Justice Harold B. Beeler

NEW YORK COUNTY
Supreme Court

DECISION & ORDER

This is a matrimonial action in which this Court has conducted a non-jury trial with respect to interpretation of the parties' "Antenuptial Agreement" ("the agreement"). The Court ordered the trial because it was unable to give effect to the language of the agreement as it was written regarding ownership of the parties' primary residence and required extrinsic evidence of their intentions on this issue. The Court has had a full opportunity to consider the evidence presented, including the testimony offered and the exhibits received. The Court has further had an opportunity to observe the demeanor of the witnesses called to testify and has made determinations on issues of credibility with respect to these witnesses. The Court now makes the following findings of fact and conclusions of law:

FINDINGS OF FACT

The parties got engaged in December 2000 and married on May 6, 2001. They executed the agreement on May 4, 2001. They have no children, but plaintiff-wife has custody of twin teenage sons from a prior marriage. Defendant has two adult children from previous marriages. This matrimonial action commenced on April 12, 2005. The Court granted a divorce on defendant's counterclaim of constructive abandonment on July 30, 2008, but deferred entry of judgment pending resolution of the financial issues, primarily the construction of the agreement.

Neither party challenges the validity of the agreement and they agree that the marriage has not yet terminated. The relevant terms of the agreement are:¹

• All property owned prior to the marriage by each party or acquired during the marriage by each party shall remain separate property, unless designated as joint property. ¶¶2, 3.

• Each party waives all interests in the other's separate property. ¶4.

• No separate property shall be deemed to be marital property. ¶¶14, 15.

• No contribution in the form of money, property or personal services by one party to the separate property of the other shall alter or convert the separate property to marital property. ¶14.

• Each party waives any right to share in any pension, profit-sharing or retirement plan of the other. ¶4.

• Neither party shall incur a financial obligation or encumbrance against the separate property of the other. ¶5.

• Each party waives any spousal maintenance or right to receive equitable distribution of marital property subject to ¶8. ¶7.

• "[Richard A.] Smith shall cause the cooperative or condominium apartment which he intends to purchase, with his funds, as the primary residence of the parties to be held in joint names of the parties with right of survivorship. If such apartment is sold during the marriage of the parties and if they acquire by purchase any replacement residence which shall be their primary residence (without hereby imposing on either party any obligation to purchase a replacement residence), then in such event, such replacement residence so purchased shall be placed in the joint names of the parties with right of survivorship." ¶8(A).

• Husband shall give wife $100,000 on each of their first four wedding anniversaries if they are still married on the anniversary date. ¶8(B).²

• If the marriage terminates at any time, husband shall pay wife $1 million. ¶8(C)(i).

• If the termination occurs after their fourth wedding anniversary date, husband shall pay wife an additional $200,000. ¶8(C)(ii).

• If the marriage terminates, "the apartment shall be sold and the net proceeds shall be divided equally between [the parties]." ¶8(D)(i).

• If no "primary residence of the parties held in the joint names of the parties with right of survivorship shall be held at the termination of the marriage of the parties, [husband] shall pay to [wife] Five Hundred Thousand Dollars ($500,000) if such termination occurs within the first five (5) years of the marriage and One Million Dollars ($1,000,000) if such termination occurs after the fifth anniversary of the marriage." ¶8(D)(ii).

• If the marriage terminates, all property held in joint names, except for their primary residence, shall be divided equally between them. ¶8(E).

At the time of the marriage, defendant owned and occupied a two-bedroom apartment at 145 Central Park West, a building known as the San Remo, which he valued at $4,500,000 (with a $600,000 mortgage) in the property schedule attached to the agreement; plaintiff lived in Great Neck, New York with her children. Defendant initiated a brief discussion with plaintiff about a pre-nuptial agreement in January 2001, shortly after the engagement. The issue was put aside until May 1, 2001 when defendant's attorney sent a draft copy of the agreement to plaintiff's attorney who returned it signed by plaintiff on May 3, 2006. The only changes made by plaintiff's attorney to the draft before his client executed it were to include a provision for his fee and the respective property schedules for each party. No discussions or negotiations were conducted concerning any other aspect of the agreement. In addition to his apartment, defendant listed assets totaling $39,000,000; plaintiff listed assets worth $1,118,000.

At or about the same time they first discussed a pre-nuptial agreement, the parties began discussing acquiring a larger apartment to accommodate her children as well as a child they intended having together. Two attempts at in vitro fertilization failed after they were married. In April 2001, plaintiff contacted a real estate broker and, in June 2001, the couple accompanied the broker to see an apartment on Fifth Avenue with an asking price of $9.9 million. They did not like that apartment and made no offer on it. Plaintiff and the broker shortly thereafter viewed two townhouses without the parties making an offer on either. They resumed the search for an apartment in November 2001 having paused for defendant's kidney surgery in August and the events of September 11th and contacted a second real estate broker to assist them. The parties saw ten to fifteen apartments together, sometimes returning for a second or third visit, in the period December 2001 to April 2002. Plaintiff alone visited other apartments. They bid $8.25 million on a duplex apartment at 775 Park Avenue in February 2002 with an asking price of $9.9 million after visiting it three times, the last time accompanied by a building contractor. After their initial bid was rejected, they raised their offer to $8.75 million which was also rejected and they made no further effort to purchase that apartment. Sometime thereafter, the parties visited 927 Fifth Avenue three times and then offered $8.25 million against an asking price of $9.8 million.³ Their bid was rejected as was their follow-up offer of $8.75 million. They made no other bids and stopped looking at apartments in April 2002.

After ending the search for a new apartment, they decided to renovate the San Remo apartment to provide more living space. Plaintiff offered credible testimony about defendant's desire to keep the San Remo apartment because of its good view, its adaptability to their family needs and the relative economy of using it over spending millions more for another apartment. The difference in cost would allow them to purchase a vacation home as well. They hired an architect in February 2003, rejected a proposal for $715,000 in renovations from a construction company already at work in the San Remo and hired a contractor plaintiff found in Brooklyn for about one-half the cost. Although defendant entirely paid for the work, both parties were actively involved in the project, she more with the design, he more with the construction. The work was conducted in two stages, November-December 2003 for non-structural work and January-December 2004 for structural work (such as moving walls) and replacement of the windows. The parties remained in the apartment throughout the entire renovation project.

Once the parties decided to renovate the San Remo apartment rather than purchase another apartment, plaintiff made repeated requests to put that apartment in joint name. Defendant consulted a lawyer about drafting papers to effect that change in ownership, but no papers were ever presented to plaintiff and defendant remained the sole owner of the apartment. On or about Friday, April 8, 2005, defendant changed the locks on the apartment and informed the building's management in writing that plaintiff and her children were not allowed in the apartment. The following Tuesday, plaintiff commenced the instant action. They reconciled some weeks later⁴ and resumed living together until June 2006 when they separated permanently. Defendant moved to his Shelter Island home and plaintiff remained in the San Remo apartment. During their period back together, discussions resumed concerning ownership of the San Remo apartment which now included lawyers for each party, but the status remained the same.

CONCLUSIONS OF LAW

Based upon these findings of fact, plaintiff has proven her claim that defendant breached the agreement to purchase a primary residence for the parties to be held in joint name. Defendant did not, in fact, make such a purchase, but, after viewing other apartments and submitting offers on two, chose in conjunction with his wife to renovate his San Remo apartment entirely at his expense in order to make it into the couple's primary residence thereby meeting a goal of the agreement without taking all the prescribed steps in the agreement. The voluntary conduct of the parties after they married transmuted the San Remo apartment, indisputably defendant's separate property before the marriage, into the primary residence of the parties which properly should have been held in joint names of the parties as stated in the agreement at ¶8(A).

The parties share the legal position that the Court must enforce the intention of the contracting parties. Specifically, defendant quotes Terwilliger v. Terwilliger, 206 F3d 240, 246 (2d Cir 2000): "Under New York law, a written contract is to be interpreted so as to give effect to the intention of the parties as expressed in the unequivocal language they have employed." Yet, defendant claims in his Pre-Trial Brief that "[a]n intention to purchase an apartment places no affirmative duty or obligation upon the Defendant to do so, but rather, left the purchase subject to Defendant's discretion." He testified, "I did not believe I had an obligation to purchase an apartment under 8A." However, the Court finds no reason to substitute his expressed intention to purchase an apartment prescribed by ¶8(A) with a vague possibility. As early as defendant brought up the subject of a pre-nuptial agreement, plaintiff brought up the subject of an appropriate residence to house their family. The agreement they executed recognized such an apartment "as the primary residence of the parties to be held in joint names of the parties with right of survivorship." They engaged two real estate brokers, the first prior to executing the agreement; they visited many apartments after they were married; they then bid and re-bid on two luxury apartments. While defendant's imprecise testimony about the prices and bids on these two apartments seemed to give the impression that he made dramatically low bids that were destined to fail, plaintiff offered credible details about a more serious approach to the housing search including bids much closer to the asking prices with increases after initial rejection.

The agreement makes no reference to the location, purchase price, size or quality of the apartment to be purchased, nor does it provide any sense of the timing of the purchase. Defendant argues that this makes the agreement imperfect, but not ambiguous and the Court may not rewrite or interpret the agreement to conflict with its clear meaning. However, the parties read the word "intends" very differently, even though it is supposed to express their mutual intention. Defendant asks the Court not to rewrite or interpret the agreement, but he readily qualifies his expressed intention to purchase an apartment by adding an unwritten "maybe" to the language of the agreement. There is no question that the agreement is imperfect in that it leaves the present circumstances unaddressed, but the Court finds that this is far more consequential than defendant maintains. The language here does not convey clear meaning. While "a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms" (Greenfield v. Philles Records, 98 NY2d 562, 569 [2002]), the instant agreement is, at the very least, incomplete and unclear. This results in ambiguity, because ¶8(A) does not "have 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." Breed v. Insurance Co. of North America, 46 NY2d 351, 355 (1978); see also W.W.W. Assoc., Inc. v. Giancontieri, 77 NY2d 157, 162 (1990) ("Whether or not a writing is ambiguous is a question of law to be resolved by the courts").

"While the plain meaning of the express language of a matrimonial contract generally controls its construction [citation omitted], such a contract should not give one party an unfair or unreasonable advantage over the other [citation omitted], and necessarily includes elements of good faith and fair dealing [citation omitted]." Haskin v. Mendler, 184 AD2d 372, 373 (1st Dept 1992). "A contract should not be interpreted in such a way as would leave one of its provisions substantially without force or effect." John E. Andrus Mem'l Home v. De Buono, 260 AD2d 635, 636 (2d Dept 1999). If ¶8(A) is to have force or effect, the word "intends" must be read as an obligation not an option. Aside from the economics related to this provision of the agreement,⁵ the anticipated purchase of a primary residence is a material condition of the agreement. The mutual waiver of support or maintenance expressed in ¶7, only meaningful as plaintiff's waiver of support or maintenance by her husband-to-be because of the documented disparity in their financial positions, is "[s]ubject to the provisions of paragraph 8 herein." A critical bargain in this agreement is the trading of support or maintenance for what is contained under the heading "Financial Provisions for Goldman." No Financial Provisions for Smith are cross-referenced in the waiver of support or maintenance; no such heading appears anywhere in the agreement.

The parties planned their marriage and executed the agreement with plaintiff having custody of two children and the parties anticipating a child of their own. While the agreement lacks specificity regarding the apartment to be purchased, the intention to purchase a primary residence is expressed unconditionally. It appears as the first item in ¶8, beginning over two pages of detailed obligations almost all directed at defendant involving potentially millions of dollars. This is an unusual position for a provision that defendant maintains is near-whimsical, to be followed only if and when he chooses. Drafted by defendant's counsel, defendant's intention to purchase an apartment for the new family is not relegated to a footnote or to the end of a long list of unquestioned financial conditions surrounding the forthcoming marriage. The lack of precision in the language used to express defendant's intention, cited by defendant as a reason to read the provision as purely voluntary on his part, contrasts with the clarity of the rest of ¶8 and essentially the entire agreement. However, defendant's counsel wrote the language and it simply does not say "Smith shall cause the cooperative or condominium apartment which he may at his discretion purchase, with his funds, as the primary residence of the parties to be held in joint names of the parties with right of survivorship." The Court finds it unreasonable to read the actual language of the agreement ("which he intends to purchase") to mean the same as the suggested alternative ("which he may at his discretion purchase") which defendant argues ultimately means the opposite of the actual language ("which he does not intend to purchase"). Such a reading vitiates the waiver of plaintiff's substantial rights to support or maintenance in alleged exchange for an ephemeral promise which, by happenstance, starts a long list of obligations for defendant as conceived by his counsel.

The second sentence of ¶8(A) provides a sense of certainty that the first sentence seems to lack thereby giving rise to this controversy.

"If such apartment is sold during the marriage of the parties and if they acquire by purchase any replacement residence which shall be their primary residence (without hereby imposing on either party any obligation to purchase a replacement residence), then in such event, such replacement residence so purchased shall be placed in the joint names of the parties with right of survivorship."

In other words, if the apartment which defendant intends to buy as the parties' primary residence is sold, there is no obligation to replace it because the proceeds of the sale of the primary residence would have been shared equally. Were they to proceed with the purchase of a replacement residence, there is no requirement that they now use defendant's funds alone. While the agreement recognizes no obligation replace the original apartment, the primary residence, it offers no such option to acquiring the original apartment.

Other parts of the agreement treat the apartment identified in ¶8(A) without any of the tentativeness defendant argues characterizes ¶8(A) itself.

"If the marriage of the parties shall be terminated, . . . the apartment referred to in paragraph 8 above, or if the same shall be sold, the replacement residence of the parties if any, then held in their joint names with right of survivorship, shall be disposed of as follows:

(i) the apartment shall be sold and the net proceeds shall be divided equally between Smith and Goldman." ¶8(D)

There are "ifs" in this provision, but they do not qualify the acquisition of "the apartment referred to in paragraph 8 above."

Defendant, on at least two occasions, was willing to spend $8.75 million for an amply-sized apartment which would comport with ¶8(A). When the parties decided to renovate the San Remo apartment instead, they both became involved in the extensive process lasting about one year. Throughout the process, plaintiff brought up the issue of ownership of the San Remo apartment and defendant indicated that his lawyers were at work on it. He never refused to consider her request; he never denied its validity. Instead, because of his command of the situation as the owner of the proprietary shares in the co-operative building, he stalled on fulfilling his obligation under the agreement and should not be allowed to benefit from his inaction. Trezza v. Trezza, 32 AD3d 1016, 1017 (2d Dept 2006) ("Supreme Court properly appointed the former wife as receiver to effectuate the sale of the former marital residence . . . [where it] was necessary because the former husband's willful failure to cooperate in effectuating the sale of the former marital residence as required by the parties' written stipulation"); Stern v. Stern, 282 AD2d 667, 668 (2d Dept 2001) ("The record supports the Supreme Court's conclusion that appointment of the receiver to sell the parties' marital residence [pursuant to the judgment of divorce] was necessitated by the defendant's obstruction and delaying tactics"). Notably, in Comras v. Comras, 195 AD2d 358, 361 (1st Dept 1993), the Appellate Division held that where a stipulation of settlement "does not expressly contain a requirement that plaintiff[-husband] post an undertaking for his obligation to indemnify defendant[-wife] or acquire third-party approval for the execution of necessary documents, its absence could well defeat his contractual responsibility . . . [and the trial] court appropriately declined to allow him the option of doing nothing to facilitate obtaining consent to the transfer of [certain real property]." This Court declines to allow defendant the option of doing nothing, thereby breaching his contractual obligations.

The agreement makes no provision for breach. Plaintiff does not request specific performance, i.e. placing the San Remo in joint names and/or invoking ¶8(D)(i) which requires selling the apartment and dividing the net proceeds equally upon termination of the marriage. Defendant argues that a remedy for plaintiff as an ex-wife without an explicit property interest in the San Remo must not prove more beneficial to her than the agreement's provision for her as a widow identified in ¶9(B). In the event of defendant's death during the marriage, according to that provision, plaintiff shall receive a testamentary bequest of $5 million reduced by the current value of defendant's IRAs and pension plan, of which she is the named beneficiary pursuant to ¶9(A), and "reduced further by the amount of the net value of the apartment." At the time the agreement was executed, defendant's IRAs and pension plan had an undisputed value of $2.5 million. Accordingly, defendant contends, the apartment's value to plaintiff was never intended to exceed $2.5 million. However, this reading seems inconsistent with ¶9(C), immediately following, which states that the apartment, if owned by both parties at the time of defendant's death, shall pass to plaintiff "subject to any outstanding indebtedness secured by the apartment" without mention of any cap on her bequest as found in ¶9(B). Both paragraphs refer to a "replacement residence" owned by the parties succeeding "the apartment," but only ¶9(C) cites "the apartment, referred to in Paragraph 8." There is a consistent reading of the two adjacent paragraphs dealing with the apartment upon defendant's death. Paragraph 9(B) provides a cash outlay to plaintiff as widow not to exceed $5 million, but possibly as little as zero based on the value of defendant's retirement accounts (which plaintiff will inherit) and the equity of the apartment. Paragraph 9(C) alone mentions transfer of the apartment to the widow subject only to her clearing any debt related to the apartment whether or not the apartment actually secures the debt. Read together, plaintiff will receive upon defendant's death the lesser of $5 million cash or $5 million reduced by the sum of the value of his retirement accounts and the equity on the apartment ( ¶9[B]), and the apartment with any associated debt ( ¶9[C]). The apartment's value is not limited by ¶9(B) nor is the transfer to plaintiff as surviving spouse. Paragraph 9(B) limits only the cash award to plaintiff under the will incremental to the cash value of defendant's retirement accounts. As surviving spouse, plaintiff gets the apartment under ¶9(C) whether or not it has net equity value.

While the San Remo was not literally the apartment described in ¶8(A), it became the surrogate by the conduct of the parties especially as defendant controlled and prevented the actual fulfillment of ¶8(A). Remaining at the San Remo apparently satisfied both parties as they turned their time and energy to renovating the existing apartment which took over one year to accomplish. An award to plaintiff of half of the net equity value of the San Remo, as a remedy for defendant's breach, is, therefore, appropriate. The actual award to plaintiff shall be determined at trial on damages by the court assigned to this action succeeding the Honorable Harold B. Beeler which shall take testimony of the market value of the San Remo as of July 24, 2008, the last date of the trial, and the amount of any mortgage on or any indebtedness related to the San Remo as of July 24, 2008. The difference between the market value of the San Remo and any associated indebtedness shall be the net equity value of the apartment, half of which shall be the cash award to plaintiff.

The parties shall comply with all other provision of the agreement forthwith.

This constitutes the decision and order of the Court.

1. Where names are used in the agreement, plaintiff is Goldman and defendant is Smith.

2. A lump sum payment of $400,000 was apparently made by defendant to plaintiff in the Fall of 2005 pursuant to ¶8(B). On or about July 30, 2007, defendant paid plaintiff $100,000 as an advance against the other funds due her upon termination of the marriage.

3. Defendant's testimony about these two apartments is less precise than plaintiff's. He recollected that they bid $8 million and then raised their bid to $8.75 million for "a $12 million apartment" on Park Avenue, and bid $8 million for "a $15 million apartment" on Fifth Avenue.

4. Plaintiff testified they were apart about two weeks while defendant testified it was about four months.

5. Plaintiff is certain of $1,200,000 upon termination of the marriage plus either $1,000,000 by defendant's reading of the agreement or half the proceeds of the sale of the San Remo apartment according to plaintiff, the value set ultimately by the marketplace. The difference between these two constructions is likely to be several million dollars. Upon sale, the San Remo apartment may realize substantially more than the $4,500,000 value defendant estimated for it when the agreement was drawn. For example, ignoring the value of the extensive renovations made to the apartment in 2003 and 2004, a $4,500,000 property would be now worth about $6,766,000 if it appreciated 6 percent annually over seven years (2001 to 2008) and about $8,769,000 at 10 percent annual appreciation. If the mortgage balance remains at $600,000, as it was in 2001, plaintiff's share of the proceeds might range from $3,083,000 to $4,084,500 before commissions and fees. By comparison, had defendant purchased an apartment in 2002 at $8.75 million, it would be worth $12,412,042 today appreciating at 6 percent annually and $15,501,159 at 10 percent before accounting for mortgage indebtedness and transaction costs.