Case Name: STEFANAC v. CRANBROOK EDUCATIONAL COMMUNITY (AFTER REMAND)
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1990-07-05
Citations: 435 Mich. 155
Docket Number: Docket No. 82317
Parties: STEFANAC v CRANBROOK EDUCATIONAL COMMUNITY (AFTER REMAND)
Judges: Riley, C.J., and Cavanagh, Boyle, and Griffin, JJ., concurred with Brickley, J.
Reporter: Michigan Reports
Volume: 435
Pages: 155–227

Head Matter:
STEFANAC v CRANBROOK EDUCATIONAL COMMUNITY (AFTER REMAND)
Docket No. 82317.
Argued March 8, 1989
(Calendar No. 7).
Decided July 5, 1990.
Judith Stefanac brought an action in the Oakland Circuit Court against Cranbrook Educational Community, alleging wrongful discharge, sex discrimination, and termination of employment in violation of public policy. The court, Robert C. Anderson, J., relying on Leahan v Stroh Brewery Co, 420 Mich 108 (1984), granted the defendant’s motion for accelerated judgment because plaintiff failed to tender consideration, and therefore the release executed by the plaintiff barred her claims. Thereafter, the plaintiff, on rehearing, sought the court’s consent to tender the disputed consideration and refile her suit. The court affirmed its previous ruling, dismissing the complaint with prejudice. The Court of Appeals, Beasley and C. L. Horn, JJ. (Bronson, P.J., not participating), affirmed in an unpublished opinion per curiam (Docket No. 89512). The Supreme Court vacated the judgment of the Court of Appeals and remanded the case for consideration of plaintiff’s alternate argument whether her offer to tender the disputed consideration was made within a reasonable time. 428 Mich 903 (1987). On remand, the Court of Appeals, Beasley, P.J., and Michael J. Kelly and Maher, JJ., held that the offer to tender the disputed consideration had been made within a reasonable time and instructed the trial court to issue an order allowing the plaintiff thirty days to make restitution (Docket No. 101319). The defendant appeals.
In an opinion by Justice Brickley, joined by Chief Justice Riley and Justices Cavanagh, Boyle, and Griffin, the Supreme Court held:
Where a plaintiff has entered into a settlement agreement, of consideration recited in the agreement must occur not only within a reasonable time after execution of the agreement, but, in all cases, prior to or simultaneously with the commencement of any proceeding raising a legal claim in contravention of the agreement.
References
Am Jur 2d, Compromise and Settlement §§ 7, 8,13.
Timeliness of tender or offer of return of consideration for release or compromise, required as condition of setting it aside. 53 ALR2d 757.
1. Settlement agreements are binding until rescinded for cause. Tender of consideration received is a condition precedent to the right to repudiate a contract of settlement. The law favors settlements, and a party entering into a settlement agreement, offering adequate consideration, is entitled to rely on the terms of the agreement. A compromise and release should not be confused with the law of contract. The very essence of a release is to avoid litigation, even at the expense of strict right. One who seeks to repudiate or avoid a compromise settlement or release and revert to the original right of action must place the other party in statu quo, absent waiver or fraud in the execution. In this case, the plaintiff’s allegations of fraud are insufficient to bring the claim within the exception, and the defendant has not waived the obligation to tender. The plaintiff made no effort to raise the validity of the release; rather, she merely ignored the existence and terms of the agreement and brought an action in contravention of it, while retaining its benefits.
2. A plaintiff must tender restitution promptly and without unreasonable delay upon discovery of fraud or be held to have ratified the release. Long acquiescence and failure to complain promptly operates, as a matter of law, to reaffirm a contract of settlement and bars litigation. A settlement agreement is binding until rescission by repudiation and tender. Tender is a prerequisite to the right to repudiate. Commencement of a lawsuit is not a proper means to repudiate a settlement. Tender must occur within a reasonable time after learning of the grounds upon which the release and settlement could be repudiated. What is reasonable under the circumstances is a matter of discretion for the trial court. In this case, the trial court had no occasion to rule on the issue because, instead of repudiating the agreement, the plaintiff filed suit in contravention of the terms of the release.
3. Independent of the issue what constitutes a reasonable time within which to repudiate a settlement is the question whether tender is permissible after commencement of an action in contravention of the agreement. As a matter of law, in all cases where a legal claim is raised in contravention of an agreement, the plaintiff must tender the consideration recited in the agreement prior to or simultaneously with filing suit. A defendant is entitled to rely on the binding nature of an agreement. A plaintiff is not entitled to retain the benefit of an agreement and at the same time bring suit in contravention of the agreement.
Reversed.
Justice Levin, dissenting, stated that where a plaintiff claims, and the court finds, that there would be entitlement to retain recited consideration after a release is set aside because the amount recited as consideration represents payment that accrued and was owing to the plaintiff separate and apart from the claims that were settled by the release, and that no consideration in fact was paid to settle those claims, tender is not required. In deciding whether tender is required before suit in this case the Supreme Court is obliged to accept as true the allegations in the plaintiff’s complaint and in her response to the motion for summary disposition, and to proceed on the assumptions, absent judicial determination at the trial level to the contrary, both that the release in fact was obtained by fraud or duress and that the defendant indeed owes the plaintiff two weeks’ vacation pay and thus an amount equal to the consideration recited in the release. In addition, it exalts form over substance to require tender before suit where it is apparent that the defendant would not have accepted the tender had it been promptly offered.
A person who has signed a release should not be permitted to proceed in an action in disaffirmance of the release until the consideration actually paid for the release itself has been returned. The purpose of the tender rule is not to provide a fair and necessary check against the instability of contracts, but rather to provide a check against the unjust enrichment of the rescinding party that would result if the rescinding party were allowed to retain the benefits of the contract attacked. The factual dispute in an action to set aside a release does not involve the merits of the plaintiff’s underlying claim against the defendant that were resolved by the release if it is valid. It is only if and when the release is set aside that the plaintiff should be able to put the defendant to the expense of defending against the underlying claim.
The consideration paid by the defendant to the plaintiff at the time the release is signed does not provide protection against a claim that the release itself was procured by fraud or duress, or protect the very instrument that is intended to ensure forbearance of litigation. If it is judicially determined in this case that the plaintiff was coerced into signing the release, the release should be set aside and she should be required to return the payment before obtaining a determination on the merits of her claims of wrongful discharge unless it is also so judicially determined that the defendant owes her that amount as additional vacation pay.
The majority’s reading of Leahan is incorrect and contradicts a well-established tenet of the law of contracts. Parol evidence is always admissible to show that a statement in a document is not true.
Tender of consideration, although a precondition to an action at law, is not a precondition to commencement of an action seeking equitable relief. The majority errs in concluding that the abolition of the procedural distinction between law and equity in some way diminishes the power of a court to order rescission in accordance with the rules and practices developed in equity. Modem procedural reforms, in conjunction with the consolidation in one court of jurisdiction of both equitable and legal claims, eliminate the necessity of tender as a prerequisite to commencement of an action seeking to obtain rescission. Under unified proceedings, a court may enter a judgment conditioning rescission on the return of consideration received by the plaintiff, thus effectuating the purpose of the tender rule, the avoidance of unjust enrichment of the residing party. Contracts to relinquish the enforcement of legal rights warrant at least as much judicial surveillance as other contracts.
Justice Archer, dissenting, stated that an inflexible application in this case of the rule of Leahan that a party to a contract of settlement must tender any consideration received as a condition precedent to repudiating the contract is neither complete nor fair. Where there is a bona fide, good-faith dispute regarding whether consideration recited in a release agreement actually amounted to consideration, the rule of Leahan is unworkable.
Where, aside from the transaction, the person seeking restitution would be entitled to retain what the other gave as a result of the agreement, there is no enrichment as a result of the agreement even though what was given is retained, nor does it diminish the net assets of the other. Clearly, a plaintiff who contests the sufficiency of the consideration supporting a release agreement should be allowed to withhold tender of the alleged consideration until there is a judicial determination that consideration was in fact paid. If it is found that the consideration was paid, the plaintiff should be required to tender that amount. However, if the court determines that the amount paid to the plaintiff for the release was already owed to the plaintiff, the plaintiff should be allowed to retain that amount and proceed with any legal action.
In this case, the plaintiff unquestionably was owed her wages find accrued vacation pay. A question of fact exists regarding whether additional vacation pay was owed, and any amount determined to be in excess of that owed the plaintiff should be tendered to the defendant within a reasonable time following resolution. However, the plaintiff should be allowed to amend her complaint to request rescission.
164 Mich App 709; 417 NW2d 582 (1987) reversed.
Compromise and Settlement — Release — Consideration — Tender — Reasonable Time.
Where a plaintiff has entered into a settlement agreement, tender of consideration recited in the agreement must occur not only within a reasonable time after execution of the agreement, but, in all cases, prior to or simultaneously with the commencement of any proceeding raising a legal claim in contravention of the agreement.
Bell & Gardner, P.C. (by Mary E. Rosick and Cynthia Yott), for the plaintiff.
Dickinson, Wright, Moon, Van Dusen & Freeman (by John Corbett O’Meara, Thomas G. Kienbaum, and Elizabeth Hardy) for the defendant.

Opinion:
AFTER REMAND
Brickley, J.
The issues presented in this case are whether a plaintiff, before commencing a suit which disregards the terms of a release, must tender the consideration recited in the release and, if so, at what point before or during the proceedings must this tender take place. We hold that when a plaintiff has entered into a settlement agreement tender of consideration recited in the agreement must occur not only -within a reasonable time after execution of the agreement, but in all cases prior to or simultaneously with the commencement of any proceeding raising a legal claim in contravention of the agreement.
i
On November 16, 1983, plaintiff resigned as personnel director of Cranbrook Educational Community. In connection with her termination, plaintiff signed a document entitled "Release of Claims." The release is dated November 16, 1983, and reads in pertinent part as follows:
For and in consideration of Cranbrook Educational Community's (Cranbrook) acceptance of the voluntary resignation of Judith Stefanac (Stefanac) and Cranbrook's further agreement to pay Stefanac for two weeks, less applicable state and federal withholding taxes, Stefanac, for herself, her heirs, administrators and executors, does hereby fully and forever release, acquit and discharge Cranbrook, its agents, servants and representatives, of and from any and all claims, demands, actions and causes of action of every kind, nature and description which Stefanac may have had, may now have or may hereafter have by reason of any matter, cause, act or omission arising out of or in connection with Stefanac's employment with and/or resignation from Cranbrook.
After signing the release plaintiff received a check from defendant for $2,090.65. The check was purportedly intended to be payment for four weeks accrued vacation time and two weeks' severance pay.
Plaintiff filed suit against Cranbrook on August 9, 1984, alleging wrongful discharge, sex discrimination, and termination in violation of public policy. Subsequently, defendant filed a motion for accelerated judgment, arguing that the release barred plaintiff's claims. In response, plaintiff filed an affidavit challenging the validity of the release. The parties agreed that plaintiff's affidavit raised a question of fact, and therefore the motion was denied without prejudice.
Following a discovery period of one year, defendant again moved for dismissal of the action on the grounds that the release barred suit. Defendant also argued at this point, that plaintiff's failure to tender the consideration received in exchange for the release prevented her from now attempting to rescind the agreement. Defendant's position was based on this Court's decision in Leahan v Stroh Brewery Co, 420 Mich 108; 359 NW2d 524 (1984). Plaintiff conceded that Leahan merely reaffirmed the law as it had existed in the past, but asserted that the facts of Leahan differed from the instant case. Further, plaintiff maintained that the release was void for lack of consideration and that she was entitled to all money received as a result of her termination. The trial court interpreted Leahan as dispositive of the issue and granted defendant's motion.
Three weeks later, plaintiff filed a motion for rehearing. On rehearing, plaintiff sought the trial court's consent to tender the disputed consideration and, following tender of the money, the opportunity to refile her suit against defendant. This is the first indication that plaintiff was willing to repay the consideration recited in the release. The trial judge affirmed the previous ruling, dismissing plaintiff's complaint with prejudice.
Plaintiff appealed as of right, raising two issues. Plaintiff continued to argue that she was entitled to all the money received and therefore that tender was not required in order to maintain the action. Alternatively, plaintiff argued that her offer to tender back the disputed consideration was within a reasonable time under the circumstances of the case. Basing its analysis on an examination of Leahan, the Court of Appeals held:
[T]he consequence of the Leahan decision is that if a release recites that consideration was paid and if money was in fact paid, a plaintiff may not argue that the money was not actually consideration, regardless of any evidence to that effect. That seems to be what Leahan holds. If not, we believe it is up to the Supreme Court to say so. Consequently, we affirm.[ ] [Emphasis added.]
However, the Court of Appeals did not directly address plaintiff's alternate argument that tender of the disputed consideration occurred within a reasonable time. Consequently, we issued an order vacating the judgment of the Court of Appeals and remanded the case for consideration of the second issue raised by plaintiff. 428 Mich 903 (1987).
On remand, the Court of Appeals ruled that "plaintiff's offer to tender back the disputed con sideration was within a reasonable time." The Court instructed the trial judge to issue an order which would allow plaintiff thirty days to make restitution to the defendant. Further, the trial court held:
If such restitution is made, trial shall be had on the merits, including determination of the validity of the release. If such restitution is not made, judgment may enter for defendant.
Nothing in this opinion is intended to preclude the trial judge from making appropriate findings of fact after trial, including resolution of how much, if any, of the monies paid plaintiff were in consideration of the release.[ ]
We granted defendant's application for leave to appeal. 430 Mich 892 (1988).
ii
It is a well-settled principle of Michigan law that settlement agreements are binding until rescinded for cause. Further, tender of consideration received is a condition precedent to the right to repudiate a contract of settlement. See, generally, Randall v Port Huron, St C & M C R Co, 215 Mich 413; 184 NW 435 (1921); Kirl v Zinner, 274 Mich 331; 264 NW 391 (1936); Leahan v Stroh Brewery Co, supra. The policy consideration underlying the general rule is that the law favors settlements. A party entering into a settlement agreement, offering adequate consideration, is entitled to rely on the terms of the agreement. The rationale for the rule was explained further by this Court in Kirl v Zinner:___
A compromise and release is not to be confused with the law of contract, in which equivalents are exchanged, for the very essence of a release is to avoid litigation, even at the expense of strict right.
It is a general and salutary rule that one repudiating or seeking to avoid a compromise settlement or release, and thereby revert to the original right of action, must place the other party in statu quo, otherwise the very fact of payment, in consideration of the compromise or release, will likely operate as a confession of liability. [274 Mich 334-335. Emphasis in original.]
Plaintiff asserts that she should be excepted from this rule because the release was void and not merely voidable. The validity of the release was challenged by plaintiff on the grounds that it lacked consideration and was procured under duress and fraud. Specifically plaintiff asserts that defendant misrepresented the terms of the agreement. Moreover she asserts that defendant knew that plaintiff was legally entitled to the money she received, that she needed the money to support her family, and that defendant waved the checks at her refusing to give plaintiff any funds unless she signed the release.
Plaintiff contends that although the release recites that consideration was received, she in fact did not get anything in exchange for signing the settlement agreement. Therefore tender was not necessary prior to filing suit because "there is nothing to be returned to restore the status quo ante." However, plaintiff admits that she signed the release and that she received four checks. Subsequently she endorsed and cashed the checks received.
We start with the presumption that the plaintiff
executed the release knowingly and that the recited consideration was received. Porth v Cadillac Motor Car Co, 198 Mich 501; 165 NW 698 (1917). Kirl v Zinner, supra. The plaintiff has the burden of showing, by a preponderance of the evidence, that the release is unfair or incorrect on its face. Id. Even in light of these presumptions and the plaintiff's burden, the plaintiff must tender the recited consideration before there is a right to repudiate the release. Id. The only recognized exceptions in Michigan are a waiver of the plaintiff's duty by the defendant and fraud in the execution. Plaintiff has not raised either exception and thus is not relieved of the duty to tender the consideration recited in the release.
Our reports are replete with authority that negate plaintiff's contentions. In Niederhauser v Detroit Citizens' St R Co, 131 Mich 550, 552; 91 NW 1028 (1902), we held:
The law is well settled that, if one seeks to rescind a settlement on the ground of fraud or mistake, he must, after discovering the fraud, place the other party in statu quo.
In Randall, supra at 420, Justice Stone wrote:
"While there is still some real conflict in the cases as to whether or not there has to be a tender of the amount received when it is sought to set a release aside on the ground of fraud, by the weight of authority the cases divide themselves into two classes, first, where the fraud goes to inducing the injured party to sign a release, the effect of which he understands. And, second, where that fraud is in inducing him to sign a release under the belief that he was signing something else. I am satisfied that Michigan has recognized this distinction and has held, in the cases already cited, that where the fraud goes to inducing the injured party to sign a release, tender of the amount received has to be made within a reasonable length of time after discovery of the fraud. In other words, if a party claims that he was induced, through fraud, to enter into the contract, in order to rescind that contract, he must put the parties in statu quo. That is, he must return the money that he received, and ask to have the contract or agreement or release set aside on the ground that he entered into it through fraud."
Similarly in Kirl v Zinner, supra at 335, we said:
"Where a party to a compromise desires to set aside or avoid the same and to be remitted to his original rights, he must place the other party in statu quo by returning or tendering the return of whatever has been received by him under such compromise, in case it is of any value, and so far as possible any right lost by the other party because thereof. This rule obtains even though the contract was induced by the fraud or false representations of the other party, or was obtained under duress, or was made under a mistake of fact or as to the law; and until this is done the settlement will constitute a good defense. By electing to retain the property, a party must be held to be bound by the settlement. The rule applies to actions ex contractu as well as ex delicto." 12 CJ, p 355, § 57.
Our most recent pronouncement in this area is Leahan v Stroh Brewery Co, supra, which is in accord with this case and supports our holding. In Leahan, we upheld the lower court's rejection of plaintiff's challenge of a release executed in connection with his resignation from Stroh Brewery Company. Mr. Leahan filed a complaint against the defendant, alleging age discrimination and breach of employment contract. The defendant raised as a defense the language in the plaintiff's resignation letter which released the defendant of further liability. In response, the plaintiff claimed that the release was voidable because of duress and lack of consideration. As in this case, Mr. Leahan did not claim that he did not receive anything in exchange for the release. Rather, he claimed that the money he received was not consideration, but instead was representative of some other benefit that he was entitled to under the agreement. Our holding in Leahan reflects our position in this case that the consideration recited in the release must be tendered before the plaintiff can maintain an action for claims arising out of the settlement agreement.
Plaintiff's allegations of fraud are insufficient to bring her claim within the fraud in the execution exception. Plaintiff admits that she read and executed the release agreement. She was the personnel director of the institution and, in fact, had dealt with similar release agreements in other employment termination situations. Thus, we can impute to her full understanding of the terms and conditions of the agreement. Additionally, defendant has not at any time during the trial court proceedings waived plaintiff's obligation to tender the consideration recited in the release agreement. Finally, plaintiff's allegation that the release was void because it lacked consideration is directly contrary to the express language of the release. Thus, plaintiff is not relieved of her duty to tender the consideration she received.
hi
The dissent raises the question whether tender is a precondition to an action in equity based on the rule announced by this Court in Style v Greenslade, 364 Mich 679, 683; 112 NW2d 92 (1961). In Style we held that "[i]f the release is upheld in the chancery proceeding, that should end the matter. If the release is held invalid, plaintiff may then proceed with her law action involving questions of negligence and damages." On this authority the dissent would remand the case allowing Stefanac to amend her complaint to seek cancellation of the release (post, p 210, Levin, J., dissenting) even though plaintiff has not requested such relief. Albeit it was at this Court's initiative in Style, supra, p 683, that the case be "remanded and further proceedings therein enjoined until plaintiff may bring and have determined an appropriate chancery action," we read Style not as authorizing a similar disposition in the instant case but as precedent that a plaintiff seeking to avoid a release may first seek equitable relief.
However, the record shows no effort on the part of plaintiff in the instant case, at the time of bringing suit, to raise an issue as to the validity of the release executed in conjunction with her resignation. Rather, plaintiff merely ignored the existence and terms of the agreement and filed an action in contravention of the agreement, while at the same time retaining the benefit derived from the agreement. Plaintiff did not challenge the validity of the release until after defendant had raised it as a defense barring plaintiff's action at law..
Conversely, defendant has continued to maintain that plaintiff's action is barred by the existence of the release executed by plaintiff. Although defendant did not specifically raise nontender as a defense until more than one year had passed after the commencement of the action, we find it sufficient that defendant relied on the binding nature of the agreement as an affirmative defense to the action.
Whether the tender rule announced today would preclude a plaintiff from bringing an action seeking solely equitable relief is beyond the scope of this Court's limited grant order and, given the facts of this case, such an analysis goes beyond what is necessary to resolve this dispute. Accordingly, we find it unnecessary to rule on the continued legitimacy of Style in view of the fact that the consolidation of the chancery court with courts of law no longer requires that a plaintiff bring separate actions in equity and law. We make no further ruling on whether a plaintiff who, under Style, decides to file a separate equitable action, would later be precluded from bringing an action at law by the mandatory joinder rule, or principles of res judicata and collateral estoppel. However, the tender rule set forth here requires that whenever a legal claim is raised in contravention of a settlement agreement, even if joined with an equitable claim, tender is a precondition. Anything less would nullify the purpose of the tender rule.
The dissent's alternative argument that there will be no unjust enrichment in allowing plaintiff to proceed with her actions as filed is equally without merit. The dissent asserts:
[T]his Court should provide Stefanac an opportunity to prove her claim that she could not obtain amounts admittedly due her without signing the release, and that the two weeks' pay, recited as consideration in the release, was, as she asserts, owed as an additional two weeks' vacation pay. [Post, p 196, Levin, J., dissenting.]
However, the plaintiff's allegation that the money she received was money already owed her is merely a restatement of the claim that the release is invalid because it lacked consideration. Further, plaintiff's actions of endorsing the check clearly marked as representing "severance pay" are contrary to her assertions in this action. Absent an appropriate proceeding to determine the validity of the release, we do not find it necessary to extend our review beyond the writings offered in support of defendant's claims.
In this regard, the dissent draws an analogy to an accord and satisfaction. An accord is a contract whereby the obligee agrees to discharge a preexisting duty in exchange for some substituted performance. (See 2 Restatement Contracts, 2d, § 281, pp 381-382). If any conclusion is to be drawn from such an analogy, it must be that plaintiff's actions amount to a satisfaction. By cashing the checks, plaintiff accepted defendant's substituted performance and discharged any further duty owed. (Id., see also 1 Restatement Contracts, 2d, §69[2], p 164).
Finally, the dissent contends that our reading of Leahan "contradicts] a universal tenet of the law of contracts that the parol evidence rule does not prevent a showing that there has been nonpayment/failure of consideration" (Post, p 206, Levin, J., dissenting). Properly understood, the tender rule is not a rule of evidence but rather is a rule of procedure. We do not contest the dissent's enunciation of the principles encompassing the parol evidence rule. However, until plaintiff either challenges the validity of the release on equitable grounds or preserves the right to challenge or rescind the release by tendering the consideration recited in the release prior to or simultaneously with bringing suit, the parol evidence rule has no application. Parol evidence is admissible to explain the terms of the contract and has application only after the terms of the agreement have been challenged. We observe that plaintiff is not claiming that she did not receive any money as a result of executing the release agreement. We also note that plaintiff is not merely asserting a claim for an additional two weeks' pay. Rather, plaintiff's actions amount to an attempted rescission of the agreement rather than an action whereby plaintiff seeks to enforce the terms of the release.
IV
Having set forth the general rule that a plaintiff has a duty to tender the consideration recited in a release, we turn next to the question of the period of time during which the tender must take place.
There are a line of cases that have addressed the question what is a reasonable time within which plaintiff can repudiate and tender other than by filing a lawsuit. The earliest case dealing with this question is Bertha v Regal Motor Car Co, 180 Mich 51; 146 NW 389 (1914), in which the plaintiff suffered an eye injury. Following medical treatment he was informed that he would recover his eyesight in approximately seven weeks. The plaintiff entered into a settlement agreement releasing the defendant of all claims for damages resulting from the injury. Subsequently, the plaintiff learned that the doctors had misrepresented the extent of his injury. "He immediately caused the sum of $110, with interest, to be tendered back to defendant company. Through its president this tender was refused, and suit was at once instituted." Id. at 54. The defendant pled the release as a defense, and the circuit court directed a verdict in its favor. The Bertha Court reversed the verdict in favor of the defendant, holding that the plaintiff had properly repudiated the settlement agreement and that the defendant's actions in refusing to accept tender and paying for the plaintiff's medical treatment amounted to an adoption and ratification of the doctors' misrepresentation of the extent of the plaintiff's injuries.
This Court relied on Bertha in Burns v Reading Estate, 188 Mich 591; 155 NW 479 (1915), holding that a plaintiff must tender restitution promptly and without unreasonable delay upon discovery of the fraud or he will be held to have ratified the release. The Court found that the plaintiff's failure to rescind by refunding the contract consideration for a period of eighteen months was an unreasonable delay. "His long acquiescence and failure to complain promptly, as was his duty on discovery of the true conditions operated, as a matter of law, . to reaffirm the contract of settlement which has now become a bar to the prosecution of his stated original cause of action." Id. at 604 (emphasis added).
Randall v Railway Co, supra, is also instructive on this issue. This Court made three specific findings in Randall. First, the Court adhered to the general principle that a settlement agreement was binding "until rescission by repudiation and ten der." Id. at 423. Then the Court stated that tender was a prerequisite to the right to repudiate and that the commencement of a lawsuit is not a proper means to repudiate a settlement. Finally, the Court held:
It is finally contended by appellant that, if any tender was necessary, the tender made on the trial was sufficient. We think not, for the reasons stated and for the further reason that the tender was not made within a reasonable time. The long period of delay from the date of settlement to date of tender at the trial, of two and a quarter years, cannot be said to be a reasonable time as matter of law. [Id. at 424. Citations omitted.]
The rule that is derived from the foregoing analysis is that tender must occur within a reasonable time after the plaintiff learns of the grounds upon which the release and settlement could be repudiated. What is reasonable under the circumstances is a matter of discretion for the trial court. Thus in this case, had Ms. Stefanac made an offer of tender within the eight-month period between the execution of the release and the filing of suit, the issue of the reasonableness of her action would have been a matter of discretion for the trial court. However, the trial court had no occasion to rule on this issue because instead of repudiating the release agreement plaintiff proceeded to file suit in contravention of the terms of the release.
Independent of the issue what constitutes a reasonable time within which to repudiate a settlement is the question whether tender is permissible after commencement of an action in contravention of an agreement. Prior to this action, the issue was not squarely before the Court. The cases which have factually disallowed tender after the com mencement of an action have not always clearly identified the rationale behind such action. It has not been clear in those cases whether the litigation was barred because tender did not occur within a reasonable time or whether it was the lawsuit itself that prevented the plaintiff from asserting a claim. However, we find the rule to be that in order to preserve the right to challenge or rescind a release agreement, tender must occur prior to or simultaneous with the filing of a suit alleging a cause of action arising out of the release agreement.
Plaintiff relies on Carey v Levy, 329 Mich 458; 45 NW2d 352 (1951), and McDonald v Zinn Drywall, 134 Mich App 270; 350 NW2d 864 (1984), which in turn relies on Carey, to support her argument that the tender in this case, after the commencement of suit, was within a reasonable time. Plaintiff further argues that what constitutes a reasonable time must be determined case by case. We. disagree.
In Carey, the plaintiff brought suit to recover damages as a result of an automobile accident. As a defense, the defendant offered the release executed by the parties. The trial court conditionally dismissed the action, allowing the plaintiff a forty-day grace period within which to make restitution. The plaintiff refused to comply with the order and then appealed. The only question at issue on appeal was whether the plaintiff had an obligation to tender any consideration.
The Court adopted in its rationale, without reference to the grace period, the general proposition that the plaintiff had an obligation to tender the consideration:_
Unless we hold in accord with the foregoing authorities, we permit plaintiffs to retain the money they received from defendants, notwithstanding they would withhold from defendants the consideration for which the money was paid to plaintiffs — i.e., the release from liability and from the annoyance and expense of litigation. "If that (claimed loss of memory) disposes of the matter a safe retreat is open to parties to a settlement, for it shows an easy way to avoid a release." Kirl v Zinner, supra. And further, it would materially tend to discourage settlements between parties involved in this type of cases, if the settlement could be avoided without restitution. Why should one pay a substantial sum for his release from an asserted liability, if he knows that the opposite party by merely advancing a claim of mental incompetency may disavow his release and bring suit without first placing the defendant in statu quo? See "Restitution and Unjust Enrichment," 46 Am Jur, p 99.
"The requirement that the other party to the transaction should be placed in his original position exists to prevent enrichment by the rescinding party at the expense of the other." Restatement of the Law, Restitution, ch 2, §65e. [Id. at 464-465. Emphasis added.]
However, despite this reasoning, the Court, apparently following the lead of the trial court which had not been disputed by the defendant, remanded, giving the plaintiff thirty days to tender restitution and reinstate the suit. The issue of the grace period was simply not before the Court. The defendant's failure to object to the trial court's order amounted to a waiver of the issue.
We hold as a matter of law that a plaintiff must, in all cases where a legal claim is raised in contravention of an agreement, tender the consideration recited in the agreement prior to or simultaneously with the filing of suit. To allow a grace period for tender after the commencement of a lawsuit would undermine the very rule announced by this Court in Carey. Although seemingly harsh, we find that this rule is necessary in order to preserve the stability of release agreements. As we have previously stated, a defendant is entitled to rely on the binding nature of the agreement. The very essence of a release and settlement is to avoid litigation. The plaintiff is not entitled to retain the benefit of an agreement and at the same time bring suit in contravention of the agreement.
CONCLUSION
The indispensable ingredient for the utility of agreements is the principle of enforceability. The uniqueness of an agreement not to sue is that it is an agreement not to enforce other rights — an agreement to forbear enforcement. In an increasingly litigious society, the utility of such an agreement takes on increasing importance, both for overburdened courts and for economic vitality. However, when the very instrument that is intended to insure forbearance of litigation itself fosters a separate layer of litigation that is intended to resuscitate the litigability of the matter that was the subject of the settlement, enforceability (judicial scrutiny) can be defeating of the very stability the contractual instrument is intended to foster. The tender rule, therefore, is of more than historical significance.
Certainly no legal instrument can be totally isolated from judicial review but in order to raise a legal claim beyond the terms of the agreement a plaintiff must tender. When a contract not to sue recites consideration and there is no allegation of fraud in the execution, the tender rule provides a fair and necessary check against the instability of contracts not to sue. To hold otherwise would undermine the principle of the enforceability of contracts in the broadest sense.
Plaintiff brought suit on August 9, 1984, and it was not until more than a year later that plaintiff manifested an intention to tender the disputed consideration. We hold that plaintiff is not entitled to commence suit in contravention of the settlement agreement.
The judgment of the Court of Appeals is reversed, and the trial court's dismissal of the plaintiff's claim with prejudice is reinstated.
Riley, C.J., and Cavanagh, Boyle, and Griffin, JJ., concurred with Brickley, J.
The plaintiff had also received separate checks for refunded retirement contributions and travel expenses.
Defendant's motion was filed on September 4, 1984. Thereafter, defendant raised the release as an affirmative defense in its answer filed on October 16,1984.
We decided Leahan three months after defendant's original motion.
Plaintiff received a check which was the equivalent of six weeks' salary. The check was itemized by defendant to be four weeks of accrued vacation pay and two weeks' severance pay. Plaintiff claims that at her dismissal she had accrued six weeks of vacation time and therefore the check did not include any consideration in exchange for the release agreement. Rather, the money received was for six weeks' vacation pay to which plaintiff was entitled. Defendant contends that the policies of the institution prohibit an employee from accruing more than four weeks of vacation time.
We are not persuaded by plaintiff's argument that defendant had the burden of raising the tender issue at the time of the first motion. It is sufficient that defendant raised the release as a defense. See MCR 2.116(C)(7). This is especially significant in light of the fact that Leahan was not decided until three months after the ruling on defendant's first motion. Further, when defendant did specifically raise as a defense plaintiff's failure to tender the recited consideration, plaintiff still refused to tender any money received.
Stefanac v Cranbrook Educational Community, unpublished opinion per curiam of the Court of Appeals, decided January 27, 1987 (Docket No. 89512).
Stefanac v Cranbrook Educational Community (On Remand), 164 Mich App 709, 716; 417 NW2d 582 (1987).
Id.
Q- [W]hen you signed [the release] were you mindful of what it contained?
A. Yes, I had read it. I could comprehend what it said.
Q. But you acknowledge you did receive something additionally, namely the severance pay that you otherwise would not have received?
A. Not received in terms of pay?
Q. Yes.
A. That's right.
Slater v United States Health & Accident Ins Co, 133 Mich 347; 95 NW 89 (1903).
Randall v Port Huron, St C & M C R Co, 215 Mich 413; 184 NW 435 (1921); Stewart v Eldred, 349 Mich 28; 84 NW2d 496 (1957).
We assume that plaintiff was aware of the Style remedy. While it may have been suitable to guide the plaintiff in Style on her legal options when there was no clear precedent, we do not think it within our province to do so now. It is not the function of this Court to plead a plaintiff's case or exercise specific legal options for her.
See n 2.
The dissent credits us as being inspired by "generosity of spirit" in allowing defendant to plead nontender so late in the litigation. (Post, p 212, Levin, J., dissenting.) However, at the risk of rebuking the compliment, we must point out that defendant need not specifically raise the tender issue because until plaintiff tenders the consideration recited in the release, it is the existence of the release and its terms which prohibit the plaintiff from bringing suit. By pleading the release as a defense, defendant has complied with the requirements of MCR 2.111(F).
The Michigan Constitution of 1850 states that "[t]he legislature shall, as far as practicable, abolish distinctions between law and equity proceedings." Const 1850, art 6, § 5. The same provision was repeated in the 1908 Constitution. Const 1908, art 7, § 5. The Legislature acted upon this directive by giving the Supreme Court the power to promulgate the rules as may be practical to improve the practice by "[t]he abolishing of distinctions between law and equity proceedings . . . ." 1857 CL 3390 approved April 4, 1851. See also 1948 CL 601.14 repealed by 1961 PA 236, § 9901, effective January 1, 1963. Along with this statute, a separate statutory provision was enacted which vested distinct jurisdiction in courts at law and courts in equity, 1915 CL 12299, see also 1948 CL 606.1 et seq. It was not until 1963 that jurisdiction over both equitable and legal claims was vested solely in one circuit court. See MCL 600.601; MSA 27A.601; Const 1963, art 6, § 5.
MCR 2.203(A)(1) states in pertinent part:
In a pleading that states a claim against an opposing party, the pleader must join every claim that the pleader has against that opposing party at the time of serving the pleading, if it arises out of the transaction or occurrence that is the subject matter of the action . [Emphasis added.]
Furthermore, GCR 1963, 203.1, upon which MCR 2.203(A)(1) was based, specified that a party must join every equitable and legal claim arising out of the same transaction or occurrence in one proceeding.
As the dissent states "[t]he law does not permit an employer to withhold the payment of wages and other amounts due an employee . . . (Post, p 195, Levin, J., dissenting.) Accordingly, plaintiff had other legal options available to her to receive payment for the additional two weeks' vacation pay she now claims is due to her.
See, e.g., Crawley v Studebaker Corp, 183 Mich 462; 149 NW 1019 (1914), and Porth v Cadillac Motor Co, 198 Mich 501; 165 NW 698 (1917).
As a safeguard in a situation such as in Bertha, (i.e., tender offered but refused) we suggest that plaintiff place the consideration received in an escrow account with the court. Such action on the part of a plaintiff will remove any doubt as to whether tender, in fact, occurred. Further, it will provide a time frame from which the trial court can access whether tender occurred within a reasonable time.
See, e.g., Burns v Reading Estate, supra, Randall v Railway Co, supra, Speath v Merchants' Life Ins Co, 245 Mich 100; 222 NW 88 (1928), Kirl v Zinner, supra, and Leahan v Stroh Brewery Co, supra.