Ristau v. Wescold, Inc.
Decision Date | 10 March 1994 |
Citation | 868 P.2d 1331,318 Or. 383 |
Parties | Ward W. RISTAU, Respondent on Review, v. WESCOLD, INC., an Oregon corporation; and Theodore E. Youngren, Petitioners on Review. CC 9104-02042; CA A73177; SC S40351. |
Court | Oregon Supreme Court |
Don G. Carter, McEwen, Gisvold, Rankin & Stewart, Portland, argued the cause and filed the petition, for petitioners on review.
Robert D. Bulkley, Jr., Markowitz, Herbold, Glade & Mehlhaf, P.C., Portland, argued the cause, for respondent on review. With him on the response to the petition were David B. Markowitz and Lynn R. Stafford.
Before CARSON, C.J., and PETERSON, * GILLETTE, VAN HOOMISSEN, FADELEY, UNIS and GRABER, JJ.
The issue in this case is whether an agreement purporting to release "any and all claims, * * * whether known or unknown, now existing," precludes a claim of statutory fraud in the inducement of a contemporaneously executed stock sale agreement. The trial court held that the release agreement barred the claim and granted summary judgment in favor of defendants. The Court of Appeals, in an in banc decision, reversed, holding that the trial court erred in granting summary judgment. 1 We reverse the decision of the Court of Appeals and affirm the judgment of the circuit court.
From about 1974 until 1988, plaintiff and defendant Youngren each owned 50 percent of the stock of Western Engineers, Inc. (Western). Plaintiff and defendant Youngren also served as the officers and directors of Western. In an agreement dated October 31, 1988, but signed a few days later, plaintiff, defendant Youngren, and their wives executed a stock sale agreement whereby plaintiff sold all his stock in Western to defendant Youngren. There were a number of other agreements executed simultaneously.
Just prior to closing the transaction, plaintiff suggested that the parties execute a mutual release agreement. Plaintiff's lawyer drafted the release agreement, and it was executed at the same time as the other agreements.
The release provided, in part:
In November 1989, Western, W.E. Stone & Co., Inc., and Industrial Refrigeration & Equipment Co., Inc., merged into defendant Wescold, Inc. Defendant Youngren is the president and sole shareholder of Wescold, Inc.
In April 1991, plaintiff filed this action, pursuant to ORS 59.127(1)(b), 2 seeking either rescission of the 1988 stock sale agreement or damages. 3 In December 1991, the trial court granted defendants' motion for summary judgment on the ground that the release agreement barred plaintiff's claim. The trial court did not reach defendants' second ground for summary judgment. The Court of Appeals reversed.
Summary judgment properly is granted when "there is no genuine issue as to any material fact and * * * the moving party is entitled to a judgment as a matter of law." ORCP 47 C. As this court often has stated, in deciding whether to grant a motion for summary judgment, the court "must draw all inferences of fact from the depositions and affidavits against the moving party and in favor of the party opposing the motion." Uihlein v. Albertson's, Inc., 282 Or. 631, 634, 580 P.2d 1014 (1978).
We are presented with a question of contract interpretation. A release agreement is a contract subject to the rules of contract construction and interpretation. See Lindgren v. Berg, 307 Or. 659, 665, 772 P.2d 1336 (1989) (). If the terms of a contract are unambiguous, "the construction of [the] contract is a question for the court and is treated as a matter of law." May v. Chicago Insurance Co., 260 Or. 285, 292, 490 P.2d 150 (1971). This court recently has summarized its method of contract interpretation:
OSEA v. Rainier School Dist. No. 13, 311 Or. 188, 194, 808 P.2d 83 (1991). (Citations omitted.)
In this case, the terms of the release agreement are unambiguous. Thus, we will enforce the release agreement according to its terms.
The release agreement bars "any and all claims, demands, rights, damages, expenses, loss of compensation, suits and causes of action, whether known or unknown, now existing." The release agreement further acknowledges that all the other agreements, including the stock sale agreement, were "effective substantially contemporaneously" with the release agreement. Thus, plaintiff's claim under ORS 59.127, which accrued at the time of the "purchase," arose at the same time as the execution of the release agreement. Because the release agreement and the stock sale agreement came into effect contemporaneously, the claim under ORS 59.127 was "now existing" at the time that the release agreement was executed.
Even if the foregoing were not enough to establish that the release agreement unambiguously released this claim, the release agreement also explicitly listed the claims that the release did not cover. 4 The release agreement specifically excluded from release the obligations of the parties arising under the other agreements, that is, claims that would arise if the parties did not fulfill the obligations created by the other specified agreements. The use of the term "obligation" rather than the term "claim" establishes that the parties intended to exclude from release later claims that might occur under the agreements. By including the exclusion in the release, the parties were looking forward to claims that might develop out of the failure to perform the obligations created or envisioned by the agreements. The release agreement applied to all claims that existed at the moment the release agreement was executed; the exclusion applied to claims that arose under the listed agreements after the execution of the release agreement. Because plaintiff's claim under ORS 59.127 existed at the moment the release was executed, it was covered by the release.
Plaintiff argues to the contrary that the general release agreement executed at the time of the stock sale agreement should not bar his claim under ORS 59.127, because "a release of claims arising from the transaction itself must be express." 5 Plaintiff relies upon a New Jersey case that held that "[c]laims or demands arising contemporaneously with delivery [of the release] * * * are not discharged unless expressly embraced therein or falling within the fair import of the terms employed." Bilotti v. Accurate Forming Corp., 39 N.J. 184, 204, 188 A.2d 24 (1963). The New Jersey Supreme Court held that a fraud claim involving a stock sale transaction executed simultaneously with a release agreement could not be "expressly embraced in that instrument" or "within the fair import of the general terms employed" unless "possible fraud in the stock sale was specifically considered at the time the transaction was consummated and the release delivered." Id. at 205, 188 A.2d 24.
Plaintiff argues that this court should adopt the New Jersey rule and hold that, in order for a release to apply to a claim of fraud in the inducement of a contemporaneously executed agreement, the release agreement must mention explicitly fraud in the inducement of that agreement. As discussed above, we agree with plaintiff and the New Jersey Supreme Court insofar as we will...
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