| Herbert v Schodack Exit Ten, LLC |
| 2013 NY Slip Op 04083 [107 AD3d 1119] |
| June 6, 2013 |
| Appellate Division, Third Department |
| Francis Herbert et al., as Cotrustees of the John P. BaylyCredit Shelter Trust, Appellants, v Schodack Exit Ten, LLC, et al.,Respondents. |
—[*1] The Tuttle Law Firm, Latham (James B. Tuttle of counsel), forrespondents.
Lahtinen, J. Appeal from an order of the Supreme Court (McNamara, J.), enteredFebruary 28, 2012 in Albany County, which, among other things, granted defendants'cross motion for summary judgment dismissing the complaint.
Defendant Schodack Exit Ten, LLC (hereinafter SET) and British AmericanDevelopment Corporation (hereinafter BADC) entered into a joint venture with equalshares of B.A. Capital Corporate Campus, LLC (hereinafter BACCC), which theyformed in 2000 to commercially develop a 106-acre parcel owned by SET. BACCC'soperating agreement provided that SET would contribute land and improvements,whereas BADC would market and manage the development. The agreement provided aprocedure for transferring the property from SET to BACCC, and also included aprovision intended to motivate BADC's diligent efforts in that, if no developmentoccurred, then BADC would be required to purchase two acres annually from SET. Thedevelopment did not proceed as anticipated, resulting in litigation, including an actionbetween BADC and SET that was previously before us (British Am. Dev. Corp. v SchodackExit Ten, LLC, 83 AD3d 1247 [2011]) and the current action involving aninternal dispute by members of SET.
One of the original four members of SET was John P. Bayly, who died in 2004.Plaintiffs are trustees of a trust created by Bayly and they brought this action againstdefendants (SET's other three members, as well as SET) alleging that defendants hadviolated SET's [*2]operating agreement when theyauthorized transfer of SET's parcels to BACCC in 2005 without unanimous consent ofall members of SET. The sale occurred because SET faced financial shortages as a resultof the development not proceeding, together with BADC failing to make annualpurchases of SET property. Under such circumstances and in an effort to have BADCshare the real property tax burden, defendants authorized SET to transfer its remainingundeveloped property to BACCC. In return, BADC issued promissory notes for a littleover $2,700,000.
As is relevant on appeal, plaintiffs contended that, under the terms of SET'soperating agreement, such a transfer required unanimous consent of SET's four members.Defendants countered that the consent of three members was sufficient under theoperating agreement. Plaintiffs moved for summary judgment and defendantscross-moved for summary judgment dismissing the complaint. Supreme Court deniedplaintiffs' motion and granted defendants' cross motion, holding that the clear terms ofthe operating agreement permitted defendants' action with the approval of threemembers. Plaintiffs appeal.
"It is well settled that a contract is to be construed in accordance with the parties'intent, which is generally discerned from the four corners of the document itself.Consequently, 'a written agreement that is complete, clear and unambiguous on its facemust be enforced according to the plain meaning of its terms' " (MHR Capital Partners LP vPresstek, Inc., 12 NY3d 640, 645 [2009], quoting Greenfield v PhillesRecords, 98 NY2d 562, 569 [2002]). "Further, a contract should be 'read as a whole,and every part will be interpreted with reference to the whole; and if possible it will be sointerpreted as to give effect to its general purpose' " (Beal Sav. Bank v Sommer, 8 NY3d 318, 324-325 [2007],quoting Matter of Westmoreland Coal Co. v Entech, Inc., 100 NY2d 352, 358[2003] [citations omitted]). Whether a contract is ambiguous is an issue of law for thecourts to decide (see Matter of Wallace v 600 Partners Co., 86 NY2d 543, 548[1995]; W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]).
The pertinent section of SET's operating agreement provides that "all managementdecisions affecting [SET] must be approved by at least three (3) [m]embers and alldecisions involving commitments in excess of $10,000.00 must be accompanied by three(3) competitive bids, and be approved by the unanimous consent of all [m]embers." Inthe context of SET's business purpose, defendants' decision to transfer SET property toBACCC and receive BADC's promissory notes clearly fell within the ordinary meaningof a management decision. The issue thus narrows to whether the additional language inthe operating agreement regarding commitments in excess of $10,000 and competitivebids controlled, thereby imposing a requirement of unanimity. The term "commitment" ina business context involves an agreement to do something in the future, "esp[ecially] toassume a financial obligation" (Black's Law Dictionary [9th ed 2009]; seeMerriam-Webster On-line Dictionary,http://www.merriam-webster.com/dictionary/commitment [accessed May 9, 2013]).Significantly, the operative language was also tied to a competitive bid requirementfurther reflecting that such provision was intended to apply to incurring monetaryobligations. Nor was this a situation where the property could have been placed on theopen market in light of SET's commitment under the BACCC operating agreement. Weagree with Supreme Court that the ordinary meaning of the relevant words, considered inthe context of the entire agreement, unambiguously authorized defendants' action as amanagement decision and the unanimity requirement was not implicated under thesecircumstances. The remaining arguments are academic or unavailing.
Rose, J.P., Spain and Garry, JJ., concur. Ordered that the order is affirmed, withcosts.