Monday, November 20, 2017
Court of Appeal:
Judge Erred in Finding ‘Without Prejudice’ to Be Ambiguous
By a MetNews Staff Writer
The Fourth District Court of Appeal has reversed a judgment of an Orange Superior Court judge, David L. Belz, who found that the term “without prejudice” in a settlement agreement meant “with prejudice.”
Justice Richard D. Fybel of Div. Three wrote the unpublished opinion, filed Thursday. It reinstates an action dismissed by Belz who found “without prejudice” to be ambiguous.
The litigation concerns the Lois Kathleen Sanchez Revocable Family Trust, set up in 2011. The trustor/trustee died in 2012 and, pursuant to the terms of the trust, her friend Brian Moshenko, a certified public accountant, became successor trustee.
A dispute arose between the beneficiaries of the trust and Moshenko, and the beneficiaries brought a petition to have him removed as trustee, for an accounting, and for attorney fees. Moshenko responded by filing a petition for settlement of his first accounting and an award of trustee and attorney fees.
Several days before the Nov. 25, 2013 trial date, the parties entered into a settlement agreement. It provided that Moshenko would step aside as trustee and each party would withdraw papers that had been filed “without prejudice.”
It recited that “[t]he purpose of this Agreement is to enable the parties to avoid trial on the pending proceedings.”
Each side filed a request for dismissal without prejudice and trial on the scheduled date was averted. However, an accord was not reached at and each side filed a new petition, with the litigation expanding.
“With regard to the argument that the dismissals were ‘without prejudice’ to bring essentially the same actions as alleged in the prior pleadings, the argument is not persuasive. The term, ‘without prejudice’ as contained in the Settlement Agreement is ambiguous and should not be interpreted based on the subjective belief of either party. The Settlement Agreement could have clearly stated the intent of the parties and the meaning of the phrase ‘without prejudice’. The document did not clarify the meaning of that phrase.”
The Orange County judge concluded that the settlement agreement constituted a mutual release of all claims except for Moshenko’s claim for recompense for attorney fees and that the beneficiaries breached the agreement by continuing the litigation.
He found in favor of Moshenko on a breach-of-contract petition and declared that the settlement agreement was an affirmative defense to the beneficiaries’ fiduciary-breach petition.
In explaining the reversal, Fybel wrote:
“The objective theory of contracts is a cornerstone of contract law and provides that the objective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties, controls interpretation. The testimony at trial about certain parties’ subjective understanding of the meaning of the term without prejudice therefore was irrelevant. Construing the language of the settlement agreement de novo, without such testimony, we conclude the term ‘without prejudice’ is unambiguous and permitted Appellants to refile their claims. By concluding the settlement agreement constituted a full release of all claims, the trial court in effect construed the term ‘without prejudice’ to mean ‘with prejudice.” That result is not supported by the law.”
“[N]o releases are given in the Settlement Agreement. There is no paragraph which operates as a release; for example, there is no language stating X releases and forever holds Y harmless.”
The case is Sanchez v. Moshenko, G053442.
The beneficiaries were represented by Alan S. Yockelson Dale A. Kiken. Moshenko’s lawyers on appeal were Jennifer A. Lumsdaine of Tredway, Lumsdaine & Doyle, along with Jill Brousard.
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