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RICHFOOD, INC., ET AL. v. JENNINGS, ET AL.


RICHFOOD, INC., ET AL.
v. JENNINGS, ET AL.


April 17, 1998
Record No. 971461

RICHFOOD, INC., ET AL.

v.

DENNIS JENNINGS, ET AL.

OPINION BY JUSTICE CYNTHIA D. KINSER
FROM THE CIRCUIT COURT OF HANOVER COUNTY

Richard H. C. Taylor, Judge
Present: All the Justices


In this case, we address the scope of claims encompassed in a
release and whether a subsidiary corporation that did not sign
the release is nevertheless bound by it. Because the release
applies only to claims that arose prior to its execution and
because a subsidiary is separate and distinct from its parent
corporation, we will reverse the judgment of the circuit court.

I.

The material facts relevant to this appeal are not disputed.
Richfood, Inc., is a wholesale food distributor providing goods
and services to retail grocery stores. Market Insurance Agency,
Inc., is a wholly-owned subsidiary of Richfood and provides
insurance to grocery stores. Richfood, Dennis B. Jennings, and
Paul H. Dembinski were shareholders of Bold Horizons, Inc., which
operated a grocery store.

Market Insurance prepaid the annual premium on Bold Horizons’
workers’ compensation insurance policy. Richfood then billed Bold
Horizons for the premium on a monthly basis and credited Bold
Horizons’ payment to Market Insurance.

In August 1994, Richfood, Jennings, Dembinski, and Bold
Horizons entered into a stock purchase agreement with Farm Fresh,
Inc., for the sale of Bold Horizons. In order to settle and
compromise certain claims, Richfood, Jennings, Dembinski, and
Bold Horizons also executed a Settlement Agreement and General
Release dated September 23, 1994 (the Agreement).[1] The provision of the
Agreement at issue in this case, paragraph 3.a., states the
following:

Richfood hereby releases, acquits and forever

discharges The Jennings, Dembinski and their agents,

attorneys-at-law and attorneys-in-fact, from any and

all claims, debts, liabilities, demands, obligations,

costs, fees, expenses, damages, actions and causes of

action, of whatever kind or nature, whether known or

unknown, based upon, arising out of or connected with

anything whatsoever done, omitted or suffered to be

done by or for any of them, based on, arising out of

or in connection with any relationship or dealings

related in any way to Bold Horizons or the "Food 4
Less" store located at 4001 Virginia Beach Boulevard,

Virginia Beach, Virginia, whether such claims are

known or unknown, suspected or unsuspected or

otherwise whatsoever.

The sale of Bold Horizons effected a cancellation of the
workers’ compensation insurance policy as of August 30, 1994. At
that time, a portion of the prepaid premium had not been used.
Consequently, in May 1995, the insurance carrier issued a refund
check to Richfood in the amount of $27,950, which represented the
unused premium prepaid by Market Insurance. A Richfood employee
forwarded the refund check to Farm Fresh, and Farm Fresh
subsequently paid the proceeds of the check to Jennings and
Dembinski.

Upon discovering that Jennings and Dembinski had received the
proceeds from the refunded premium, Richfood and Market Insurance
demanded that Jennings and Dembinski return the proceeds.
Jennings and Dembinski, however, refused. Richfood and Market
Insurance commenced the instant action, seeking reimbursement of
the refund.

In response, Jennings and Dembinski filed grounds of defense
and a motion for summary judgment. In their motion, they argued
that the Agreement bars the claim of Richfood and Market
Insurance.

After considering the pleadings, the Agreement, the written
submissions of the parties, and the argument of counsel, the
circuit court determined that the Agreement was unambiguous and
discharged Jennings and Dembinski "from liability to
Richfood and Market Insurance for claims and causes of action
arising in the future and for wrongful conduct occurring after
the execution of the Release because the alleged wrongful conduct
was connected with the matters referred to in the Release . . .
." Accordingly, in an order dated April 21, 1997, the court
granted Jennings’ and Dembinski’s motion for summary judgment.
Richfood and Market Insurance appeal.

II.

Jennings and Dembinski assert that the Agreement discharges
the claim of Richfood and Market Insurance even though the
parties executed the Agreement several months before Jennings and
Dembinski received the proceeds from the insurance premium
refund. Jennings and Dembinski claim that paragraph 3.a. releases
all claims based on both past and future conduct between the
parties relating to the operation of Bold Horizons’ grocery store
and that the disputed insurance premium refund resulted from or
was a part of the operation of that business.

Alternatively, Jennings and Dembinski argue that even if the
Agreement does not apply to conduct occurring after execution of
the Agreement, the claim asserted by Richfood and Market
Insurance in this case existed prior to the date of the
Agreement. According to Jennings and Dembinski, the insurance
premium refund was a "known account receivable as of August
30, 1994," when the workers’ compensation insurance policy
was canceled, and that future wrongdoing is, therefore, not at
issue. We disagree with both arguments.

"The scope of a release agreement, like the terms of any
contract, is generally governed by the expressed intention of the
parties." First Security Federal Savings Bank, Inc. v.
McQuilken
, 253 Va. 110, 113, 480 S.E.2d 485, 487 (1997).
"Where parties contract lawfully and their contract is free
from ambiguity or doubt, the agreement between them furnishes the
law which governs them." Russell Co., Inc. v. Carroll,
194 Va. 699, 703, 74 S.E.2d 685, 688 (1953).

Like the trial court, we find no ambiguity in paragraph 3.a.
of the Agreement. The operative words of that provision are all
in the past tense. Specifically, paragraph 3.a. states that
Richfood releases and forever discharges Jennings and Dembinski
"from any and all claims, debts, . . . arising out of or
connected with anything whatsoever done, omitted or
suffered to be done . . . ." (emphasis added). Thus,
paragraph 3.a. of the Agreement, by its terms, covers only claims
that already had accrued prior to its execution. The additional
language stating "whether such claims are known or unknown,
suspected or unsuspected" speaks of anything "done,
omitted or suffered to be done" and discharges such claims
regardless of whether they were known by the parties when
executing the Agreement. This language does not extend paragraph
3.a. to claims not in existence on the date of the Agreement. In
sum, paragraph 3.a. of the Agreement does not discharge claims
arising out of conduct or events that had not occurred on or
before the date of the Agreement.

The alleged wrongful conduct giving rise to the claim now
asserted by Richfood and Market Insurance against Jennings and
Dembinski did not transpire before the execution of the
Agreement. It may well be that Richfood and Market Insurance, as
well as Dembinski and Jennings, knew that there would be a
premium refund from the workers’ compensation insurance carrier.
However, in the present action, Richfood and Market Insurance
allege that Jennings and Dembinski wrongfully retained that
refund. This alleged conduct by Jennings and Dembinski occurred
after Richfood initially received the refund check in May 1995,
long after the parties executed the Agreement. Thus, we conclude
that the provision of the Agreement at issue does not bar the
claim asserted by Richfood and Market Insurance in this case.

We also hold that Market Insurance has a separate, independent
basis for asserting that the Agreement does not preclude its
claim against Jennings and Dembinski. Contrary to the position
taken by Jennings and Dembinski, Market Insurance’s status as a
subsidiary of Richfood does not make Market Insurance a party to
the Agreement. As a subsidiary, Market Insurance is a corporate
entity separate from Richfood. See Thompson v. Air
Power, Inc.
, 248 Va. 364, 371, 448 S.E.2d 598, 603 (1994); Beale
v. Kappa Alpha Order and Kappa Alpha Alumni Found.
, 192 Va.
382, 395, 64 S.E.2d 789, 796 (1951). "The mere showing that
one corporation is owned by another or that they share common
officers is not a sufficient justification for a court to
disregard their separate corporate structure." Southern
States Coop., Inc. v. Dailey
, 280 S.E.2d 821, 827 (W. Va.
1981).

Furthermore, Market Insurance did not sign the Agreement, and
the terms of the pertinent provision do not include or bind the
subsidiaries of Richfood. In the opening paragraph of the
Agreement, Richfood is defined as "Richfood, Inc., Richfood
Holdings, Inc., Donald D. Bennett, John E. Stokely, Edgar E.
Poore, Daniel R. Schnur, Esq. and David W. Hoover, (collectively,
‘Richfood’)." Notably, this definition includes neither
Market Insurance nor any subsidiaries of Richfood. In every
paragraph of the Agreement in which Richfood is releasing other
parties, including paragraph 3.a., the term "Richfood"
is never expanded to include other persons or entities. However,
the recipient of each release is broadened to include its
"officers, directors, employees, agents, attorneys-at-law,
attorneys-in-fact and all other parties or entities by or through
whom they may act." Thus, the parties understood how to
include persons or entities in addition to those specifically
identified when it was their intent to do so. "No word or
clause will be treated as meaningless if a reasonable meaning can
be given to it, and there is a presumption that the parties have
not used words aimlessly." Winn v. Aleda Constr. Co.,
Inc.
, 227 Va. 304, 307, 315 S.E.2d 193, 195 (1984). Thus, we
conclude that Market Insurance is not a party to the Agreement
and is, therefore, not bound by paragraph 3.a.

For these reasons, we will reverse the judgment of the circuit
court and remand for further proceedings consistent with this
opinion.

Reversed and remanded.

 

 

 

FOOTNOTES:

[1]
Several other individuals, not parties to this case, also signed
the Agreement.

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