APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR
A. SULLIVAN, JR., Judge, presiding.
JUSTICE LORENZ DELIVERED THE OPINION OF THE COURT:
Plaintiff Ainsworth Corporation (Ainsworth) appeals from an order of the circuit court of Cook County granting summary judgment in favor of defendants Cenco Corporation and Sherwood Irvin (Cenco).
Plaintiff's sole contention on appeal is that genuine issues of material fact remain with respect to whether the terms of a general release preclude the institution of a tort action against the defendants for fraud in the inducement of a contract.
Material to our disposition are the following facts.
In June of 1976, plaintiff and defendants entered into an asset purchase agreement whereby plaintiff agreed to purchase, among other assets, all of the inventory and operating assets of the Medical Products Group of Cenco Medical Industries, Inc., a wholly owned subsidiary of Cenco. The Medical Products Group was engaged in the manufacture and sale of medical sutures and related hospital and medical products.
A section of the asset purchase agreement entitled "Representations and Warranties of Sellers and Cenco" contained a provision which stated that the Medical Products Group manufacturing processes and sterility procedures implemented under Cenco were in compliance with State and Federal safety laws, including the U.S. Pure Food and Drug Act. It provided in pertinent part that: "to the best of [Cenco's] knowledge none of the properties owned, occupied or operated by [Cenco], nor the ownership, occupancy or operation thereof, is, to any extent materially and adversely affecting the business of [Cenco], in violation of any law, ordinance or regulation or * * * federal, state and local safety laws, regulations and ordinances (including * * * the United States Pure Food and Drug Act, or similar laws and regulations * * *.)"
The consideration for this asset purchase agreement included a small amount of cash at closing, a one-year promissory note for $200,000 and $435,000 of Ainsworth preferred stock. The stock was convertible into a debt instrument in the event of Ainsworth's failure to pay dividends and made redemptions as specified in the asset purchase agreement schedule.
Shortly after consummation of the purchase, a dispute arose between the parties which persisted for several months. Ainsworth alleged that there were substantial discrepancies in Cenco's statements concerning the liabilities and assets of the Medical Products Group, particularly relating to inventory assets. Ainsworth subsequently defaulted upon its promissory note payments and stock redemption obligations.
At the request of Ainsworth's president, Joseph Cvengros, both parties entered into a letter agreement in January of 1977 "in order to resolve the existing dispute between us."
This settlement agreement stated that:
"[Cenco has] contended that Ainsworth is in default with respect to certain of its obligations thereunder * * *. The [Asset Purchase] Agreement also contains various representations and warranties by [Cenco] and [Ainsworth] contend[s] that certain of those representations and warranties have been breached. In order to resolve the existing dispute between us, we have all agreed to the following * * *."
In the settlement agreement, Cenco agreed to substantial financial concessions as to plaintiff's payment obligations, including a reduction of interest on the $200,000 note, a 10-month deferral of any payments on the note, a 15-month deferral of stock dividend payment and redemption, and a waiver of past defaults.
The settlement agreement further provided "that the representations and warranties of [Cenco] in the [Asset Purchase] Agreement shall all expire on the date of [the settlement agreement] and Ainsworth and Cvengros waive any breach of any of such representations, warranties or covenants, or any default under the agreement which may have occurred prior to the date of this agreement." (Emphasis added.)
Approximately four months later, the U.S. Food and Drug Administration investigated the medical products facilities acquired by the plaintiff from Cenco, in order to ascertain its ...