Court Opinion

ID: 2747409
Source: CourtListenerOpinion
Date Created: 2014-10-31 19:04:34.888819+00
Date Added: 2024-06-11T11:26:34.819647
License: Public Domain

STATE OF MICHIGAN

                            COURT OF APPEALS

REBECCA POLLOCK,                                                     UNPUBLISHED
                                                                     October 30, 2014
               Plaintiff-Appellee,

v                                                                    No. 316950
                                                                     Macomb Circuit Court
CHESTERFIELD TOWNSHIP,                                               LC No. 2011-004006-CK

               Defendant-Appellant.

Before: FITZGERALD, P.J., and WILDER and OWENS, JJ.

PER CURIAM.

        Defendant appeals as of right the circuit court’s order requiring defendant to pay health
and life insurance benefits to plaintiff. We affirm.

        In a preceding case, plaintiff sued defendant, her former employer, for alleged gender
discrimination. The parties resolved that case by executing a settlement agreement, which was
drafted by defendant. Under the terms of the settlement, plaintiff agreed to release any further
claims arising out of her employment with defendant. As an exception to this release, defendant
agreed not to impede plaintiff’s then-pending application for “duty disability retirement through
the Municipal Employment Retirement System” (MERS). Plaintiff’s application for duty
disability retirement was approved by MERS, and she requested defendant to pay a stipend for
health and life insurance. Defendant refused and the instant suit ensued.

        The trial court found that the settlement agreement was ambiguous with respect to
whether defendant was responsible to pay any benefits to plaintiff. It consequently found that
resort to extrinsic evidence was necessary to determine the parties’ intent. The trial court found
that plaintiff “approached the settlement negotiations with the understanding that plaintiff would
be entitled to medical and life insurance benefits if her duty disability retirement was approved
by MERS,” while defendant “approached the settlement negotiations with the understanding that
plaintiff would not be entitled to medical and life insurance benefits under any circumstances,
even if plaintiff’s duty disability retirement was approved by MERS.” Finding that extrinsic
evidence did not establish the parties’ intent with respect to health and life insurance, the court
employed the rule of construction known as contra proferentem. See Klapp v United Ins Group
Agency, Inc, 468 Mich. 459, 470-471; 663 NW2d 447 (2003) (“[I]f the language of a contract is
ambiguous, and the [fact-finder] remains unable to determine what the parties intended after
considering all relevant extrinsic evidence, the [fact-finder] should only then find in favor of the

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nondrafter of the contract pursuant to the rule of contra proferentem.”). The court held “that
defendant’s current opposition to plaintiff’s request for health and life insurance benefits
constitutes an interference with her application for duty disability benefits.”

         Defendant argues that the trial court erred in finding that the settlement agreement was
ambiguous. We disagree. In general, the interpretation of a settlement agreement, which is
construed as a contract, presents a question of law that we review de novo. MacInnes v
MacInnes, 260 Mich. App. 280, 283; 677 NW2d 889 (2004). However, “the meaning of an
ambiguous contract is a question of fact that must be decided by” the finder of fact. Klapp, 468
Mich. at 469. We review a trial court’s factual findings following a bench trial for clear error.
Ladd v Motor City Plastics Co, 303 Mich. App. 83, 92; 842 NW2d 388 (2013). “A finding is
clearly erroneous if there is no evidentiary support for it or if this Court is left with a definite and
firm conviction that a mistake has been made.” Chelsea Investment Group LLC v Chelsea, 288
Mich. App. 239, 251; 792 NW2d 781 (2010). We “give deference to the trial court’s superior
ability to judge the credibility of the witnesses who appeared before it.” Glen Lake-Crystal River
Watershed Riparians v Glen Lake Ass’n, 264 Mich. App. 523, 531; 695 NW2d 508 (2004)
(internal quotation marks and citation omitted).

       “A contract is ambiguous when its words may be reasonably understood in different
ways.” Hellebuyck v Farm Bureau Gen Ins Co of Michigan, 262 Mich. App. 250, 254; 685
NW2d 684 (2004). A contract may also be latently ambiguous “when the language in a contract
appears to be clear and intelligible and suggests a single meaning, but other facts create the
necessity for interpretation or a choice among two or more possible meanings.” Shay v Aldrich,
487 Mich. 648, 668; 790 NW2d 629 (2010) (internal quotation marks and citations omitted).

       The pertinent language of the settlement agreement reads as follows:

               IT IS FURTHER UNDERSTOOD AND AGREED that Plaintiff has
       applied for duty disability retirement through the Municipal Employees’
       Retirement System of Michigan (MERS), and that her application is currently
       pending. Defendant agrees that it will execute whatever documents are necessary
       to assist and cooperate in Plaintiff’s application for retirement benefits through
       MERS, including specifically waiving the one year tolling provision under MERS
       Plan Section 24 (1)(a), and providing any other documents necessary to timely
       file her application and Defendant shall not object to Plaintiff’s application for
       duty disability benefits. Defendant cannot, has not and does not make any
       representation with respect to Plaintiff’s eligibility for disability benefits which is
       within the discretion of MERS. If Plaintiff is denied disability benefits by MERS,
       she may pursue appeals with respect to MERS, but will have no recourse against
       the Township. If Plaintiff’s disability benefits are approved by MERS, Defendant
       will not object to or appeal her entitlement to disability payments under
       Defendant’s MERS Plan. For purposes of MERS’ pension benefit, Plaintiff
       ceased to be paid on January 6, 2006.

        With respect to the question at issue, this provision is ambiguous. The ambiguity
originates from the meaning of the word “through.” The provision provides that plaintiff
“applied for duty disability retirement through” MERS and that defendant agreed to “cooperate

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in Plaintiff’s application for retirement benefits through MERS.” (Emphasis added). Defendant
argues that this meant that plaintiff would only be entitled to the monthly benefit paid by MERS
if she was approved by MERS for duty disability retirement. Plaintiff argues, however, that it
meant that defendant would have to provide health and life insurance, which are duty disability
benefits, for plaintiff if she was approved by MERS for duty disability retirement, i.e., MERS
serves only as the entity that determines whether plaintiff is entitled duty disability retirement;
the responsibility to pay those benefits falls elsewhere. Both interpretations are reasonable.
Additionally, Random House Webster’s College Dictionary (2001) contains 21 definitions for
“through,” but as used in the settlement agreement, the most apt definition being “by the means
of.” Both proffered interpretations are consistent with the benefits being provided “by means of”
MERS involvement. Given this uncertainty in the meaning of the agreement, the trial court did
not err in holding that the settlement agreement is ambiguous.

        Defendant also argues that the trial court’s interpretation of the contract was erroneous.
We disagree. Where a contract is ambiguous, the finder of fact may consider extrinsic evidence
to arrive at its proper interpretation. Klapp, 468 Mich. at 469-470. “ ‘[T]he court can look to
such extrinsic evidence as the parties’ conduct, the statements of its representatives, and past
practice to aid in interpretation.’ ” Id. at 470, quoting Penzien v Dielectric Prods Engineering
Co, Inc, 374 Mich. 444, 449; 132 NW2d 130 (1965). The objective is to discern the intent of the
parties. Id. at 469-470. However, if extrinsic evidence does not reveal the intent, as a last resort,
the ambiguity should “be construed against the drafter of the contract.” Id. at 470-471. Stated
otherwise, “[i]f an ambiguous term exists in the contract, courts should generally construe the
term against the contract’s drafter, unless the drafter presents persuasive extrinsic evidence that
the parties intended a contrary result.” Scott v Farmers Ins Exch, 266 Mich. App. 557, 561; 702
NW2d 681 (2005).

        Plaintiff’s and defendant’s attorneys in the gender discrimination case agreed that under
ordinary circumstances, when MERS approves a police officer for duty disability retirement,
defendant is required to pay for health and life insurance. Frank Klik, a labor rep with the Police
Officers Labor Council with defendant, corroborated this assertion. Regarding the settlement
agreement in this case, plaintiff’s attorney believed that if MERS approved plaintiff for duty
disability retirement, she would be entitled to those benefits as if she had been approved under
ordinary circumstances. Defendant’s attorney testified that his understanding of the agreement
was that plaintiff would not be entitled to duty disability benefits from defendant even if she was
approved by MERS, and that the agreement was a lump sum settlement. He also testified that
the parties discussed health and life insurance and that he made it clear to plaintiff that defendant
would not pay such benefits. Plaintiff’s attorney testified that defendant’s attorney never told her
that “duty disability benefits” did not include health and life insurance, and that she and
defendant’s attorney never discussed health care benefits.

        The trial court credited plaintiff’s attorney’s account where it conflicted with defendant’s
attorney’s account. The trial court also found that the parties “never actually discussed”
plaintiff’s entitlement to health and life insurance. Deferring to the trial court’s superior ability
to examine the facts and consider the credibility of the witnesses appearing before it, we are not
left with a definite and firm conviction that the trial court’s findings were erroneous. And
pursuant to those findings, the trial court correctly concluded that the settlement agreement
should be interpreted against defendant. The trial court found that extrinsic evidence of the

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parties’ intent indicated that the parties did not have a common understanding of the benefits that
plaintiff would be entitled to if approved by MERS. Instead, they had contradictory
understandings. Thus, the extrinsic evidence presented at trial did not readily suggest one
interpretation of the disputed language over the other. In this circumstance, the rule of contra
proferentem, as a last resort, required the trial court to construe the language against defendant,
the undisputed drafter of the settlement agreement. Klapp, 468 Mich. at 472.

       Finally, defendant argues that this suit was barred by the doctrine of res judicata. We
disagree. Whether a claim is barred by the doctrine of res judicata is a question of law that we
review de novo. Ditmore v Michalik, 244 Mich. App. 569, 574; 625 NW2d 462 (2001).

         “Res judicata bars a subsequent action between the same parties when the essential facts
or evidence are identical.” Bd of Co Rd Comm’rs for Co of Eaton v Schultz, 205 Mich. App. 371,
375; 521 NW2d 847 (1994). For the doctrine to apply, the following elements must be met: “(1)
the first action be decided on the merits, (2) the matter contested in the second case was or could
have been resolved in the first, and (3) both actions involve the same parties or their privies.” Id.
at 375-376. Plaintiff does not dispute that elements (1) and (3) have been met, but disputes
whether her claim for benefits could have been resolved in the preceding lawsuit. In determining
whether the matter contested in the second case could have been resolved in the first, “the
determinative question is whether the claims in the instant case arose as part of the same
transaction as did the claims in” the preceding case. Adair v State, 470 Mich. 105, 125; 680
NW2d 386 (2004).

        The instant suit was not barred by res judicata. The transaction that gave rise to the
preceding case was the alleged gender discrimination. The transaction that gave rise to the
present case was the settlement of the gender discrimination suit. While naturally related, they
were distinct transactions. Although, as defendant argues, the parties could have resolved
whether defendant would be required to provide health and life insurance for plaintiff, that is no
longer the issue. Rather, the issue is whether the settlement agreement barred such recovery by
plaintiff. In sum, the current dispute arose after and because of the settlement, and consequently
could not have been resolved in the preceding lawsuit.

       Affirmed.

                                                              /s/ E. Thomas Fitzgerald
                                                              /s/ Kurtis T. Wilder
                                                              /s/ Donald S. Owens

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