Opinion
03 Civ. 4043 (AJP)
December 19, 2003
OPINION ORDER
Presently before the Court are cross-motions for summary judgment by plaintiff Chevron and defendants Tallyerand and Cappelli, involving the interpretation of a clause in a prior settlement agreement between the parties. (Dkt. Nos. 14-20.) The parties have consented to disposition of this case by a Magistrate Judge pursuant to 28 U.S.C. § 636(c). (Dkt. No. 11.)
For the reasons discussed below, Chevron's summary judgment motion isGRANTED and Talleyrand's cross-motion is denied.
FACTS
The facts are not in dispute, only the interpretation of them.On or about November 22, 1996, Chevron and Talleyrand entered into a Partnership Agreement. (Dkt. No. 15: Chevron 56.1 Stint. ¶ 4; Dkt. No. 19: Talleyrand Response 56.1 Stint. ¶ 4.) Under the Partnership Agreement, Talleyrand was the sole general partner and Chevron the sole limited partner. (Chevron 56.1 Stmt. Talleyrand Response ¶ 5.) The Partnership, and the partners, anticipated obtaining tax benefits in the form of tax credits due to the Partnership's ownership of a low-income housing project. (See Chevron 56.1 Stmt. ¶ 6; Dkt. No. 18: Talleyrand 56.1 Stmt. ¶ 6.)
On January 12, 2001, Chevron commenced suit in this Court against Talleyrand, 01 Civ. 0290 (the "First Action"). (Chevron 56.1 Stmt. Talleyrand Response ¶ 7.) On July 17, 2001, the parties settled the First Action. (Chevron 56.1 Stmt. Talleyrand Response ¶ 9.) Pursuant to the First Settlement Agreement, Talleyrand was to pay Chevron $4.2 million — $3.2 million at closing and $1 million (plus interest) six months after the closing date. (Chevron 56.1 Stmt. Talleyrand Response ¶ 10.) At the closing on July 23, 2001, Chevron received $3.2 million, of which $828,038 was in the form of tax credits. (Chevron 56.1 Stmt. Talleyrand Response ¶ 11.) Chevron formally withdrew as a partner in the Partnership on July 23, 2001. (Chevron 56.1 Stmt. ¶ 12; Talleyrand 56.1 Stmt. ¶ 15; Chevron Response 56.1 Stmt. ¶ 15.)
On April 26, 2002, Chevron brought a second action in this Court against Talleyrand, 02 Civ. 3227, alleging Talleyrand failed to pay the $1 million due January 23, 2002, i.e., due six months after the prior closing date. (Chevron 56.1 Stmt. Talleyrand Response ¶ 14.) On September 27, 2002, Chevron and Talleyrand settled this second action by entering into the Second Settlement Agreement. (Chevron 56.1 Stmt. Talleyrand Response ¶ 15.) Talleyrand paid the $1 million plus interest and Chevron's attorneys' fees and reaffirmed their agreement to the First Settlement Agreement. (Chevron 56.1 Stmt. Talleyrand Response ¶¶ 15-16.) The Talleyrand Surety Bond Requirement
Since the First Settlement Agreement called for Chevron to leave the partnership on the closing date, a portion of Chevron's tax credits would have been immediately subject to recapture by the IRS unless Chevron obtained a "Low-Income Housing Credit Disposition Bond — IRS Form 8693 (a `Recapture Bond')," which Chevron obtained and continues to maintain. (Chevron 56.1 Stmt. Talleyrand Response ¶¶ 17, 19.)
The First Settlement Agreement requires Talleyrand to indemnify Chevron if Chevron is called upon to make any payment under its Recapture Bond:
Indemnity Obligations. If, and to the extent, Chevron must make a payment under the Recapture Bond, or a payment of a recapture tax and/or any associated interest or costs as set forth in Section 42(j) of the Code (collectively the "Recapture Payments"), Defendants [Talleyrand and Louis Cappelli] shall pay Chevron an amount equal to the payment required to be made by Chevron as described herein, except that no payment shall be owed if the Recapture Payments result from Chevron's failure to comply with its obligations. . . . To satisfy its Recapture Payments obligations, Chevron may, at its sole discretion, make demand on the surety bond described in paragraph 8 below.
(Chevron 56.1 Stmt. Ex. C: First Settlement Agmt. ¶ 7(d);see also Chevron 56.1 Stmt. ¶ 20; Talleyrand 56.1 Stmt. ¶ 22; Chevron Response 56.1 Stmt. ¶ 22.)
Defendants Talleyrand and Cappelli's obligations under § 7(d) were to be secured by a Surety Bond:
Defendants' Obligation to Obtain Surety Bond. Prior to the Closing Date, and as a condition precedent to the parties' respective obligations to close, Defendants [Talleyrand and Cappelli] shall obtain a surety bond for the benefit of Chevron from a duly licensed surety, to be maintained by Defendants for fifty-eight (58) months after the termination of the Compliance Period (the" Surety Bond"). Defendants shall be responsible for maintaining the Surety Bond in accordance with applicable law, including, without limitation, paying all premiums and posting all collateral required for the issuance of the Surety Bond. Said bond shall be in an amount equal to ninety (90%) percent of the Tax Credits allocated by the Defendants to Chevron under this Agreement, shall contain terms reasonably satisfactory to Chevron, and shall cover all obligations, conditions and recapture contingencies set forth in paragraphs 5 and 7 above, exclusive of paragraph 7(a).
(Chevron 56.1 Stmt. Ex. C: First Settlement Agmt. ¶ 8; see also Chevron 56.1 Stmt. Talleyrand Response ¶ 21.)
On or about July 13, 2001, Talleyrand obtained a Surety Bond, in the amount of $752,762.93, in satisfaction of paragraph 8. (Chevron 56.1 Stmt. Talleyrand Response ¶¶ 22-23.) The Surety Bond expired no later than July 17, 2003. (Chevron 56.1 Stmt. Talleyrand Response ¶ 26.)
Failure to maintain Talleyrand's Surety Bond is a breach of the First Settlement Agreement, which provides:
The failure to maintain the Surety Bond as set forth herein shall constitute a material breach of this Agreement. In the event of any such breach, Chevron shall provide written notice to Defendants. Defendants shall have ten (10) days from the receipt of such notice to cure the breach by procuring and maintaining the Surety Bond. In the event Defendants fail to cure the breach, Defendants shall be required within fourteen (14) days of any such failure to deliver to Chevron cash in the amount of the required Surety Bond, such amount to be held in escrow for the same purposes of the bond, as set forth herein.
(Chevron 56.1 Stmt. Ex. C: First Settlement Agmt. ¶ 9.) Chevron gave Talleyrand and Cappelli written notice but they did not obtain a new Surety Bond nor give Chevron cash, contending that they had no obligation to maintain the Surety Bond. (Chevron 56.1 Stmt. ¶¶ 28-32; Talleyrand Response 56.1 Stmt. ¶¶ 28, 31-32; Talleyrand 56.1 Stmt. ¶¶ 30-35; Chevron Response 56.1 Stmt. ¶¶ 30-35.)
Talleyrand relied on the property sale indemnity proviso in Paragraph 9:
If the Partnership shall sell the Property at anytime during which the Surety Bond is required by this Settlement Agreement, Chevron agrees to accept a surety bond (the "Substitute Surety Bond") obtained by the purchaser of the Property, which Substitute Surety Bond shall contain terms reasonably satisfactory to Chevron. The Substitute Surety Bond shall be in replacement of the Surety Bond required to be obtained by Defendants pursuant to this Agreement. In the event however, that any purchaser of the Property has a net worth at the time of the sale of the Property in excess of $500,000,000.00, all obligations to provide the Surety Bond or a Substitute Surety Bond under this Agreement shall be terminated, provided that such purchaser provides an indemnity for the benefit of Chevron covering the obligations, conditions and recapture contingencies set forth in paragraphs 5 and 7 (exclusive of paragraph 7(a)) of this Agreement and containing terms reasonably satisfactory to Chevron.
(Chevron 56.1 Stmt. Ex. C: First Settlement Agmt. ¶ 9.)
The Purchase and Sale Agreement
On June 13, 2001, Talleyrand, on behalf of the not-yet-dissolved Partnership, entered into an Agreement of Purchase and Sale (the "P S Agreement") to sell the housing property to third party defendant ERP Operating Limited Partnership ("ERP"). (Chevron 56.1 Stmt. ¶ 33; Talleyrand 56.1 Stmt. ¶ 36; Chevron Response 56.1 Stmt. ¶ 36.)
The P S Agreement contains an indemnification clause, as follows:
"Purchaser's Indemnity Obligations. If, and to the extent, a Recapture Event Purchaser Breach occurs and such Recapture Event Purchaser Breach results in a payment under the Recapture Bond, subject to the provisions below, Purchaser shall pay to Seller, on an aftertax basis, an amount equal to the payment required to be made by Seller under the Recapture Bond, but only to the extent such payment directly relates to the recapture of Tax Credits caused by a Recapture Event Purchaser Breach. An `after tax basis' means that payment to Seller is equal to the payment required under the Recapture Bond after taking into account any applicable deduction available to Seller as a result of the payment under the Recapture Bond and any federal income tax payable by Seller on account of the receipt of such payment by Purchaser. The obligations of Purchaser under this Section 1.5(f) shall survive the Closing without limitation."
(Chevron 56.1 Stmt. Talleyrand Response ¶ 41, quoting Chevron 56.1 Stmt. Ex. K: P S Agreement ¶ 1.5(f).)
The terms in the indemnification paragraph are further defined in the P S Agreement as follows:
a. Recapture Event Purchaser Breach refers to the failure by ERP under Paragraph 1.5(e) to take "any and all actions required to insure that the Property will continue to qualify as a low-income housing project under Section 42 of the Code to the extent necessary to avoid any event that would cause recapture of the Tax Credits, explicitly excluding any event outside ERP's reasonable control, events caused by Talleyrand, and all preclosing events (see Tab K, ¶ 1.5(e));
i. Property refers to the same property underlying the Partnership Agreement (see Tab K, ¶ 1.2);
ii. Tax Credits refers to the credits obtained by the Partnership "[i]n connection with [the Partnership's] construction" of the Property (see Tab K, ¶ 1.5(a));
b. Recapture Bond refers to the Partnership's obligation to obtain a bond pursuant to Section 42(j)(6) of the Code (see Tab K, ¶ 1.5(b)(ii));
c. Purchaser refers to ERP (see Tab K, ¶ 1.1(a)); and
d. Seller refers to the Partnership (see Tab K, ¶ 1.1(b)).
(Chevron 56.1 Stmt. Talleyrand Response ¶ 42, citing the relevant provisions of the P S Agreement.) ERP has a net worth in excess of $500 million. (Talleyrand 56.1 Stmt. ¶ 47; Chevron Response 56.1 Stmt. ¶ 47; ERP Motion to Dismiss Br. at 4.) Attorneys' Fees
Closing under the P S Agreement took place on November 13, 2001. (Chevron 56.1 Stmt. Talleyrand Response ¶ 46.) ERP assigned the purchase to EQR-TalleyrandLLC ("EQR"), a company that does not have a net worth in excess of $500 million. (Chevron 56.1 Stmt. ¶¶ 47-49; Talleyrand Response ¶ 49; Talleyrand 56.1 Stmt. ¶¶ 45-48; Chevron Response 56.1 Stmt. ¶¶ 45-48.)
The prevailing party as between Chevron and Talleyrand is entitled to reasonable costs including attorneys' fees pursuant to the prior settlement agreements. (Chevron 56.1 Stmt. Talleyrand Response ¶ 54, citing Ex. C: First Settlement Agmt. ¶ 17; Second Settlement Agmt. ¶ 7.)
ANALYSIS I. STANDARDS FOR CONTRACT INTERPRETATION UNDER NEW YORK LAW
For other decisions by this Judge discussing the standards for contract interpretation under New York law in language substantially similar to that in this entire section of this Report Recommendation, see Bank of Taiwan New York Agency v.Granite State Ins. Co., 03 Civ. 0682, 2003 WL 21540664 at *4-7 (S.D.N.Y. July 9, 2003) (Peck, M.J.); New Paradigm Software Corp. v. New Era of Networks. Inc., 99 Civ. 12409, 2002 WL 31749396 at *4-7 (S.D.N.Y. Dec. 9, 2002) (Peck, M.J.): Aviation Dev. Co. v. C S Acquisition Corp., 97 Civ. 9302, 1999 WL 46630 at *6 (S.D.N.Y. Feb. 2, 1999) (Peck, M.J.), aff'd. 201 F.3d 430 (2d Cir. 1999).
"It is black letter law that in a diversity action such as this, state substantive law applies." Contri v. Yellow Freight Sys., Inc., 92 Civ. 2603, 1996 WL 87237 at *2 (S.D.N.Y. Feb. 29, 1996) (Peck, M.J.) (citing Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822 (1938)). Both settlement agreements provide that they are governed by New York law. (Dkt. No. 15: Chevron 56.1 Stmt. Ex. C: First Settlement Agmt. ¶ 18; Second Settlement Agmt. ¶ 8.) As the Second Circuit has stated, "the parties agree that New York substantive law governs . . . and `where the parties have agreed to the application of the forum law, their consent concludes the choice of law inquiry.'" Texaco A/S (Denmark) v. Commercial Ins. Co., 160 F.3d 124, 128 (2d Cir. 1998) (quoting American Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997)); accord, e.g., Bellis v. Tokio Marine Fire Ins. Co., 93 Civ. 6549, 2002 WL 193149 at *13 n. 20 (S.D.N.Y. Feb. 7, 2002).
The P S Agreement provides that it is governed by "the law of the state in which the Real Property is located," which is New York. (Chevron 56.1 Stmt. Ex. K: P S Agmt. ¶ 11.4.)
see also, e.g., Stagl v. Delta Airlines. Inc., 52 F.3d 463, 467 (2d Cir. 1995); Gelb v. Royal Globe Ins. Co., 798 F.2d 38, 44 n. 5 (2d Cir. 1986), cert. denied. 480 U.S. 948, 107 S.Ct. 1608 (1987); Printers II, Inc. v. Professional Publ'g. Inc., 784 F.2d 141, 146 n. 6 (2d Cir. 1986); IBS. Inc. v. Banco Exterior De Espana. Ltd., 98 Civ. 6487, 2001 U.S. Dist. LEXIS 23505 at *8 n. 2 (S.D.N.Y. Jan. 12, 2001): Norfolk Southern Rv. v. Flexi-Van Leasing. Inc., 99 Civ. 0055, 2000 WL 1855112 at *5 n. 1 (S.D.N.Y. Dec. 18, 2000): ABC Radio Network. Inc.v. Lens America. Inc., 97 Civ. 9467, 1999 WL 771360 at *2 (S.D.N.Y. Sept. 28, 1999);Air Support Int'l. Inc. v. Atlas Air. Inc., 54 F. Supp.2d 158, 165 (E.D.N.Y. 1999); Vanguard Mun. Bond Fund. Inc. v. Cantor. Fitzgerald L.P., 40 F. Supp.2d 183,189 (S.D.N.Y. 1999) (Stein, D.J. Peck, M.J.).
"Under New York law `the initial interpretation of a contract is a matter of law for the court to decide.' Included in this initial interpretation is the threshold question of whether the terms of the contract are ambiguous." Alexander Alexander Servs., Inc. v. These Certain Underwriters at Lloyd's. 136 F.3d 82, 86 (2d Cir. 1998) (citations omitted); accord, e.g.,W.W.W. Assoc., Inc. v. Giancontieri. 77 N.Y.2d 157, 162, 565 N.Y.S.2d 440, 443 (1990) ("Whether or not a writing is ambiguous is a question of law to be resolved by the courts."); Sutton v. East River Sav. Bank. 55 N.Y.2d 550, 554, 450 N.Y.S.2d 460, 462 (1982) ("the threshold decision on whether a writing is ambiguous is the exclusive province of the court").
see, e.g., Augienello v. Coast-to-Coast Financial Corp., No. 02-9043, 64 Fed. Appx. 820, 821-22, 2003 WL 21069080 at *1 (2d Cir. May 9, 2003) (citing International Multifoods Corp. v. Commercial Union Ins. Co., 309 F.3d 76, 83 (2d Cir. 2002)); Norfolk Southern Ry. v. Flexi-Van Leasing, Inc., 2000 WL 1855112 at *5; ABC Radio Network. Inc. v. Lens America. Inc., 1999 WL 771360 at *2; Air Support Int'l. Inc. v. Atlas Air. Inc., 54 F. Supp.2d at 165; see also, e.g., Commercial Union Ins. Co. v. Flagship Marine Servs., Inc., 190 F.3d 26, 33 (2d Cir. 1999); Haber v. St. Paul Guardian Ins. Co., 137 F.3d 691, 695 (2d Cir. 1998): Savers v. Rochester Tel. Corp., 7 F.3d 1091, 1094 (2d Cir. 1993); Seiden Assoc., Inc. v. ANC Holdings. Inc., 959 F.2d 425, 429 (2d Cir. 1992); Berman v. Parco. 986 F. Supp. 195, 209 (S.D.N.Y. 1997) (Wood, D.J. Peck, M.J.); EJS-ASOC Ticaret ve Danismanlik Ltd. v. AT T. 886 F. Supp. 331, 334 (S.D.N.Y. 1994); Chase Manhattan Bank. N.A. v. Keystone Distrib. Inc., 873 F. Supp. 808, 811 (S.D.N.Y. 1994).
Under New York law, the construction of an unambiguous contract is a matter of law, appropriate for summary judgment resolution. see, e.g., Adirondack Transit Lines. Inc. v. United Transp. Union. Local 1582. 305 F.3d 82, 85 (2d Cir. 2002) ("The proper interpretation of an unambiguous contract is a question of law for the court, and a dispute on such an issue may properly be resolved by summary judgment.'") (quoting Omni Quartz. Ltd. v. CVS Corp., 287 F.3d 61, 64 (2d Cir. 2002)); Bouzo v. Citibank. N.A., 96 F.3d 51, 58 (2d Cir. 1996); Nowak v. Ironworkers Local 6 Pension Fund. 81 F.3d 1182, 1192 (2d Cir. 1996); Savers v. Rochester Tel. Corp., 7 F.3d at 1094; Seiden Assoc., Inc. v. ANC Holdings. Inc., 959 F.2d at 428; Metropolitan Life Ins. Co. v. RJR Nabisco. Inc., 906 F.2d 884, 889 (2d Cir. 1990).
The summary judgment standards under Rule 56, Fed.R.Civ.P., are well-known and will not be set out here. see,e.g., Aviation Dev. Co. v. C S Acquisition Corp., 1999 WL 46630 at *7 n. 6; Fleet Capital Corp. v. Yamaha Motor Corp., 01 Civ. 1047, 2002 WL 31174470 at *10-11 n. 16 (S.D.N.Y. Sept. 26, 2002) (Peck, M.J.) ( cases cited therein);Brown v. Cushman Wakefield, Inc., 01 Civ. 6637, 2002 WL 1751269 at *12-13 (S.D.N.Y. July 29, 2002) (Peck, M.J.), report rec. adopted, 235 F. Supp.2d 291 (2002); Hogan v. Metromail, 99 Civ. 11204, 2002 WL 373245 at *11-13 (S.D.N.Y. Mar. 8, 2002) (Peck, M.J.); Cobian v. New York City, 99 Civ. 10533, 2000 WL 1782744 at *7 (S.D.N.Y. Dec. 6, 2000) (Peck, M.J.),aff'd, No. 01-7575, 2002 WL 4594 at *1 (2d Cir. Dec. 21, 2001);Austin v. Ford Models. Inc., 95 Civ. 3731, 2000 WL 1752966 at *6 (S.D.N.Y. Nov. 29, 2000) (Peck, M.J.), aff'd. No. 01-7030, 2001 WL 1562070 at *1 (2d Cir. Dec. 4, 2001), cert. denied. 123 S.Ct. 189 (2002); Douglas v. Victor Capital Group, 21 F. Supp.2d 379, 387-88 (S.D.N.Y. 1998) (Stein, D.J. Peck, M.J.);Mariani v. Consolidated Edison Co., 982 F. Supp. 267, 271-273 (S.D.N.Y. 1997) (Peck, M.J.), aff'd, No. 97-9502, 172 F.3d 38 (table), 1998 WL 961111 (2d Cir. Jan. 25, 1998).
see also, e.g., Nicholas Labs. Ltd. v. Almay, Inc., 900 F.2d 19, 21 (2d Cir. 1990); Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989);Norfolk Southern Rv. v. Flexi-Van Leasing, Inc., 2000 WL 1855112 at *5; ABC Radio Network, Inc. v. Lens America. Inc., 1999 WL 771360 at *3: Air Support Int'l. Inc. v. Atlas Air, Inc., 54 F. Supp.2d at 165; Berman v. Parco, 986 F. Supp. at 208-09; Chase Manhattan Bank. N.A. v. Keystone Distrib. Inc., 873 F. Supp. at 810-11: Royal Bank of Canada v. Mahrle, 818 F. Supp. 60, 62 (S.D.N.Y. 1993); Broadway Nat'l Bank v. Progressive Cas. Ins. Co., 775 F. Supp. 123, 126 (S.D.N.Y. 1991), aff'd mem., 963 F.2d 1522 (2d Cir. 1992).
Where the terms of an agreement are clear and unambiguous, the Court will not look beyond the "four corners" of the agreement, and parol evidence of the parties' intentions is inadmissible. E.g.,R/S Assoc. v. New York Job Dev. Auth. 98 N.Y.2d 29, 33, 744 N.Y.S.2d 358, 360 (2002) ("Unless the court finds ambiguity, the rules governing the interpretation of ambiguous contracts do not come into play. Thus, when interpreting an unambiguous contract term [e]vidence outside the four corners of the document . . . is generally inadmissible to add to or vary the writing. [E]xtrinsic and parol evidence is not admissible to create an ambiguity in a written agreement which is complete and clear and unambiguous upon its face.") (ellipsis brackets in original, citations internal quotations omitted) (quoting W.W.W. Assoc. Inc. v. Giancontieri. 77 N.Y.2d at 162-63, 565 N.Y.S.2d at 443); Weissman v. Sinorm Deli, Inc., 88 N.Y.2d 437, 447, 646 N.Y.S.2d 308, 313 (1996) ("[W]hen parties set down their agreement in a clear, complete document, evidence outside the four corners of the document as to what was actually intended is generally inadmissible."); Wells v. Shearson Lehman/American Express, Inc., 72 N.Y.2d 11, 19, 530 N.Y.S.2d 517, 521 (1988): see,e.g., RJE Corp. v. Northville Indus. Corp., 329 F.3d 310, 314 (2d Cir. 2003) ("Where a `contract is clear and unambiguous on its face, the intent of the parties must be gleaned from within the four corners of the instrument, and not from extrinsic evidence.'") (quoting De Luca v. De Luca, 300 A.D.2d 342, 342, 751 N.Y.S.2d 766, 766 (2d Dep't 2002)); Feifer v. Prudential Ins. Co., 306 F.3d 1202, 1210 (2d Cir. 2002) ("It is axiomatic that where the language of a contract is unambiguous, the parties' intent is determined within the four corners of the contract, without reference to external evidence."); Omni Quartz, Ltd, v. CVS Corp., 287 F.3d at 64; In re Revere Armored, Inc., No. 97-6112, 131 F.3d 132 (table), 1997 WL 794460 at *3 (2d Cir. Dec. 30, 1997) ("When the terms of a contract are clear and unambiguous, this Court will not look beyond the four comers of the contract itself to interpret the parties' intentions."); Mizuna, Ltd. v. Crossland Fed. Sav. Bank, 90 F.3d 650, 660 (2d Cir. 1996) (quoting W. W.W. Assoc., Inc. v. Giancontieri, supra);Goldman v. Commissioner of Internal Revenue, 39 F.3d 402, 406 (2d Cir. 1994); Goodheart Clothing Co. v. Laura Goodman Enter., Inc., 962 F.2d 268, 272 (2d Cir. 1992); Seiden Assoc., Inc. v. ANC Holdings. Inc., 959 F.2d at 428.
see also, e.g., Nicholas Labs. Ltd, v. Almay. Inc., 900 F.2d at 20: Burger King Corp. v. Horn Hardart Co., 893 F.2d 525, 527 (2d Cir. 1990); Daigle v. West, No. 5:00-CV-189, 5:00-CV-1055, 2002 WL 31177712 at *8 (N.D.N.Y. Nov. 6, 2002); New Avex. Inc. v. Socata Aircraft. Inc., 02 Civ. 6519, 2002 WL 1998193 at *5 (S.D.N.Y. Aug. 29, 2002) ("`It is the primary rule of construction of contracts that when the terms of a written contract are clear and unambiguous, the intent of the parties must be found within the four corners of the contract, giving a practical interpretation to the language employed and the parties' reasonable expectations.'") (quoting Marshall v. Marshall. 264 A.D.2d 826, 827, 695 N.Y.S.2d 595, 596 (2d Dep't 1999), appeal dismissed in part denied in part. 94 N.Y.2d 894, 706 N.Y.S, 2d 696 (2000)); Schafrann v. Venezuela, 01 Civ. 10637, 2002 WL 1766446 at *2 (S.D.N.Y. July 31, 2002) (quoting W.W.W. Assoc., Inc. v. Giancontieri, supra); Municipal Capital Appreciation Ptnrs. I. L.P. v. Page, 181 F. Supp.2d 379, 390-92 (S.D.N.Y. 2002): ABC Radio Network, Inc., v. Lens America. Inc., 1999 WL 771360 at *3:Berman v. Parco, 986 F. Supp. at 209; G.D. Searle Co. v. Medicore Communications. Inc., 843 F. Supp. 895, 906 (S.D.N.Y. 1994); Royal Bank of Canada v. Mahrle, 818 F. Supp. at 62; Broadway Nat'l Bank v. Progressive Cas. Ins. Co., 775 F. Supp. at 126-27; Health-Chem Corp. v. Baker, 737 F. Supp. 770, 773 (S.D.N.Y.), aff'd mem., 915 F.2d 805 (2d Cir. 1990);Adler Shavkin v. Wachner, 721 F. Supp. 472, 476, 479 (S.D.N.Y. 1988).
"Contract language is not ambiguous if it has a `definite and precise meaning . . . concerning which there is no reasonable basis for a difference of opinion.'" Hunt Ltd, v. Lifschultz Fast Freight. Inc., 889 F.2d at 1277 (quoting Breed v. Ins. Co. of N. Am., 46 N.Y.2d 351, 355, 413 N.Y.S.2d 352, 355 (1978)). Conversely, a contract is ambiguous if it is reasonably susceptible to more than one meaning. E.g., Chimart Assoc. v. Paul, 66 N.Y.2d 570, 763, 498 N.Y.S.2d 344, 346 (1986) (to determine if ambiguity exists in contract court must determine "whether the agreement on its face is reasonably susceptible of more than one interpretation"); St. Mary v. Paul Smith's Coll. of Arts Sciences. 247 A.D.2d 859, 859, 668 N.Y.S.2d 813, 813 (4th Dep't 1998) (same, quoting Chimart); Hutzel v. United States Aviation Underwriters, Inc., 132 A.D.2d 45, 49, 522 N.Y.S.2d 301, 303 (3 d Dep't 1987) ("an ambiguity exists . . . when a term `is capable of more than one meaning'"), appeal denied, 71 N.Y.2d 804, 528 N.Y.S.2d 829 (1988); Walk-In Med. Ctrs., Inc. v. Breuer Capital Corp., 818 F.2d 260, 263 (2d Cir. 1987) ("An `ambiguous' word or phrase is one capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business."); Health-Chem Corp. v. Baker, 737 F. Supp. at 773 ("[A] term is ambiguous when it is `capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement. . . .'").
Accord, e.g., RJE v. Northville Indus. Corp., 329 F.3d at 314: Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d at 1192; Savers v. Rochester Tel. Corp., 7 F.3d at 1095; Seiden Assoc., Inc. v. ANC Holdings. Inc., 959 F.2d at 428; Norfolk Southern Ry. v. Flexi-Van Leasing. Inc., 2000 WL 1855112 at *5; ABC Radio Network, Inc. v. Lens America. Inc., 1999 WL 771360 at *3; Air Support Int'l. Inc. v. Atlas Air, Inc., 54 F. Supp.2d at 165.
see, e.g., Lipari v. Maines Paper Food Serv., Inc., 245 A.D.2d 1085, 1085, 667 N.Y.S.2d 548, 549 (4th Dep't 1997); Levey v. A. Leventhal Sons, Inc., 231 A.D.2d 877, 877, 647 N.Y.S.2d 597, 597 (4th Dep't 1996); Arrow Communication Labs., Inc. v. Pico Prods., Inc., 206 A.D.2d 922, 922-923, 615 N.Y.S.2d 187, 188 (4th Dep't 1994): American Express Bank Ltd, v. Uniroyal, Inc., 164 A.D.2d 275, 277, 562 N.Y.S.2d 613, 614 (1st Dep't 1990) ("A contract should be construed so as to give full meaning and effect to all of its provisions."), appeal denied, 77 N.Y.2d 807, 569 N.Y.S.2d 611 (1991); see also,e.g., Alexander Alexander Servs., Inc. v. These Certain Underwriters at Lloyd's. 136 F.3d at 86; Savers v. Rochester Tel. Corp., 7 F.3d at 1095: Goodheart Clothing Co. v. Laura Goodman Enter., Inc., 962 F.2d at 272; Seiden Assoc., Inc. v. ANC Holdings. Inc., 959 F.2d at 428; Norfolk Southern Rv. v. Flexi-Van Leasing, Inc., 2000 WL 1855112 at *5; Berman v. Parco, 986 F. Supp. at 209 n. 9 (citing cases).
Clear contractual language does not become ambiguous simply because the parties to the litigation argue different interpretations.E.g., Bethlehem Steel Co. v. Turner Constr. Co., 2 N.Y.2d 456, 460, 161N. Y. So.2d 90, 93 (1957) ("Mere assertion by one that contract language means something to him, where it is otherwise clear, unequivocal and understandable when read in connection with the whole contract, is not in and of itself enough to raise a triable issue of fact."); Moore v. Kopel, 237 A.D.2d 124, 125, 653 N.Y.S.2d 927, 929 (1st Dep't 1997) ("[A] contract is not rendered ambiguous just because one of the parties attaches a different, subjective meaning to one of its terms."); see, e.g., Savers v. Rochester Tel. Corp., 7 F.3d at 1095; Seiden Assoc., Inc. v. ANC Holdings. Inc., 959 F.2d at 428 ("The language of a contract is not made ambiguous simply because the parties urge different interpretations."); Metropolitan Life Ins. Co. v. RJRNabisco. Inc., 906 F.2d at 889 ("Language whose meaning is otherwise plain is not ambiguous merely because the parties urge different interpretations in the litigation.").
see also, e.g., Hunt Ltd, v. Lifschultz Fast Freight, Inc., 889 F.2d at 1277: Norfolk Southern Rv. v. Flexi-Van Leasing, Inc., 2000 WL 1855112 at *6; ABC Radio Network, Inc. v. Lens America, Inc., 1999 WL 771360 at *3: Air Support Int'l, Inc. v. Atlas Air. Inc., 54 F. Supp.2d at 165-66;Berman v. Parco. 986 F. Supp. at 210; EJS-ASOC Ticaret v. AT T. 886 F. Supp. at 334; Chase Manhattan Bank, N.A. v. Keystone Distrib., Inc., 873 F. Supp. at 811; Broadway Nat'l Bank v. Progressive Cas. Ins. Co., 775 F. Supp. at 126;Health-Chem Corp. v. Baker. 737 F. Supp. at 773.
"[W]hen ambiguity exists and the resolution of the ambiguity hinges on such extrinsic matters as the credibility of witnesses or documents or upon choosing one among several reasonable inferences that may be drawn from such extrinsic evidence, a jury, and not a court, should decide what meaning is to be ascribed to the contract." Chase Manhattan Bank. N. A. v. Keystone Distrib., Inc., 873 F. Supp. at 811. However, it is the Court's role to determine the value or existence of extrinsic evidence produced by the parties. Uniroyal. Inc. v. Home Ins. Co., 707 F. Supp. 1368, 1375 (E.D.N.Y. 1988) (Weinstein, D.J.) ("The appraisal of the value or existence of extrinsic evidence is for the court as a matter of substantive law."). Thus, even when a contract is ambiguous, if the parol evidence offered by the parties does not resolve that ambiguity, or after opportunity to do so the parties do not offer extrinsic evidence to resolve the ambiguity, the Court must construe the contract as a matter of law on a summary judgment motion. E.g.,State of New York v. Home Indem. Co., 66 N.Y.2d 669, 671, 495 N.Y.S.2d 969, 971 (1985) ("[I]f the tendered extrinsic evidence is itself conclusory and will not resolve the equivocality of the language of the contract, the issue remains a question of law for the court."); Kenayan v. Empire Blue Cross Blue Shield, 248 A.D.2d 42, 677 N.Y.S.2d 560, 563 (1st Dep't 1998) (where the "evidence introduced by the parties extrinsic to the [contract] was not dispositive of the [interpretation] issue . . . the proper interpretation is an issue of law for the court"); Primavera v. Rose Kiernan, Inc., 248 A.D.2d 842, 670 N.Y.S.2d 223, 224-25 (3d Dep't 1998) ("If, however, extrinsic evidence does not resolve the ambiguity, the interpretation of the ambiguous contract terms remain a question of law for the court."); Econo Truck Body Equip., Inc. v. Guaranty Nat'l Ins. Co., 162 A.D.2d 913, 915, 557 N.Y.S.2d 991, 993 (3d Dep't 1990).
see also, e.g., Seiden Assoc., Inc. v. ANC Holdings, Inc., 959 F.2d at 428; Burger King Corp. v. Horn HardartCo., 893 F.2d at 528: Wards Co. v. Stamford Ridgeway Assoc., 761 F.2d 117, 120 (2d Cir. 1985);Norfolk Southern Ry. v. Flexi-Van Leasing. Inc., 2000 WL 1855112 at *6; ABC Radio Network, Inc. v. Lens America, Inc., 1999 WL 771360 at *3; Berman v. Parco, 986 F. Supp. at 210.
see also, e.g., Alexander Alexander Servs., Inc. v. These Certain Underwriters at Lloyd's. 136 F.3d at 86 (where no extrinsic evidence exists, court may grant summary judgment); Chase Manhattan Bank v. American Nat'l Bank Trust Co., 93 F.3d 1064, 1073 (2d Cir. 1996) ("Summary judgment may be proper in a contract action if . . . the contract is ambiguous but there is no relevant extrinsic evidence of the parties' actual intent.");McCostis v. Home Ins. Co., 31 F.3d 110. 113(2d Cir. 1994):General Star Indem. Co. v. Custom Editions Upholstery Corp., 940 F. Supp. 645, 655 (S.D.N.Y. 1996); Uniroyal, Inc. v. Home Ins. Co., 707 F. Supp. at 1374-75 (leading case).
Here, both Chevron and Talleyrand agree that the settlement agreement provisions covering Talleyrand's Bond and the P S Agreement provision as to indemnity are clear and unambiguous. (see,e.g., Dkt. No. 16: Chevron S.J. Br. at 8-13; Dkt. No. 20: Talleyrand S.J. Br. at 7 ("The [P S] contract provisions are clear and unambiguous. . . ."); Chevron S.J. Reply Br. at 4.)
II. ERP'S INDEMNITY DOES NOT PROVIDE CHEVRON WITH THE SAME PROTECTION AS TALLEYRAND'S SURETY BOND
Chevron argues that there are five reasons why ERP's indemnity is not satisfactory replacement for Talleyrand's Surety Bond:
Chevron does not find the terms of the indemnification to be satisfactory because: (1) the provision runs to the benefit of the Partnership, and not to Chevron; (2) the provision does not cover all contingencies set forth in paragraphs 5 and 7 of the First Settlement Agreement, instead limiting the scope of the indemnity only to the buyer's conduct; (3) the indemnification is triggered by conditions unrelated to the Defendants' obligations in the First Settlement Agreement; and (4) the indemnitor does not have a net worth in excess of $500 million.
(Dkt. No. 15: Chevron 56.1 Stmt. ¶ 45.) Because the Court agrees with Chevron that the ERP indemnity is not as broad as the Talleyrand Surety Bond, the Court need not consider all of Chevron's other claimed deficiencies.
Pursuant to the First Settlement Agreement, defendants agreed to indemnify Chevron for any recapture payment (unless caused by Chevron's conduct) (Dkt. No. 16: Chevron S.J. Br. at 9-10):
If, and to the extent, Chevron must make a payment under [its] Recapture Bond, or a payment of a recapture tax . . ., Defendants shall pay to Chevron an amount equal to the repayment required to be made by Chevron . . ., except that no payment shall be owed if the Recapture Payments result from Chevron's failure to comply with its obligations. . . .
(Dkt. No. 15: Chevron 56.1 Stmt. Ex. C: First Settlement Agmt. ¶ 7(d).)
ERP's indemnity obligation, however, only applies to recapture payments caused by ERP's conduct: "If, and to the extent, a Recapture Event Purchaser Breach occurs and . . . results in a payment under the Recapture Bond, . . . [ERP] shall pay to [Talleyrand Partnership], . . . an amount equal to the payment required to be made by the [Partnership] under the Recapture Bond." (Chevron 56.1 Stmt. Ex. K: P S Agreement ¶ 1.5(f).) "Recapture Event Purchaser's Breach" excludes Recapture Payments "as a result of (i) any act, omission or condition taken, omitted to be taken, or existing before the Closing Date, [or] (ii) any event not within [ERP's] reasonable control. . . . (Id., ¶ 1.5(e).) In other words, if a Recapture Payment is required because of events prior to November 13, 2001 (the closing date) (see page 6 n. 1 above), ERP is not required to indemnify the Partnership, but Talleyrand is required to indemnify Chevron under the First Settlement Agreement. (see Chevron SJ. Br. at 9-10.)
The availability of tax credits depends on, inter alia, there being a "qualified basis" in the project. (Chevron S. J. Br. at 6 n. 6, citing statutory tax code provisions.) Chevron gives this example of a way that ERP's indemnification would not cover a situation but where Chevron is covered by Talleyrand's Surety Bond indemnification obligation:
The practical effect of the proposed indemnification, therefore, is to substantially reduce Chevron's security. Assume, for example, that the IRS retroactively determines that the Partnership never put the proper qualified basis into the property. In that instance, some or all of the credits could be subject to recapture. Under paragraph 7(d), the Defendants would be responsible for indemnifying Chevron for any losses incurred. see Tab C [First Settlement Agmt], ¶ 7(d). To be paid under the present agreement, Chevron need only contact the surety company, provide the necessary information, and be made whole.
The proposed indemnification, however, does not cover that scenario. As a pre-closing event caused by the Partnership, it is expressly excluded from that provision. see Tab K [P S Agmt.], ¶¶ 1.5(e) and (f). Chevron therefore is left unsecured, and a specific obligation otherwise covered in paragraph 7(d) of the First Settlement Agreement is left uncovered. see Tab C [First Settlement Agmt.], ¶ 9.
(Chevron S.J. Br. at 10-11; see also Chevron S.J. Reply Br. at 2-3; ERP Motion to Dismiss Br. at 11-12.)
Indeed, ERP agrees with Chevron's interpretation of the difference between the ERP indemnity and Talleyrand's indemnity obligation to Chevron:
[I]t is abundantly clear from the plain language of the P S Agreement that ERP only agreed to a limited indemnity under which it agreed to indemnify Talleyrand for ERP's own acts after it became owner of the Property that could cause the property to no longer qualify for low-income housing project treatment. ERP did not agree to also be obligated for the much broader indemnification obligations that Talleyrand undertook to Chevron under the Settlement Agreement.
(ERP Motion to Dismiss Br. at 2-3; see also id. at 6 ("As stated in Chevron's summary judgment papers, ERP's indemnification obligations do not cover Talleyrand's obligations to Chevron in the Settlement Agreement."); id. at 9 ("ERP does not have to make any payment if there is a recapture payment made because of actions by anyone (i.e., Talleyrand or Chevron) other than ERP itself. Thus, Talleyrand's attempt to get the Court to expand ERP's indemnification obligations to cover Talleyrand's own much broader obligations to Chevron completely contradicts the very document from which ERP's only obligations arise."); id. at 10-12.)
Talleyrand's only response to Chevron (and ERP) is that "the ERP indemnification tracks the language of the indemnity required by the First Settlement Agreement" (Dkt. No. 20: Talleyrand S. J. Br. at 8) — which, as shown above, is not correct. (see also Chevron S. J. Reply Br. at 2-3.) Talleyrand adds that "it should be noted that there has not been, to date, any event that would trigger recapture of tax credits" (id.) — which is irrelevant since the IRS still can audit the project for prior periods, including pre-closing periods of time, and the purpose of the Talleyrand Surety Bond is to protect Chevron in the event the IRS seeks to do so and requires recapture.
CONCLUSION SCHEDULING
For the reasons stated above, Chevron's summary judgment motion is GRANTED and Talleyrand's cross-motion is DENIED.
The logical extension of this Opinion would appear to call for the Court to grant ERP's motion to dismiss. Because Talleyrand's response to ERP's motion is not yet due, however, the Court does not do so at this time. Talleyrand should stipulate to the dismissal with ERP or explain to the Court why ERP's motion to dismiss should not be granted.
As the "prevailing party," Chevron is entitled to attorneys' fees pursuant to the Settlement Agreements. (see page 6 above.) The parties should try to agree on the amount of such fees. If they cannot do so, Chevron shall submit its time sheets and any other supporting papers (affidavits and, if necessary, brief) by January 9, 2004, and Talleyrand's opposition papers are due by January 16, 2004.
That will also give Talleyrand the chance to obtain a new Surety Bond; if it does not do so, the parties shall submit an agreed upon, or counter-proposed, final judgment (leaving the amount of attorneys' fees blank for the Court to fill in, unless the parties have agreed on the amount) by January 9. 2004.
SO ORDERED.