Opinion ID: 6499888
Heading Depth: 2
Heading Rank: 1

Heading: Gain-on-Sale Proceeds

Text: Under New York law, which governs the C30 PSA, see J. App’x at 624, written contracts are unambiguous when “the contract language has a definite and precise meaning,” Orchard Hill Master Fund Ltd. v. SBA Commc’ns Corp., 830 F.3d 152, 157 (2d Cir. 2016). “If an ambiguity is found, the court may accept any available extrinsic evidence to ascertain the meaning intended by the parties during the formation of the contract.” In re Motors Liquidation Co., 943 F.3d 125, 131 (2d Cir. 2019) (internal quotation marks omitted). Thus, summary judgment should be granted either when “the evidence presented about the parties’ intended 5 meaning is so one-sided that no reasonable person could decide the contrary” or when “the non-moving party fails to point to any relevant extrinsic evidence supporting that party’s interpretation of the language.” Luitpold Pharms., Inc. v. Ed. Geistlich Söhne A.G. Für Chemische Industrie, 784 F.3d 78, 88 (2d Cir. 2015) (internal quotation marks omitted). We agree with the district court that the C30 PSA does not unambiguously dictate how Gain-on-Sale Proceeds should be calculated. Appaloosa’s proposed interpretation – that Gain-on-Sale Proceeds include all the funds received in excess of the outstanding principal and interest minus the costs of selling the property – would make several provisions of the C30 PSA superfluous, including key aspects of the proceeds-distribution structure known as the “waterfall” provision. This interpretation is therefore contrary to the basic principle of avoiding any construction “that would render a contractual provision without force and effect.” Id. at 87. CWC’s proposed interpretation – that Gain-on-Sale Proceeds can be calculated only after the excess proceeds are used to pay Yield Maintenance and Penalty Interest – is also flawed because the C30 PSA does not specify how Gain-on-Sale Proceeds should be prioritized relative to Yield Maintenance and Penalty Interest in the distribution of proceeds from the sale of an REO Property. 6 See C30 PSA § 1.01, REO Loan, J. App’x at 404–05. Unlike Appaloosa or CWC, the GSEs argue that the relevant provisions of the C30 PSA are ambiguous. Because we conclude that the C30 PSA is indeed ambiguous with respect to how Gain-onSale Proceeds should be calculated, we must turn to the extrinsic evidence submitted by the parties to determine the meaning of the term. 1 See Motors Liquidation, 943 F.3d at 131. Under New York law, the parties’ practical interpretation of a contract is “deemed of great, if not controlling, influence,” and the parties’ course of performance under the contract is the “most persuasive evidence of the[ir] agreed intention.” Fed. Ins. Co. v. Ams. Ins. Co., 691 N.Y.S.2d 508, 512 (1st Dep’t 1999). The district court concluded that the parties’ course of performance here “indisputably supports CWC’s and the GSEs’ view that Penalty Interest and Yield Maintenance are paid before Gain-on-Sale Proceeds.” Matter of Trusts Established 1 Appaloosa also argues that the Co-Lender Agreement, which controls in the event of a conflict between it and the C30 PSA, unambiguously prohibits CWC from collecting Penalty Interest. Despite conceding that the Co-Lender Agreement does not discuss Penalty Interest, Appaloosa nevertheless argues that the Co-Lender Agreement’s silence should be construed to limit CWC’s compensation to what is included in the Co-Lender Agreement. We do not interpret the Co-Lender Agreement’s silence as a conflict with the C30 PSA that would unambiguously prohibit CWC from collecting Penalty Interest. See Selective Ins. Co. of Am. v. County of Rensselaer, 26 N.Y.3d 649, 657 (2016). 7 Under Pooling & Servicing Agreements Relating to Wachovia Bank Com. Mortg. Tr. Com. Mortg. Pass-Through Certificates, Series 2007-C30 (In re Wachovia PSA Trusts), No. 17-cv-1998 (KPF), 2020 WL 1304400, at  (S.D.N.Y. Mar. 19, 2020). We agree. As the district court recounted, the data offered by CWC and the GSEs reveal that the contracting parties’ historical manner of distributing REO Property proceeds is consistent with CWC’s and the GSEs’ proposed distribution here. Id. at –24. CWC’s and the GSEs’ proposed distribution is also consistent with how other special servicers in the industry have distributed proceeds from comparable sales of REO Properties. Id. at –30. Appaloosa does not challenge the validity of this evidence. Rather, Appaloosa contends that, because it and other certificate holders “did not know about the transactions that . . . comprise the supposed course of performance,” the parties’ “clandestine” course of performance should not be considered. Appaloosa’s Br. at 49–50. But what matters in ascertaining course of performance is the conduct of the parties to the contract. See Fed. Ins., 691 N.Y.S.2d at 512. As a result, what the certificate holders – third-party beneficiaries under the C30 PSA – did or did not know is irrelevant to the contracting parties’ intent when they drafted 8 the C30 PSA. The district court therefore did not err in concluding that extrinsic evidence supports CWC’s and the GSEs’ position that Penalty Interest and Yield Maintenance must be paid prior to Gain-on-Sale Proceeds.