What is the effect of mutual release on rescission and breach of fiduciary duty causes of action?

The trial court's determination in the instant case, as to the rescission and breach of fiduciary duty causes of action, was that the action would not succeed, in that the mutual release barred its prosecution. The mutual release operated to effect a relinquishment of the right to pursue the claims raised against appellants. (Hastings v. Matlock (1980) 107 Cal.App.3d 876, 882.) While appellants' innocence of the misconduct alleged was not established, appellants' lack of liability was established. In this respect, the determination is one on the merits.

Respondents claim it is not, citing Silver v. Shemanski (1949) 89 Cal.App.2d 520 and Code of Civil Procedure section 597. In Silver, plaintiff filed a complaint for declaratory relief against defendants. (At p. 524) He subsequently entered into a compromise agreement with one of the defendants, agreeing to dismiss the action for consideration. (Id. at pp. 526-527.) Plaintiff did not dismiss the action, however. Sometime thereafter, that defendant filed an answer and a cross-complaint. (Id. at pp. 527-528.) In the cross-complaint, she sought to set aside the compromise agreement. When the case was called for trial, plaintiff sought to try first the question whether the compromise agreement should be set aside, in that, if the agreement was found to be valid, that finding would dispose of the remaining issues. The trial court tried that issue first, found the compromise agreement to be valid, and dismissed the cross-complaint. (Id. at pp. 528-529.) The question on appeal was whether the trial court erred in trying first the question of the validity of the compromise agreement. (Id. at p. 529.)

The court observed that pursuant to Code of Civil Procedure section 2042, the trial court has discretion to regulate the order of proof.⁴ (Silver v. Shemanski, supra, 89 Cal.App.2d at p. 529.) Code of Civil Procedure section 597 provides the trial court with authority to hear first a special defense that would bar a recovery by the plaintiff. (Silver, supra, at p. 530.) The court then noted that "section 597 of the Code of Civil Procedure is but a legislative recognition of the power of a trial court under section 2042 of the Code of Civil Procedure and places an imprimatur upon a practice which contemplates a trial first of the severable issues which if determined adversely to the plaintiff will obviate the necessity of a protracted trial of issues which by such determination are rendered irrelevant and immaterial. The rule in question is supported by reasons based upon the economical and speedy administration of justice." (Silver, supra, at p. 530.) The court thereafter concluded that the trial court was justified in trying first the question of the validity of the compromise agreement, since determination of that issue might render trial on the remaining issues unnecessary. (Id. at pp. 530-531.)