Sometimes a Hyphen is Just a Hyphen
Here’s a nice summary of the case from the NYLJ (link may require subscription):
Brazilian infrastructure company Concessionaria Do RodoanelOeste does not have to pay a termination fee for prepaying $895 million inloans and thereby terminating interest rate swap agreements with investmentbanks Banco Espirito Santo, Caiza Banco de Investimento and Credit AgricoleCorporate Investment Bank, a unanimous appeals panel has ruled in rejecting thebanks’ argument that the inconsistent use of a hyphen in the swap agreementscreated ambiguity.
Rodoanel took out $895 million in loans to complete ahighway project and hedged them by entering into interest rate swap agreements,a type of derivative, with the banks. Rodoanel decided to pay down the debtbefore it was due, allowing it to terminate the swap agreements. The banksclaimed that Rodoanel owed them a termination fee, called the “Close OutAmount” or “Close-out Amount” in different documents. They saidthat the differing punctuation created ambiguity about what the term meant,requiring the use of parol evidence in addition to the contracts themselves.
The trial court held that the discrepancy in hyphenationcaused an ambiguity and allowed the banks to introduce parol evidence. The appellate panel reversed and heldthat the agreement was not ambiguous and that the “ordinary and natural meaning”of the language was dispositive. It appeared to the court that the banks were attempting to manufacture an ambiguity to effectuate a result that the banks should have provided for in the agreement:
If plaintiffs, who are commercially sophisticated”hedge providers,” had intended that, in the event of an earlytermination, the party “in the money” was entitled to retain thebenefits of this favorable market condition, they could easily have expressedthis intent in the language of the interest rate swap agreement.
Further, the court wrote that punctuation is a guide ininterpreting a contract, but should not be used to contravene the parties’clearly manifested intent:
Ultimately, this case serves as a reminder that, in acontract containing punctuation marks, the words and not the punctuation guideus in its interpretation (see 17A CJS Contracts §406; 12 AM Jur Contracts§256). Punctuation is always subordinate to the text and is never allowed tocontrol its meaning (Sirvint v. Fidelity & Deposit Co. of Md., 242 App Div187, 189 [1st Dept. 1934), affd, 266 NY 482 [1934]; see also 17A Jur 2dContracts §366 [2011]; 68A NY Jur Insurance §869). Of course, punctuation in acontract may serve as a guide to resolve an ambiguity that has not been createdby punctuation or the absence therein, but it cannot, by itself, createambiguity (Wirth & Hamid Fair Booking, Inc. v. Wirth, 265 NY 214 [1934];see also Stoddart v. Golden, 179 Cal 663, 178 P. 797 [1919]; Randolph v.Fireman’s Fund Ins. Co., 255 Iowa 943, 124 NW2d 528 [1963]). It is a cardinalprinciple of contract interpretation that mistakes in grammar, spelling orpunctuation should not be permitted to alter, contravene or vitiate manifestintention of the parties as gathered from the language employed (Sirvint, 242 AppDiv at 189; Wirth & Hamid Fair Booking, 265 NY at 219).
Banco Espírito Santo, S.A. v. Concessionária Do Rodoanel Oeste S.A., 652013/11, NYLJ 1202571875870, at *1 (App. Div., 1st, Decided September 18, 2012) (link may require subscription to NYLJ).
[Meredith R. Miller]