Covington v. Skillcorp Publishers, Inc., 930354

• Decision Date: 07 January 1994
• Docket Number: No. 930354,930354
• Citation: 247 Va. 69,439 S.E.2d 391
• Parties: David Eric COVINGTON v. SKILLCORP PUBLISHERS, INC. Record
• Court: Virginia Supreme Court

Page 391

439 S.E.2d 391

247 Va. 69

David Eric COVINGTON v. SKILLCORP PUBLISHERS, INC.

Record No. 930354.

Supreme Court of Virginia.

Jan. 7, 1994.

Raymond Palmer, Richmond (Thomas W. Wright, on brief), for appellant.

Gerard J. Roerty, Jr., Richmond (Susan C. Armstrong, Mays & Valentine, on brief), for appellee.

Present: All the Justices.

WHITING, Justice.

In this suit to rescind a settlement allegedly procured by fraud, we decide whether the trial court erroneously required the complainant to tender the amounts he received in settlement before proceeding with his rescission claim. Since the trial court sustained the defendant's demurrer and dismissed the suit, we state as true the facts alleged in the amended bill of complaint and in the exhibits attached thereto, and the fair inferences to be drawn therefrom. Fun v. Virginia Military Inst., 245 Va. 249, 250, 427 S.E.2d 181, 181 (1993).

In August 1982, Skillcorp Publishers, Inc., a publisher of educational materials, employed David Covington as its exclusive agent in Virginia to market and sell its "Handwriting Skills K-8 Program" (the program) for a 20% commission on the gross amount of all sales in Virginia.

The contract provided that:

This agreement will be in effect for one year and will automatically be renewed for an additional one-year period unless either party wishes to terminate the agreement. The agreement may be terminated by either party by ... a thirty-day notice of termination.

After Covington had obtained the requisite approval by state officials for the program's purchase by local public schools, Skillcorp terminated the contract effective April 20, 1983.

Thereafter, Covington sued Skillcorp for breach of contract. On June 21, 1985, in response to Covington's interrogatories, and under oath, Skillcorp listed the number of programs sold to public schools in Virginia from the beginning of Covington's contract through May 31, 1985. Relying on those answers "as to the volume of sales in Virginia generated by [his] efforts," Covington settled his case against Skillcorp for $22,394.45, "an amount relating to the sales reported, the liability risk and the costs of litigation." After the exchange of mutual general releases and Skillcorp's payment to Covington of the agreed settlement amount, Covington's action was dismissed with prejudice on July 29, 1985.

Later, Covington discovered that Skillcorp's answers to his interrogatories substantially and materially understated the number of program sales in Virginia during the period in question. On March 16, 1989, Covington filed a multi-count bill of complaint seeking: (1) to rescind the settlement agreement because of Skillcorp's fraud and deceit in understating the program sales in Virginia; and, if rescission were granted, (2) to recover compensatory and punitive damages arising from Skillcorp's termination in breach of the contract.

Covington's third amended bill of complaint based his right to rescind the settlement on theories of actual fraud, constructive fraud, and mutual mistake of fact. The trial court sustained Skillcorp's demurrer to this amended bill of complaint based on the ground that Covington had failed to allege his "readiness, willingness, and ability to restore [Skillcorp] to the status quo by returning money received in the earlier settlement of this case." Covington appeals.

We have indicated that "[a] court of equity is always reluctant to rescind unless the parties can be put in status quo." Adelman v....