Present: All the Justices
FIRST SECURITY FEDERAL
SAVINGS BANK, INC.
v. Record No. 960916 OPINION BY JUSTICE BARBARA MILANO KEENAN
January 10, 1997
JANE MCQUILKEN, ET AL.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Jane Marum Roush, Judge
In this appeal, the plaintiff, a party to a release
agreement, challenges the trial court's exclusion of parol
evidence offered to prove that the release was not intended to
benefit the defendants.
On August 9, 1995, First Security Federal Savings Bank, Inc.
(First Security) filed a motion for judgment against Jane
McQuilken, John C. Myers, Mary D. Greenway, and Edward G. Heck
(collectively, the former employees), and others. First Security
alleged that the former employees left its employ to form
Security Capital, Inc., "d/b/a Mortgage Capital Investors," and
that the former employees diverted clients to this corporation
while they were still employed by First Security. First Security
also alleged that the former employees' conduct constituted a
breach of their contractual and fiduciary duties to First
Security, as well as fraud, conspiracy, misappropriation of trade
secrets, and tortious interference with existing contracts.
On August 16, 1995, one week after filing its motion for
judgment, First Security acquired two offices of "CMK Corporation
T/A Mortgage Capital Investors." In connection with this
acquisition, the parties executed a written agreement which
contained the following release:
First Security, its agent, representatives, and/or
assigns do hereby remise, release and forever discharge
Mortgage Capital, its related companies, subsidiaries,
divisions, their officers, directors, employees,
agents, successors, heirs, representatives, executors,
administrators and/or assigns, and Kevin Keegan, from
any and all manner of actions, cause of actions, suits,
litigation, debts, sums of money, accounts, reckonings,
bonds, bills, covenants, controversies, grievances,
variances, disputes, promises, trespasses, damages,
judgments, liens, executions, claims and demands of any
kind whatsoever, in law or in equity, which arose or
could have arisen directly or indirectly prior to the
date of the execution of this Agreement which were or
could have been asserted by First Security against
Mortgage Capital, its related companies, subsidiaries,
divisions, their officers, directors, employees,
agents, successors, heirs, representatives, executors,
administrators and/or assigns, and Kevin Keegan.
In their amended grounds of defense, the former employees
stated that when the agreement was signed, they were employees of
"a related company, division and/or subsidiary of Mortgage
Capital Investors and were intended beneficiaries of the release
of liabilities." The defendants filed a motion requesting
summary judgment on this basis. In response, First Security
asserted that the former employees were not intended
beneficiaries of the release agreement, and sought to present
parol evidence regarding the negotiation and execution of the
agreement.
The trial court ruled that parol evidence was inadmissible
because the language of the release was unambiguous and included
the former employees, as well as the claims brought against them.
Based on its ruling, the trial court entered summary judgment
for the former employees and dismissed the action with prejudice.
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On appeal, First Security contends that the trial court
improperly refused to consider parol evidence of its intent in
executing the release agreement. Citing McComb v. McComb, 226
Va. 271, 274-75, 307 S.E.2d 877, 879-880 (1983), First Security
argues that the parol evidence rule does not apply to a
controversy between itself, a party to the written release, and
the former employees, who First Security contends are "strangers"
to the release.
In response, the former employees assert that the trial
court did not err in refusing to consider parol evidence because
the language of the release agreement is clear and unequivocal.
The former employees contend that the release plainly conveyed a
benefit on them and, thus, that they are not "strangers" to the
release agreement within the meaning of McComb. We agree with
the former employees.
The scope of a release agreement, like the terms of any
contract, is generally governed by the expressed intention of the
parties. See Great Falls Hardware v. South Lakes Village Ctr.,
238 Va. 123, 125-26, 380 S.E.2d 642, 643-44 (1989). In the
present case, First Security executed an agreement containing
unrestricted language releasing the employees of Mortgage Capital
from "any . . . actions . . . which arose . . . prior to the date
of the execution of this Agreement."
It is undisputed that each of the former employees was an
employee of Mortgage Capital on the date the release was signed.
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Nevertheless, First Security asserts that its intent remains a
disputed issue of fact, and that it should be allowed to present
parol evidence to show that it did not intend to release these
particular employees of Mortgage Capital from the action it had
filed against them one week earlier.
First Security contends that McComb supports its right to
present parol evidence. There, we stated that "the parol
evidence rule operates only between the parties to a writing and
has no application in a suit involving strangers to the writing
nor in a suit involving one party to the writing and a stranger
thereto." 226 Va. at 274-75, 307 S.E.2d at 879. Accord Poff &
Co. v. Ottaway, 191 Va. 779, 788, 62 S.E.2d 865, 870 (1951);
Harriss, Magill Co. v. Rodgers Co., 143 Va. 815, 831, 129 S.E.
513, 518 (1925); Roselle v. Commonwealth, 110 Va. 235, 237, 65
S.E. 526, 527 (1909), aff'd, 223 U.S. 716 (1912).
In McComb, a wife's parents had lent $4,000 to be used as a
down payment on a home jointly purchased by their daughter and
son-in-law. In return, the husband alone executed a note for
repayment of the loan. After the marriage failed, the wife sued
the husband on another obligation, and the husband demanded a
set-off of $2,000 based on his claim that the wife was jointly
liable to repay the note, despite the fact that she had not
signed it.
The wife invoked the parol evidence rule, arguing that the
husband should not be allowed to present testimony to vary the
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content of the note. The trial court ruled, and this Court
affirmed, that parol evidence was admissible because the wife was
a "stranger" to the note. We stated that since the wife was free
to present parol evidence regarding the note, her husband must be
equally free to do so. 226 Va. at 275-76, 307 S.E.2d at 880.
Third party beneficiaries, however, are not "strangers" to
an instrument within the meaning of McComb. Like a party to an
agreement, a third party beneficiary is entitled to enforce the
terms of the agreement and is subject to defenses arising from
that agreement. See Code § 55-22; Ashmore v. Herbie Morewitz,
Inc., 252 Va. 141, 149, 475 S.E.2d 271, 275 (1996); Kelley v.
Griffin, 252 Va. 26, 29, 471 S.E.2d 475, 477 (1996); Levine v.
Selective Ins. Co., 250 Va. 282, 286, 462 S.E.2d 81, 84 (1995).
An agreement will be enforced in favor of a third party
beneficiary when the beneficiary establishes that the parties to
the agreement clearly and definitely intended to confer a benefit
on the beneficiary. See Levine, 250 Va. at 286, 462 S.E.2d at
83; Ward v. Ernst & Young, 246 Va. 317, 330, 435 S.E.2d 628, 634
(1993). Here, the language of the release agreement established
that the parties intended to confer a benefit on the former
employees, namely, to release them from legal actions which were
brought, or could have been brought, against them prior to the
execution of the agreement.
The intent of the parties is established as a matter of law
when the release language is considered in the context of the
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undisputed facts that (1) First Security had filed an action
against the former employees one week before it executed the
release, and (2) the former employees were employees of Mortgage
Capital on the date the release was signed. * Therefore, the
trial court did not err in granting summary judgment because no
material fact remained in genuine dispute. See Rule 3:18; Carson
v. LeBlanc, 245 Va. 135, 139-40, 427 S.E.2d 189, 192 (1993).
Although the trial court did not specifically state that the
former employees were third party beneficiaries of the release,
such a finding is implicit in the court's ruling. If the former
employees were not third party beneficiaries, the release
provisions would have been irrelevant to this case.
*
These facts distinguish the present case from Lemke v.
Sears Roebuck Co., 853 F.2d 253 (4th Cir. 1988). There, the
court ruled that parol evidence was admissible to determine
whether a homeowner's release of its insurer was also intended to
release Sears, the seller of a lawn mower whose operation caused
the injury. Unlike the present case, in which the release
language specifically designated the employees of Mortgage
Capital as persons included in the release, the language in the
release in Lemke did not contain any specific reference to Sears.
Thus, the court was unable to determine from the record before
it whether Sears was a third party beneficiary of the release
agreement.
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Thus, the trial court properly applied the parol evidence
rule in this case because First Security was a party to the
release agreement, and the former employees, as third party
beneficiaries, were not "strangers" to that agreement. When the
trial court has reached the correct result for reasons not
expressed in its ruling, we will uphold that result. See Robbins
v. Grimes, 211 Va. 97, 100, 175 S.E.2d 246, 248 (1970).
For these reasons, we will affirm the trial court's
judgment.
Affirmed.
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