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Supreme Court, Appellate Division, Second Department, New York.

Vicki MOSELLO, respondent, v. FIRST UNION BANK, etc., appellant.

Decided: February 22, 1999

GUY JAMES MANGANO, P.J., THOMAS R. SULLIVAN, DANIEL W. JOY and MYRIAM J. ALTMAN, JJ. McCullough, Goldberger & Staudt, White Plains, N.Y. (Patricia W. Gurahian and Edmund C. Grainger III of counsel), for appellant. Jeffrey I. Klein, White Plains, N.Y., for respondent.

In an action to recover damages for breach of contract and conversion, the defendant appeals from (1) an order of the Supreme Court, Westchester County (Silverman, J.), dated January 15, 1998, which granted the plaintiff's motion for summary judgment on her complaint and to dismiss the defendant's affirmative defense of setoff, and (2) a judgment of the same court, entered February 24, 1998, which is in favor of the plaintiff and against it in the principal sum of $27,023.61.

ORDERED that the appeal from the order is dismissed;  and it is further,

ORDERED that the judgment is reversed, on the law, the order dated January 15, 1998, is vacated, and the plaintiff's motion is denied;  and it is further,

ORDERED that the appellant is awarded one bill of costs.

The appeal from the intermediate order must be dismissed because the right of direct appeal therefrom terminated with the entry of judgment in the action (see, Matter of Aho, 39 N.Y.2d 241, 248, 383 N.Y.S.2d 285, 347 N.E.2d 647).  The issues raised on the appeal from the order are brought up for review and have been considered on the appeal from the judgment (see, CPLR 5501[a] [1] ).

 Generally, a stipulation of discontinuance “with prejudice” will be given res judicata effect and will bar litigation of the same cause of action (see, Van Hof v. Town of Warwick, 249 A.D.2d 382, 671 N.Y.S.2d 144;  Dolitsky's Dry Cleaners v. Y L Jericho Dry Cleaners, 203 A.D.2d 322, 610 N.Y.S.2d 302).   However, the language “with prejudice” is narrowly interpreted when the interest of justice or the equities of the case warrant such an approach (see, Van Hof v. Town of Warwick, supra;  Dolitsky's Dry Cleaners v. Y L Jericho Dry Cleaners, supra, at 323, 610 N.Y.S.2d 302).

 In this case, a narrow interpretation of the stipulation of discontinuance previously entered into by the plaintiff and the assignee of the defendant's predecessor in settlement of another action is warranted.   Under the circumstances, the stipulation cannot be construed as precluding litigation of the validity of the guarantee at issue in this action, an issue which depends solely on the unresolved question of whether the plaintiff's signature on the guarantee was forged.   Consequently, the Supreme Court erred in concluding that the defendant's affirmative defense, asserting the right of setoff based on the guarantee, was barred by res judicata.

In light of our determination, it is unnecessary to address the defendant's remaining contention.


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