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June 27, 1957

Peter F. DAMANTI, Plaintiff
A/S INGER, Defendant and Third-Party Plaintiff, Daniels & Kennedy, Inc., and Illinois Atlantic Corp., Third-Party Defendants

The opinion of the court was delivered by: BRUCHHAUSEN

Defendant and third-party plaintiff, A/S Inger, the shipowner, moves for various forms of relief under Rules 50, 49, 58 and 59 of the Federal Rules of Civil Procedure, 28 U.S.C.A.

Immediately prior to the time for making summations to the jury in the original action herein, the shipowner settled with the plaintiff stevedore, after inviting impleaded third-party defendants, Illinois Atlantic Corporation, the time charterer and Daniels & Kennedy, Inc., the stevedore, to take over the shipowner's defense.

 Additional testimony was given by the shipowner's attorney as to the reason for the settlement of the plaintiff's action. Thereupon the causes of action for indemnity were submitted to the jury upon special interrogatories, a copy of which, with the answers, is annexed.

 The cases hold that settlement with a plaintiff does not preclude recovery by the settling indemnitee, who is a passive wrongdoer, against a primarily liable indemnitor, Chicago, Rock Island & Pacific Ry. Co. v. United States, 7 Cir., 220 F.2d 939; Chicago, Rock Island & Pacific Ry. Co. v. Dobry Flour Mills, 10 Cir., 211 F.2d 785; Garrity v. Bartolomeo, 2 Cir., 149 F.2d 604; Dunn v. Uvalde Asphalt Paving Co., 175 N.Y. 214, 67 N.E. 439; Cf. American President Lines v. Marine Terminals Corp., 9 Cir., 234 F.2d 753; Cf. Newport News Shipbuilding & Dry Dock Co. v. United States, 4 Cir., 226 F.2d 137; Cf. also, Cardinal v. State, 304 N.Y. 400, 107 N.E.2d 569.

 It has been held that a party undertaking to settle a claim must prove that he was liable, that the settlement was reasonable, and that he and the party from whom he seeks indemnity were not joint tort-feasors in pari delicto, but that his negligence was passive and secondary, while that of the party from whom indemnity is claimed was primary, active and affirmative. The Toledo, 2 Cir., 122 F.2d 255; Donald v. Guy, ,D.C.Va., 127 F. 228.

 However, there is a distinction between liability in law and liability in fact. The litigant who could correctly determine the latter, whether or not the trial be before a jury, would be clairvoyant.

 It seems unlikely that the same degree of liability in fact on the part of the indemnitee must be established as would have been established by the plaintiff against the said indemnitee, for the law favors settlements, and if such original liability had to be so clear cut, settlements could rarely, if ever, be made. The result would be that only jury verdicts would establish the right to indemnity, and indemnitors, if they were advised of the original lawsuit and given a reasonable opportunity to defend, would be bound by the findings implicit in the original judgment, i.e., liability and damages. Standard Oil Co. v. Robbins Dry Dock & Repair Co., 2 Cir., 32 F.2d 182; New York & Porto Rico S.S. Co., of New York v. Lee's Lighters, D.C.E.D.N.Y., 48 F.2d 372; Crawford v. Pope & Talbot, Inc., 3 Cir., 206 F.2d 784.

 As pointed out in Whitmarsh v. Durastone Co., D.C.R.I., 122 F.Supp. 806, 810:

 'The voluntary payment or submission to judgment by a person who thereafter seeks indemnity from the actual wrongdoer does not defeat his right to recovery. It merely varies the degree of proof required to establish the liability of the person from whom such indemnity is sought.'

 In Fein v. Bonetti, Sup., 111 N.Y.S.2d 840, affirmed 282 App.Div. 868, 125 N.Y.S.2d 1; reversed on other grounds 307 N.Y. 682, 120 N.E.2d 854, an effort was made by the indemnitor to bind the indemnitee by the testimony against it of the plaintiff in the original action. In its decision, the trial Court said, 111 N.Y.S.2d 840, 844:

 'Certainly the judgment against plaintiff after the first trial does not preclude the claim here, it not being clear as to just upon what elements the verdict for Mrs. Fein was found.'

 In Chicago, Rock Island & Pacific Ry. Co. v. United States, 7 Cir., 220 F.2d 939, 941, something of a similar nature arose. The trial Court found that both the original claimant and the indemnitee-plaintiff were 'in the exercise of due care and caution in their behalf.' The Court rejected the argument that such absence of liability on the indemnitee's part precluded recovery in the indemnity action by the following language, placing such a finding in its proper perspective, at page 941:

 'It does not follow from the finding here that plaintiff and its employee 'were in the exercise of due care and caution in their behalf' that a similar finding would have been made by the triers of fact in an action by the employee against the plaintiff. Plaintiff at the time it made settlement with the employee did not have the benefit of such a finding. It was required at that time to use its foresight rather than its hindsight in evaluating the situation relative to its probable liability. Taking into consideration that which we all know, that is the almost insurmountable difficulties attending the defense by a railroad in an action for damages under the Federal Employers' Liability Act, [45 U.S.C.A. ยง 51 et seq.], it cannot be said that plaintiff made other than a fair and reasonable settlement of its potential liability. To have resisted settlement to the point of a jury verdict would have been sheer folly under the circumstances.'

 The rule as to the finality of the adjudication of the original claim is clearly stated in Crawford v. Pope & Talbot, Inc., supra, 206 F.2d at page 795:

 'If the indemnitor was not a party to the original action against the indemnitee, and where he was under no duty to participate in the defense of the original action, or where, being under such a duty, he was not given reasonable notice of the action and requested to defend, neither the indemnitor nor the indemnitee is bound in subsequent litigation between them by findings made in the action. Where, on the other hand, the indemnitee and the indemnitor are co-defendants actively participating in the defense of the original action, or where the indemnitor, with notice of the action and of the indemnitee's request that he defend it, does not participate in the defense but leaves it to the reasonable efforts of the indemnitee, then in subsequent litigation between them both indemnitor and indemnitee are bound by the findings necessary to the judgment in the action.'

 Perhaps it would not be accurate to substitute the word 'settlement' for 'judgment' in the above quoted paragraph, but at the same time it would seem improper to go to the other extreme and say that the settling indemnitee, before he could recover, must place himself in the original claimant's shoes and prove claimant's case against himself to the same degree and with the same vigor as would have been incumbent upon the original claimant. The result would be that settlements would be fewer and indemnity claims larger.

 Perhaps there may be a distinction between the readiness with which an indemnitee may settle when the basis of his indemnity claim is upon an express agreement to indemnify, Chicago, Rock Island & Pacific Ry. Co. v. Dobry Flour Mills, supra, or upon an agreement to indemnify, implied in fact, Ryan Stevedoring Co. v. Pan-Atlantic S.S. Corp., 350 U.S. 124, 76 S. Ct. 232, 100 L. Ed. 133, as opposed to a quasi-contractual agreement to ...

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