Barbour v. Poncelor

The plaintiff (appellant) stated his case in several counts claiming damages for deceit practiced upon him by the defendant (appellee) in the sale to plaintiff of certain shares of capital stock in a corporation on November 28, 1916, and in one count declaring upon the breach of this contract of sale. The defendant set up a written release of liability of the causes of action declared on, given, it is averred, on May 22, 1917, by the plaintiff to the defendant for a valuable consideration and purporting to conclude in most general, comprehensive terms, against the defendant's liability resulting in any way from the respective sales of the two blocks of capital stock of the corporation. The plaintiff's demurrers to special pleas, in addition to the general issue, asserting this defense were overruled. The plaintiff replied, along with a general traverse, in a number of replications; to which the defendant's demurrers were sustained. Because of these adverse rulings, the plaintiff suffered a nonsuit.

It is to be borne in mind that the cause of action declared on in this complaint is rested upon the contract consummated on November 28, 1916, not the contract made on May 22, 1917, in which the second block of 125 shares was sold by the defendant to the plaintiff. The defendant's pleas invoked the effect of the fifth paragraph of the contract executed on May 22, 1917. This paragraph reads:

"(5) And it is further stipulated, understood and agreed to, and it is a part of the consideration of the transfer of this stock to Ben F. Barbour, that D. J. Poncelor shall never be liable directly or indirectly for any claim of any sort or description, growing out of, or arising out of the sale of any of the stock of the Rye-Ola Company to said Ben F. Barbour. And this stipulation applies to the sale of the first 125 shares, as well as to the sale of the remaining 125 shares contemplated in this contract and agreement."

The report of the appeal will set forth the contract in which this clause appears.

The interpretation or construction of the contract in which the quoted matter occurs was a function of the court; the judicial purpose and duty being to ascertain the lawful intention of the parties as therein expressed and to give effect to that intention. Murphy v. Black, 41 So. 877, 878;¹ Jordan v. McDonnell, 151 Ala. 279, 282, 44 So. 101; 34 Cyc. p. 1075. The provisions of the contract reproduced above operated as a release of the defendant, the seller, from all liability, "directly or indirectly, for any claim of any sort or description growing out of or arising out of the" sales of both blocks of stock to the plaintiff. Unless avoided, this release, most comprehensively expressed, affected to exonerate the defendant from any consequences that might result from those sales to the injury or damage of the plaintiff who gave the release for a valuable consideration. That the terms employed in the release feature of the contract were sufficiently comprehensive to include the consequences that might or would result from the deceit or fraud or breach declared on in this complaint, cannot, we think, be a matter of doubt. For the expression of the purpose manifest upon the face of this release, broader terms could not have been chosen. The effect and operation of the unequivocal terms thus employed — unqualified by anything else appearing in the writing — cannot be restricted to claims known to both the parties or to the releasor only, even though a claim or claims existed in favor of the releasor in consequence of the releasee's fraudulent acts or omission in respect of the sales of the two blocks of stock, of which wrongful acts or omissions the releasor was wholly ignorant until after this release was given; and parol evidence would be inadmissible to so restrict the release as to avert its application according to its terms. 34 Cyc. p. 1092; Kirchner v. New Home Sewing Machine Co., 135 N.Y. 182, 187,188, 31 N.E. 1104; Sherburne v. Goodwin, 44 N.H. 271, 276; Slayton v. Hemken, 91 Hun, 582, 36 N.Y. Supp. 249, 251; Pierson v. Hooker, 3 Johns. (N.Y.) 68, 3 Am. Dec. 467, cited by this court in Thomason v. Dill, 30 Ala. 444, 454, 455, in support of the familiar rule that a written contract, free from ambiguity, is conclusive upon the parties, precluding, in the absence of fraud and mistake, recourse to parol evidence to introduce stipulations or exceptions omitted from the instrument; anything omitted being regarded as abandoned.

Contracts, the execution of which are induced by fraudulent acts or omissions to the injury of the party defrauded, are voidable, not absolutely void; and an infirmity so intervening may be waived or surrendered by the party defrauded. The release relied on in the pleas being operative to exempt the releasee from any liability, even though arising from the releasee's fraud in the sales, the plaintiff, if he would avert the result of his own act and agreement, was properly put to the assertion, especially, of any matter that would avoid the release. Differing from the rule prevailing in some jurisdictions (see annotations to Pattison v. Seattle R. Co., 35 L.R.A. [N. S.] pp. 660, 664, where both lines of authority are shown; 23 R.C.L. pp. 411, 412), this court long since accepted the doctrine that a releasor cannot avert the concluding effect of his exonerating act, even on the ground of fraud in the procurement of the release, without restoring the consideration he has received under the contract — unless this primary duty to restore is excused for some reason recognized by law. Rabitte v. A. G. S. Ry. Co., 158 Ala. 431, 47 So. 573; B. R. L. P. Co. v. Hinton, 158 Ala. 470, 48 So. 546; B. R. L. P. Co. v. Jordan, 170 Ala. 530, 54 So. 280.

Whatever the considerations that might afford bases for discrimination in the application of the doctrine or incline the judgment to accept the view prevailing elsewhere (23 R. C. L. pp. 411-413), the stated conclusion of this court on the question has become too deeply embedded in our law and has been too often applied to now justify a re-examination of its soundness with a view to the announcement of a different rule. The reason and basis of the doctrine this court has accepted is that the releasor cannot be permitted to repudiate the release and at the same time retain benefits, derived by him therefrom, which he might restore. The rule's force in a court of law is directed at the releasor who would assert a right concluded by his release, unless he avoids it; and this duty upon the releasor is not dependent upon the fact that the releasee, who relies upon and asserts the release, will not or cannot restore to the impleading releasor that which the releasee received from the releasor. In our courts of law, whatever may be the process in equity, there is no method for moderating the releasor's primary duty to restore benefits received under the release because the releasee will not or cannot, in his turn, restore what he has received from the releasor. The averments of the replications, seeking to avoid the release, did not conform to this requirement of the plaintiff, the releasor; and were demurrable on that account.

The fraud that would entitle a releasor to avoid the release must underlie the execution of the contract of release, not merely affect or infect a subject upon which the release would, if unavoided, operate to the discharge of the releasee. The fraudulent acts or omissions or concealments averred in the complaint and in the replications relate to the sale of the stock, not to the execution of the contract of release. The plaintiff, the releasor, engaged, for a valuable consideration, to hold the defendant, releasee, harmless in the circumstances and with respect to the subject-matter defined in the broad terms of his release; and to his own contract must be attributed the unfortunate plight in which he finds himself. The rulings of the court on the replications and pleas accord with the principles stated. The judgment is affirmed.

Affirmed.

All the Justices concur except GARDNER, J., who dissents.

¹ Reported in full in the Southern Reporter; reported as a memorandum decision without opinion in 148 Ala. 675.