Opinion
G053442
11-16-2017
ZACHARY SANCHEZ et al., Plaintiffs and Appellants, v. BRIAN MOSHENKO, Plaintiff and Respondent.
Law Office of Alan S. Yockelson, Alan S. Yockelson; The Kiken Group and Dale A. Kiken for Plaintiffs and Appellants. Tredway, Lumsdaine & Doyle, Jennifer A. Lumsdaine, Brandon L. Fieldsted; The Brousard Law Group and Jill Brousard for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2012-00597244) OPINION Appeal from a judgment of the Superior Court of Orange County, David L. Belz, Judge. Reversed and remanded. Law Office of Alan S. Yockelson, Alan S. Yockelson; The Kiken Group and Dale A. Kiken for Plaintiffs and Appellants. Tredway, Lumsdaine & Doyle, Jennifer A. Lumsdaine, Brandon L. Fieldsted; The Brousard Law Group and Jill Brousard for Plaintiff and Respondent.
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INTRODUCTION
The issue presented by this appeal is whether the term "without prejudice" in a settlement agreement used in reference to withdrawal or dismissal of claims is ambiguous and can be construed to mean "with prejudice."
A settlement agreement between Appellants and Respondent, Brian Moshenko, has a provision requiring both sides to dismiss or withdraw without prejudice their respective claims. Appellants later refiled their claims. At trial, there was conflicting testimony from several parties about their respective, subjective understanding of the meaning of the term "without prejudice" but no testimony that anybody conveyed that understanding to another person. In light of this testimony and other provisions of the settlement agreement, the trial court concluded the term "without prejudice" is ambiguous and the agreement constituted a full release of, and a full defense to, Appellants' claims.
Zachary Sanchez, Joshua Sanchez, and Michael Sanchez as guardian for Shayna Sanchez are the Plaintiffs and Appellants. We refer to each individually by first name to avoid confusion and refer to them collectively as Appellants. --------
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. We therefore reverse the judgment and remand.
FACTS AND PROCEDURAL HISTORY
I. The Trusts and the Parties
Lois Kathleen Sanchez was the trustee of the Lois Kathleen Sanchez Revocable Family Trust U/T/D 03-34-2011 (the Trust). Her three children, Zachary (born in August 1993), Joshua (born in September 1995), and Shayna (born in July 1998) were the beneficiaries of the Trust. Michael is the ex-husband of Lois, the father of Zachary, Joshua, and Shayna, and the current guardian of Shayna.
Moshenko, a life-long friend of Lois, was named the successor trustee of the Trust and of her mother's trust, the Kathaleen M. Yates Trust Dated March 23, 2010, which established the Lois Sanchez Children's Irrevocable Trust (the Children's Trust). Sally Cothrel and Mona Blay were named the second and third successor trustee of the Trust. The terms of the Trust provided that it would terminate three months after the death of Lois and the remaining trust property would be distributed to the Sanchez Family Trust (the Family Trust) and held in trust for Zachary, Joshua, and Shayna until each attained the age of 30.
Lois died in March 2012. Moshenko became trustee of the Trust, the Children's Trust, and the Family Trust.
II. The Parties Enter Into a Settlement Agreement and
the Stipulation
A dispute arose between Moshenko and Appellants over the distribution of certain personal property and Moshenko's decision to list for sale the real property in the Trust. In September 2012, Appellants filed a petition (the Removal Petition) for removal of Moshenko as trustee of the Trust, for suspension of the trustee's powers, for appointment of an interim successor trustee, to compel the trustee to account, and for attorney fees. Moshenko filed objections to the Petition (the Removal Objections) and filed a petition for settlement of the trustee's first account and approval of trustee and attorney fees (the Accounting). Appellants filed objections to the Accounting (the Accounting Objections) with a request for surcharge of the fiduciary and other remedies.
Trial was scheduled to commence on November 25, 2013 on all issues raised by the Removal Petition, the Removal Objections, the Accounting, and the Accounting Objections. Several days before the date scheduled for trial, the parties entered into a settlement agreement (the Settlement Agreement). Paragraph 2.g of the Settlement Agreement states: "[I]t is the intention of the parties to this Agreement to settle and resolve the disputes between ZACHARY, MICHAEL, JOSHUA and SHAYNA, on the one hand, and BRIAN, on the other hand, concerning the REMOVAL PETITION and REMOVAL OBJECTIONS, together with the ACCOUNTING and the ACCOUNTING OBJECTIONS."
Under the terms of the Settlement Agreement, Moshenko was to resign forthwith as trustee of the Family Trust and the Children's Trust, within 10 days deliver "written Declinations to act as Trustee" from successor trustees Cothrel and Blay, and withdraw the Removal Objections. The Settlement Agreement states that Appellants "shall withdraw their REMOVAL PETITION without prejudice and request that it be taken off calendar" and that Moshenko "will withdraw his REMOVAL OBJECTIONS without prejudice." (Italics added.) Moshenko agreed to withdraw the Accounting and file an amended accounting petition, and Appellants agreed to withdraw the Accounting Objections "without prejudice." (Italics added.)
Paragraph 7.e of the Settlement Agreement, called "Representation and Warranties," states: "Later Discovered Facts. Each party is aware that he/she/it may hereafter discover claims or facts in addition to or different from those he/she/it now knows or believes to be true with respect to the matters related herein. Nevertheless, it is the intention of the parties to fully, finally and forever settle and release all such matters, and all claims relative thereto, which do now exist, may exist, or heretofore have existed between them. In furtherance of such intention, the releases given herein shall be and remain in effect as full and complete releases of all such matters, notwithstanding the discovery or existence of any additional or different claims or facts relative thereto." (Italics added.) The Settlement Agreement does not include a separate release and does not otherwise mention releases.
Paragraph 8.b of the Settlement Agreement states: "No Admissions or Waivers. This Agreement effects the settlement of claims which are denied and contested, and nothing contained herein shall be construed as an admission of wrongdoing or liability by any party or any waiver of any right or objection. The purpose of this Agreement is to enable the parties to avoid trial on the pending proceedings." (Italics added.)
At about the same time that the parties entered into the Settlement Agreement, they entered into a stipulation for court approval of the Settlement Agreement (the Stipulation). Among other things, the parties stipulated that "the REMOVAL PETITION be dismissed without prejudice and the REMOVAL OBJECTIONS be withdrawn without prejudice and taken off calendar" and that "the ACCOUNTING be dismissed without prejudice and the ACCOUNTING OBJECTIONS be withdrawn without prejudice and taken off calendar." (Italics added.)
The parties submitted the Stipulation when appearing for trial on November 25, 2013. The court approved the stipulation and the dismissals with the comment, "you can file your amended petition at the appropriate time." That same day, Appellants' counsel filed a request for dismissal without prejudice of the Removal Petition and Removal Objections. Moshenko filed a request for dismissal without prejudice of the Accounting and the Accounting Objections.
III. The Litigation Resumes
In late December 2013, Moshenko filed an Amended Petition for Settlement of 1st Account and Approval of Trustee and Attorney Fees (the Amended Accounting). Several months later, Appellants filed objections to the Amended Accounting with a request to surcharge the fiduciary and for other remedies (the Amended Accounting Objections).
In April 2014, Appellants filed a petition for breach of fiduciary duty against Moshenko (the Fiduciary Breach Petition). The allegations of the Fiduciary Breach Petition were essentially the same as the allegations of the Removal Petition, Accounting Objections, and Amended Accounting Objections. Moshenko demurred to the Fiduciary Breach Petition and moved to enforce the Settlement Agreement. The trial court overruled the demurrer and denied the motion.
Moshenko then filed objections to the Fiduciary Breach Petition and filed a petition alleging breach of contract and other causes of action (the Breach of Contract Petition) against Appellants. Only the breach of contract cause of action survived successful demurrers. The Breach of Contract Petition alleged that Appellants breached the Settlement Agreement by filing the Fiduciary Breach Petition.
Trial on the Fiduciary Breach Petition and the Breach of Contract Petition commenced on October 29, 2015. The Breach of Contract Petition was tried first. At trial Moshenko testified that he had been a certified public accountant since 1990, had practiced as an accountant since 1987, and had earned a master's degree in taxation. Since 1987, he had never seen a release agreement. When asked about his understanding of the meaning of the term "without prejudice" he believed the term to mean the same thing as "without recourse" in a loan transaction, "[m]eaning, . . . the lender cannot come after us, so the party would not go after the individual who took out the loan." Moshenko acknowledged some confusion on his part as to the meaning of "without prejudice."
IV. The Trial Court's Decision
The trial court issued a statement of decision that made findings regarding the meaning of the term "without prejudice." The court found: "The Court considered that . . . Zachary and Michael argued that the language in the Settlement Agreement 'That the accounting be dismissed without prejudice and the accounting objections be withdrawn without prejudice and taken off calendar did not constitute a release.['] The court disagrees. The testimony of Zachary and Michael was not credible to support this finding. In addition, a reasonable reading of the entire set of documents including the Stipulation re Approval of Written Settlement Agreement and Order Thereon and Settlement Agreement can only be made by considering the full context of the agreement. The parties intended to settle all matters pending up to that point in time with the exception as specified on page 3 at paragraph 9 of the Settlement Agreement wherein a first and final accounting would be provided with a request for approval of attorney fees for all attorneys seeking compensation."
The court also found: "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 court concluded the Settlement Agreement was a full release of all claims, except for attorney fees incurred by Moshenko, and Appellants "failed to comply with the terms of the Settlement Agreement by filing a Petition on April 2, 2014." The court found "the Settlement Agreement and the Stipulation . . . confirms the intent of the parties to resolve any and all claims . . . before the court at that time, which then did exist, may exist or heretofore have existed between them." The court found the Settlement Agreement was enforceable and constituted an affirmative defense to the Fiduciary Breach Petition except as to attorney compensation.
Judgment on the Breach of Contract Petition was entered in favor of Moshenko. The trial court later denied a motion by Appellants to set aside and vacate the judgment.
DISCUSSION
I. The Standard of Review Is De Novo Because No
Relevant Extrinsic Evidence Was Admitted at Trial
We start by confirming our standard of review is de novo. "The ultimate construction placed on the contract might call for different standards of review. When no extrinsic evidence is introduced, or when the competent extrinsic evidence is not in conflict, the appellate court independently construes the contract. [Citations.] When the competent extrinsic evidence is in conflict, and thus requires resolution of credibility issues, any reasonable construction will be upheld if it is supported by substantial evidence." (Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 955-956 (Founding Members).)
"Extrinsic evidence is admissible to prove a meaning to which the contract is reasonably susceptible." (Founding Members, supra, 109 Cal.App.4th at p. 955.) Extrinsic evidence was presented at trial, and the parties argue back and forth over the meaning of this evidence and the weight it should be given. Moshenko testified about his understanding of the meaning of "without prejudice," and Zachary and Michael testified about their understanding that the Settlement Agreement was not a release.
None of this evidence was relevant. "California recognizes the objective theory of contracts [citation], under which '[i]t is the objective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties, that controls interpretation' [citation]. The parties' undisclosed intent or understanding is irrelevant to contract interpretation." (Founding Members, supra, 109 Cal.App.4th at p. 956.) No evidence was presented that Moshenko ever disclosed to anybody his understanding of the meaning of "without prejudice," and no evidence was presented that Michael or Zachary ever disclosed to anybody their understanding that the Settlement Agreement was not a release.
Because the only extrinsic evidence presented was of undisclosed intent, and undisclosed intent is irrelevant to contract interpretation, we construe the Settlement Agreement independently based on its language. "The basic goal of contract interpretation is to give effect to the parties' mutual intent at the time of contracting. [Citations.] When a contract is reduced to writing, the parties' intention is determined from the writing alone, if possible. [Citation.] 'The words of a contract are to be understood in their ordinary and popular sense.' [Citations.]" (Founding Members, supra, 109 Cal.App.4th at p. 955.) "We interpret the intent and scope of the agreement by focusing on the usual and ordinary meaning of the language used and the circumstances under which the agreement was made." (Lloyd's Underwriters v. Craig & Rush, Inc. (1994) 26 Cal.App.4th 1194, 1197-1198.)
II. The Term "Without Prejudice" Is Unambiguous: It
Means the Claim Can Be Refiled
The trial court erred by concluding the term "without prejudice" is ambiguous. The term without prejudice has a standard and universal legal definition. It means "'removed from the court's docket in such a way that the plaintiff may refile the same suit on the same claim'" and "'[a] dismissal that does not bar the plaintiff from refiling the lawsuit within the applicable limitations period.'" (Semtek Internat. Inc. v. Lockheed Martin Corp. (2001) 531 U.S. 497, 505-506.) A dismissal without prejudice is not a bar to another action by the plaintiff on the same cause of action. (Gagnon Co., Inc. v. Nevada Desert Inn (1955) 45 Cal.2d 448, 455.) "The dismissal here . . . was without prejudice, which has the effect of holding open Nolan's right to refile his application so long as it is not barred by the statute of limitations." (Nolan v. Workers' Comp. Appeals Bd. (1977) 70 Cal.App.3d 122, 129.)
In the Settlement Agreement, Appellants agreed to withdraw the Removal Petition "without prejudice." The Stipulation likewise provided for the dismissal "without prejudice" of the Removal Petition. "Without prejudice" is unambiguous and means the Removal Petition or the claims asserted in it could be refiled within the applicable statute of limitations period. In effect, the trial court construed the term "without prejudice" to mean "with prejudice."
In construing a contract, we look to the contract as a whole, "so as to give effect to every part, if reasonably practicable." (Civ. Code, § 1641.) Our goal is to discern and give effect to the parties' intent at the time of contracting. (Founding Members, supra, 109 Cal.App.4th at p. 955.) The Settlement Agreement's expression of purposes supports the conclusion the term "without prejudice" has its usual meaning. The Settlement Agreement has two stated purposes. Paragraph 2.g states the intention of the parties is "to settle and resolve the disputes between ZACHARY, MICHAEL, JOSHUA and SHAYNA, on the one hand, and BRIAN, on the other hand, concerning the REMOVAL PETITION and REMOVAL OBJECTIONS, together with the ACCOUNTING and the ACCOUNTING OBJECTIONS." Paragraph 8.b identifies a narrower purpose. It states: "The purpose of this Agreement is to enable the parties to avoid trial on the pending proceedings." (Italics added.)
The intent identified in paragraph 2.g. to "settle and resolve disputes" is carried out by the provisions of paragraph 3 and 4. Paragraph 3, entitled "Resolution of the Removal Petition and the Removal Objections" required Moshenko to execute a formal resignation as trustee and Appellants to withdraw their Removal Petition without prejudice. Paragraph 4, entitled "Resolution of the Accounting and the Accounting Objections," required Moshenko to withdraw the Accounting and Appellants to withdraw the Accounting Objections. The intention of the parties to settle and resolve disputes thus meant only resolution of Moshenko's status as trustee and resolution of the Accounting, and thereby "avoid trial on the pending proceedings." (Italics added.) The intent was not to settle and resolve all pending and potential claims and disputes; that is, a release.
The Settlement Agreement does not have a formal release provision. Instead, it refers to releases in paragraph 7.e, called "Later Discovered Facts." Paragraph 7.e states "[i]n furtherance of such intention, the releases given herein shall be and remain in effect as full and complete releases of all such matters, notwithstanding the discovery or existence of any additional or different claims or facts relative thereto." (Italics added.)
As Appellants point out, no 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. Paragraph 7.e is a boilerplate provision meant to ensure that any later-discovered facts or claims will not affect the releases given herein, but there are no releases given herein. Paragraph 7.a of the Settlement Agreement includes a representation that all parties had been advised by counsel about the meaning of Civil Code section 1542, but does not include a Civil Code section 1542 waiver, which has come to be expected in a release. The provision for dismissals "without prejudice," combined with the stated intent of the Settlement Agreement to avoid trial on the Removal Petition, the Accounting, and the Accounting Objections, supports the conclusion that paragraph 7.e standing alone cannot be read as a release of liability. Inclusion of paragraphs 7.a and 7.e apparently were instances in which boilerplate was copied without modification from another contract, without consideration whether the boilerplate was even applicable to the Settlement Agreement.
Because the term without prejudice is unambiguous, we do not address whether it must be construed against Appellants. (Civ. Code, § 1654 ["In cases of uncertainty not removed by the preceding rules, the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist"].)
DISPOSITION
The judgment is reversed and the matter is remanded for further proceedings. Appellants shall recover their costs on appeal.
FYBEL, J. WE CONCUR: BEDSWORTH, ACTING P. J. ARONSON, J.