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Extrinsic evidence of the intent of the parties of no moment in interpreting the terms of a contract

Extrinsic evidence of the intent of the parties of no moment in interpreting the terms of a contract
Kito v Board of Educ. of William Floyd School Dist., 2008 NY Slip Op 08459, Decided on November 5, 2008, Appellate Division, Second Department

Bernard J. Kito, Jr. was employed by the William Floyd School District. He requested a leave of absence for the 2003-2004 school year and he and the District entered into a written agreement whereby the District agreed to give Kito the leave he had requested and Kito agreed to retire at the end of the 2003-2004 school year.

In addition, the District agreed to give Kito $139,669.20 in "retirement pay," $130,165 to be paid to Kito over the course of the 2003-2004 school year, as "salary."

The agreement also provided that in the event "Any part of [the stipulation] which is found contrary to law shall be deemed null and void.?

Finally, the stipulation provided that ?Any benefit lost to [Kito] by [reason of] being found null and void shall be replaced by the [District] with a benefit of substantially equal value."

Kito, who had received payments totaling $130,165 during the 2003-2004 school year, submitted his application for retirement to the New York State Teachers? Retirement System at the end of the school year.

Subsequently the Retirement System told Kito that it would not consider the $130,165 he had received pursuant to the stipulation when calculating his retirement benefits because those payments could not be considered "regular salary." As a result, Kito?s retirement allowance would be some $10,000 per year less than it would have been had Retirement System included such payments in calculating his retirement benefit.

Kito estimated that he was going to receive approximately $250,000 less in total retirement benefits. He demanded that the District pay him that amount in accordance with the terms of the stipulation. The District refused to do so and Kito sued in an effort to recover damages ?for an alleged breach of the stipulation's indemnification provision.?

Supreme Court denied the District?s motion for summary judgment and the District appealed.
The Appellate Division vacated the lower court?s ruling, holding that the District ?was entitled to summary judgment dismissing the complaint? as a matter of law.

The court said that the stipulation did not contain a provision addressing how the Retirement System?a separate governmental entity not a party to the stipulation?would treat the $130,165 in payments, nor did it contain a provision to the effect that the Retirement System would take that sum into account when calculating the Kito's retirement benefits. Accordingly, the District was correct when it argued that the Retirement System's consideration of that sum was not "part of [the stipulation]."

The Appellate Division said that when the Retirement System refused to take the $130,165 in payments into account, no part of the stipulation was "found contrary to law" and "deemed null and void," which meant that no "benefit" was "lost to [Kito] by being found null and void?." Accordingly, the District was not required by the terms of the stipulation to give Kito "a benefit of substantially equal value."

Although Kito attempted to demonstrate that he and the School District intended that the ?indemnification provision? cover the "loss" he would suffer in the event the Retirement System refused to consider the $130,165 when calculating his retirement benefits, the Appellate Division ruled that ?the indemnification provision is unambiguous and clearly does not cover that situation,? and thus extrinsic evidence of intent cannot be considered.

The full text of the decision is posted on the Internet at:

http://www.courts.state.ny.us/reporter/3dseries/2008/2008_08459.htm

Full post as published by New York Public Personnel Law on November 10, 2008 (boomark / email).