Opinion
650500/09.
Decided March 21, 2011.
Smith, Gambrell Russell, LLP, New York, New York, John J. Lee, for Plaintiff.
Todd Levi, LLP, New York, New York, Jill Levi, for Defendant.
Plaintiff Wells Fargo Northwest, N.A. (Wells Fargo) moves, pursuant to CPLR 3212, for partial summary judgment on the issue of liability on its first cause of action for breach of contract, alleging a breach of three lease agreements.
The facts of this case have been presented in an earlier decision and need not be reiterated in detail here. Basically, defendant US Airways, Inc. (US Airways), in three separate purchase agreements, sold to Wells Fargo three aircraft. According to the specifications appearing as an attachment to the purchase agreements, each aircraft had a maximum take-off weight (MTOW) of 138,500 pounds. Exs. 1 (1), 1 (2) and 1 (3). Allegedly, US Airways was permitted to operate the aircraft at this MTOW by means of a special arrangement with Boeing, the planes' manufacturer, an agreement that was not divulged to Wells Fargo, and this arrangement was only permitted to US Airways.
Contemporaneously with the execution of the purchase agreements, Wells Fargo entered into three separate aircraft lease agreements with US Airways for the same planes, by which terms US Airways leased the planes and was to return the aircraft at the termination of the leases with certain return restrictions. These return restrictions included the requirements that the aircraft meet the manufacturer's original type certificate and data sheet, as amended or supplemented, and that the operating weights would be "as at delivery" (see below). These leases do not indicate any specific MTOW for the planes. When the aircraft were returned, they had a MTOW of 124,500 pounds.
Oral argument was held on this motion on February 15, 2010, at which time the parties argued that the crux of the instant matter lies in the interpretation of the word "delivery," in both the upper and lower case use of the letter "D", as it appears in the lease agreements.
The thrust of Wells Fargo's argument is that, at the time that the planes were delivered to US Airways at the commencement of the lease, the aircraft had a MTOW of 138,500 pounds, as specified in the purchase agreements. Therefore, according to Wells Fargo, the planes had to be returned to it at the termination of the leases with a MTOW of 138,500 pounds.
Conversely, US Airways contends that the term delivery, as used in the lease, has two distinct meanings: when the term is capitalized, it means the delivery of the planes pursuant to the lease; when the term is not capitalized, it means the delivery of the planes from Boeing to US Airways as the initial purchaser. Hence, according to US Airways, when the lease states that the aircraft must be returned at the lease's termination with the same operating weight "as at delivery," since "delivery" is in the lower case it refers to the manufacturer's specifications, which have a MTOW of 124,500 pounds. Aff. in Opp. of James Bicknell, Ex. B.
The applicable lease provisions state:
"Section 1. Interpretation
1.1 Definitions. In this Agreement, unless the context otherwise requires, capitalized words and expressions shall have the respective meanings given to them in paragraph 1 of Schedule 1.
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Section 3. Delivery
3.1 Delivery. Lessor shall deliver and Lessee shall accept the Aircraft on lease on the Scheduled Delivery Date. The Aircraft shall be delivered to and accepted by Lessee at the Delivery Location in an "AS IS, WHERE IS" condition. . . . Lessee's acceptance pursuant to the Lease Supplement shall be absolute, unconditional and irrevocable.
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Section 18. DISCLAIMERS. [this section provides for specific disclaimers and waivers at the time that the aircraft is delivered to and accepted by US Airways] Section 19. Redelivery Conditions.
19.1 Redelivery. On the Expiry Date of the sooner cancellation or termination of the leasing of the Aircraft hereunder, Lessee shall (unless a Total Loss has occurred) redeliver the Aircraft and Aircraft Documents (which shall include each of the documents referred to in Schedule 10) to Lessor at Lessee's expense at the Redelivery Location. At the time of such redelivery:
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(b) the Aircraft shall be in compliance with the Return Conditions and the other requirements of the Lease.
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SCHEDULE 1
DEFINITIONS AND CONSTRUCTION
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"Delivery" means delivery of the Aircraft on lease by Lessor to Lessee hereunder as evidenced by Lessee's execution and delivery of the Lease Supplement; "Delivery Date" means the date on which delivery occurs; "Delivery Location" means such location as may be agreed by Lessor and Lessee as the delivery location under the Aircraft Purchase Agreement;
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"Redelivery Date" means the date on which the Aircraft is redelivered by Lessee to Lessor in accordance with this Agreement;
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"Return Conditions" means the conditions specified in
Schedule 11;
"Scheduled Delivery Date" means the date on which the Aircraft is delivered to Lessor under the Aircraft Purchase Agreement;
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SCHEDULE 11
RETURN CONDITIONS
In addition to the return requirements set forth in Section 19 of this Agreement, Lessee, at its own expense, shall cause the Aircraft to be in compliance with all of the following provisions at the time of its redelivery:
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e) The Aircraft shall comply with the Manufacturer's original type certificate and data sheet, and any amendments or supplements effective up to the Expiry Date.
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q) Operating weights of the aircraft will be as at delivery and will be freely transferable."
Motion, Exs. 1 (4), (5) and (6).
Lease Agreement uses the term "delivery" and "redelivery" in several other places not relevant to the instant litigation.
In addition to its argument regarding the meaning of the term "delivery," US Airways contends that, when Wells Fargo accepted redelivery of the aircrafts, it waived its right to challenge the condition of the aircrafts' return. Wells Fargo maintains that, pursuant to the redelivery certificates, it did not waive such rights, and that it only discovered the MTOW discrepancy subsequent to their return when it was preparing the aircraft for new leases.
The Redelivery Certificates executed between the parties states: "By signing this Certificate, Lessor accepts redelivery of the Aircraft under the Lease Agreement without prejudice to each party's rights and obligations under the Lease Agreement."
Motion, Exs. 1 (8) and (9).
In addition, Wells Fargo argues that, because of the lower MTOWs, the planes are not freely transferrable at an MTOW of 138,500 pounds, which breaches another provision of the lease agreements. US Airways argues that the term "freely transferrable" applies to the aircrafts' MTOWs of 124,500 pounds, not the higher MTOW allowed to it by Boeing.
"The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case [internal quotation marks and citation omitted]." Santiago v Filstein , 35 AD3d 184 , 185-186 (1st Dept 2006). The burden then shifts to the motion's opponent to "present evidentiary facts in admissible form sufficient to raise a genuine, triable issue of fact." Mazurek v Metropolitan Museum of Art , 27 AD3d 227 , 228 (1st Dept 2006); see Zuckerman v City of New York, 49 NY2d 557, 562 (1980). If there is any doubt as to the existence of a triable fact, the motion for summary judgment must be denied. See Rotuba Extruders, Inc. v Ceppos, 46 NY2d 223, 231 (1978).
In the case at bar, the issue is whether the terms of the lease agreement regarding redelivery specifications have been breached with respect to the MTOWs of the aircraft.
I have scrutinized the lease agreements, and every time that the term "delivery" is used, regardless of whether the "d" is upper or lower case, it refers to the date on which the lease arrangement began. Nowhere in the body of the leases is any reference made to the delivery of the planes from the manufacturer to US Airways. Each time the term is used it relates to the Lessor and the Lessee.
"The fundamental rule of contract interpretation is that agreements are construed in accord with the parties' intent, and [t]he best evidence of what parties to a written agreement intend is what they say in their writing.' Thus, a written agreement that is clear and unambiguous on its face must be enforced according to the plain meaning of its terms, and extrinsic evidence of the parties' intent may be considered only if the agreement is ambiguous [internal citations omitted]."
Riverside South Planning Corp. v CRP/Extell Riverside, L.P. , 60 AD3d 61 , 66 (1st Dept 2008); affd 13 NY3d 398 (2009).
"Whether an agreement is ambiguous is a question of law for the courts . . . Ambiguity is determined by looking within the four corners of the document, not to outside sources. The entire contract must be reviewed and [p]articular words should be considered, not as if isolated from the context, but in the light of the obligation as a whole and the intention of the parties as manifested thereby. Form should not prevail over substance and a sensible meaning of words should be sought. Where the language chosen by the parties has a definite and precise meaning, there is no ambiguity [internal quotation marks and citations omitted]."
Riverside South Planning Corp. v CRP/Extell Riverside, L.P., 13 NY3d 398, 404 (2009).
Contractual language is ambiguous as a matter of law when, on the face of the writing and within its four corners, and without resorting to extrinsic evidence, the contract is reasonably susceptible to more than one interpretation. Van Wagner Advertising. Corp. v S M Enterprises, 67 NY2d 186 (1986); Sheriff Officers Association, Inc. v County of Nassau , 69 AD3d 921 (2d Dept 2010). Here, the reference to the delivery of the aircraft relates only to the date on which the leases began. On that date, both sides agree that the MTOWs of the planes was 138,500 pounds, the same MTOW at which the planes were operated throughout the entire term of the leases.
The only reference in the leases to any other potential MTOW is section (e) of Schedule 11, which mandates that on the aircraft's return they "shall comply with the Manufacturer's original type certificate and data sheet, and any amendments or supplements." This is not inconsistent with the conclusion that the MTOWs of the aircraft on the redelivery date are 138,500, because the original data sheets, indicating MTOWs of 124,500 pounds, were amended and/or supplemented by Boeing's agreement with US Airways that increased the aircrafts' MTOWs to 138,500 pounds.
Kindly, US Airways' argument that Wells Fargo's execution of the Redelivery Certificates acts as a waiver to maintaining this cause of action, because the provisions regarding the Redelivery Certificates state that such certificates do not prejudice the parties' rights under the agreements is unpersuasive. Further discussion is unnecessary.
Accordingly, it is hereby
ORDERED that plaintiff's motion for partial summary judgment on the issue of liability on its first cause of action is granted; and it is further
ORDERED that the issue of damages on plaintiff's first cause of action is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further
ORDERED that this motion is held in abeyance pending the report and recommendations of the Special Referee and a motion pursuant to CPLR 4403 or receipt of the determination of the Special Referee or the designated referee; and it is further
ORDERED that counsel for the party seeking the reference or, absent such party, counsel for the plaintiff shall, within 30 days from the date of this order, serve a copy of this order with notice of entry, together with a completed information sheet, upon the Special Referee Clerk in the Motion Support Office in Rm. 119 at 60 Centre Street, who is directed to place this matter on the calendar of the Special Referee's Part (Part 50 R) for the earliest convenient date.
Copies are available in Rm. 119 at 60 Centre Street, and on the Court's website.