Dutch Hill Inn, Inc. v. Patten

• Citation: 131 Vt. 187,303 A.2d 811
• Decision Date: 03 April 1973
• Docket Number: No. 60-72,60-72
• Parties: DUTCH HILL INN, INC. v. Harry PATTEN et al.
• Court: United States State Supreme Court of Vermont

Page 811

303 A.2d 811

131 Vt. 187

DUTCH HILL INN, INC. v. Harry PATTEN et al.

No. 60-72.

Supreme Court of Vermont.

April 3, 1973.

Waldo C. Holden, and Harold J. Gilbar, Jr., Bennington, for plaintiff.

Stephen H. Gilman, Bennington, for defendants.

Before SHANGRAW, C. J., and BARNEY, SMITH, KEYSER and DALEY, JJ.

KEYSER, Justice.

This case was heard below on defendant Patten's motion for the entry of 'Settled and Discontinued.' The motion was grounded on a release executed in consideration of the payment of $500.00 by James Voris and Nancy Voris, individually, and as the principal stockholders (all but three qualifying shares) of the plaintiff corporation. The court declared the release null and void, ordered the return of the $500.00 and placed the cause on the calendar for further proceedings.

The cause then came to this Court on petition of the defendants to appeal as provided by V.R.A.P., Rule 5(b)(2) on the single issue following:

'Is a general release executed by the plaintiff in the presence of the defendant's attorney who had prepared the same void or merely voidable because the plaintiff's attorney was not present at the execution of such release, although the terms thereof had been previously agreed upon between the parties in the absence of either of their attorneys?'

The following facts about which there is no dispute are shown by the record.

This action was before this Court in an earlier appeal after trial on the merits. The opinion was filed on October 5, 1971, and reported in 129 Vt. 466, 282 A.2d 815 (1971). Defendant Patten was one of the principal stockholders in the defendant corporations. The Pattens operated the Heartwellville Lodge in Readsboro, Vermont. James Voris and his wife, Nancy, owned all of the fifty shares of capital stock of the plaintiff corporation excepting three qualifying shares. These were issued to plaintiff's attorney, his secretary, and a realtor in order to qualify the corporation for a liquor license. Mr. Voris was president and his wife was secretary and treasurer.

On Sunday evening, October 17, 1971, as a result of the Vorises being in the restaurant at the Lodge, defendant Patten had a visit with them. Among other topics of conversation, they discussed a settlement of this suit. As a consequence it was mutually agreed that Patten was to pay the Vorises $500.00 to 'settle the case, wash it, and get rid of it.' It was agreed that the next morning the Vorises would go to the law office of Robert Manuel, Patten's counsel in North Adams, Massachusetts. Patten was to call Mr. Manuel to have him draw a release for signature by the Vorises and give them the $500.00 in settlement of the case.

The following morning, October 18, 1971, as agreed, the Vorises went to attorney Manuel's office where the agreement was reduced to writing in the form of a general release. Mr. Voris testified that while waiting for the paper to be typed, they chatted with Mr. Manuel 'about a few things' and when it was brought in Mr. Manuel asked them, 'Sure you want to sign this?' and he said, 'Yes.'

Mr. and Mrs. Voris then signed the release and acknowledged it under oath 'to be their free act and deed.' By the terms of the instrument the Vorises were signing 'individually and as stockholders of Dutch Hill Inn, Inc.' By the instrument the defendants were released 'against any and all claims that the undersigned (Vorises), individually and as stockholders and officers of the Dutch Hill Inn, Inc., have or may have against the said Harry S. Patten, a/k/a Harry Patten, The Heartwellville Restaurant, Inc. and American Land and Development Co., Inc., a/k/a American Land Development Company, Inc., in law or in equity, liquidated or unliquidated, from the beginning of the world to the date hereof, and more particularly from all claims as recited in Chancery Proceeding #3891, in the Bennington County Court, . . ..'

The testimony of Mr. Voris shows that the Dutch Hill corporation had few formal meetings after its organization meeting. He said when the Dutch Hill business was moved to Heartwellville Lodge with Patten there was no formal meeting of the Dutch Hill corporation, simply a discussion between himself and his wife. And he admitted they had done some things 'not according to Hoyle.' He also said 'I guess I have done quite a few things not exactly as corporation law.' The tenor of his testimony indicates that the business of the corporation was conducted by the Vorises more or less on a personal basis.

On October 18, 1971, none of the parties involved in the settlement agreement had any knowledge of the Supreme Court decision filed on October 5, 1971. A check for $500.00 payable to 'James Voris and Nancy Voris' was delivered to and accepted by them in exchange for the signed release. The face of the check bore the notation 'Settlement of Dutch Hill Inn, Inc., case.' The check was immediately endorsed and cashed at a bank in North Adams. The Vorises were given a duplicate copy of the release and in the afternoon they went to see Mr. Holden, their attorney in Bennington.

On December 30, 1971, attorney Manuel received a letter from plaintiff's attorney with a check enclosed for $500.00 which purported to repudiate the settlement made between the Vorises and Patten. The check was not accepted by Manuel and he returned it the same day to attorney Holden. In the meantime on December 7th, defendants' Vermont attorney had filed the motion to enter the case 'Settled and Discontinued.'

After hearing on the motion the court made its entry order, subparagraphs 2(d) and (e) of which read as follows:

'd. While there was no fraud on the part of the agents or attorneys for any of the corporate parties, the release, prepared by attorney Manuel, without the knowledge of plaintiff's attorney or attorney Gilman, should have been submitted to the former before execution by the Vorises.

e. Therefore, the release (DM Ex 1) is declared null and void; plaintiff's agents are ordered to return the sum of $500.00 to attorney Manuel; and this cause shall be placed on the calendar for further proceedings in accordance with the opinion of the Vermont Supreme Court.'

It is very evident that the court held the release was null and void on the basis of its finding in subparagraph (d), supra. Thus the plaintiff argues the release is void as against public policy and cites the Code of Professional Responsibility of the American Bar Association, DR 7-104(A)(1). This section provides that an attorney of a client shall not communicate or cause 'another to communicate on the subject of the representation with a party he knows to be represented by a lawyer in that matter unless he has the prior consent of the lawyer representing such other party or is authorized by law to do so.'

Public policy, however, strongly favors settlement of disputed claims without litigation. Such policy prohibits the admission of evidence of unaccepted offers of settlement of disputed claims. C. McCormick, Evidence § 274 (2d ed. E. Cleary 1972); E. Morgan, Basic Problems of Evidence 209 (1962). The reason for this policy is simply to encourage compromise between the adverse parties before resorting to the judicial system to resolve disputes.

In order to avoid the effect of this release, the plaintiff must show that to enforce it would be 'cruel or shocking to the average man's conception of justice', Sipes v. McGhee, 316 Mich. 614, 25 N.W.2d 638, 642 (1947), or 'injurious to the public or against the public good.' Veazy v. Allen, 173 N.Y. 359, 66 N.E. 103, 105 (1903).

The facts surrounding the execution of this release as shown by the record do not bear out plaintiff's contention. The terms of the agreement expressed in the release were concluded by the parties themselves the night before they were formalized on October 18th without any intervention by Mr. Patten's attorney. The record clearly establishes that attorney Manuel did not have a hand in the negotiations of the settlement, or that he advised or communicated with the Vorises in any manner regarding it. The testimony is uncontradicted that what was done on October 18 was in accordance with the agreement to settle...