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IN RE: the Intermediate Accounting of Robert BECHT and Edward T. Borg as Trustees of the Trust created under Article Fifth of the Last Will and Testament of Vincent Terranova, Covering the Period from December 31, 2010 through December 31, 2016, Deceased.
Objectant, George Terranova (George), the Co-Trustee and Residuary Beneficiary of the Trust created under Article Fifth of decedent's Last Will and Testament, seeks partial summary judgment as to his objections numbered 1 and 2 to petitioners' accounting.
Specifically, George objects to Schedule I of the intermediate accounting in which his Co-trustees, Robert Becht and Edward T. Borg (Becht & Borg) claim entitlement to the sums of $223,839.31 each for paying commissions; $54,200.92 for principal commissions; and annual commissions in the sum of $27,100.45. George contends that Becht & Borg expressly agreed in a written settlement agreement dated June 17, 2011 that in lieu of SCPA 2309 commissions, they would receive annual commissions of $25,000.00.
Becht and Borg oppose the motion, claiming that the settlement agreement was drafted “solely to limit the annual commissions which each Co-Trustee (George included) was to receive and not to have any impact on the commissions otherwise due and payable to each Co-Trustee as a result of the distributions of principal from the Trust at the rate of One (1%) Percent as provided for in Sec. 2309(1).”
The essence of the dispute lays in one provision of an exacting, detail-laden forty plus page settlement agreement that was the product of countless hours of negotiations, court conferences, and revisions among counsel. The pertinent language can be found in Section 9.06 “Commissions Payable To Trustees.” It reads as follows:
In lieu of trustee's commissions pursuant to Section 2309 of the SCPA commencing January 1, 2011, and for so long as they remain Trustees and provided that no Event of Default shall have occurred and is continuing, the Trust shall pay to (I) George Terranova an annual trustee's commission of One Hundred Fifty Three Thousand Nine Hundred Dollars ($153,900), and (ii) each of Becht and Borg in their capacities as Trustee, an annual trustee's commission of Twenty Five Thousand Dollars ($25,000.00). The annual trustee's commission of any successor Trustee to George Terranova, Becht or Borg shall be fixed at the time of the appointment of any such successor Trustee. The foregoing trustee commissions shall be paid, in equal quarterly installments in arrears solely from Annual Net Cash Flow as provided in Article VII without interest. One third (1/3) of such trustee's commissions shall be charged against Trust Income and shall be paid to each of the Trustees, subject to the provisions of Article VII. The remaining two thirds (2/3) of such aggregate trustee's commissions shall be charged against Trust Principal and shall be paid subject to the provisions of ArticleVII. The amount of trustee's commissions payable to the Trustees (other than Becht and Borg) shall be re-set effective January 1, 2015 and on January 1 of each successive five year period thereafter based on (I) the fair market value of all of Trust's assets other than amounts due from the Life Insurance Trust and real property ․ (emphasis added)
George's papers in support of his prima facie showing include a copy of the pleadings, a copy of the signed settlement agreement, and a relatively brief memorandum of law. In contrast, the opposition includes 22 exhibits consisting of communications between the parties during the negotiation process, various drafts of the agreements, depositions, and term sheets. In reply, movant again submitted a brief memorandum of law.
A settlement agreement is subject to the ordinary rules of contract construction (see Texas 1845, LLC v Kyaw, 117 AD3d 1028 [2d Dept 2014]). The threshold inquiry before the Court where the claims of the parties turn upon the language of an otherwise unchallenged agreement falls upon the clarity of the instrument. As a preliminary matter:
A written agreement that is complete, clear, and unambiguous on its face must be enforced so as to give effect to the meaning of its terms and the reasonable expectations of the parties, and the court should determine the intent of the parties from within the four corners of the contract without looking to extrinsic evidence to create ambiguities. An agreement is unambiguous if the language it uses has a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion (emphasis added).
(Id. citing Wider Consol., Inc. v Tony Melillo, LLC, 107 AD3d at 884, quoting Computer Assoc. Int'l, Inc. v U.S. Balloon Mfg. Co., 10 AD3d 699, 699, 782 NYS2d 117  [internal quotation marks and citations omitted]).
The vast differences in the submissions of the parties serves to highlight their respective positions. The moving party, in reliance on the document itself, asserts that the instrument is pellucid enough that the inquiry starts and ends within the four corners of the instrument. The opposing party, in providing a litany of extrinsic evidence, believes otherwise.
Specifically, the opposition claims that the paragraph under scrutiny is “ambiguous with respect to whether it operates to bar all statutory trustee compensation ․ or operates only to cap statutory annual trustee commissions and has no effect on statutory principal paying out commissions.” The Court, in viewing the subject paragraph, the agreement in its entirety, and considering the facts and circumstances surrounding its creation, finds this argument to be unpersuasive, illogical, and flatly contradicted by the express terms of the parties' agreement.
Indeed it is ironic that an instrument that was the result of exhaustive negotiations between sophisticated counsel, and so meticulous as to include 93 defined terms before even daring to delve into the substance of the agreement, is now being branded as inferior and ambiguous by some of the very parties involved in its creation.
Whether or not a writing is ambiguous is a question of law to be resolved by the Court (see W.W.W. Assocs v Giancontieri, 77 NY2d 157 ). Ambiguities occur when the agreement on its face is susceptible to two different meanings (see e.g., Chimart Assocs v Paul, 66 NY2d 570 ). Ambiguity is determined by examination of the document as a whole, and cannot be manufactured by resort to “extrinsic evidence that the parties intended a meaning different than that expressed in the agreement” (see e.g., Texas 1845, LLC v Kyaw, 117 AD3d 1028 [2d Dept 2014]).
Giving a practical reading of the offending clause, and keeping in mind the collective levels of knowledge and experience of the parties and their counsel, the Court finds no ambiguity in the written agreement that would permit a deep dive into the extrinsic evidence submitted by the opposing party. Where, as here, the contract is clear, “the best evidence of what parties to a written agreement intend is what they say in their writing.” (see Teitelbaum Holdings, Ltd v Gold, 48 NY2d 51 ).
The provision in the dispute at bar reads:
“In lieu of trustee's commissions pursuant to Section 2309 of the SCPA ․”
The meaning of the term “in lieu of” is not subject to debate. It means “in place of” or “as a substitute for.” It signals the agreement among the signatories that something to which they were otherwise entitled was being forfeited and replaced with something else.
Interestingly, as imperative and potentially ambiguous the term “trustee's commissions” now purports to be to the opposition, it does not appear among the 93 carefully defined terms that precede the substantive meat of the agreement. Nor are the terms “annual commissions” or “principal commissions” otherwise defined. As aptly pointed out by the opposition, the term “principal paying commissions” appears nowhere in this painstakingly reviewed agreement. Yet this would not appear to be surprising as these terms are statutorily defined and are commonly understood among estate practitioners.
Section 2309 of the SCPA encompasses both principal commissions (SCPA 2309) and annual commissions (SCPA 2309). In using the broad and general term “trustee's commissions” while citing to SCPA 2309 in its entirety, as opposed to drawing any distinctions by either the terms used, or by specific reference to a statutory subsection, the intent of the parties as expressed in the agreement is plain. Becht & Borg were agreeing to accept $25,000.00 in commissions annually and were waiving any other principal commissions to which they would otherwise be entitled to pursuant to SCPA 2309. There is no basis to infer otherwise.
It neither conflicts with the other terms of the agreement nor is it contrary to the Court's recollection of the negotiations held here. The cases cited by counsel do not apply to the factual situation presented herein 1 other than to support the proposition that buyer's remorse is not a sufficient basis to negate a legally binding agreement.
Courts have long been reluctant to interpret an agreement as impliedly stating something which the parties have neglected to specifically include (see, e.g., Rowe v Great Atlantic & Pacific Tea Co., 46 NY2d 62 ). And rightfully so, particularly where, as in this case, the agreement was crafted by seasoned estate practitioners well-acquainted with the nuances of the Surrogate's Court Procedure Act, utilizing the broad and established term “trustee's commissions” coupled with the reference to Section 2309 of the SCPA.
Accordingly, the motion by George Terranova for partial summary judgment with respect to objections 1 and 2 as set forth in his amended objections is granted.
This is the decision and order of the Court.
1. Cases cited by counsel either involve interpretation of wills, which are instruments that are unilateral in nature, or terminology which the signatories developed on their own.
Peter J. Kelly, S.
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Docket No: 1992-3511/H
Decided: May 26, 2021
Court: Surrogate's Court, New York,
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