Wе are called upon to decide whether a covenant not to sue executed by a party to an earlier suit bars a subsequent action when neither the parties nor the subject matter is the same. We conclude that it does not and that the granting of a directed verdict must be reversed.
The facts leading up to the formation of this issue are fаr more complex than the issue itself. However, an outline of the facts is essential to the determination of the case. The cast of characters includes the following: C. Nevin Briscoe was president of The Brantley Company and its subsidiaries, the Wayne Trading Company, the Pierce Trading Company, the Blackshear Bank and the Blackshear Manufacturing Company. Keith Strickland was an employee of The Brantley Company and worked under Nevin Briscoe. J. E. Briscoe is the brother of Nevin Briscoe and apparently had no rеlationship to any of the corporations involved in this litigation. The roster of corporations is as follows: The Brantley Company is an old corporation providing numerous services in its locale, either through itself or its subsidiary or related corporations. Wayne Trading Company was formerly a wholly owned subsidiary of
The Brantley Company alleged that Nevin Briscoe used his position as president of The Brantley Company to defraud its stockholders for the benefit of Morningside Farms.
The sequence of events is as follows: Wayne Trading Company owned four parcels of real estate and acting through its president Nevin Briscoe conveyed by security deеd a security interest to the parcels to Morningside Farms, Inc. Morningside Farms later exercised its right , to sell under power granted in the security deed and caused a public sale to be conducted at which it bought in the four parcels. Three days later (April 3,1975), Morningside conveyed one of the parcels (a warehouse, sometimes referred to as аn office building) to Keith Strickland for a consideration of $35,000. Strickland paid $20,000 to Morningside and gave Morningside a promissory note and security deed evidencing and securing the balance of $15,000. On May 3,1975, Morningside assigned the note and security deed to Nevin Briscoe who assigned it to his brother J. E. Briscoe on March 7, 1977.
In the meantime, on March 3,1976 (prior to the assignment to J. E. Briscоe), certain shareholders of The Brantley Company filed suit against Nevin Briscoe, Morningside Farms and the individual shareholders of Morningside Farms. The plaintiffs alleged civil deceit, fraud and conspiracy and sought to recover the three properties not conveyed to Strickland (a feed mill, a pig farm, and a parcel containing six environmental chicken houses). In November, 1976, a settlement was reached. Under the settlement, Nevin Briscoe, Morningside Farms and its individual shareholders executed a general release in favоr of The Brantley Company. The chicken houses, feed mill and pig farm were conveyed to The Brantley Company, and in consideration, The Brantley Company executed a covenant not to sue in favor of Briscoe, Morningside Farms and its individual shareholders. After the settlement was effected and in a separate transaction, Keith Strickland, who wаs not a party to the original suit, executed and delivered to The Brantley Company a quitclaim deed to the warehouse property.
At this point, it should be noted that the warеhouse property was not part of the subject matter of the original lawsuit and that neither J. E. Briscoe nor Keith Strickland was a party to the original lawsuit or the settlement following it.
On August 11, 1977, J. E. Briscoe instituted foreclosure proceedings on the warehouse property. It was in response to these proceedings that on September 1,1977, Strickland and The Brantley Company brought the present action in equity praying for a
Two basic questions are involved in this case. Does a covenant not to sue protect a party not named in it (J. E. Briscoe)? Does a covenant not to sue bar an action involving a transaction and property not described in it (the warehouse property)?
1. Appellees point out that the covenant protected Nevin Briscoe and Morningside Farms, Inc. and that J. E. Briscoe was the assignee of Nevin Briscoe and successor in title to Morningside Farms, Inc. Appellees argue that these facts establish him as their privy. In effect, they are asserting that the assignment of the note and security deed carried with it an assignment of Nevin Briscoe’s rights under the covenant not to sue. We cannot agree.
A covenant not to sue does not extinguish a cause of action. It merely bars the holder of the cause of action from asserting it against the party or parties with whom he has covenanted.
Otis v. Wren Mobile Homes,
2. Having found that J. E. Briscoe is not a party to the covenant not to sue, we are still faced with the effect of the cоvenant as to Nevin Briscoe and Morningside Farms, Inc. Therefore, it is necessary now to move to the question of whether the subject matter of the present litigation is affectеd by the covenant not to sue. The covenant makes no reference to the real estate involved in the present action nor does it make any reference to the note and security deed sought to be cancelled. There are references, however, to certain other parcels of
For the reasons stated, we hold the trial court erred in directing a verdict for the defendants.
Judgment reversed.