Petrello v. White

10-2744-cv
Petrello v. White
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 14th day of January, two thousand thirteen.
PRESENT: JON O. NEWMAN,
BARRINGTON D. PARKER,
REENA RAGGI,
Circuit Judges.
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ANTHONY G. PETRELLO, CYNTHIA A. PETRELLO,
Plaintiffs-Counter-Defendants-Appellants,
v. No. 10-2744-cv
JOHN C. WHITE, JR., WHITE INVESTMENT
REALTY, LP.,
Defendants-Counter-Claimants-Appellees.
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APPEARING FOR APPELLANTS: NICA B. STRUNK, Esseks, Hefter & Angel,
LLP, Riverhead, New York.
APPEARING FOR APPELLEES: DANIEL N. JOCELYN (Banks Brown, Monica
S. Asher, on the brief), McDermott Will & Emery
LLP, New York, New York.
Appeal from a post-judgment order of the United States District Court for the Eastern
District of New York (Denis R. Hurley, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the order entered on June 9, 2010, is VACATED, and the case is
REMANDED for further proceedings.
Plaintiffs appeal from a post-judgment order resolving a dispute between the parties
over language in an August 25, 1998 contract for sale of 9.56 acres of waterfront property
located in Sagaponack, New York (“Contract”). See Petrello v. White, No. 01-CV-3082
(DRH)(MLO), 2010 WL 2346303 (E.D.N.Y. June 9, 2010). The district court issued the
order to effect its December 30, 2008 judgment awarding plaintiffs specific performance of
the Contract. See Petrello v. White, No. 01-CV-3082(DRH)(MLO), 2008 WL 5432230(E.D.N.Y. Dec. 30, 2008). In the order, the court interpreted the restrictive covenant in
¶ 33(2) of the Rider to the Contract, which states: “Lots 5 and 6 shall be subject to a
covenant that they shall be owned by a common owner of record,” Joint App’x at 32,
unambiguously to require that “the title to lots 5 and 6 shall be in the same person or
persons,” Petrello v. White, 2010 WL 2346303, at *1.
We have jurisdiction over this appeal pursuant to 28 U.S.C. § 1291. See, e.g., In re
Am. Preferred Prescription, Inc., 255 F.3d 87, 92-93 (2d Cir. 2001) (“[O]rders entered
post-judgment in ordinary civil litigation . . . are generally appealable, unless they are
‘ministerial’ or ‘administrative’, such as post-judgement discovery orders.” (citations
omitted)). “We review the district court’s conclusion regarding whether a contract is clear
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or ambiguous de novo.” Krumme v. WestPoint Stevens Inc., 238 F.3d 133, 139 (2d Cir.
2000) (internal quotation marks omitted). We assume the parties’ familiarity with the facts
and record of prior proceedings, which we reference only as necessary to explain our
decision to vacate and remand.
In the district court, both parties maintained that the above-quoted language of the
restrictive covenant in ¶ 33(2) is unambiguous at the same time that they disagreed as to what
that provision unambiguously means. Plaintiffs claimed that the provision requires the two
lots to have at least one owner in common, thus, preserving their ability to “checkerboard”
the property.1 Defendants, on the other hand, asserted that the provision demands that the
two lots have identical owners. A court-appointed expert advised that the disputed phrase
“shall be owned by a common owner of record”: “(1) is not a term of art; (2) is unambiguous
and should be decided within the four corners of the contract; and (3) requires that lots 5 and
6 have at least one common owner between them.” Petrello v. White, 2010 WL 2346303,
at *1. The district court adopted the first two of the expert’s conclusions, but rejected the
third, which supported plaintiffs’ position. See id. Instead, the district court ruled that the
“clear meaning of the phrase ‘shall be owned by a common owner’ requires the two lots to
have unity of ownership,” id. at *3, a construction favoring defendants.
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According to plaintiffs, checkerboarding of title “is a common strategy whereby title
to adjacent parcels are maintained in single-and-separate ownership in order to avoid the
possibility of the municipality merging the lots and the negative consequences of such a
merger on development rights.” Appellants Br. at 4 n.1.
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Under New York law, which the parties agree governs the Contract, a writing’s
ambiguity is a question of law to be resolved by the courts “‘by looking within the four
corners of the document, not to outside sources.’” Lockheed Martin Corp. v. Retail
Holdings, N.V., 639 F.3d 63, 69 (2d Cir. 2011) (quoting Kass v. Kass, 91 N.Y.2d 554, 566,
673 N.Y.S.2d 350 (1998)). A contract is unambiguous if the language used “has a definite
and precise meaning, as to which there is no reasonable basis for a difference of opinion.”
Id. (citing White v. Cont’l Cas. Co., 9 N.Y.3d 264, 848 N.Y.S.2d 603(2007)). Conversely,
contract language is ambiguous “if it is capable of more than one meaning when viewed
objectively by a reasonably intelligent person who has examined the context of the entire
integrated agreement.” Id.Focusing on different language in ¶ 33(2), the parties advance equally plausible but
conflicting constructions. Plaintiffs argue that the requirement for “a common owner of
record” is satisfied if the lots share any one common owner. Meanwhile, defendants
maintain that ¶ 33(2) contemplates that the owner of the two lots will be identical in all
respects, because it states that the lots “shall be owned by a common owner of record.” See
Appellee Br. at 17 (“By [] using the phrase ‘shall be owned by,’ the paragraph states a
condition of ownership of the lots: the only person who can own that land shall be a common
owner.”). While defendants’ argument is plausible, we depart from the district in not
deeming it conclusive as a matter of law. Certainly, the language does not clearly state that
the lots “shall be owned by identical owners of record.”
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Plaintiffs argue that any ambiguity in ¶ 33(2) should be resolved in their favor by the
New York rule of construction instructing that “[w]here the language used in a restrictive
covenant is equally susceptible to two interpretations, the less restrictive interpretation must
be adopted.” Ewing v. Watson, 15 A.D.3d 340, 343, 790 N.Y.S.2d 40 (2d Dep’t 2005). In
fact, New York applies this rule only after examining extrinsic evidence of the parties’ intent.
See Jennings Beach Assn. v. Kaiser, 145 A.D.2d 607, 608, 536 N.Y.S.2d 143 (2d Dep’t
1988) (adopting more restrictive interpretation of covenant after examining parties’ intent);
Rydberg v. Jennings Beach Assn., 69 A.D.2d 816, 817, 414 N.Y.S.2d 744 (2d Dep’t 1979),
aff’d, 49 N.Y.2d 934, 428 N.Y.S.2d 676 (1980) (same). Thus, if extrinsic evidence clearly
reveals the intent of the parties to be governed by the more restrictive meaning of a covenant,
that intent will control. See Birch Tree Partners, LLC v. Windsor Digital Studio, LLC, 95
A.D.3d 1154, 1155, 954 N.Y.S.2d 162 (2d Dep’t 2012) (holding that rule requiring restrictive
covenants to be strictly construed “is subject to the general rule of construction that the intent
of the parties is the paramount consideration.” (internal quotation marks omitted)). But
where the meaning of a covenant remains ambiguous even in light of the extrinsic evidence,
New York’s rule of construction provides for adoption of the interpretation that is least
restrictive of use and alienability of the property. See Witter v. Taggart, 78 N.Y.2d 234, 237,
573 N.Y.S.2d 146 (1991) (“[T]he law has long favored free and unencumbered use of real
property, and covenants restricting use are strictly construed against those seeking to enforce
them.”); Rowe v. Great Atl. & Pac. Tea Co., 46 N.Y.2d 62, 69, 412 N.Y.S.2d 827 (1978)
(Because “restraints on the free alienation of land . . . tend to prevent full utilization of the
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land” and are “contrary to the best interests of society,” “such covenants are to be construed
strictly even if expressly stated.”). Thus, while we hesitate to prolong this litigation, given
that the parties’ intent is paramount, and in light of the conflicting extrinsic evidence of intent
in the record, New York’s rule of construction cannot be applied in this case until the
extrinsic evidence has been evaluated in the district court.
Accordingly, the judgment of the district court is VACATED, and the case is
REMANDED for further proceedings.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
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