Matter of Kohn - 2016 NY Slip Op 07194, 144 A.D.3d 684, 40 N.Y.S.3d 487 (App. Div. 2nd Dept.)

Rule:

Extrinsic and parol evidence of the parties' intent may not be admitted to create ambiguity in a contract that is unambiguous on its face, but such evidence may be considered where a contract is determined to be ambiguous.

Facts:

After the death of Daniel N. Kohn (hereinafter the decedent) in December 2009, Joel M. Hockett (hereinafter the executor), as the executor of the decedent's estate, petitioned pursuant to SCPA 2103 against Barbara Lutz, also known as Barbara Kohn, who is the decedent's surviving spouse (hereinafter the wife), to recover certain property on behalf of the decedent's estate. In her answer, the wife asserted a counterclaim for a decree declaring that pursuant to a prenuptial agreement dated November 10, 2006, she was entitled to a payment upon the decedent's death in the amount of $3,500,000, reduced by the amount of four mortgages and one half of the value of the funds in joint accounts identified in the prenuptial agreement. Subsequently, the wife moved for summary judgment on her counterclaim, and the executor cross-moved, inter alia, for summary judgment dismissing the counterclaim. The executor contended that the prenuptial agreement provided for a payment to the wife upon the decedent's death in the amount of $3,500,000, reduced by the amounts of the four mortgages and the entire value of the funds in the joint accounts. In an order dated June 30, 2014, the Surrogate's Court, among other things, granted the wife's motion and denied that branch of the executor's cross motion which was for summary judgment dismissing the counterclaim. The court found that the disputed clause in the prenuptial agreement required that the payment to the wife be reduced by the amount of the mortgages and only one half of the value of the joint accounts.

Issue:

Did the Surrogate’s Court err in granting the motion for summary judgment in favor of the wife?

Answer:

Yes.

Conclusion:

Here, the decedent agreed in the prenuptial agreement that, upon his death, the wife shall receive liquid assets in the amount of $3,500,000, "reduced by the amounts of four (4) mortgages . . . and any accounts that pass to [the wife] by operation of law." The executor argues that the plain meaning of this provision unambiguously establishes that the payment to the wife must be reduced by the entire value of the funds in the joint accounts. The wife, as the surviving joint owner, was "entitled to the entire funds in those accounts" upon the decedent's death. In support of her motion, the wife contended that only one half of the value of the funds in the joint accounts must be deducted from the $3,500,000 payment pursuant to the prenuptial agreement, since she received "an immediate one-half interest in the joint property" when the decedent opened the accounts. Thus, she already owned a one-half interest in the joint accounts prior to the decedent's death, and only the decedent's one-half interest in the joint accounts passed to her upon his death. Since both parties advanced reasonable interpretations of the disputed provision, the Surrogate's Court, upon renewal, should have considered the new evidence submitted by the executor, which, together with the evidence previously submitted by the executor on his cross motion, established, prima facie, that the parties intended for the $3,500,000 payment to the wife to be reduced by the amounts of the mortgages and the value of the entire funds in the joint accounts. In opposition to the executor's prima facie showing, the wife failed to raise a triable issue of fact. Accordingly, the Surrogate's Court, upon renewal, should have vacated its determination in the prior order, and thereupon denied the wife's motion for summary judgment on her counterclaim, and granted that branch of the executor's cross motion which was for summary judgment dismissing the counterclaim and, in effect, declaring that the prenuptial agreement entitled the wife to a payment in the amount of $3,500,000 reduced by the amounts of the subject mortgages and the full value of the funds in the joint accounts.