HAFFENREFFER v. HAFFENREFFER No. 2008-276-Appeal.
994 A.2d 1226 (2010)
David H. HAFFENREFFER, in his Capacity as Co-Executor of the Estate of Carolyn B. Haffenreffer v. Karl HAFFENREFFER, in his Capacity as Co-Executor of the Estate of Carolyn B. Haffenreffer et al.
Supreme Court of Rhode Island.
May 18, 2010.
William R. Landry, Esq., Providence, RI, for Plaintiff.
R. Daniel Prentiss, Esq., for Defendant.
Present: GOLDBERG, FLAHERTY, and ROBINSON, JJ.
Justice ROBINSON for the Court.
This case comes before us on the defendant's appeal from two grants of summary judgment entered in accordance with Rule 56 of the Superior Court Rules of Civil Procedure in favor of the plaintiff, David H. Haffenreffer. The defendant, Karl Haffenreffer, raises two principal issues on appeal. First, Karl
Facts and Travel
David and Karl are brothers. Their mother, Carolyn B. Haffenreffer, passed
The Probate Estate
Carolyn's probate estate consisted mainly of various parcels of real property and various items of personal property. Carolyn bequeathed all her tangible personal property in roughly equal shares to be divided amongst Karl, David, and David's wife. Carolyn directed that three parcels of real estate in Little Compton be devised to David. She also instructed the coexecutors to sell one parcel of real estate on Congdon Street in Providence.
Additionally, Carolyn directed the coexecutors to sell several other parcels of real estate located in Little Compton; it is these parcels that lie at the core of the instant controversy. Section 10 of the will governed the preconditions for the sale of these parcels. Essentially, section 10 required that the coexecutors first offer to sell the parcels to a select group of family members for "the lowest price which the seller would be willing to accept for such parcel;" then, if any of the parcels remained unsold, the coexecutors were to offer them for sale to the public.
The Trust Agreement
Carolyn's will provided that the residue and remainder of her estate should be transferred into her trust. Carolyn had established in 1982 a Trust Agreement with Fleet National Bank (now Bank of America) to serve as trustee.
In May of 2004, several months after Carolyn's death, Attorney Field (one of the coexecutors) created a spreadsheet to better explain what assets would ultimately constitute the Overall Estate
The Offer Document
On March 2, 2005, the three coexecutors (Karl, David, and Attorney Field) caused to be created a document (Offer Document) that would be used to facilitate the sale of the six Little Compton parcels as directed by Carolyn's will; in that document, the coexecutors mutually agreed to sell the six parcels in four saleable units. The Offer Document permitted Karl, David, and David's three children to make offers to purchase the four units in accordance with section 10 of Carolyn's will. What ultimately lies at the heart of the instant dispute is the language in the socalled "credit provision" of the Offer Document which sets forth the terms of payment for the units. That provision reads as follows:
The Offer Document required that any family member who wished to purchase a unit return his or her response by May 2, 2005.
On May 2, 2005, Karl submitted his response to the Offer Document—accepting the offer by indicating that he wished to purchase three specific units of the four that had been offered; those three units had been appraised as having a total value of $5,215,500. Karl indicated that he would pay most of the purchase price by using, in the form of a credit, the approximately $4.1 million that was due to him from Carolyn's Overall Estate to be distributed in accordance with the Trust Agreement.
Almost a month later, on June 1, 2005, Attorney Field responded to Karl's acceptance of the coexecutors' offer to sell the parcels. Attorney Field did so in a memorandum to the coexecutors and their counsel; he asserted that the credit provision set forth in the Offer Document did not permit Karl to purchase the three units by using a credit reflective of the amount due to him from the Overall Estate. Attorney Field indicated that Karl would have to pay for the properties in the form of cash, certified check, bank check, or wire transfer.
Less than a week later, on June 7, 2005, Karl, through his attorney, responded to Attorney Field and David, demanding that the sale take place and asserting that he was entitled to use a credit reflective of the amount due to him from Carolyn's Overall Estate. It is undisputed that David and Attorney Field, in their capacities as coexecutors, ultimately refused to consummate the sale.
The Superior Court Actions
On May 6, 2005, David commenced the instant action in Newport County Superior Court by filing a verified complaint seeking
Karl answered the amended complaint and also filed a counterclaim and cross-claim, asserting that it was David and Attorney Field who, when they refused to convey the three parcels to him, had breached the contract that had come into existence when he accepted the offer set forth in the Offer Document. Karl contended that, in drafting the Offer Document, the coexecutors had intended that the credit provision in the Offer Document would allow him to use his intended distribution from Carolyn's Overall Estate as a credit for a portion of the purchase price. The parties thereafter filed cross-motions for summary judgment.
On May 3, 2007, the parties appeared in Superior Court and participated in a hearing on their cross-motions for summary judgment. On July 27, 2007, the hearing justice issued a written decision and ruled that the credit provision clearly and unambiguously permitted Karl to use a credit from his anticipated share of Carolyn's probate estate only—and
In the wake of the just-referenced ruling, Karl was granted leave to amend his counterclaim. He then added a count 3 to his original counterclaim. In count 3 of Karl's counterclaim, he sought reformation of the contract on the basis of mutual mistake; he again argued that the coexecutors had intended that, in purchasing such parcels as he might choose to purchase, he could use a credit from his expected share of the Overall Estate. David and Karl again filed cross-motions for summary judgment.
On May 23, 2008, the same hearing justice as had ruled on the earlier cross-motions addressed the most recent cross-motions for summary judgment; she once again ruled in favor of David and declined to allow reformation of the contract. The hearing justice again declared that the Offer Document was clear and unambiguous and should be understood as David would have it. She held that the phrase "pursuant to the terms of the Will" in that document meant that, in seeking to purchase the subject properties, Karl was entitled to use a credit only with respect to his shares of Carolyn's probate estate and
Standard of Review
This Court employs a de novo standard in reviewing a hearing justice's decision on a motion for summary judgment pursuant to Rule 56 of the Superior Court Rules of Civil Procedure. Estate of Giuliano v. Giuliano, 949 A.2d 386, 391 (R.I.2008). We carry out such a review in the same manner as did the hearing justice, "reviewing the evidence and drawing all reasonable inferences in the light most favorable to the nonmoving party." Fiorenzano v. Lima, 982 A.2d 585, 589 (R.I. 2009); see also Planned Environments Management Corp. v. Robert, 966 A.2d 117, 121 (R.I.2009); Chavers v. Fleet Bank (RI), N.A., 844 A.2d 666, 669 (R.I.2004). This Court "will affirm a summary judgment if there is no genuine issue of material fact and we conclude that the moving party is entitled to judgment as a matter of law." O'Sullivan v. Rhode Island Hospital, 874 A.2d 179, 182 (R.I.2005); see also Alves v. Hometown Newspapers, Inc., 857 A.2d 743, 750 (R.I.2004).
Further, since the instant dispute involves contract interpretation, it should be recalled that "this Court reviews the trial justice's interpretation of contracts de novo." Zarrella v. Minnesota Mutual Life Insurance Co., 824 A.2d 1249, 1259 (R.I.2003). In addition, whether or not a contract is ambiguous is a question of law. Gorman v. Gorman, 883 A.2d 732, 738 n. 8 (R.I.2005); see also Young v. Warwick Rollermagic Skating Center, Inc., 973 A.2d 553, 558 (R.I.2009). Accordingly, our review of the hearing justice's ruling as to that issue is conducted on a de novo basis. Young, 973 A.2d at 558.
On appeal, Karl contends that the hearing justice should not have granted summary judgment in David's favor. He asserts that the credit provision in the Offer Document is ambiguous, in that (in his view) it is susceptible to more than one possible meaning. Karl further contends, however, that there is only one reasonable interpretation of that provision — viz., that the provision contemplates a credit being taken with respect to the Overall Estate and not just Carolyn's probate estate (as is contended by David). Karl further alleges error in the hearing justice's failure to look to extrinsic evidence in interpreting the provision in question. Karl contends that extrinsic evidence demonstrates that, at the time of the drafting of the Offer Document, the coexecutors intended that the credit provision refer to the Overall Estate. Karl therefore asserts that summary judgment should have been granted in his favor.
For the reasons that follow, it is our conclusion that the phrase "Estate of Carolyn B. Haffenreffer" as used in the credit provision of the Offer Document unambiguously refers to Carolyn's Overall Estate.
In reviewing the terms of Carolyn's will, it is immediately apparent that the will transfers a large portion of the decedent's estate to a trust, as Carolyn's will expressly provides that the residue and remainder of her estate should be transferred "to Fleet National Bank as trustee under [Carolyn's] 1982 Trust Agreement * * *." In the law of wills and trusts, such a provision is commonly referred to as a pour-over provision. See, e.g., Filippi v. Filippi, 818 A.2d 608, 615 (R.I.2003); see also Notarantonio v. Notarantonio, 941 A.2d 138, 141 (R.I.2008). When such a pour-over provision is utilized, the decedent's will and her trust become inextricably linked. See Merrill v. Boal, 47 R.I. 274, 283, 132 A. 721, 725 (1926) ("Very frequently a trust agreement * * * is later incorporated by reference into a will and serves as a part thereof."); see also 79 Am.Jur.2d Wills § 196 (2009) ("[T]he general rule of incorporation by reference is applicable to permit the incorporation in a will wherein a bequest is made in trust of an extrinsic trust instrument to supply the terms of the trust."). Since it employs a pour-over provision, Carolyn's will not only provides for the distribution of her probate estate, but it also directs that a large portion of her estate be distributed through a trust. Therefore, it is our conclusion that the shares to which Karl is entitled "pursuant to the terms of the Will" include shares from Carolyn's probate estate and from her trust.
Accordingly, this Court may "consider extrinsic evidence where relevant to prove a meaning to which the language of the instrument is reasonably susceptible * * *." Harrigan v. Mason & Winograd, Inc., 121 R.I. 209, 213, 397 A.2d 514, 516 (1979);
The pertinent extrinsic evidence (much of it consisting of sworn testimony by David and by Attorney Field and members of Attorney Field's law firm) indicates that, until some point in time after the
The transcript of the deposition of Attorney Field that was conducted on July 28, 2005 contains the following significant dialogue:
Similarly, in his deposition taken on August 2, 2006, David acknowledged that he understood the credit provision of the Offer Document as referring to "the trust and the will put together."
In addition, Attorney David I. Lough (the lawyer in Attorney Field's office who actually drafted the Offer Document) stated in an affidavit that he drafted the credit provision of the Offer Document "with the objective of carrying out the intention of the executors * * * as [he] understood it." Attorney Lough stated that his understanding of the intention of the coexecutors was as follows:
Despite the prior understanding of the parties, David acknowledged in his deposition that he took the position that Karl could not use a credit from his anticipated distribution from Carolyn's Overall Estate at the time "when Karl made his election to accept the offers of the property and tried to use his share from the trust as part of the purchase price."
In summary, we conclude as a matter of law that the phrase "Estate of Carolyn B. Haffenreffer" unambiguously refers to Carolyn's Overall Estate, and not solely to her probate estate.
For the reasons set forth in this opinion, we reverse and vacate the Superior Court's grants of summary judgment in favor of David. We remand this case to the Superior Court.
Chief Justice SUTTELL did not participate.
Justice INDEGLIA took no part in the consideration or decision of this appeal.
Justice GOLDBERG, dissenting.
I respectfully dissent from the decision of the majority in this case. I disagree with the legal conclusions reached by the majority, the marked departure from settled contract law, and the holding that the Superior Court's grant of summary judgment should be vacated. I would affirm.
In my opinion, the seasoned and well-respected hearing justice who was confronted with this unseemly dispute between two brothers, who not only commissioned the drafting of the offer-document contract, but also were its beneficiaries, issued a twenty-one page decision that was eloquently drafted, well-reasoned, and correct. The hearing justice properly refused to engage in the interpretive acrobatics urged by Karl and that were adopted in the majority decision. The hearing justice found that the controlling language of the so-called "credit provision" was clear and unambiguous and governed its consequences. She then decided, correctly in my opinion, that it was incumbent upon her to enforce the agreement as written. In accordance with our well-settled law, the hearing justice, quoting 17A C.J.S. Contracts § 310 (1990), refused to attempt to ascertain "the actual mental process of the parties or their state of mind when the contract was executed," nor resort to any extrinsic evidence—having found that both routes were unnecessary and impermissible. Significantly, the majority decision ignores the hearing justice's conclusion that this distasteful agreement was clear and unambiguous. Instead, by examining both the will and the trust instruments, the majority reaches the conclusion that the term "Estate of Carolyn B. Haffenreffer" as set forth in the Offer Document, "unambiguously refers to Carolyn's Overall Estate." Further, the majority concludes that the phrase, "pursuant to the terms of the Will" means pursuant to the terms of the will and trust instrument — a result that is contrary to our well-established law and a marked departure from our precedent.
In my opinion, the majority decision overlooks what really happened in this case as reflected in the issues and pleadings that were presented to the hearing justice. I particularly am concerned by the failure of the majority to decide the case based on the issues that were preserved, and not those that were not preserved. Is the agreement ambiguous or not? If it is ambiguous — a question of law for the Court — then summary judgment must be vacated and the case remanded for trial. If the agreement is not ambiguous, a conclusion that I have reached, then the judgment is affirmed. A holding that the agreement is not ambiguous, but does not mean what it says is confusing and foreign to our appellate jurisprudence. Consequently, I dissent.
The decedent executed the will in 1995, and directed how her real and tangible property was to be distributed. She bequeathed her personal tangible property in equal shares to Karl, David, and David's wife. She directed that her home in Providence be sold, and she gave David the option to receive three of her lots in Little Compton. The remaining real estate in Little Compton, consisting of six lots, was not devised to anyone; rather, the decedent directed that these lots be sold (but, in general, first offered to David, Karl, and her grandchildren). Although the will set forth specific instructions about how the sale was to be accomplished, the terms of the sale and the price were left to the coexecutors. Significantly, the will dictated that any offeree who accepts the offer shall make payment of the sale price to the executors within ninety days after the mailing of the offer. The majority decision overlooks this tight time frame in its examination of the remaining terms of the will.
The will also contained a provision specifying that the residue of the estate be poured over into a trust, which the decedent established in 1982, and amended numerous times; the final amendment, the sixteenth, was amended on December 14, 1999, four years after the will.
After Carolyn's death in 2003, the coexecutors, having been duly appointed and qualified, entered into an agreement with respect to the sale of the lots in Little Compton. The property was divided into four parcels, designated as (i), (ii), (iii) and (iv); appraisals were obtained and all three fiduciaries agreed upon the Offer Document. The Offer Document set forth precisely how payment was to be made:
The record before this Court discloses that less than fifteen minutes before the deadline, Karl delivered his acceptance of the offer for three parcels, totaling
However, despite the provision in the Offer Document that expressly prohibited seller financing, and notwithstanding that there were no amounts currently due Karl under the will or the trust, Karl contended that he was entitled to use a "credit" to pay for all of parcel (iv) and some of parcel (i), and intended to pay for the remainder of parcel (i) and all of parcel (ii) by wire transfer.
In addition, the will specifically set forth a strict closing schedule for the sale of this real estate—ninety days from offer to payment. A careful reading of the will and the Sixteenth Trust Amendment to the trust instrument—an exercise the hearing justice refused to allow—reveals that Karl wanted to apply a credit against an amount that he was not due under either instrument, but which would become due, in the future, after the probate estate was settled and the trust made its final payment. Before the Superior Court, Karl argued that the trust estate "owe[d]" Karl "value equal to one-third of its `available assets'" and that Karl was "simply taking his value in the form of real property." (Emphases added.) According to Karl, the executors were free to distribute to the trust a promissory note, or other document, and Karl would then relinquish "an interest in his share of the [t]rust [e]state equal to the credit amount used to pay for [the] property." The executors refused to do so, and the hearing justice also declined to engage in these scenarios.
The Proceedings Below
It is significant to me that in the Superior Court, neither party sought to have the hearing justice declare the contract to be ambiguous. It is undisputed that before the Superior Court, Karl argued that the contract was not ambiguous and that his interpretation was the only reasonable result. Although Karl argued that the contract was unambiguous, citing Paolella v. Radiologic Leasing Associates, 769 A.2d 596 (R.I.2001), he nonetheless urged the hearing justice to look to extrinsic evidence "to aid in the interpretive process and to assist [the court] in determining the contract's meaning"—an exercise the hearing justice deemed unnecessary and impermissible. In his memorandum to the hearing justice, Karl contended that the contract was not ambiguous because plaintiff's interpretation was unreasonable as a matter of law and therefore "Karl's [i]nterpretation is the one valid interpretation of the contracts that are before the court." According to Karl, the contract "should be enforced according to the single, reasonable interpretation that gives meaning, life and effect to the [c]redit [p]rovision." However, to reach "the single, reasonable interpretation" of the contract and give "meaning, life and effect to the [c]redit [p]rovision[,]" one must venture upon a journey that is foreign to our jurisprudence
The hearing justice refused to engage in the fact-finding that Karl advocated; she found the contract's language to be clear and unambiguous and refused to resort to the analysis of extrinsic evidence. She correctly declared:
Thus, the hearing justice gave effect to all of the provisions of the credit provision (including the prohibition against seller financing) and paid faithful allegiance to our pronouncements. In reversing her decision, the majority ignores most of the language in the Offer Document and rewrites the agreement in favor of Karl. In so doing, the majority declares that "it is our conclusion that the phrase `Estate of Carolyn B. Haffenreffer' as used in the credit provision of the Offer Document unambiguously refers to Carolyn's Overall Estate." Thus, the term "estate" becomes "Overall Estate" and the remainder of the document, including the requirement that any credits must be due "pursuant to the terms of the Will" is ignored. According to the majority, because the will directs that the residue of the estate be transferred to the trust, the will and the trust "become inextricably linked" and are incorporated by reference into the credit provision and thus considered in the construction of the contract. I respectfully dissent.
Interpretation of the Offer Document
Rhode Island Contract Interpretation Doctrines
Last term, this Court expressed Rhode Island's long-standing contract interpretation doctrines in Young v. Warwick Rollermagic Skating Center, Inc., 973 A.2d 553 (R.I.2009), and today, less than one year later, the majority departs from these venerable doctrines.
The first step of contract interpretation is to determine whether the writing is clear or ambiguous. "A contract is ambiguous when it is `reasonably susceptible of different constructions.'" Young, 973 A.2d at 558 n. 6 (quoting Westinghouse Broadcasting Co. v. Dial Media, Inc., 122 R.I. 571, 579, 410 A.2d 986, 991 (1980)). "In determining whether or not a particular contract is ambiguous, the court should read the contract `in its entirety, giving words their plain, ordinary, and usual meaning.'" Id. at 558 (quoting Mallane v. Holyoke Mutual Insurance Company in Salem, 658 A.2d 18, 20 (R.I.1995)); see also Irene Realty Corp. v. Travelers Property Casualty Company of America, 973 A.2d 1118, 1122-23 (R.I.2009). Importantly, we have oft said that "while carrying out this task, the court should `refrain from engaging in mental gymnastics or from stretching the imagination to read ambiguity * * * where none is present.'" Young, 973 A.2d at 559 (quoting Mallane, 658 A.2d at 20); see also Paul v. Paul, 986 A.2d 989, 993 (R.I.2010) (recognizing that to a skilled advocate, "ambiguity lurks in
In Young, this Court was faced with interpreting an insurance release document. The document provided that the plaintiff, in exchange for monetary compensation, would release the defendant from injuries and damages "in any way growing out of any personal injuries, whether known or unknown to me at the present time resulting or to result from any and all incidents or injuries occurring during my employment[.]" Young, 973 A.2d at 556. This Court stated that, "[the release] is replete with such straightforward English words as `any' and `all.'" Id. at 559. "In view of our conclusion as to the unambiguous nature of the release language, there is no reason not to accept the release document and apply it at face value." Id. We properly recognized that "[i]f the contract terms are clear and unambiguous, judicial construction is at an end for the terms will be applied as written." Id. (quoting Rivera v. Gagnon, 847 A.2d 280, 284 (R.I.2004)); see also Monahan v. Girouard, 911 A.2d 666, 672 (R.I.2006) (recognizing same).
We acknowledged that while the plaintiff had the right to assert her position:
Ultimately, we refused to give credence to the plaintiff's version of what the written contract meant because when "we are confronted with unambiguous contractual words, what is claimed to have been the subjective intent of the parties is of no moment." Young, 973 A.2d at 560 (citing Vincent Co. v. First National Supermarkets, Inc., 683 A.2d 361, 363 (R.I.1996)). In my opinion, that is the case currently before us — we are asked to consider and then elect between the subjective intent of the parties.
Most importantly to the case at bar, this Court acknowledged that "[i]n situations in which the language of a contractual agreement is plain and unambiguous, its meaning should be determined without reference to extrinsic facts or aids." Young, 973 A.2d at 560 (quoting Clark-Fitzpatrick, Inc./Franki Foundation Co. v. Gill, 652 A.2d 440, 443 (R.I.1994)); see also National Refrigeration, Inc. v. Standen Contracting Co., 942 A.2d 968, 972 (R.I. 2008) (recognizing that "[b]ecause this contract language is clear and unambiguous, reference to extrinsic evidence is not necessary").
Application of the Doctrines to the Credit Provision
I agree with the majority on one point — the language of the credit provision is not reasonably susceptible of more than one meaning; it clearly and unambiguously mandates that the parties can use shares that are due from the estate pursuant to the terms of the Will. The majority essentially contends that the phrase "pursuant to the terms of the Will" actually means pursuant to the terms of the trust. The majority reaches this conclusion by: (1) looking at some of the terms of the Offer Document containing the credit provision;
I also respectfully disagree with that portion of the majority opinion in which the Court declares that "we believe it worthwhile to note that our interpretation of the credit provision as unambiguously allowing Karl to use as a credit his shares from Carolyn's Overall Estate is entirely consistent with the intentions of the parties in preparing the Offer Document, as reflected in the copious extrinsic evidence in the record." Thus, as support for its conclusions, the majority proceeds to consider some, but not all, of the massive and confusing record that Karl produced. The opinion wholly overlooks the fact that the other parties, and the independent coexecutor, deeply and vigorously dispute Karl's declared intent with respect to the Offer Document. Moreover, when faced with a clear and unambiguous writing, "what is claimed to have been the subjective intent of the parties is of no moment." Young, 973 A.2d at 560, 560 n. 11 (recognizing that "[a] court's proper role in interpreting a contract is to divine `the intent that is expressed in the language of the contract'") (quoting Westinghouse Broadcasting Co., 122 R.I. at 581 n. 10, 410 A.2d at 991 n. 10).
In this case, David, Karl, and the independent coexecutor agreed on the terms of the credit provision that was designed solely for the benefit of the brothers Haffenreffer. As reflected in the writing, each was permitted to use credits for
Words have meaning. The term "will" means "will;" it does not mean "overall probate and trust estate." The agreed-upon language of the Offer Document is clear, and our involvement, like that of the hearing justice, should stop. We have no warrant to wade into the sea of extrinsic evidence in an effort to gauge the parties' intent. Consequently, I dissent.
For the foregoing reasons, I conclude that the credit provision of the Offer Document was clear and unambiguous. I would affirm the judgment.
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