Richfood, Inc. v. Jennings

Present: All the Justices

RICHFOOD, INC., ET AL.

v. Record No. 971461 OPINION BY JUSTICE CYNTHIA D. KINSER
April 17, 1998
DENNIS JENNINGS, ET AL.

FROM THE CIRCUIT COURT OF HANOVER COUNTY
Richard H. C. Taylor, Judge

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,

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

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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

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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

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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

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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.

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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

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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.

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