arrived at through mediation is supported only by the nonevidentiary arguments and representations of Plaintiffs' attorney. Under Americold the fact of mediation does not itself establish or imply reasonableness.
(7). The court finds “no evidence of collusion.” Due to the essentially nonadversarial nature of the proceeding, it should not be surprising that Plaintiffs would not present such evidence or raise such an issue. This is essentially a “non-finding” based on speculation and conjecture, gratuitously included in the journal entry prepared by counsel. It is certainly not a positive finding that the consent judgment was entered into in good faith and is entitled to little weight in our analysis.
(8). The journal entry makes no reference to any consideration of the interests of Deere as a nonreleased party, despite the presence of counsel for Deere who carefully protected Deere's evidentiary interests in the continuing litigation.
(9). Finally, the court found that the consent judgment amount was less than the amount of damages which Terry “was exposed to” and therefore “is fair and reasonable.” “Exposure” cannot be equated with “liability” and, based on the lack of consideration of the relative merits of the liability and defense theories of the parties, mere exposure is an inadequate conclusion to support the finding of fair and reasonable.
In the memorandum opinion issued regarding the garnishment proceedings, the district court discussed this journal entry and acknowledged that it “makes no finding regarding Terry's fault and the court has never been asked to make a finding as to fault.”
Of concern are the brevity of the expedited hearing and the summary nature of the court's ruling from the bench. The transcript of the hearing is a bare 41 pages, including opening and closing statements and discussion of procedural matters. There is no indication on the record that the court had any opportunity to actually read and/or consider the various documentary exhibits admitted. As in Americold, it would appear here that the district court did not address in any depth the strengths or weaknesses of the Plaintiffs' claims and the defendant's defenses or make an independent determination as to the reasonableness of the settlement. See Americold, 261 Kan. at 840.
The failure of the Plaintiffs to make an adequate record to enable the district court to give a full, complete, and independent consideration of all relevant factors leads us to the conclusion that the Plaintiffs have not met the Glenn threshold of establishing a prima facie case that the consent agreement was entered in good faith and is fair and reasonable. The district court erred in so finding and compounded the error by entering a final and decisive judgment against Terry.
Since a consent judgment must be fair and reasonable and entered into in good faith as a prerequisite to enforceability against an insurer, it follows that the judgments of the district court filed on October 25, 2010, finding Farm Bureau responsible for paying the judgment and on February 11, 2011, determining interest and attorney fees are without basis in law and are, accordingly, reversed. We remand to the district court to enter appropriate orders vacating any such judgments against Farm Bureau and dismissing the garnishment proceedings.
Reversed and remanded with directions.