27 N.Y.2d 15 (1970)
A release given to a directly negligent party, which explicitly reserves rights against other potentially liable parties, should be interpreted as a covenant not to sue, thus not barring a subsequent action against a party whose liability is solely derivative or statutory.
Summary
This case addresses whether a release given to a negligent driver, with explicit reservation of rights against other parties, bars a subsequent action against the vehicle’s owner, whose liability arises solely from a statute (Vehicle and Traffic Law § 388). The court held that the release should be construed as a covenant not to sue, allowing the plaintiff to proceed against the owner. The court reasoned that the intention of the parties, as expressed in the reservation of rights, should be given effect, preventing the unintended release of parties not contemplated by the original agreement.
Facts
Plaintiff’s intestate died after being struck by a car owned by the defendant Feltman and driven by Moses. The plaintiff settled with Moses, the driver, executing a release that reserved all rights against other parties. Plaintiff then sued Feltman, the owner, under Vehicle and Traffic Law § 388, which imputes liability to vehicle owners for the negligence of drivers operating with their permission.
Procedural History
The Special Term denied the defendant’s motion to dismiss, construing the release as a covenant not to sue. The Appellate Division affirmed this decision, with one Justice dissenting. The case then came before the New York Court of Appeals via a certified question: Did Special Term err in denying the motion to dismiss?
Issue(s)
Whether a release given to the actively negligent driver of a motor vehicle, which reserves rights against all other persons, bars a subsequent action against the owner of the vehicle, whose liability is based solely on Vehicle and Traffic Law § 388.
Holding
No, because the release, containing an express reservation of rights, should be construed as a covenant not to sue the driver, and does not release the owner, whose liability is derivative and statutory.
Court’s Reasoning
The court emphasized the intent of the parties as the guiding principle in interpreting the release. It cited precedent (Gilbert v. Finch) establishing that a release with reservation of rights is construed as a covenant not to sue. The court noted that the Vehicle and Traffic Law § 388 was enacted to provide injured parties with a financially responsible party to recover from. The owner’s liability under the statute is analogous to respondeat superior, where the employer’s liability is derivative of the employee’s negligence. The court distinguished between cases where the liability is joint and several versus derivative. It found persuasive the reasoning in Boucher v. Thomsen, where a similar release was held not to bar action against the vehicle owner. The court rejected the argument that allowing the suit would lead to double recovery, stating that any later recovery would be reduced by the amount already received in settlement. The court stated, “[W]here a release has been given but the releasor reserves the right to proceed against other wrongdoers, we believe effect should be given to the intention of the parties as expressed by these reservations and allow the suit against any defendant not a party to the release.” It moved away from the harsh common-law rule, focusing on giving effect to the parties’ intentions. The court reasoned that to hold otherwise would be to extend the benefit of the qualified release to parties specifically excluded by its terms.