Chrysler's motion for summary judgment, and cross-moves for summary judgment on the ground that the operative language in Section 8(b) unambiguously excuses Bankers Trust from participating in any further Advances under the Agreement, whether they be Advances, Overadvances or CC Overadvances, for as long as the conditions giving rise to the CC Overadvances remain uncured.
Section 14 of the Participation Agreement provides that the Agreement shall be governed by the laws of the State of New York.
To decide a summary judgment motion in a dispute over the meaning of contract language, the court must first determine as a matter of law whether the terms of the contract are "sufficiently ambiguous to permit any proof concerning the subjective intent of the parties." Tokio Marine & Fire Ins. Co. v. McDonnell Douglas Corp., 617 F.2d 936, 940 (2d Cir. 1980); Sutton v. East River Savings Bank, 55 N.Y.2d 550, 554, 450 N.Y.S.2d 460, 435 N.E.2d 1075 (1982). If the contract language is "unambiguous," the court must enforce the plain, ordinary, and common meaning of those terms as a matter of law without reference to extrinsic evidence.
Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989); see also IBM Poughkeepsie Employees Fed. Credit Union v. Cumis Ins. Soc., 590 F. Supp. 769, 772 (S.D.N.Y. 1984) (Weinfeld, J.). Both parties agree in their respective summary judgment motions that the phrase "Participant shall have no further obligations to purchase additional participations hereunder" is "unambiguous," yet the parties offer conflicting interpretations of the allegedly unambiguous language.
However, the phrase is not "ambiguous" simply because Bankers Trust and Chrysler disagree as to its meaning. As the Second Circuit has cautioned:
Language whose meaning is otherwise plain does not become ambiguous merely because the parties urge different interpretations in the litigation. The court is not required to find the language ambiguous where the interpretation urged by one party would 'strain the contract language beyond its reasonable and ordinary meaning.'" Hunt, 889 F.2d at 1277 (quoting Bethlehem Steel Co. v. Turner Construction Co., 2 N.Y.2d 456, 161 N.Y.S.2d 90, 141 N.E.2d 590 (1957)).
The Second Circuit has also noted that "it is the rare sentence that cannot be read in more than one way if the reader is willing either to suspend the rules of common English usage or ignore the conventions of a given commercial setting . . . . Contorted semanticism must not be permitted to create an issue where none exists." Wards Co., Inc. v. Stamford Ridgeway Assocs., 761 F.2d 117, 120 (2d Cir. 1985).
In order to determine whether the phrase in Section 8(b) of the Participation Agreement is "ambiguous," it is necessary to consider it in the context of the entire Participation Agreement, including the other language in that subsection. The phrase is ambiguous only 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 and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Walk-In Medical Centers, Inc. v. Breuer Capital Corp., 818 F.2d 260, 263 (2d Cir. 1987) (citations omitted).
The first paragraph of Section 8(b) defines the concept of a CC Overadvance and makes clear that Bankers Trust as the Participant
has no obligation to purchase a participating share of the CC Overadvance.
The second paragraph of Section 8(b) reads:
In addition, Chrysler agrees that so long as (x) the sum of the amount of outstanding Advances (not including any such CC Overadvances) plus any such CC Overadvances is in excess of an amount equal to Availability at such time less $ 3,000,000, or (y) all Events of Default and Subordination which gave rise to the CC Overadvance as set forth in the preceding paragraph shall not have been cured . . ., then (i) prior to any payment on account of the principal amount of any CC Overadvances, the Participant shall have received repayment of Participant's participating share hereunder from Current Asset Collateral and Participant shall have no further obligations to purchase additional participations hereunder, (ii) Chrysler shall be entitled to receive interest on the CC Overadvance on a current basis and on account of past due unpaid interest if Borrower has paid interest on all Advances under the Loan and Security Agreement, (iii) . . . . At such time as Availability minus $ 3,000,000 is an amount equal to or greater than the amount of all outstanding Advances (which shall include the CC Overadvance), and all Events of Default and Subordination Events which gave rise to the CC Overadvance have been cured (a waiver not being a cure for purposes hereof), then the CC Overadvance shall be and be deemed to be repaid in full and shall thereupon constitute an Advance in which Participant shall purchase a participating share hereunder. (Emphasis added).
Since the first paragraph of Section 8(b) already excuses Bankers Trust, as the participant, from any obligation to purchase a participating share of a CC Overadvance, to read the highlighted phrase in the second paragraph of Section 8(b) as excusing Bankers Trust's obligation to purchase a share of additional CC Overadvances would render the second paragraph redundant. See Morgan, Olmstead, Kennedy & Gardner, Inc. v. Federal Ins. Co., 637 F. Supp. 973, 977 (S.D.N.Y. 1986) (Conner, J.), affd 833 F.2d 1003 (2d Cir. 1986) (finding contract language "unambiguous" in part based on "fundamental" principle that contract should be construed so as to give meaning to each of its terms). In addition, the phrase would make no sense if it was meant to excuse Bankers Trust from purchasing additional CC Overadvances when by virtue of the first paragraph of Section 8(b) Bankers Trust is not obligated to purchase a share of any CC Overadvance.
Certainly, in the phrase "Participant shall have no further obligations to purchase additional participations" the term "participations" must at least refer to something in which Bankers Trust participates. By virtue of the first paragraph of Section 8(b) Bankers Trust is not "participating" in the extension of CC Overadvances to HIS, and by virtue of the last sentence of the second paragraph of Section 8(b) Bankers Trust does not "participate" by purchasing a percentage of the CC Overadvance until it converts into an Advance.
Bankers Trust is, however, required to "participate" in Advances and overadvances by purchasing a participating share, specifically 18.75%, of each Advance or overadvance.
The word "participation" is used in other parts of the Participation Agreement to refer to a purchase by Bankers Trust of a share of an Advance. For example, Section 10(a) twice refers to "Advances in which Participant is purchasing a participation hereunder," and Section 1 states "Participant hereby purchases without recourse on a continuing basis an undivided participation and interest in the Advances at any time outstanding."
(Emphasis added). Thus, with each Advance Bankers Trust has purchased a "participation," and "participations" as used in the phrase in Section 8(b) refers to a cumulation of purchases Bankers Trust has made when several Advances have been extended.
For the foregoing reasons, the phrase "Participant shall have no further obligations to purchase additional participations hereunder" is unambiguous. The phrase means that so long as the conditions listed in the first half of the sentence in which the phrase is contained remain uncured, Bankers Trust has no obligations to purchase a percentage of Advances or overadvances made subsequent to the CC Overadvance.
This clear meaning does not conflict with other provisions of the Agreement. Chrysler contends that portions of the Agreement, stating that Bankers Trust's obligation to participate in Advances is "absolute and unconditional," prove that the phrase in Section 8(b) cannot possibly relieve Bankers Trust of its obligation to purchase its required share of new Advances. However, Chrysler ignores some important language which indicates that Bankers Trust's absolute promise to participate is subject to many provisions of the Agreement which excuse or limit the degree of Bankers Trust's commitment. For example, although Section 1 states that Bankers Trust agrees to purchase "without recourse" on a continuing basis an undivided participation and interest in the Advances, in the same sentence the Agreement states that Bankers Trust's promise is subject to "the terms and conditions set forth herein".
Finally, Chrysler's argument that if the phrase means what Bankers Trust contends, the concept would be too important to have been "buried" in the middle of the paragraph must be rejected. The law does not require parties to highlight particularly important language, and entities like Chrysler and Bankers Trust which are large financial institutions should be deemed to have read every word of their contract.
Chrysler's motion for summary judgment is denied. Bankers Trust's motion for summary judgment is granted.
IT IS SO ORDERED.
November 10, 1992