Opinion ID: 1440915
Heading Depth: 1
Heading Rank: 4

Heading: Effect of Accord and Satisfaction

Text: To determine whether the March, 2004 settlement agreement entered into by R & D, Abrams, and Kampa, captioned Accord and Satisfaction, served to satisfy the judgment and thereby preclude any enforcement action against Rice, it is necessary to look at the nature of that agreement in light of the two Virginia statutes. We have already given a skeletal outline of the agreement, but its terms have meaning only if put in context, and that requires an identification and examination of the relevant interests and entities. Unfortunately, the record extract and appendices, in addition to their other substantial shortcomings, fail to indicate what some of those interests are. No definitive findings seem to have been made by any of the courts, and the only explanation we have for some of these facts come from verified allegations by Rice. As best we can tell, the dramatis personae are as follows: (1) Broad Run Golf, LLC (Broad Run) is a Maryland limited liability company (LLC), whose members are Kampa, Rice, and Smyth, each with a one-third interest. The entity in which R & D made its investment is identified as New Broad Run Golf LLC, in which Abrams, Kampa, Rice, and Smyth were the principals, but we are unable to find an explanation of when that entity was created or what, if any, connection it had to Broad Run. As noted, Broad Run (or New Broad Run) intended to develop the Bear National Golf Course. (2) Mid-Atlantic is a Delaware LLC whose members are Broad Run, which had a 55% interest, and STP-Beacon Hill, a Massachusetts LLC (Beacon Hill), which owned the remaining 45%. (3) Beacon Hill, also a Massachusetts LLC, was, until March, 2004, owned by Abrams (99%) and his son (1%). (4) New STP-Beacon Hill LLC (New Beacon Hill) is a Delaware LLC that owns the Beacon Hill Golf Course in Loudoun County. Its sole member is Mid-Atlantic. (5) Cottages at Beacon Hill (Cottages) is a Delaware LLC. The members were Abrams, Kampa, Rice, and Smyth. (6) R & D 1, LLC (R & D 1) and R & D 2001, LLC (R & D) are Virginia LLCs, of which Gregory is allegedly the managing member. Who owns them is not clear. R & D was the plaintiff in the Loudoun County case. (7) NAP Foundation (NAP) is a Virginia non-stock, not for profit corporation of which Gregory is trustee and president. At some point, not clear from the record, R & D assigned part of its Loudoun County judgment to NAP. It appears that, in the Fall of 2002, New Beacon Hill owned a 340-acre tract of land in Loudoun County, which it proposed to develop as a golf course. As best we can tell, this was a different golf course than the Bear National Golf Course being developed by Broad Run or New Broad Run. The tract consisted of two parcels, one of approximately 330 acres and one of 10.6 acres. Rice contends that the 330-acre parcel was to be used for the golf course and the 10.6-acre parcel was to be used for a clubhouse and some cottages intended as amenities to the golf course. In November, 2002, just prior to the closing of a $10.5 million construction loan to be used to finance development of the golf course, Abrams, on behalf of New Beacon Hill, deeded the 10.6-acre parcel to Cottages. It is alleged that he did so without the knowledge of Rice or Smyth who, as noted, together owned two-thirds of Mid-Atlantic, which, in turn, was the sole member of New Beacon Hill, and without any authority. In January, 2003, the lawsuit that produced the judgment at issue here was filed by R & D. In November, 2003while that suit was pendingAbrams, with the concurrence of Smyth and Rice, caused Cottages to convey the 10.6-acre parcel to R & D 1, which put Abrams in control of it. That, according to Rice, severely restricted the ability of New Beacon Hill to develop the amenities necessary for a private golf course and thus to sell the course. In March, 2004, Abrams and Kampa entered into the settlement agreement with R & D. As noted, that agreement had four elements to it. The first element was designed to remove Abrams and Mid-Atlantic entirely from any interest in or control over the golf course being developed by Beacon Hill. That was to be accomplished by (1) an assignment by Abrams and Beacon Hill of their interests in Mid-Atlantic, the sole member of New Beacon Hill., to Kampa, so that Mid-Atlantic would thereafter be owned 55% by Broad Run and 45% by Kampa, (2) an assignment by Abrams to Kampa of all interest Abrams had in New Beacon Hill and the golf course, (3) a release by Abrams to Kampa of all interests Abrams had in any contracts related to the golf course, and (4) Abrams's resignation as a manager of New Beacon Hill. The Assignment recited that its express intent was that Abrams and Mid-Atlantic would no longer have any ownership or other interest in New Beacon Hill or the golf course being developed by New Beacon Hill. It stated that the substitution of Kampa for Abrams was intended to help facilitate the future development of the [Beacon Hill] Golf Course and the financial status of [New Beacon Hill], both of which are potential assets that may help generate future revenues to repay the judgment. The second element was a mutual release of contract obligations between Cottages and R & D 1 and concerned the November, 2003, conveyance of the 10.6-acre parcel from Cottages to R & D 1. The release recited that the contract leading to that conveyance contained certain postclosing obligations, which it did not define, and it purported to confirm the conveyance but release each entity from those postclosing obligations. The release noted that Rice and Smyth, two of the members of Cottages, were not signing the release and stated that R & D 1 accepted the consequences. The third element was a promissory note from Abrams and Kampa to R & D for $175, 000, together with 12% annual interest, due March 1, 2005. That note has not been paid and, according to Rice, was never intended by the parties to be paid. Finally, there was the Consent Order setting aside the judgment against Abrams and Kampa. Appellants contend that the settlement agreement, captioned Accord and Satisfaction, was merely in the nature of a joint tort-feasor release and is governed by Va. Code, § 8.01-35.1. That statute deals with the situation in which a release or a covenant not to sue is given in good faith to one of two or more persons liable in tort for the same injury. In that event: (1) The release or covenant not to sue shall not discharge any of the other tortfeasors from liability for the injury . . . unless its terms so provide; but any amount recovered against the other tortfeasors or any one of them shall be reduced by any amount stipulated by the covenant or the release, or in the amount of the consideration paid for it, whichever is the greater; (2) In determining the amount of consideration given for a covenant not to sue or release for a settlement which consists in whole or in part of future payment or payments, the court shall consider expert or other evidence as to the present value of the settlement consisting in whole or in part of future payment or payments; (3) The release or covenant not to sue shall discharge the tort-feasor to whom it is given from all liability for contribution to any other tort-feasor; and (4) A tortfeasor who enters into such a release or covenant not to sue is not entitled to recover by way of contribution from another tort-feasor whose liability for the injury . . . is not extinguished by the release or covenant not to sue, nor in respect to any amount paid by the tortfeasor which is in excess of what was reasonable. Appellees view § 8.01-35.1 as applicable only to pre-judgment settlements in the form of releases or covenants not to sue. An accord and satisfaction, they urge, is not a release or covenant not to sue. The statute governing an accord and satisfaction, they contend, where consideration is paid by one judgment debtor on a judgment entered jointly and severally against more than one judgment debtor, is Va. Code, § 8.01-443. That statute permits a judgment creditor to bring actions on the judgment against any or all of the judgment debtors, jointly or severally, and no bar shall arise as to any of them by reason of a judgment against another, . . . until the judgment has been satisfied. Section 8.01-443 further provides: If there be a judgment against one or more joint wrongdoers, the full satisfaction of such judgment accepted as such by the plaintiff shall be a discharge of all joint wrongdoers, except as to the costs; provided, however, this section shall have no effect on the right of contribution between joint wrongdoers as set out in § 8.01-34. (Emphasis added). Appellees argue that the consideration stated in the accord and satisfaction between R & D, Abrams, and Kampa, and the accompanying assignment, mutual release, promissory note, and consent order, was accepted by R & D as a full satisfaction of the judgment, and, for that reason, discharged Rice as well. In making his own settlement, for $1,000,000, they claim, Smyth was simply an unwise volunteer; he, too, had been discharged by the accord and satisfaction. The two statutes express different, but entirely consistent, principles. As pointed out in Hayman v. Patio Products, Inc., 226 Va. 482, 311 S.E.2d 752, 755 (1984), under Virginia common law, a release of, or an accord and satisfaction with, one of several joint tort-feasors operated as a release of all even if the agreement provided otherwise. A covenant not to sue one joint tortfeasor did not have that effect, however; it did not release the other joint tortfeasors. See also Perdue v. Sears, Roebuck and Co., 694 F.2d 66 (4th Cir.1982). [10] As initially enacted in 1979, § 8.01-35.1 applied only to covenants not to sue, but, as subsequently amended, it now applies to both kinds of instrument and thus, for these purposes, treats them the same. A good faith settlement with a joint tortfeasor, whether by release or covenant not to sue, does not release the other joint tortfeasors unless the release or covenant so provides, but it does protect them by reducing their liability to the extent of the consideration paid by the settling tortfeasor or the amount provided in the release or covenant, whichever is greater, and by discharging them from liability for contribution to the settling tortfeasor. We see nothing in the statute to suggest that it is limited to pre-judgment settlements, as averred by appellees, and that it cannot apply when one of several persons jointly and severally liable on a judgment effects a settlement of that person's liability under the judgment. The obvious thrust of the statute, confirmed by the courts that have interpreted it, was to promote settlements, [11] and that goal would seem to be as applicable to settling liability under joint and several judgments as to settling pre-judgment claims against alleged joint tortfeasors. We therefore do not agree that § 8.01-35.1 applies only to pre-judgment settlements. [12] The underlying premise of § 8.01-35.1, however, is that, in the post-judgment context, the consideration paid by the settling judgment debtor does not, and is not intended to, satisfy the judgment in full, for if that were not the case, the provisions preserving but reducing the liability of the other judgment debtors would be meaningless. The function of the statute seems to be to allow a plaintiff, before or after judgment, to enter into settlements with one or more defendants or judgment debtors without affecting the plaintiff's right to proceed against the others for the balance of what is owed, or believed to be owed. That is also the law in Maryland. As this Court pointed out in Trieschman v. Eaton, supra, 224 Md. 111, 119, 166 A.2d 892, 896 (1961), neither an unsatisfied judgment held against one tortfeasor nor the partial satisfaction of a judgment against one tortfeasor serves to discharge other tortfeasors liable for the same harm. Section 8.01-443 is entirely consistent with that view. The first part of it permits a plaintiff to pursue to judgment claims against any or all joint wrongdoers, jointly, severally, and successively, until the judgment has been satisfied. That pursuit ends, however, when a judgment against one or more joint wrongdoers is fully satisfied; the full satisfaction of such judgment accepted as such by the plaintiff shall be a discharge of all joint wrongdoers, except as to the costs. (Emphasis added). That carries forth the well-established common law view that there can be but one satisfaction of the same wrong. The Revisor's Note to § 8.01-443 confirms that the statute was intended to make clear that discharge of all joint tort-feasors, except as to costs, occurs only when one of multiple judgments has been fully satisfied and has been accepted as such by the plaintiff. (Emphasis added). The Revisor's Note continues that `[s]atisfaction' is determined by case law and in an appropriate situation would include, besides full payment, an accord and satisfaction or a covenant not to sue supported by consideration. The issue, then, is not which statute applies; they both may apply. The question is whether the March, 2004 agreement, captioned and later referred to as an accord and satisfaction, actually constituted, and was accepted by R & D as, a full satisfaction of the judgment against Abrams, Kampa, Rice, and Smyth. If so, Rice was discharged; if not, he remains liable, subject to the credits required by § 8.01-35.1. The Circuit Court resolved that issue on summary judgment, and, on this record, that was error. There are material facts in genuine dispute. That the parties referred to the agreement as an accord and satisfaction is certainly relevant in determining their intent, but it is not dispositive, especially when the Consent Order contemplated by the agreement, and upon which the agreement was expressly contingent, very clearly states that it shall have no effect on either the claims or the judgment against Rice and Smyth. Also bearing significantly on whether R & D accepted the accord and satisfaction as a full satisfaction of the judgment is the statement in the assignment by Abrams and Beacon Hill that the removal of Abrams was intended to facilitate the development of the Beacon Hill golf course and the financial status of New Beacon Hill, both of which are potential assets that may help generate future revenues to repay the judgment. (Emphasis added). That is certainly an indication that R & D did not regard the judgment as fully satisfied. Obviously, Smyth did not believe that the judgment was fully satisfied, as he paid $1,000,000 to secure his own release from it. There is no independent evidence in this record to indicate what value R & D placed on either the assignment of Abrams's interests, which were to Kampa, not R & D, or on the mutual release of contract rights relating to the conveyance of the 10.6-acre parcel. The only monetary consideration referenced in the settlement agreement was an unsecured promissory note for $175,000 that has not been paid. On this record, it cannot properly be determined, as a matter of law, that the accord and satisfaction constituted, and was accepted by R & D as, a full settlement of the judgment. JUDGMENT OF CIRCUIT COURT FOR MONTGOMERY COUNTY REVERSED; CASE REMANDED TO THAT COURT FOR FURTHER PROCEEDINGS; COSTS TO BE PAID BY APPELLEES.