Court Opinion

ID: 5859540
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:14:31.294362+00
Date Added: 2024-06-11T08:44:23.221201
License: Public Domain

— Judgment modified and, as modified, affirmed, without costs, in accordance with the following memorandum: This appeal involves the interpretation of a separation agreement entered into by the parties in 1970. Paragraph 11 of the agreement provides that the “husband agrees that any profits realized in connection with his business or property shall also be divided equally with his wife.” The husband contends that this provision was not intended to cover profits received from the sale of his personally held corporate stock. The wife argues paragraph 11 entitles her to share in the profits realized from any of the husband’s business activities, including the sale of his personally held corporate stock. We find the loosely drafted agreement is reasonably susceptible of either interpretation. Therein lies the ambiguity which would have permitted the court to consider extrinsic evidence (Steckler v Steckler, 78 AD2d 818, 819). We agree, however, that the trial court properly declined to consider extrinsic evidence in this case. At trial, the husband was unable to remember or otherwise demonstrate that he had engaged in any pre-execution discussions with the wife dealing specifically with the parties’ intentions concerning the provisions of paragraph 11. Additionally, the attorney who drafted the agreement testified that he was unable to recall the specifics of pre-execution conversations with the parties. In any event, he also indicated he had no meaningful discussion with the wife regarding the meaning of the agreement’s provisions. Accordingly, any extrinsic evidence offered was, as the court noted, of no assistance in its task. The disputed paragraphs of the agreement are set forth in the dissenting memorandum which adopts the interpretation of the agreement urged by the husband. It is, however, an established principle of contract law that any ambiguity or dual meaning attributable to the words of a contract should be interpreted most strictly against the drafter (see 22 NY Jur 2d, Contracts, § 228). Here, the husband not only selected the attorney who drafted the document, but the husband provided very specific instructions on what the agreement should provide. Testimony at trial revealed the wife, unrepresented, had only slight participation in the process. Applying this principle as a guide, we decline, as did the Trial Judge, to search out an interpretation that *1186would support the husband’s position. In interpreting a contract, the court should give “the words and phrases employed their plain meaning” (Laba v Carey, 29 NY2d 302, 308). The trial court correctly interpreted the term “property” to include profits received from the sale of the husband’s personally held corporate stock. The term “property” has a broad everyday meaning and, contrary to the husband’s position, there is nothing in the agreement to indicate that paragraph 11 was meant to apply only to the husband’s noncorporate stock property. We believe the trial court was also correct in refusing to limit the husband’s right to encumber his stock. While paragraph 10 provides that the husband may not “sell or transfer” his stock without the prior written consent of the wife, neither “sell” nor “transfer,” given its common everyday meaning encompasses the right to encumber the stock (see, e.g., Webster’s New World Dictionary [2d Coll ed, 1970]; Black’s Law Dictionary [revised 4th ed, 1968]). If an encumbrance should result in an outright transfer and vitiate the wife’s rights under paragraph 10, she may bring an action for breach of the agreement or breach of the covenant of good faith (Van Valkenburgh, Nooger & Neville v Hayden Pub. Co., 30 NY2d 34, cert den 409 US 875; Kirke La Shelle Co. v Armstrong Co., 263 NY 79, 87). The agreement lends itself to a coherent and reasonable interpretation which supports the wife’s position. In paragraph 10, the husband agrees that the wife is to enjoy 50% of the income from even the stocks he solely owns, and further, that he will not sell or transfer any of such stock unless his wife agrees. Paragraph 10 not only gives the wife a share in the income generated by the husband’s solely owned stock, but also gives her the right to consent to or to refuse a proposed transaction disposing of that income-producing property and, once she has consented to a transaction disposing of that income-producing property, she is entitled under paragraph 11 to her “equitable” share of the “profits realized” from the transaction, in exchange for surrendering her income interest. The trial court erred, however in interpreting the term “profits realized” to include only the net profits received by the husband after sale of his stock or other property, less any amount of gain that is reinvested by the husband. Realization, under either its everyday definition or its meaning for tax purposes (see, generally, Helvering v Horst, 311 US 112; Loose v United States, 74 F2d 147), occurs when an individual receives, or has control over the disposition of, the proceeds of a transaction. The husband’s profits, if any, are realized upon the sale of his stock; whatever he may elect to do with those profits cannot change the fact that they already have been realized. The wife is, thus, entitled to one half of the profits made by the husband upon the sale of his corporate stock or other property during the years in question minus capital gains taxes and other expenses. We have examined the wife’s other contentions and find them to be without merit. Concur — Dillon, P. J., Denman and Moule, JJ.