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Fried v. Smith
Citations: 244 Va. 355; 9 Va. Law Rep. 298; 421 S.E.2d 437; 1992 Va. LEXIS 99Docket: Record No. 911007
Court: Supreme Court of Virginia; September 18, 1992; Virginia; State Supreme Court
The court, led by Justice Hassell, is addressing the ambiguity of a release provision in a contract related to a lease guaranty. Barbara J. Fried and B. Mark Fried leased property to M. M Pontiac, Inc., with Steven C. Smith guaranteeing the lease. After M. M Pontiac filed for bankruptcy, its assets were sold to Dave Perno Pontiac, Inc., but the Frieds ensured that Smith remained liable under his guaranty. When Dave Perno Pontiac failed to pay rent, the Frieds sought to enforce Smith's guaranty, but he refused, leading to legal action. The trial court ruled in favor of Smith, interpreting a release in a stock purchase agreement dated May 1988 as terminating Smith's obligations under the lease guaranty. The relevant provision stated that the Frieds released the Smiths from all claims, but excluded obligations under certain agreements. On appeal, the Frieds contended that the language was ambiguous and that parol evidence should be considered to determine the intent behind the release. Conversely, Smith argued that the release was clear, negating the need for parol evidence. The court defined "ambiguity" as a condition where a term admits multiple meanings. It concluded that the release language was ambiguous because the broad phrase “any and all claims” conflicted with the narrower specification of liabilities, suggesting inconsistency in the obligations being discharged. A "demand" is defined as a claimed amount due, and a valid cause of action requires a legal obligation from the defendant to the plaintiff, a breach of that obligation, and resulting injury or damage to the plaintiff. Without injury, a cause of action does not exist. The phrases "claims, demands or causes of action from the beginning of time to the date of closing" do not imply future liabilities but rather refer to existing rights. Conversely, the phrase "including, but not limited to, any and all liabilities, obligations and duties of the released parties" may suggest future or contingent liabilities. Liability is a broad legal term encompassing various obligations, both absolute and contingent. The interplay between these phrases creates ambiguity, with the first limiting the release to existing claims and the second expanding it to include all forms of liability. Smith contends that the court should interpret the latter phrase to mean "and," effectively releasing him from all claims and liabilities. However, the court declines to amend the contract, asserting its role is to interpret the language used by the parties rather than rewrite it. The court will reverse the prior judgment and remand the case for a trial court to consider extrinsic evidence to clarify the ambiguous contractual terms. Additionally, the court does not address Smith’s argument regarding the timeliness of the Frieds’ appeal, as it was previously denied.