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.] [Read more…]

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Writing That One Must Arbitrate May Not Be Enough To Require Arbitration

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We’ve written about arbitration a few times and made reference to this alternate dispute resolution process in several blog postings over the years. [For example, click: HERE or HERE.] Those who read our Ruminations may remember that we are somewhat ambivalent about its general use and a little more inclined toward its use for specific, discrete disputes, such as battles over operating expenses.

Today, for the benefit of those who like the concept and who use provisions such as: “All disputes hereunder will be resolved by arbitration,” we have a new warning. [Perhaps, we should write, “alert.”] When we first heard about an Appellate Division ruling from a New Jersey Court, one that threw out a contract’s “must arbitrate” that read as follows:

Any and all claims or controversies arising out of or relating to [plaintiff’s] employment, the termination thereof, or otherwise arising between [plaintiff] and [defendant] shall, in lieu of a jury or other civil trial, be settled by final and binding arbitration. This agreement to arbitrate includes all claims whether arising in tort or contract and whether arising under statute or common law including, but not limited to, any claim of breach of contract, discrimination or harassment of any kind.

we said (to ourselves), “That must be wrong.” After all, doesn’t the quoted provision clearly and unequivocally say that any and all claims have to be arbitrated? But, after reading the decision itself, we switched sides. That’s not to say that New Jersey’s Supreme Court won’t reverse the ruling, because it might. After all, courts just seem to “love” arbitration and seem to bend over backward to validate every agreement to arbitrate. On the side agreeing with the Appellate Division, however, is a (previously unknown to us) 2009 Mississippi Supreme Court decision eerily similar to this month’s New Jersey decision. [Read more…]

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Keep It Simple Stu…

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Who hasn’t heard this or something like this? “Can we just make it simple and do a lease amendment instead of a whole new lease? We don’t need a new lease and it will save us money.” Often, that’s a hint that there’s going to be a big bill. And, worse, later on, when a question comes up, there will be another bill.

Ruminations isn’t talking about simple changes. For those, an amendment will almost always suffice, especially if it covers only one or two changes. But what about a lease assignment combined with a space reduction, some construction, a change in maintenance responsibilities, a letter of credit instead of the cash security deposit, and you get the idea. [Read more…]

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What Do You Mean When You Write: “Subject To”?

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The augurs of ancient Rome prognosticated by inspecting the entrails of birds. Similarly, courts divine meaning by interpreting the detritus of our documents. When we don’t leave a clear message behind, those who follow get to tell us what the words we used meant. Sometimes they are right; sometimes not.

Ruminations now rushes in where fools fear to tread. We’re going to extract some lessons from a Supreme Court of Texas decision about mineral rights and royalties. Bless those who labor in that world. If we get something wrong in this world of oil and gas and other things extracted, we’re sure to hear from those whose world we are about to invade.

When a married couple purchased a certain 55-acre property, their seller “reserved” a 1/4 mineral interest (actually an NPRI – a non-participating royalty interest) in the property. That means the original owner would continue to get 1/4 of the benefits from all oil, gas, and minerals extracted from beneath the property.

Property ownership involves what is likened to a “bundle of sticks.” That means there are many rights embodied within the concept of ownership. These rights can be separated and different owners can own different rights in the same property. So, in the “mineral rights” concept, one party can own the property’s surface and another can own the subsurface portion. Similarly, one can own all of a property’s land right down to the earth’s core, excluding the minerals in that “dirt,” and those can be owned by another. Just like a “total” property can have multiple owners, so can those minerals. So, here, the married couple had a 3/4 interest in the property’s minerals and their seller kept a 1/4 interest. So far, so good. [Read more…]

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Where Can I Sue You?

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Is your forum selection provision mandatory or permissive? What’s a forum selection provision? That’s the one your agreement says where you can file suit to enforce your agreement. What is often confused with a forum selection provision? That would be a choice of law provision. That’s where the parties agree as to which state’s law will apply to their agreement. Once you are properly in any state’s courts, those courts can apply whatever law you’ve agreed should be used. It doesn’t have to be the law of that state. [Yes, there are exceptions, but that’s the overriding principle.]

This isn’t going to be a treatise over whether a court will accept jurisdiction over an out-of-state dispute. One reason is that it varies from state to state. Some states don’t want to get involved, but others “almost” solicit the business. For example, New York’s General Obligations Law (GOL) says that, with certain commercially irrelevant exceptions: [Read more…]

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Notwithstanding Anything To The Contrary Contained Herein

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When a carpenter or other craftsperson needs to make “that final adjustment,” she or he reaches into the toolbox and out may come a shim. We’ve all seen shims used, but not everyone knows they have a name. Those wedges, washers, and thin strips of material used to align parts or make them fit are called “shims.” We who draft agreements of every type also use shims. Reluctant as Ruminations is to use the word “all” and mean “all,” today’s use seems accurate. Who among us hasn’t slipped in at least one “notwithstanding anything to the contrary” into every agreement longer than several pages? That’s using a shim because it makes the parts of the agreement “fit” together.

Basically, this shim is used in two circumstances. The first is where, after reading what we’ve written, we realize that our crafted provision isn’t exactly right. We realize that there are one or more circumstances that don’t fit what we’ve written. We realize that what we’ve written needs adjustment. We’ve got to carve out some exceptions. So, instead of rewriting the provisions to make them say what they should say, we append a list of those things we realize don’t fit – but not of those things we didn’t realize don’t fit. [Read more…]

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We Reap What We Sow – Let’s Read What We Write

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We’re sure that, at one time, there were no written leases. It may have been that no one could conceive that putting the arrangement in writing would be desirable. More likely, it was that writing had not yet been invented. Jump ahead – handwritten, typed, and pre-printed leases came into being. And, then, the greatest invention of all – the word-processed form.

We imagine that when you wrote out a lease by hand, you already had negotiated the “deal” and all you were doing was to write it down. Our imagination isn’t good enough to have any sense as to how that felt, but it seems that some advantages of that process have been lost. Today, we’ll only touch on one of those – the scribe (or the one dictating the text) had to know the whole deal and then, to write it out, had to hear or read the deal in its entirety. The typed lease was probably a step away because, and we are guessing, the draftsperson might mark changes on prior, similar leases so as to reflect the new “deal.” Yet, there was no “search” or “search and replace” function – the editor-negotiator had to read the lease or, at least goodly parts of the lease. [Read more…]

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Who Should Write Settlement Agreements? The Courts?

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Today’s Ruminations is triggered by a court decision that may not have reached the “correct” result. If that suspicion is correct, then why do we promulgate its holding? There’s a simple answer. Had more talent been employed in negotiating the agreement dissected by the court, there would have been no court involvement. There would also be a different blog posting today.

The facts appear to be somewhat simple. They might be simpler had the court shown more of the actual agreement in its written decision. Instead, it gave us its characterization. Normally, when courts do so, they do it in a way that tilts the “story” to support its decision. So, we’ll assume that the characterization is the strongest the court could write to support the outcome. Enough with the mystery – here’s the story.

A fitness center leased space. The lease was subsequently amended, at which time the tenant’s owner signed a personal guaranty. The document was denominated as a limited guaranty, but the only “limitation” was its dollar amount cap. Otherwise, it appears to have been what we call a “come heck or high water” obligation. [Some would give it a different, but similar nickname.] The guaranty expressly said that the guarantor’s liability was “co-extensive with that of” the tenant. [Read more…]

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