Winet v. Price

• Decision Date: 23 March 1992
• Docket Number: No. D013555,D013555
• Citation: 6 Cal.Rptr.2d 554,4 Cal.App.4th 1159
• Court: California Court of Appeals Court of Appeals
• Parties: Robert S. WINET, Cross-Complainant and Appellant, v. William E. PRICE, Cross-Defendant and Respondent.

Page 554

6 Cal.Rptr.2d 554

4 Cal.App.4th 1159

Robert S. WINET, Cross-Complainant and Appellant, v. William E. PRICE, Cross-Defendant and Respondent.

No. D013555.

Court of Appeal, Fourth District, Division 1, California.

March 23, 1992.

Chapin, Fleming & Winet, George E. Fleming and Shirley A. Banner, San Diego, for cross-complainant and appellant.

Keesal, Young & Logan, Robert H. Logan and Dawn M. Schock, Long Beach, for cross-defendant and respondent.

FROEHLICH, Associate Justice.

We are presented in this case with an agreement releasing all claims against a party, including unknown and unsuspected claims, and reinforcing such release by specifically referring to and waiving the benefits of the provisions of CIVIL CODE SECTION 1542¹. The issue is whether this release can be avoided if the releasor testifies he was unaware of a claim and did not intend to waive the right to pursue that claim. Appellant Robert S. Winet (Winet) argues the answer is yes, while respondent William E. Price (Price) contends the answer is no. The trial court agreed with Price and terminated Winet's attempt to pursue the alleged claim by entering summary judgment based on the release.

We conclude it is possible for a general release to effectively accomplish its primary purpose: to enable parties to end their relationship and permanently terminate their mutual obligations. On the record before us, we conclude the present release accomplishes that goal, and we therefore affirm.

I. Factual Background

A. The Genesis of the Release

The material facts are undisputed. During the period from 1973 to early 1975, Price, an attorney, performed legal services for Winet and Winet's various legal entities. Among the legal services Price performed was the drafting of a partnership agreement for an entity known as Newark Storage Partners, Ltd. (hereinafter referred to as "the Newark partnership"). Winet was the general partner of the Newark partnership.

A dispute eventually arose between Winet and Price over legal fees owed by Winet. ² Accordingly, in 1975, Price's law firm, Price & Elster, filed an action to collect its fees from Winet, alleging Winet owed it over $20,000. The matter was eventually settled and a general release signed as part of that settlement. The scope and enforceability of that release concerns us here.

B. The Release

The general release, which named (among others) Price and Winet as releasing parties, provided for a release of "any and all ... claims, ... damages and causes of action whatsoever, of whatever kind or nature, whether known or unknown, or suspected or unsuspected ... against any other Party...." (Emphasis added.) The release of all "known or unknown, or suspected or unsuspected" claims also specifically included all claims arising:

"(a) By reason of any matter or thing alleged or referred to, or directly or indirectly or in any way connected with or arising out of or which may hereafter be claimed to arise out of all or any of the matters, facts events or occurrences alleged or referred to in any of the pleadings on file in [the Price v. Winet collection action].

"(b) Arising out of or in any manner connected with the performance of legal services by [Price or his law firms] for [Winet or his entities], or any act or omission by any Party in connection with "(c) Arising out of or in any way connected with any loss, damage, or injury whatsoever, known or unknown, suspected or unsuspected, resulting from any act or omission, by or on the part of any Party, committed or omitted prior to the date hereof."

said legal services or any request for the performance of legal services.

The parties did specifically except from their agreement any claims connected with "any act or omission committed or omitted relating to Canoga Storage Partners, Ltd...." (Release, p (d)), but made no similar exception for the Newark partnership. The parties then reaffirmed that their agreement included unknown or unsuspected claims, declaring:

"All Parties to this Mutual General Release do hereby further agree as follows:

"(1) There is a risk that subsequent to the execution of this Mutual General Release, one or more Parties will incur or suffer loss, damages or injuries which are in some way caused by the transactions referred to above, but which are unknown and unanticipated at the time this Mutual General Release is signed.

"(2) All Parties do hereby assume the above-mentioned risks and understand that this Mutual General Release SHALL APPLY TO ALL UNKNOWN OR UNANTICIPATED RESULTS OF THE TRANSACTIONS AND OCCURRENCES DESCRIBED ABOVE, AS WELL AS THOSE KNOWN AND ANTICIPATED, and upon advice of legal counsel, all Parties do hereby waive any and all rights under California Civil Code § 1542, which section has been duly explained and reads as follows: [p] 'A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release....' "

"...

"(4) The advice of legal counsel has been obtained by all Parties prior to signing this Mutual General Release. All Parties execute this Mutual General Release voluntarily, with full knowledge of its significance, and with the express intention of effecting the legal consequences provided by [Civ.Code, § 1541], i.e., the extinguishment of all obligations."

Winet was represented by legal counsel during the negotiation of the release.

C. The Present Lawsuit

Nearly 15 years later, some of the limited partners in the Newark partnership sued Winet. The lawsuit sought damages against Winet for breaching his duties as general partner. It also sought declaratory relief and reformation because certain ambiguous language in the Newark partnership agreement did not accurately reflect the agreement or conform to the representations upon which the limited partners relied when they purchased their interests. Winet then cross-complained for contribution and indemnity against Price, alleging that Winet's liability to the plaintiffs, if any, was caused by Price's malpractice in drafting the partnership documents.

Price subsequently moved for summary judgment, arguing that the release was unambiguous and barred any claim by Winet against Price because the claim arose out of the Newark partnership agreement, which the general release encompassed. Winet opposed the motion, arguing summary judgment was inappropriate because there was a disputed issue of "fact," i.e., whether the release covered the present claim. In opposition to the summary judgment motion, Winet submitted his own declaration stating, in pertinent part, that when he signed the release he did not intend to waive all possible disputes with Price over Price's legal services, and that he was unaware at the time he signed the release of the possibility of the present action.

The trial court granted summary judgment, concluding that the release was broadly designed to bar all claims of malpractice arising out of Price and Winet's relationship, that it was specifically negotiated with the help of counsel, and that the significance of Winet's waiver of section 1542 was explained and understood by the parties. Winet appeals.

Our independent review of the language of the release convinces us that it does encompass the claims sued upon here, and we therefore affirm.

II. Standard of Review

The sole issue here is whether the trial court correctly interpreted the written release as barring Winet's claim against Price. Because the interpretation of a settlement agreement is governed by the same principles applicable to any other contractual agreement (see, e.g., Edwards v. Comstock Insurance Co. (1988) 205 Cal.App.3d 1164, 1167-1169, 252 Cal.Rptr. 807), we briefly outline the standards applicable to appellate review of a trial court's interpretation of a contract.

We begin by noting the oft-stated rule that parol evidence is properly admitted to construe a written instrument when its language is ambiguous. The test of whether parol evidence is admissible to construe an ambiguity is not whether the language appears to the court unambiguous, but whether the evidence presented is relevant to prove a meaning to which the language is "reasonably susceptible." (Pacific Gas & E. Co. v. G.W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 37, 69 Cal.Rptr. 561, 442 P.2d 641.)

The decision whether to admit parol evidence involves a two-step process. First, the court provisionally receives (without actually admitting) all credible evidence concerning the parties' intentions to determine "ambiguity," i.e., whether the language is "reasonably susceptible" to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is "reasonably susceptible" to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step--interpreting the contract. (Blumenfeld v. R.H. Macy & Co. (1979) 92 Cal.App.3d 38, 45, 154 Cal.Rptr. 652.)

Different standards of appellate review may be applicable to each of these two steps, depending upon the context in which an issue arises. The trial court's ruling on the threshold determination of "ambiguity" (i.e., whether the proffered evidence is relevant to prove a meaning to which the language is reasonably susceptible) is a question of law, not of fact. (Madison v. Superior Court (1988) 203 Cal.App.3d 589, 598, 250 Cal.Rptr. 299.) Thus the threshold determination of ambiguity is subject to independent review. (Equitable Life Assurance Society v. Berry (1989) 212 Cal.App.3d 832, 840, 260 Cal.Rptr. 819.)

The second step--the ultimate construction placed upon the ambiguous language--may call for differing standards of review, depending upon the parol evidence used to construe the contract. When the competent parol evidence is in conflict, and thus requires resolution of credibility issues, any reasonable construction will be upheld as long as it is supported by substantial evidence. (Stratton v....