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Matthews v. Minakakis

A-2517-99T3 (N.J. Super. App. Div. 2000) (Unpublished)

RELEASES—The scope of a release is determined by the intention of the parties as expressed in the terms of the particular instrument, considered in the light of all of the facts and circumstances.

Two men were equal shareholders in a restaurant. One of them contributed approximately $150,000 to form the corporation. The other contributed a lesser amount, but operated the restaurant on a full-time basis. The restaurant was only marginally successful and the working shareholder retained all of the income from the business. He then made arrangements to sell the restaurant and expressed a desire to retain all of the proceeds from the sale of the restaurant. The silent shareholder indicated that he had no problem with this arrangement as long as he was repaid the $150,000 that he had contributed and was indemnified for any tax liability he might incur as a result of the transaction. The two men signed a handwritten agreement, essentially to that effect. The restaurant’s accountant suggested that the silent shareholder transfer his shares to the working shareholder at the beginning of a tax year because the working shareholder had a lower tax bracket “and it would be much simpler for him and cheaper for him to report all of the” income as his own. To achieve this objective, the corporation’s attorney, who was also the working shareholder’s nephew, prepared another agreement with respect to the sale of shares. That agreement contained a mutual release. When the silent shareholder insisted upon payment of the $150,000, the working shareholder pointed to the subsequent agreement and its release and also alleged that the original handwritten agreement had been signed under duress. The lower court found the release to be clear and unambiguous and therefore there were no material issues of fact in dispute. Accordingly, it granted the working shareholder summary judgment. The Appellate Division was not so sure. It pointed out that “[t]he scope of the release is determined by the intention of the parties as expressed in the terms of the particular instrument, considered in the light of all the facts and circumstances.” That being the case, it concluded that there was a “contested issue of fact as to what was within the contemplation of the parties who executed the [later] agreement.” It seemed to the Court that if the parties really intended to relieve the working shareholder of the $150,000 obligation, it would have been likely that the later agreement would have expressly so stated. In addition, the attorney who drafted the later agreement was not even aware of the $150,000 obligation. Accordingly, the Appellate Division decided that the issue as to whether the release was intended to include the $150,000 obligation had to be decided by a trial.

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