Maybe A Word Doesn’t Mean What It Unambiguously Means

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Let’s get out in the world. Let’s leave our silos. Let’s break through the real estate bubble. What is Ruminations babbling about? Real property law is not an island unto itself. It is part of the entire body of law. Yet, even those few of us who search for “real” law don’t often look at what courts say in other areas. There are things that can be learned by leaving the real estate tent to see how the rest of the (law) world lives. Today’s blog posting could show why we need to take such strolls. It describes a court decision about how to interpret a seemingly unambiguous trust document. There’s a story behind it and here it is.

As part of her estate plan, a grandmother left her estate’s assets to a trust that paid its income to her surviving husband. She specified that whatever was left upon his death was to go to her surviving grandchildren. Biologically, she had six. Two of her three children insisted that when she wrote “grandchildren,” she only considered four of those six as such. The woman suffered from no mental deficiencies. She was fully competent right up until her death. She could count. She could name all six. Yet, a court agreed that when she said the trust’s assets were to go to her grandchildren, she might have meant only four of them. [It didn’t reach that conclusion. It ordered a lower court to hold a trial to determine what the word “grandchildren” meant to her – what was her “personal” definition.]

Here’s how that came about. Her daughter, mother of the two grandchildren who might not have fit her personal definition of “grandchildren,” married outside of the grandmother’s religion. The two grandchildren were raised outside of that religion. The intermarriage so disturbed the grandmother than she equated that marriage to her daughter’s death and, consistent with the demands of her own religion, actually mourned her daughter’s death. According to her two other children, this grandmother never accepted her daughter’s two children as grandchildren. They testified that when their mother spoke of her “grandchildren,” she meant only the four who were their children. There appears to have been no contact between the grandmother and her daughter for the first 16 years after the daughter’s marriage. An attempted reconciliation at that point was disastrous when the grandmother learned that her daughter’s children had been accepted into their new religion. There was other extrinsic evidence that the grandmother only counted four grandchildren.

BUT, the plain language of the trust, a 2005 document executed 19 years after the unrealized reconciliation and 25 years after the initial schism, clearly said “grandchildren” without any modifiers. Nothing in the document would have given its reader any clue at all that “grandchildren” meant only some of them. The following text from the court’s decision will be as puzzling to readers as it was to us. [What was the attorney thinking? Keep that question in mind. It is one point of today’s blog posting.]

The attorney who drafted the trust stated that he understood that [the grandmother] did not count [her daughter’s] children among her grandchildren, nor even acknowledge their existence. He used the word “grandchildren” to include only [the two sons’] children. Although [one son and the grandmother’s husband] directed the attorney to draft the trust, the attorney said that he reviewed the trust with [the grandmother], explained that only [her two sons’] children would benefit, and she understood.

Ruminations frequently writes about how courts will interpret our documents when their meaning is disputed. Generally, the rule is that courts will stay within the four corners of the document when the disputed language is held to be unambiguous. They won’t take testimony or look at other documents when the meaning of something in an agreement appears, on its face, to have only one meaning. When a court finds text to be ambiguous, i.e., capable of two (or more) meanings, it will look outside of the document in an effort to understand what the parties intended. That’s because “intent” is the keystone to interpretation. So, under those principles, if a lease or purchase agreement or loan document used the unqualified word, “grandchildren,” we would expect the dispute to be over the DNA results, not what the word “grandchildren” meant. Now, after seeing this court decision, we are a little less sure about the strength of the wall separating the analysis of unambiguous terms and the analysis of ambiguous terms.

We think it would be helpful to use the court’s own words to explain some of the rules it used for interpretation. So, for the most part, that’s what follows:

The court’s primary goal in interpreting a trust agreement is to fulfill the settlor’s intent.

The goal always is the ascertainment of the testator’s intent and it is not to be thwarted by unduly stressing `the literal meaning’ of his words

The court may even read a trust or will “contrary to its primary signification” if necessary “to prevent the intention of the testator from being defeated by a mistaken use of language.”

[The court has the] judicial power “to effectuate the manifest intent of a testator by inserting omitted words, by altering the collocation of sentences, or even by reading his will directly contrary to its primary signification is well established.”

The Court has acknowledged that in ascertaining intent, its focus really is probable intent.

When we say we are determining the testator’s intent, we mean his probable intent.

The Court speaks of “probable intent” because “it is impossible to determine with absolute certainty [the testator’s] actual subjective intent.”

The Court “continue[s] to adhere to the view of the doctrine of probable intent expressed in [an earlier decision, but] … [t]he doctrine does not permit a court to “conjure up an interpretation or derive a missing testamentary provision out of whole cloth.”

However, a court “may, on the basis of the entire will, competent extrinsic evidence and common human impulses strive reasonably to ascertain and carry out what the testator probably intended. . . .”

Now, we’re not really surprised about those excerpts from the court’s decision. After all, a trust document is not a two-party agreement. Essentially, it is the expression of what one person desires. There is no “mutual” agreement. There is no discussion which, of necessity, requires the use of jointly understood words. What surprised us was the following. Though buried in a court’s decision about the disposition of a person’s estate, it shouted out to us in the business of crafting real property agreements:

With respect to interpretation, our courts have long disapproved the so-called “plain meaning rule,” which bars a court from looking beyond the face of a writing to consider extrinsic evidence in ascertaining intent.

Evidence of the circumstances is always admissible in aid of the interpretation of an integrated agreement. This is so even when the contract on its face is free from ambiguity.

In construing contractual instruments, our courts will broadly search for the probable common intent of the parties, will consider their relations, the attendant circumstances and the objectives they were trying to obtain, and will endeavor to find a reasonable meaning “in keeping with the express general purpose.”

In fairness, not all of that text is new to Ruminations or its readers. But the part saying “even when the contract on its face is free from ambiguity” is a splash in the face.

We also found the following distinction between interpretation and reformation quite interesting. The court’s decision noted that “[i]t is sometimes difficult to discern which task a court has undertaken.” Interpretation looks for the meaning “of language already in the instrument,” whereas “reformation involves remaking or modifying an instrument, to correct mistakes, to fulfill an unexpressed intention, or to address circumstances that were unforeseen.”

“The preponderance-of-the-evidence standard of proof applies to interpretation; however, the more rigorous clear-and-convincing standard of proof applies to reformation.” … “The higher standard of proof for reformation is warranted to prevent reliance on ‘contrived evidence.’”

We’ll now resort to republishing more of the court’s own words:

[I]t does not matter whether an ambiguity was “latent” — that is, discernable only by resort to extrinsic evidence — or “patent” — identifiable on the face of the document.

In deciding whether there is an ambiguity, a court should always admit extrinsic evidence including direct statements of intent since experience teaches that language is so poor an instrument for communication or expression.

Extrinsic evidence shall be considered twice: to determine if there is ambiguity, and, if there is, to resolve it.

Once the evidence establishes the probable intent of the testator, “the court may not refuse to effectuate that intent by indulging in a merely literal reading of the instrument.”

Now, we’ll return to the attorney who prepared the grandmother’s trust agreement. That’s us, but not just attorneys. It is all of us who write agreements. According to the attorney’s testimony, he knew that his client only wanted to benefit four of her grandchildren. Basically, that’s what he told the court. Yet, he wrote “grandchildren” in the document. He claimed to have discussed that “word” with the grandmother. He must have persuaded her that “grandchildren” meant less than all of her grandchildren. Everyone was on the same page – the grandmother, her husband, and one son. So, why did he write “grandchildren” when he claimed that everyone understood that she only meant four of those people? He said that use of the word wasn’t an oversight. Here’s our guess, informed by experience in the world of real property documents. His form said “grandchildren.” He persuaded himself that violating the form was more “wrong” than having the trust say what the grandmother meant. Regrettably, we’ve been there, especially when it comes to a lender’s form loan documents. By way of example, here’s what we’ve heard from time to time:  “No, that’s our form – we don’t make changes.”

So, there is really only one takeaway from today’s blog posting. Let’s all: “Write what we mean and mean what we write.” If we don’t, a court might do it for us.

[Oh, if anyone wants to read the court’s decision for her or himself, click HERE for a copy.]

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