In the Matter of the Trusteeship under the Indenture of Trust, dated as of September 1, 1996, between the City of Newburgh Industrial Development Agency and Wells Fargo Bank, National Association as Successor Trustee.

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A20-1335

In the Matter of the Trusteeship under the Indenture of Trust,
dated as of September 1, 1996, between the City of Newburgh
Industrial Development Agency and Wells Fargo Bank,
National Association as Successor Trustee.

Filed April 19, 2021
Affirmed
Frisch, Judge

Hennepin County District Court
File No. 27-TR-CV-19-74

James J. Thomson, Larry M. Wertheim, Kenne dy & Graven, Chartered, Minneapolis,
Minnesota (for appellant City of Newburgh Industrial Development Agency)

William P. Wassweiler, Ballard Spahr LLP, Minneapolis, Minnesota (for respondent Wells
Fargo Bank, N.A.)

Michael B. Fisco, Johanna Rose Hyman, Greenberg Traurig, LLP, Minneapolis, Minnesota
(for respondent M&T Bank Corporation)

Considered and decided by Frisch, Presiding Judge; Florey, Judge; and Smith, John,
Judge.

 Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.

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NONPRECEDENTIAL OPINION
FRISCH, Judge
Appellant argues that the district court abused its discretion by instructing the trustee
to distribute excess funds to a development company because the company abandoned the
leased property and because appellant is the company’s successor. We affirm.
FACTS
The facts of this case are largely undisputed. Appellant City of Newburgh Industrial
Development Agency (the IDA) is the fee owner of a property (the Facility) located in
Newburgh, Orange County, New York. In 1996, the IDA issued industrial development
revenue bonds (the Bonds) in the amount of $5.7 million to finance the Gemma
Development Company’s acquisition and renovation of the Facility. The Bonds were
payable from, and secured by, funds generated by the Facility. The Bonds had a maturity
date of March 20, 2018.
The IDA created a trust (the Trust) via an indenture of trust (the Indenture) dated
September 1, 1996, for the purpose of receiving funds and paying the Bonds. Respondent
Wells Fargo Bank, National Association (Trustee), is the successor trustee of the Trust. In
a concurrent lease agreement (the Lease) dat ed September 1, 1996, the IDA leased the
Facility to Gemma. The Lease required Gemma to “pay or cause to be paid basic rent for
the Facility on or before each monthly Bond Payment Date directly to the Trustee, in an
amount equal to the Debt Service Payment becoming due and payable on the Bond on such
Bond Payment Date.” Gemma then sublet the Facility to Orange County via a sublease

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agreement (the Sublease). Pursuant to an assignment of rents, rent under the Sublease was
payable “directly from Sublessee [Orange County] to the Trustee.”
As security for the Bonds, the Trustee held: (1) a mortgage on the Facility; (2) an
assignment of the IDA’s rights under the Lease except for “Unassigned Rights”; (3) an
assignment of Gemma’s rights under the Sublease; and (4) a guarantee from Gemma.
Article IV, section 4.08 of the Indenture provided:
After payment in full of the principal or Redemption
Price of and interest on all the Bonds (or after provision for the
payment thereof has been made in accordance with Artic le VI
of this Indenture) and after payment in full of the fees, charges
and expenses of the Trustee (including reasonable attorneys’
fees), and any Paying Agents and all other amounts required to
be paid hereunder, and the fees, charges and expenses of the
Issuer and all other amounts required to be paid under the
Lease Agreement, all amounts remaining in any Fund
established pursuant to Section 4.01 hereof otherwise held by
the Trustee and by any additional Paying Agent for the account
of the Issuer or the Company hereunder or under the Lease
Agreement shall be paid to the Company [(Gemma and its
successors and assigns)].
Article XI, section 11.5 of the Lease meanwhile provided:
After payment in full of the principal of, premium, if
any, and interest on t he Bonds and the payment of all fees,
charges, expenses and other amounts required to be paid under
the Bond Documents, all amounts on deposit with the Trustee
for the account of the Issuer [(the IDA)] and the Company
[(Gemma)] under the Bond Documents (ex cept for amounts
attributable to Unassigned Rights) shall belong to and be paid
to the Company [( Gemma and its successors and assigns )] by
the Trustee as an overpayment of rent, and neither the Trustee
nor the Owners of the Bonds shall have any rights here under,
except those that shall have theretofore vested.

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We will refer to this remainder as the “net remaining balance.” The Lease required Gemma
to purchase the Facility from the IDA upon the expiration or termination of the Lease.
In 2006, Gemma rece ived a loan from respondent M&T Bank Corporation in
exchange for a mortgage on the Facility and an assignment of rents and leases. Gemma
defaulted on loan payments, and in 2008, M&T initiated foreclosure proceedings. In 2010,
Gemma abandoned the Facility , but Orange County continued making monthly rent
payments directly to the Trustee. In December 2011, M&T obtained a judgment of
foreclosure, but it never executed on the sale.
The Bonds matured and the Lease terminated by its terms on March 20, 2018. The
Trustee paid the Bondholders . On April 30, 2019, the Trustee filed a petition in district
court pursuant to what is now Minn. Stat. § 501C.0202(24) (2020) seeking an order
directing the Trustee’s distribution of $351,507.37 in remaining funds. On M ay 1, 2019,
the district court scheduled the matter for July 10, 2019. The IDA’s counsel sent the
Trustee a “claim” to the net remaining balance based on: (1) $182,000 in rents mistakenly
paid by Orange County to Gemma in 2010 , (2) a $750 transaction fee, and (3) $30,000 in
attorney fees. But no interested party filed a proper objection, so the district court afforded
the interested parties more time to file objections. On July 11, 2019, t he Trustee emailed
Gemma’s president and CEO —Thomas Carchietta—regarding the extension. Carchietta
responded, indicating that “[t]here appear[s] to be no supporting documentation to [the
IDA’s] claim” and that “[t]his appears to be [an] issue between M&T Bank as Trustee and
the IDA not [Gemma].” On July 15, 2019, the IDA filed an objection repeating its claims
to the separate amounts of $182,000, $750, and $30,000.

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On September 30, 2019, t he Trustee filed an amended petition regarding the
disposition of the reduced net remaining balance of $325,935.19. The IDA and M&T filed
separate objections and claimed the right to disbursement of the net remaining b alance.
M&T claimed it was entitled to the funds based on its mortgage and assignment of rents
with Gemma. The IDA meanwhile argued that, because the net remaining balance was
generated by Orange County’s rent payments, the IDA was entitled to the funds. It also
argued, in part:
Section 4.08 of the Indenture provides that after payment in
full of the Bonds and after payment in full of the fees, charges,
and expenses of the Trustee, all amounts remaining in any
Fund shall be paid to Gemma, which has abandoned the
Facility to the IDA. Thus, the Remaining Funds are rents that
have already been collected and ar e in possession of the
Trustee as agent for the IDA, which, by reason of Gemma’s
abandonment of the Facility and the IDA’s fee ownership of
the Facility, is the successor to Gemma.
On April 24, 2020, the district court issued its order for the distribut ion of the net
remaining balance. The district court concluded that the Trustee was entitled to its fees
and expenses and that neither M&T nor the IDA were entitled to the net remaining balance.
The district court reject ed the IDA’s previous claims based upon the $182,000 in unpaid
rents, the $750 transaction fee , and the $30,000 in attorney fees . The district court also
rejected the IDA’s assertion that it was entitled to the net remaining balance as Gemma’s
“successor.” It noted that the Indenture and Lease identified Gemma as the proper recipient
for any net remaining balance. The district court authorized the Trustee to pay its
reasonable fees and expenses and ordered it to distribute the net remaining balance to
Gemma.

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The IDA moved for amended findings of fact and conclusions of law, clarifying that
it had abandoned its claims in response to the original petition and contending that it was
entitled to the net remaining balance as Gemma’s successor. The IDA argued that it was
Gemma’s successor b ecause Gemma abandoned the property without consummating the
purchase of the Facility, thereby surrendering its rights under the Lease and any interest in
the net remaining balance to the IDA. It also argued that Carchietta’s email disclaimed
any interest of Gemma in the net remaining balance and that ordering the distribu tion to
Gemma was inequitable.
The district court denied the IDA’s motion. It explained that “[t]he terms successors
and assigns are commonly used in the context of corporate mergers and acquisitions
transactions or transactions involving the sale of the assets of an entity.” It reasoned that,
in the context of the Bond Documents, the phrase referred “to the circumstances of a
transaction involving the sale of Gemma or the sale of Gemma’s assets . . . . [T]he parties
agree Gemma is a corporation that has not been dissolved and Gemma’s assets have not
been sold. Thus, the IDA is not Gemma’s successor or assign.” The district court likewise
concluded that the IDA was not Gemma’s successor in interest. It explained that the term
meant “[s]omeone who follows another in ownership or control of property. A successor
in interest retains the same rights as the original owner, with no change in substance.” The
district court concluded that, because Gemma’s right to the net remaining balance was not
premised on its ownership of the Facility, the IDA’s fee-theory asserted a different right.

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This appeal follows.1
DECISION
The district court concluded that Gemma was entitled to the net remaining balance
pursuant to the clear language of the Indenture and Lease and because the IDA was not
Gemma’s successor. The IDA acknowledges that the Indenture and Lease identify
“Gemma . . . and its successors and assigns” as the “Company” entitled to the net remaining
balance. But the IDA argues that it became Gemma’s successor upon either Gemma’s
abandonment of the Facility in 2010 or upon the expiration of the Lease in 2018.
Pursuant to Minn. Stat. § 501C.0202(24), “ A judicial proceeding involving a trust
may relate to . . . instruct[ing] the trustee regarding any matter involving the trust’ s
administration or the discharge of the trustee’ s duties, including a request for instructions
and an action to declare rights. ” Pursuant to Minn. Stat. § 501C.0204, subd. 1 (2020),
“Upon the hearing of a petition under the district court’s in rem jurisdiction, the court shall
make an order it considers appropriate. ” We review the district court’s exercise of its
equitable discretion in deciding a section 501C.0202 petition for an abuse of discretion. In
re Foley Trust , 671 N.W.2d 206, 209 (Minn. App. 2003). The construction of a trust
instrument raises a question of law we review de novo. Id.
“The meaning and legal effect of the terms of a trust are determined by . . . the law
of the jurisdiction designated in the terms of the trust unless the a pplication of that
jurisdiction’s law is contrary to a strong public policy of the jurisdiction havin g the most

1 M&T did not appeal the district court’s order, and the IDA is the sole participating party
in this appeal.

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significant relationship to the matter at issue.” Minn. Stat. § 501C.0107(a)(1) (2020). The
IDA acknowledges that New York law applies. “[I]nterpretation of indenture provisions
is a matter of basic contract law,” and construction of an inden ture is “subject to the rule
that a written agreement that is complete, clear and unambiguous on its face must be
enforced according to the plain meaning of its terms.” Cortlandt St. Recovery Corp. v.
Bonderman, 96 N.E.3d 191, 198 (N.Y. 2018) (quotation o mitted). Instruments executed
contemporaneously and in relation to the same subject matter must be construed together.
Nau v. Vulcan Rail & Constr. Co., 36 N.E.2d 106, 110 (N.Y. 1941).
Neither the Indenture nor the Lease define the term “successor.” But “it is a
common practice of New York courts to refer to dictionaries to determine the plain and
ordinary meaning of the words in a contract.” Violet Realty, Inc. v. Amigone, Sanchez &
Mattrey, LLP, 123 N.Y.S.3d 384, 387 (N.Y. App. Div. 2020). “ Successor” is defined as
either: (1) “[s]omeone who succeeds to the office, rights, responsibilities, or place of
another; one who replaces or follows a predecessor”; or (2) “A corporation that, through
amalgamation, consolidation, or other assumption of interests, is vested with the rights and
duties of an earlier corporation.”2 Black’s Law Dictionary 1732 (11th ed. 2019).
The IDA insists that it became Gemma’s “successor” because Gemma’s 2010
abandonment of the Facility resulted in a termination of the tenancy and a surrender of “all
rights under the Lease” to the IDA as fee holder of the Facility. Relatedly, the IDA

2 The IDA contends that the district court construed the term “successor” too narrowly by
applying only the second definition. We may assume for the sake of this appeal that the
broader definition of “successor” applies because Gemma’s arguments still fail.

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contends that “Gemma’s 2010 abandonment of the [Facility] (and surrender of its lease)
and the IDA’s permitting [Orange County] to remain in posse ssion worked a termination
of the IDA -Gemma [L]ease and resulted in a direct lease between the IDA and [Orange
County].” See Rhinelander Real Estate Co. v. Cammeyer , 190 N.Y.S. 516, 518 -19 (N.Y.
App. Term 1921) (“[U]pon surrender of his lease by the main lessor the undertenant
becomes the immediate tenant of the original lessor and the interest and the terms of the
subtenant of the lessee continued as if no surrender had been made.” (quotation omitted)).
We doubt that Gemma’s abandonment of the Facility re sulted in the automatic
termination and surrender of the Lease. “A surrender by operation of law occurs when the
parties to a lease both do some act so inconsistent with the landlord-tenant relationship that
it indicates their intent to deem the lease terminated.” Riverside Research Inst. v. KMGA,
Inc., 497 N.E.2d 669, 670 (N.Y. 1986) (emphasis added). “A surrender by operation of
law is inferred from the parties’ conduct, where not only must the tenant abandon the
premises, but the landlord must accept the premises as a surrender.” Ford Coyle Props.,
Inc. v. 3029 Ave. V Realty, LLC, 881 N.Y.S.2d 146, 147 (N.Y. App. Div. 2009) (emphasis
added). Further, the Lease provided:
Except as provided in Section 10.2 and 5.6 hereof, the
leasehold estate created hereby shall terminate at 12 midnight
on March 20, 2018 or on such earlier date as the Bonds are paid
in full or as may be permitted by Section 11.1 hereof and
provision for fu ll payment has been made in accordance with
Section 11.2 hereof; provided, however, that in no event shall
this Lease Agreement be terminated until all the Bonds shall
have been paid in full or provision for such full payment shall
have been made.

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(Emphasis added.) The relevant exceptions concerned: (1) the IDA’s option, upon an event
of default, to terminate the Lease upon 10 days’ written notice to Gemma; and (2) Gemma’s
option to terminate the Lease early upon sufficient payment for the Bonds, fees, expenses,
and charges. The record contains no indication that any precondition to early termination
occurred or that the IDA undertook any action effecting a surrender by operation of law in
response to Gemma’s abandonment . Instead, counsel conceded at oral argument that the
IDA took “no affirmative action when Gemma abandoned [the Facility].”
The IDA’s theory that “Gemma’s 2010 abandonment . . . worked a termination of
the IDA -Gemma [L]ease” is also inconsistent with its twice -repeated assertion that the
Lease terminated approximately eight years later , in 2018. In its brief to this court, the
IDA asserted that “[p]ursuant to Section 5.2(b) of the Lease, the Lease and the Leasehold
estate terminated on March 20, 2018 .” And at oral argument, counsel claimed that the
Lease “actually terminated by operation of law when the Bonds were paid . . . in March of
2018. It terminated by operation of law.”
Additionally, neither the Indenture nor the Lease conditioned Gemma’s entitlement
to the net remaining balance on either: (1) the nonexistence of any event of default , or
(2) Gemma’s ongoing occupancy of the Facility. Instead, the only preconditions to the
disbursement of the net remaining balance were the payments of the Bonds, fees, charges,
and expenses.
The IDA briefly suggests that Gemma lost any interest when the Bonds matured and
the Lease expired on its own terms on March 30, 2018. But the Indenture and Lease
contemplated that the Bonds would mature, triggering (1) the termination of the leasehold

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estate and the payment of the Bonds in full, and then (2) the payment of the net remaining
balance.
The IDA also claims that Gemma was not entitled to the net remaining balance
because it failed to ultimately purchase the Facility, arguing:
The provision in Section 4.08 of the Indenture stating that
excess funds [should] be paid to Gemma is part of the overall
Indenture/Lease structure providing that, once the bonds are
paid off, the Lease would terminate and Gemma would acquire
fee title to the real estate. As fee owner, Gemma would then
be entitled to the excess proceeds. Those terms were implicit
conditions for the entitlement to the excess funds under Section
4.08 and therefore Gemma, having abandoned the property and
having failed to acquire the fee title, cannot claim the excess
funds.
Although “particular words should be considered . . . in the light of the obligation as a
whole and the intention of the parties,” Cortlandt, 96 N.E.3d at 198, nothing indicates that
Gemma’s eventual purchase of the Facility was fundamental to the Indenture or Lease.
Instead, the plain and unambiguous terms of section 4.08 of the Indenture and section 11.5
of the Lease set forth specific preconditions to payment , all of which were satisfied and
none of which were Gemma’s purchase of the Facility. We therefore agree with the district
court’s conclusion that “Gemma’s right to the [n]et [r]emaining [b]alance comes from the
clear language of the Bond Documents[] and not from its role as the contemplated future
owner of the Facility.”
The IDA also argues that Carchietta expressly disclaimed Gemma’s interest in the
net remaining balance in his July 11, 2019 email correspondence. But Carchietta’s email
concerned Gemma’s claims for $182,000 in rents, a $750 transaction fee, and $30,000 in

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attorney fees —claims that the IDA later abandoned. Further, the IDA claimed those
amounts were owed pursuant to separate terms of the Bond documents and therefore were
not amounts intended to be paid to Gemma pursuant to section 4.08 of the Indenture and
section 11.5 of the Lease.
Last, the IDA contends that “the equities . . . most assuredly” support the IDA’s
position “rather than a ruling that would result in an unearned windfall f or Gemma.” But
we fail to discern how the district court’s decision is inequitable, least of all to the IDA,
given that: (1) the district court applied the plain and unambiguous language of the
Indenture and Lease, (2) the IDA took no action upon Gemma’s abandonment, (3) Gemma
remained liable for underpayment of rent pursuant to a guaranty ,3 (4) Orange County
continued paying rent to the Trustee, and (5) the Bonds were paid in full and on time. We
also observe that the IDA retains ownership of the Facilit y, a circumstance that would not
exist if Gemma purchased the Facility for $1 at the end of the Lease term in 2018.
Because we conclude that the district court properly read the relevant provisions of
the documents, and because the district court’s decisi on was consistent with its reading of
those documents, we discern no abuse of discretion by the district court and affirm the
order instructing the Trustee regarding the distribution of the net remaining balance.
Affirmed.

3 The IDA conceded at oral argument that, if Orange County had defaulted on its rental
obligations, the Trustee could have enforced its rights under the guarantee against Gemma.