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Passaic Beth Israel Hospital v. Perez

March 4, 2010


On appeal from the Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-1025-07.

Per curiam.


Argued February 3, 2010

Before Judges Axelrad, Fisher and Espinosa.

In an earlier appeal in this declaratory judgment action, we examined the trial court's summary determination that a 2000 written settlement agreement not only resolved Lorenzo Perez's then-pending 1997 suit for damages against his former employer, Passaic Beth Israel Hospital (the hospital), that involved claims of discrimination and wrongful termination (the employment action), but also encompassed Perez's then-pending 1998 workers' compensation action (the compensation action). Passaic Beth Israel Hosp. v. Perez, No. A-4595-06T2 (App. Div. March 7, 2008). Finding the judge was mistaken in summarily rejecting plaintiff's plausible interpretation that the agreement did not encompass the compensation action, we remanded for an evidentiary hearing to examine the circumstances surrounding the settlement agreement's formation and other extrinsic evidence.

Following our remand, a different judge conducted a hearing. Perez and his wife testified, as did Patricia Wilson, who was the hospital's vice-president of human resources when the settlement agreement was negotiated and executed.*fn1 Perez testified that he understood the settlement agreement would not encompass the compensation action; Perez's wife provided corroborative testimony. On the other hand, Wilson testified that she intended that the settlement agreement would include all Perez's claims against the hospital. No one else testified.

The judge also considered the fact that the parties had separate counsel in the two actions. It was undisputed that the compensation attorneys were not involved and that the attorneys in the employment action alone negotiated and participated in the drafting of the settlement agreement. Perez could not call as a witness his attorney in the employment action because that attorney died before this controversy arose. The hospital did not call as a witness its attorney in the employment action nor did the hospital attempt to demonstrate the attorney was unavailable.

In considering the evidence adduced at the hearing, the judge found both Perez and Wilson testified credibly about their intentions notwithstanding their versions were at odds. Despite that conflict, the judge concluded that "the agreement did not settle" the workers' compensation matter.

The judge reached this conclusion in part by applying equitable estoppel principles. He found -- and there was no dispute -- that the compensation matter was not dismissed following execution of the settlement agreement; instead, the parties continued to litigate that matter for many years. A trial in the compensation matter began in December 2005, but the settlement agreement was not brought to the compensation judge's attention, or urged as a reason for dismissal, until late September 2006.*fn2 Considering the hospital's silence for that extraordinary length of time, the judge concluded that the doctrine of equitable estoppel precluded the hospital from asserting the settlement agreement as a ground for dismissing the compensation action. We agree that the order under review should be affirmed, but for somewhat different reasons.

In our earlier opinion, we discussed the critical clauses of the settlement agreement. Of great significance is the fact that the agreement expressly declared the parties' desire "to avoid further proceedings with respect to certain claims that [Perez] has made against [the hospital] in the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-12016-97." That description unambiguously refers only to the employment action; the compensation action was not mentioned by name, court or docket number. The settlement agreement also expressly stated that the hospital agreed to pay Perez $35,000 in exchange for a dismissal with prejudice of "the complaint filed in the Litigation," and defined "Litigation" in a manner that could only be understood as incorporating the employment action. In the earlier appeal, we were also impressed by the fact that the settlement agreement listed all the types of claims that Perez agreed to waive -- expressly identifying dozens of such possible actions, see Passaic Beth Israel Hosp. v. Perez, supra, slip op. at 4 n.3 -- and yet failed to incorporate within that list a claim based on the Workers' Compensation Act. And we also then emphasized the hospital's continued participation in the compensation action for more than five years following execution of the settlement agreement. The compensation action was pending for nearly two years before, and remained pending for more than five years after, execution of the settlement agreement. As we stated in our earlier opinion, "insight into the parties' intentions in entering into an agreement may be gained by resort to their subsequent actions." Passaic Beth Israel Hosp. v. Perez, supra, slip op. at 11 (citing Michaels v. Brookchester, Inc., 26 N.J. 379, 388 (1958)). All these facts and circumstances favored the factual version urged by Perez.

In addition, it is striking that the hospital did not call as a witness its attorney in the employment action. The judge found that the hospital's employment attorney was involved in the negotiations and the drafting of the settlement agreement and could likely have illumined the parties' intentions; the hospital's failure to call that witness appropriately gave rise to an inference that the attorney's testimony would not have been favorable to the hospital. See Gonzalez v. Safe & Sound Sec. Corp., 185 N.J. 100, 118 (2005); State v. Clawans, 38 N.J. 162, 170-71 (1962). And, even though the judge found Wilson to be credible -- a determination entitled to our deference, see In re Estate of Stockdale, 196 N.J. 275, 298 (2008); State v. Locurto, 157 N.J. 463, 470-71 (1999) -- we agree with the judge's implicit finding that the hospital's failure to incorporate Wilson's subjective intentions within the language of the settlement agreement renders her testimony largely irrelevant, or certainly of little worth, in ascertaining the impact of the settlement agreement on Perez's compensation action. See Hagrish v. Olson, 254 N.J. Super. 133, 138 (App. Div. 1992) (holding that "a contracting party is bound by the apparent intention he or she outwardly manifests to the other party" and finding "[i]t is immaterial that he or she has a different, secret intention from that outwardly manifested").

In short, the great weight of the evidence relating to the settlement agreement's meaning, as examined in light of the agreement itself and other extrinsic evidence, supported Perez's interpretation. The judge's conclusion that the settlement agreement did not incorporate the compensation action is fully supported by the evidence, thus negating any consideration of whether the application of equitable estoppel principles would lead to the same result.


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