When, in a settlement with an insurer, a person gives a general release of all claims against the insured arising out of an occurrence and the insured has not consented to the settlement, then Code Ann. 56-408.1 does not bar that person from raising matters surrounding the occurrence as defenses to a later action by the insured, even though he could not assert them as affirmative claims.
In a suit for architect's fees, defendant appeals from the pretrial order which limits the issues so as to effectively preclude defendant from asserting its affirmative defenses. The court certified the order for immediate review.
Plaintiff-architect filed suit alleging defendant had agreed to pay him a fee of 6 percent of the construction cost of the mill; that this cost was well over two million dollars; that he was entitled to fees of $129,183 but had only received $65,000. Defendant generally denied the allegations and raised the following defenses: that the agreement had been for a fixed fee of $72,000 but plaintiff was not entitled to the balance because of his failure to properly perform his duties under the contract; that if such agreement did not exist, then plaintiff would only be entitled to the reasonable value of his services and had already been paid in excess of such value; that plaintiff would not be entitled to recover a percentage of the total construction costs since they included sums expended to repair a collapse and correct deficiencies caused by plaintiff's failure to properly perform his duties; and that since plaintiff had been overpaid for the reasonable value of his services, defendant is entitled to counterclaim for $40,000.
Plaintiff later amended his complaint, increasing the amount claimed due on the contract, adding claims for other work, and adding another count in quantum meruit for the same amount as that of the contract. Plaintiff requested a pre-trial hearing at which he presented to the court a release executed by defendant. The court declared that the release would bar defendant from asserting any lack of professional competence or care on plaintiff's part, whether as a defense to plaintiff's claim or as a basis for a counterclaim, and ordered that evidence to support such an issue would not be admitted.
The release in question was prepared by and given to plaintiff's liability insurer in connection with its cash settlement with defendant for the damages it sustained in reconstruction, repairs, and corrections. It is couched in very general terms and releases any past, present or future claims, causes of action, etc., arising out of anything done or omitted by plaintiff with respect to the building. It also states that the insurer is acting without the written consent of its insured (the plaintiff) and that the release will not bar any claims which the insured may choose to assert. It refers specifically to Georgia Laws 1963, p. 643 (Code Ann. 56-408.1).
The issue on this appeal is whether, in the light of Code Ann. 56-408.1, the general release of all claims against the plaintiff, given to his insurer and arising out of his performance on a particular project, bars the defendant from raising failure of performance as a defense to a suit for architectural fees or as the basis of a counterclaim relating to fees. In the absence of a release, of course, this would be a legitimate defense to plaintiff's action. Collins v. Frazier, 23 Ga. App. 236 (98 SE 188); 5 Am Jur2d 678, Architects, 16.
Code Ann. 56-408.1 was enacted to change the Georgia common law rule that an insured was barred from asserting his own claims if his insurer effected a settlement, even without his consent. Aetna Cas. &c. Co. v. Brooks, 218 Ga. 593 (129 SE2d 798)
. This case, as well as those leading up to it, involved automobile collisions, and it seems likely the legislature had similar occurrences in mind when it enacted the statute.
The case here is surfacely confusing because while the release was given for tort liability, the plaintiff's claim lies in contract or quasi-contract. All the contentions dealing with recoupment further obscure the matter. The real issue is whether a general release of all claims arising out of an occurrence precludes the releasor from defending a releasee's subsequent action by raising his conduct relative to the occurrence.
In other states with a common law rule similar to Code 56-408.1, the issue has apparently never been considered. It has undoubtedly been assumed by all parties that defenses (such as contributory negligence) are as available to a releasor as anyone else. See Fikes v. Johnson, 220 Ark. 448 (248 SW2d 362); Birkholz v. Cheese Makers Mut. Cas. Co., 274 Wis. 190 (79 NW2d 665); Hurley v. McMillan, 268 S. W. 2d 229 (Tex. Civ. App.); U. S. A. C. Transport v. Corley, 202 F2d 8 (5th Circuit applying pre-Aetna Georgia law).
For this reason, while the court did not err in striking defendant's counterclaim (which was the effect of the pre-trial order), it did err in ordering that evidence of plaintiff's professional competence would not be admitted in support of a defense to plaintiff's claim.
WHITMAN, Judge, concurring specially.
I concur in the judgment of reversal only. This is an appeal by the appellant-defendant from a pre-trial order certified for review, the notice of appeal being from the "ruling that the effect of a certain release, a copy of which is attached to said order, is to place a limitation on the issues to be tried in this case and on the evidence which defendant will be permitted to introduce." The pre-trial order, inter alia, stated "the court is of the opinion that the release, if received into evidence on the trial of the case, would bar the defendant from relying on any claim of lack of professional competence or the exercise of care on the part of the plaintiff [appellee] . . . or damages arising therefrom, as a defense to plaintiff's claim whether by way of showing a failure of consideration or otherwise, or as a basis for the counterclaim set up by the defendant . . . This being so, the defendant cannot now reassert such claims either by way of a direct claim or as setoff or defense to any other claim which the plaintiff might have." Thereupon and predicated thereon the court, by order and judgment stated:
"It is therefore ordered: (1) That the question of the plaintiff's failure to furnish competent professional services or to exercise due care in the preparation of the design and in the preparation of plans and specifications for the mill and in the supervision of the construction thereof will not be an issue on the trial of the case if the release is introduced in evidence, and that evidence to support such issue will not be admitted. (2) The issues to be tried (assuming the release is admitted in evidence) will be: A. Was there a contract between plaintiff and defendant for the payment of compensation for architectural services. B. If there was such a contract, what was the contract. C. If there was no contract, what was the reasonable value of the plaintiff's services."
Appellant's enumeration of errors assigns as error the pre-trial order, and particularly paragraphs 1 and 2 thereof in six numbered particulars.
I am of the opinion that under and by virtue of Code Ann. 56-408.1, the judgment of reversal in this case is correct, but it is my view that on the trial of the case in the court below the case should be heard factually on the plaintiff's complaint as amended, and the defendant's defenses thereto.