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THE MERCURY BAY BOATING CLUB INC., APPELLANT, v. SAN DIEGO YACHT CLUB, RESPONDENT, ET AL., DEFENDANT, NEW YORK YACHT CLUB, INTERVENOR. / (AND ANOTHER PROCEEDING.)
76 N.Y.2d 256, 557 N.E.2d 87, 557 N.Y.S.2d 851 (1990).
April 26, 1990


1 No. 52

Decided April 26, 1990


This opinion is uncorrected and subject to revision before publication in the New York Reports.

Robert B. Fiske, Jr., George N. Tompkins, Jr., NY City, for Appellant Mercury Bay. James W. Rayhill, Richard M. Waldron, NY City, for Intervenor NY Yacht Club. Michael D. Hess, Marjorie L. Cohen, NY City, for Defendant Royal Perth. Harold R. Tyler, Jr., Mark W. Smith, Blair Axel, Kenneth M. Poovey, James E. Brandt, NY City, for Respondent.
Robert Abrams, Attorney General (David G. Samuels, O. Peter Sherwood, Lawrence S. Kahn, Pamela A. Mann of counsel) on behalf of the Trust.

ALEXANDER, J.:

On September 7 and 9, 1988, in the waters off San Diego, California, Mercury Bay Boating Club, Inc.'s challenger vessel, the New Zealand, a monohull-keel yacht, was defeated two races to none by San Diego Yacht Club's defending twin-hulled catamaran, the Stars and Stripes, in the 27th America's Cup Match. Contending that San Diego's defense of the Cup by sailing an inherently faster multihull catamaran against a larger, but slower monohull yacht was unsportsmanlike, antithetical to the concept of "friendly competition between foreign countries" and a "gross mismatch" in violation of the of America's Cup Deed of Gift and San Diego's obligations as trustee, Mercury Bay obtained a judgment in New York Supreme Court disqualifying San Diego's catamaran, declaring the New Zealand to be the winner of the two races and directing that San Diego transfer the America's Cup to Mercury Bay.

A divided Appellate Division reversed, declared the Stars and Stripes to be an eligible vessel and the winner of the two races, and therefore that San Diego was the rightful holder of the America's Cup. We agree that the Stars and Stripes was an eligible vessel under the terms of the Deed of Gift and that San Diego breached no fiduciary duty in racing a catamaran against Mercury Bay's challenging yacht. Accordingly, we affirm.

I

The America's Cup, a silver cup trophy, is the corpus of a charitable trust created in the 19th century under the laws of New York. So called because it was won by the yacht America in a race around the Isle of Wight in 1851, the America's Cup was donated by its six owners to the New York Yacht Club in 1857. The Cup was twice returned to George Schuyler, the sole surviving donor, when questions arose as to the terms of the trust in which the Cup was to be held. Schuyler executed the present Deed of Gift in 1887, donating the Cup to the New York Yacht Club, to be held in trust "upon the condition that it shall be preserved as a perpetual challenge Cup for the friendly competition between foreign countries".

Pursuant to the Deed of Gift, the holder of the Cup is its sole trustee and is to be succeeded by a competitor who successfully challenges the trustee in a race for the Cup. Unless otherwise agreed by the parties, the terms of the challenge are specified in the deed. The relevant provisions of the deed provide:

This Cup is donated upon the condition that it shall be preserved as a perpetual Challenge Cup for friendly competition between foreign countries.

Any organized Yacht Club of a foreign country * * * shall always be entitled to the right of sailing a match for this Cup, with a yacht or vessel propelled by sails only and constructed in the country to which the Challenging Club belongs, against any one yacht or vessel constructed in the country of the Club holding the Cup.

The competing yachts or vessels, if of one mast, shall be not less that forty-four feet nor more than ninety feet on the load water-line; if of more than one mast they shall be not less than eighty feet nor more than one hundred and fifteen feet on the load water- line.

The Challenging Club shall give ten months' notice, in writing, naming the days for the proposed races * * * * Accompanying the ten months' notice of challenge there must be sent the name of the owner and a certificate of the name, rig, and following dimensions of the challenging vessel, namely, length on load water-line; beam at load water-line and extreme beam; and draught of water, which dimensions shall not be exceeded; and a custom-house registry of the vessel must also be sent as soon as possible. Centre-board or sliding keel vessels shall always be allowed to compete in any race for the Cup, and no restriction nor limitation whatever shall be placed upon the use of such centre-board or sliding keel, nor shall the centre-board or sliding keel be considered a part of the vessel for any purposes of measurement.

The Club challenging for the Cup and the Club holding the same may, by mutual consent, make any arrangement satisfactory to both as to the dates, courses, number of trials, rules and sailing regulations, and any and all other conditions of the match, in which case the ten months' notice may be waived.

In case the parties cannot mutually agree upon the terms of a match, then three races shall be sailed, and the winner of two of such races shall be entitled to the Cup. All such races shall be on ocean courses * * * * [These ocean courses] shall be selected by the Club holding the Cup; and these races shall be sailed subject to its rules and sailing regulations so far as the same do not conflict with the provisions of this deed of gift, but without any time allowances whatever. The challenged Club shall not be required to name its representative vessel until at a time agreed upon for the start, but the vessel when named must compete in all the races, and each of such races must be completed within seven hours. * * * *

Although the defending club, as holder of the Cup, is its trustee, it is nevertheless required to compete with challengers for the Cup. Nothing in the deed limits the design of the defending club's vessel other than the length on water-line limits applicable to all competing vessels, nor are the competing vessels expressly limited to monohulls. Moreover, there is no requirement that the defending vessel have the same number of hulls as the challenging vessel, or even that the competing vessels be substantially similar.

Prior to 1988, the America's Cup competitions generally were conducted under the mutual consent provisions of the deed, with the contestants agreeing upon the date, time and length of the races and, beginning in 1930, even upon the choice of vessels to be raced. Although multihull vessels were in use at the time the deed was executed in 1887 and during all the ensuing years, none ever competed for the America's Cup prior to the match at issue here. Between 1930 and 1937, the agreed-upon vessels were large ocean-going vessels known as J-boats, which subsequently became too expensive to build and maintain. Consequently, the yachting community lost interest in the America's Cup competition and the New York Yacht Club, which had successfully defended the Cup sixteen times before 1937, received no challenges for a twenty-year period thereafter. Attempting to revive interest in the competition, in 1956 the New York Yacht Club obtained a court order amending the Deed of Gift to reduce the minimum load waterline length to its present 44 feet and to eliminate the requirement that the challenging vessel sail to the match "on its own bottom", a requirement that had disadvantaged foreign challengers. These amendments allowed the competition to be conducted in yachts of the international 12-meter class, which measure 44 feet on the load waterline. Thereafter, in response to the increased interest in the competition by many challengers and with the consent of those challengers, the New York Yacht Club instituted an elimination series, conducted in these 12-meter yachts, in which the winner of the series was entitled to sail a match against the defender of the Cup.

The America's Cup races were conducted in these elimination series at three to four year intervals for a period of thirty years, with the New York Yacht Club retaining the Cup until 1983 when it lost to the Royal Perch Yacht Club of Australia. Three years later, thirteen yacht clubs representing six nations competed to determine which would challenge Royal Perth for the Cup. In the finals, Stars & Stripes '87 of the San Diego Yacht Club defeated Royal Perth's defender Kookaburra III four races to none.

San Diego planned to defend the Cup in 1990 or 1991 in a 12-meter yacht, adhering to the traditional multiple challenger format. In 1987, as yacht clubs all over the world prepared to compete in that event, Mercury Bay issued a notice of challenge to San Diego, which for the first time in thirty years, deviated from the multiple challenger format as well as the tradition of holding the races in three to four year intervals. Mercury Bay demanded a match in less than a year and disclosed that it would race a yacht measuring 90 feet on the load waterline, the maximum length permitted in the deed and a size yacht that had not been built in 50 years. As most foreign yacht clubs were already preparing for a race of 12-meter yachts, they would have been unable to compete on the terms demanded by Mercury Bay; indeed, of the nineteen bids received by San Diego, Mercury Bay's was the only challenge which deviated from the traditional format. To justify its unorthodox challenge, Mercury Bay advised San Diego that it sought to compete in a vessel larger than those of recent matches because such a yacht, by "utilizing technology outside any class or rating rule would be most likely to offer real opportunity of innovative design to the benefit of yachting at large".

San Diego announced that the terms of the challenge were unacceptable under the Deed of Gift and notified other challengers that the next match would be held in 1990 or 1991 in 12-meter yachts. Mercury Bay commenced an action in New York Supreme Court seeking a declaration of the validity of its challenge, and a preliminary injunction prohibiting San Diego from considering any other challenges until Mercury Bay's challenge was decided.

In its capacity as trustee of the America's Cup, San Diego commenced an action pursuant to EPTL 8-1.1(c)(1), seeking interpretation or amendment of the Deed of Gift to authorize a continuation of the traditional 12-meter yacht elimination series format employed by both the New York Yacht Club and the Royal Perth Yacht Club, the only two prior trustees. The Attorney General of the State of New York, which represents the beneficiaries of charitable trusts under EPTL 8-1.1(f), supported San Diego's position in both actions.

Supreme Court rejected San Diego's application to interpret or amend the Deed of Gift and granted Mercury Bay's motion for a preliminary injunction, declaring the notice of challenge valid. The court held that San Diego's options were to "accept the challenge, forfeit the cup, or negotiate agreeable terms with the challenger".

Although the parties thereafter made several proposals in an attempt to negotiate agreeable terms, they were unsuccessful, and San Diego proceeded with preparations for its defense of the Cup. In late January 1988, San Diego announced its decision to race in a catamaran whose dimensions, although smaller than Mercury Bay's monohull yacht, fell within the limitations expressed in the Deed of Gift.

Mercury Bay moved to hold San Diego in contempt of Supreme Court's prior order validating Mercury Bay's challenge, arguing that the use of a catamaran, a type of vessel never before raced in an America's Cup match, would deny it the "match" to which it was entitled under the deed because the catamaran is, by design, inherently faster than a monohull vessel. According to Mercury Bay, the deed required the defending club to race a vessel which was "like or similar" to the challenging vessel. Supreme Court denied the motion and directed the parties to reserve their protests until after completion of the America's Cup races. As indicated, the match was held on September 7 and 9, 1988 and San Diego defeated Mercury Bay two races to none.

San Diego had little time to celebrate before it found itself back in court. Mercury Bay moved to have the results of the race set aside, have itself declared the winner and for an order directing that the Cup be awarded to it. Concluding that the deed implicitly required the America's Cup race to be held only between vessels which were "somewhat evenly matched" and that San Diego's use of a catamaran constituted an attempt to "retain the Cup at all costs so that it could host a competition on its own terms" which violated the spirit of the deed, Supreme Court disqualified San Diego's catamaran, declared Mercury Bay the winner of the two races and directed San Diego to transfer the America's Cup to Mercury Bay.

In reversing Supreme Court, the Appellate Division concluded that the Deed of Gift unambiguously permitted matches between "yacht[s] or vessel[s]" meeting the length specifications articulated within the deed, that San Diego's catamaran was an eligible vessel, and therefore that San Diego is the rightful holder of the America's Cup. Mercury Bay appeals by leave of the Appellate Division.

II

Mercury Bay asks us to set aside the results of the 1988 America's Cup Match because, in its view, San Diego's defense of the Cup in a catamaran violated the spirit of the Deed of Gift as exemplified both by its terms and various items of extrinsic evidence. It argues that the donors of the Cup never intended to permit such a catamaran defense because a race between a catamaran and a monohull yacht is an inherently unfair "mismatch" which the monohull yacht has no chance of winning. Instead, Mercury Bay contends that the donors intended to restrict the defender's choice of vessel to the type selected by the challenger and to require further that the particular vessel used afford the challenger a chance of winning the match. Mercury Bay also argues that by sailing a catamaran to defend the Cup, San Diego breached its fiduciary duties as trustee under the Deed of Gift.

Although these arguments are clothed in the legal rubric of interpreting the "intent" of the drafters of the trust instrument and determining the fiduciary duties owed by the trustee, the gravamen of Mercury Bay's complaint is that such a race between a multihull catamaran and a monohull yacht is inherently "unfair", whether or not the donors intended to permit it. The measure of "fairness" in this regard, according to Mercury Bay and the dissenters, are standards of sportsmanship as determined by reference to practices which are presently the custom in sporting activities generally and yacht racing in particular.

The question of whether particular conduct is "sporting" or "fair" in the context of a particular sporting event, however, is wholly distinct from the question of whether it is legal. Questions of sportsmanship and "fairness" with respect to sporting contests depend largely upon the rules of the particular sport and the expertise of those knowledgeable in that sport; they are not questions suitable for judicial resolution (see e.g., Couch v National Assn for Stock Car Auto Racing, 845 F2d 397, 403; Charles O. Finley & Co v Kuhn, 569 F2d 527, 539). As sporting activities evolve in light of changing preferences and technologies, it would be most inappropriate and counterproductive for the courts to attempt to fix the rules and standards of competition of any particular sport. To do so would likely result in many sporting contests being decided, not in the arena of the sport, but in the courts.

Moreover, the Deed of Gift governing the conduct of the America's Cup competitions contemplates that such issues of fairness and sportsmanship be resolved by members of the yachting community rather than by the courts. The deed provides that where the defending and the challenging yacht clubs have not agreed upon the terms of the match, it is to be conducted as specified in the deed and pursuant to the rules and regulations of the defending club, so long as they do not conflict with the deed. As the deed broadly defines the vessels eligible to compete in the match, it is these rules and regulations which the donors intended to govern disputes relating to racing protocol such as the fairness of the vessels to be used in a particular match.[n 1]

In this case, the dispute over the eligibility of the chosen vessels should have been governed and determined by the rules of yacht racing promulgated by the International Yacht Racing Union (IYRU) and followed by the defending San Diego Yacht Club. Pursuant to these rules, an international jury referees the match and decides all protests jointly submitted to it by the parties. The international jury established to resolve all disputes arising out of the 1988 America's Cup Match was composed of five members, all IYRU-certified racing judges of vast experience and international repute, from countries other than the United States and New Zealand. Despite Mercury Bay's repeated claims of the unfairness of San Diego's catamaran defense and notwithstanding San Diego's request that a protest be submitted to the international jury, Mercury Bay deliberately chose to keep the issue from these yachting experts, who were of course, best suited to resolve it. Having thus chosen to seek relief in a judicial forum, Mercury Bay is limited to a resolution of only the legal issues presented.

A

The legal issue we must determine is whether the donors of the America's Cup, as the settlors of the trust in which it is held, intended to exclude catamarans or otherwise restrict the defender's choice of vessel by the vessel selected by the challenger. Long settled rules of construction preclude an attempt to divine a settlor's intention by looking first to extrinsic evidence (New York Life Insurance & Trust Co v Hoyt, 161 NY 1, 8-10). Rather, the trust instrument is to be construed as written and the settlor's intention determined solely from the unambiguous language of the instrument itself (Central Union Trust Co v Trimble, 255 NY 88, 93; Loch v Sheldrake Assocs v Evans, 306 NY 297, 304; Gross v Cizauskas, 53 AD2d 969, 970). It is only where the court determines the words of the trust instrument to be ambiguous that it may properly resort to extrinsic evidence (New York Life Insurance & Trust Co. v Hoyt, supra; Gross v Cizauskas, 53 AD2d at 970, supra; IIA Scott, Trusts [4th Ed] § 164.1 at 253-254). The rationale underlying this basic rule of construction is that the words used in the instrument itself are the best evidence of the intention of the drafter of the document. Therefore, we must examine the plain language of the Deed of Gift at issue here.

Contrary to Mercury Bay's contentions, nowhere in the Deed of Gift have the donors expressed an intention to prohibit the use of multihull vessels or to require the defender of the Cup to race a vessel of the same type as the vessel to be used by the challenger. In fact, the unambiguous language of the deed is to the contrary. The deed accords a foreign yacht club "the right of sailing a match for [the America's] Cup, with a yacht or vessel propelled by sails only and constructed in the country to which the Challenging Club belongs, against any one yacht or vessel constructed in the country of the Club holding the Cup" (emphasis added). Given its plain and natural meaning, the phrase "any one yacht or vessel" requires the defender to defend in a single vessel of any type. If, as the dissenters argue, the term "any" was intended to mean "one", in the sense of limiting the defender to a defense in a single vessel (Dissent, slip opn at 22), the term would be redundant, since the very next word in the phrase so limits the defense to "one" vessel. By limiting the defense to a single vessel, the deed ensures a "match" which will be a one-on-one competition. In this match, however, the deed expressly permits a defense by any type of yacht or vessel, and restricts the actual vessels to be used only by the length on load waterline restrictions applicable to all "competing vessels", the latter phrase again making clear the donors' intention to leave both the defender's and the challenger's choice of vessel otherwise unrestricted.

Notwithstanding the broad language of the deed, Mercury Bay argues that the donors could not have intended to permit a catamaran defense because the dimensions which the deed requires the challenger to disclose are relevant to monohull but not multihull vessels . This argument misapprehends the role of the dimensions in the competitions contemplated by the deed. Because the deed allows a challenge to be mounted upon ten months' notice, the defender of the Cup is allowed only this short time to construct a defending vessel although the challenger has had unlimited time to mount a challenge and thus may have taken years designing and constructing its challenging vessel. By requiring the challenger to disclose certain dimensions with its ten month notice, the deed provides the defender with notice of the vessel it will be facing and thus removes the competitive advantage which would otherwise inure to the challenger. For the same reason, the deed does not require the defender to disclose any details about its vessel until the start of the race. Thus, the challenger's disclosed dimensions, which may not be exceeded, limit only the challenging vessel, and do not restrict the defending vessel. So understood, the question of whether the dimensions themselves relate to multihull vessels is simply not relevant to the issue of whether the deed precludes a catamaran defense.

In this case, we are not presented with the issue to which Mercury Bay's arguments are relevant -- whether the required dimensions preclude the use of a catamaran by a challenger because the dimensions specified do not relate to multihull vessels and therefore do not provide the defender with the disclosure mandated by the deed. While we have no occasion to address this question, we note that the applicability of the required dimensions to multihull vessels is hotly contested by the parties before us, both of whom have submitted expert evidence supporting their respective positions.

We also reject Mercury Bay's contention that the phrase "friendly competition between countries" connotes a requirement that the defender race a vessel which is of the same type or even substantially similar to the challenging vessel described in the ten month notice. Neither the words themselves nor their position in the deed warrant that construction. Although the stated purpose of the Deed of Gift is to foster "the friendly competition between foreign countries", that general phrase does not delineate any of the specific requirements of the matches to be held. Moreover, while each match is a competition, the deed permits the competitors to both construct and race the fastest vessels possible so long as they fall within the broad criteria of the deed. Thus the defender does not become a competitor only when "the warning gun of the race goes off" (Dissent, slip opn at 11); the deed makes clear that the design and construction of the yachts as well as the races, are part of the competition contemplated. Mercury Bay's suggestion, argued explicitly below and implicit here, that the vessels must be evenly matched is belied by its own assertion that the deed permits a match between a 44 foot monohull and a 90 foot monohull -- two vessels which, although within the load waterline length restrictions in the deed and of the same type, cannot be said to be "evenly matched" given the much greater speed potential of the larger boat. Indeed, such a requirement that the vessels be "evenly matched" is antithetical to the consent provisions of the deed. There is no point in permitting a defender to give or withhold its consent on the terms of the matches if by simply making a challenge, the challenger could force the defender to acceed to its terms. As the Appellate Division majority noted, the donors, who chose to be specific about other aspects of the match, including the load waterline lengths of the competing vessels, could have easily included an express requirement that the vessels be evenly matched but did not do so.

In our view, the phrase "friendly competition between countries" more aptly refers to the spirit of cooperation underlying the competitions contemplated by the deed. The matches were to be between yacht clubs of different countries, and the deed contemplated that they would cooperate as to the details of the matches to be held. It was in this spirit of cooperation that the competitors had, since 1958, agreed to race in 44 foot yachts. Indeed, it was Mercury Bay, not San Diego, that departed the agreed-upon conditions of the previous thirty years. San Diego responded to Mercury Bay's competitive strategy by availing itself of the competitive opportunity afforded by the broad specifications in the deed.

Accordingly, we conclude that the unambiguous language of the Deed of Gift, permitting the defending club to defend the Cup in "any one yacht or vessel" within the specified range of load waterline length, does not require the defender to race a vessel of the same type or "evenly matched" to that of the challenger and does not preclude the defender's use of a catamaran. Because the deed provisions on these issues are unambiguous, we may not look beyond the four corners of the deed in ascertaining the donors' intent and therefore may not consider any extrinsic evidence on the meaning of these provisions. Consequently, we reject the analysis of the Dissent, which repeatedly resorts to extrinsic evidence to support its construction of the terms of the deed (Dissent, slip opn at 14-17, 20-21, 23-24).[n 2] Indeed because the plain language of the Deed of Gift is unambiguous , such resort to extrinsic evidence to impute a different meaning to the terms expressed is improper[n 3] (Central Union Trust Co v Trimble, 255 NY at 93, supra).

B

We also reject Mercury Bay's contention that notwithstanding the plain language of the Deed of Gift, San Diego breached its fiduciary duty as the trustee of the America's Cup. We have described a fiduciary's duty as requiring "[n]ot honesty alone, but the punctilio of an honor the most sensitive" (Meinhard v Salmon, 249 NY 458, 468; see also 2A Scott & Fratcher, Trusts [4th Ed], § 170 at 113; Restatement [Second] of Trusts § 170). This strict standard is the usual and appropriate measure of a trustee's fiduciary obligations because the trustee must administer the trust for the benefit of the beneficiaries and cannot compete with the beneficiaries for the benefits of the trust corpus (2A Scott & Fratcher, Trusts [4th Ed], § 170; Restatement [Second] of Trusts § 170). Thus, the trustee owes the beneficiary an undivided duty of loyalty and cannot, for example, take the economic benefit of a trust (see e.g., Matter of Scarborough Properties Corp, 25 NY2d 553, 558).

Unlike the trusts in which this strict rule of undivided loyalty was developed, the America's Cup trust promotes a sporting competition in which the donors clearly intended that the trustee compete on equal terms with the trust beneficiaries.[n 4] Indeed, the trustee of the America's Cup is obligated to use its best efforts to defend its right to hold the Cup and thus to defeat the beneficiaries in the contemplated competition. It is thus inappropriate and inconsistent with the competitive trust purpose to impose upon the trustee of a sporting trust such as this one the strict standard of behavior which governs the conduct of trustees who are obligated not to compete with the trust beneficiaries.

To be sure, the trustee of the America's Cup is obligated to act in good faith and in the spirit of friendly competition by reasonably attempting to reach an accord on the terms of the matches to be held. Where that is not possible, however, the specific terms of the deed govern and the trustee must use its best efforts to compete for the Cup within the specified terms. As we have discussed, by racing a vessel which met the load waterline specifications in the Deed of Gift and which was constructed in its country, San Diego fully complied with the terms and spirit of the trust instrument. The deed placed no other restraints on the defending club's efforts to win the competition, even though the defending club was also designated the trustee. Thus there can be no argument that the trustee was obligated to construe the deed in a way contrary to its plain language. We conclude that in the context of this sporting trust, San Diego fulfilled its fiduciary obligations by reasonably trying to come to an agreement on the terms for Mercury Bay's proposed match, and failing that, by faithfully adhering to the challenge provisions in the deed.

We reject Mercury Bay's contention that San Diego was required to race a vessel of the same type as its challenging vessel because it was only in that way that San Diego could administer the trust so as to give Mercury Bay, a trust beneficiary, a "fair" competition. This amounts simply to an argument that San Diego's conduct was "unsportsmanlike" and "unfair", issues which, as we have discussed, the Deed of Gift appropriately leaves to yachting experts.

We conclude therefore that in racing a catamaran, San Diego complied with the terms of the Deed of Gift and did not violate any fiduciary obligation owed under those terms or in the administration of the trust. Any question as to sportsmanship and fairness, such as the propriety of races between monohull and multihull vessels, are questions which the trust instrument appropriately leaves to the expertise of persons actively involved in yacht racing; they are not questions suitable for judicial resolution.

Accordingly, the order of the Appellate Division should be affirmed, with costs.


F O O T N O T E S


1. The Deed of Gift provides:

In case the parties cannot mutually agree upon the terms of a match, then three races shall be sailed, and the winner of two of such races shall be entitled to the Cup. All such races shall be on ocean courses * * * * [These ocean courses] shall be selected by the Club holding the Cup; and these races shall be sailed subject to its rules and regulations so far as the same do not conflict with the provisions of this deed of gift, but without any time allowances whatever [emphasis added]

In light of this plain language, and the undisputed fact that the applicable rules of the San Diego Yacht Club provide that an IYRU jury was to resolve protests arising out of the match, the fact that amicus curiae argue that the courts should resolve the question of the propriety of San Diego's defense (see Dissent, slip opn at 8-9) is simply irrelevant. This Court may properly determine only the legal issues with which it is presented.

2. Nor is it appropriate to our judicial function to rely in our analysis upon the various views expressed in the media as to the merit of the contentions of these litigants.

3. The fallacy of this approach is demonstrated by the writings in this case. The dissenters, agreeing with Supreme Court, read selected portions of various items of extrinsic evidence to support their position. A majority of the Appellate Division, however, upon reviewing that same extrinsic evidence, reached precisely the opposite conclusion (see Mercury Bay Boating Club, Inc v San Diego Yacht Club, 150 AD2d 82, 93-95). Thus contrary to the view taken by the dissenters,the extrinsic evidence is neither unassailably consistent nor dispositive and should not be read to contradict the plain language of the trust instrument itself.

4. While there is authority for the proposition that trusts created for the purpose of promoting sporting events are not true charitable trusts (see Restatement [Second] of Trusts, § 374 at 262; 2A Scott & Fratcher, Trusts [4th Ed] § 374.6A at 227-228; In Re Nottage, 2 Ch 649 [England 1895] [trust to promote the sport of yacht racing is not a charitable trust]), no one has disputed the characterization of this trust as a charitable trust.


WACHTLER, Ch. J. (Concurring):

I concur in Judge Alexander's explication of the governing legal principles and his application of them to the facts of this case. While his opinion leaves little room for addition or doubt, in view of the dissent a brief comment about the courts' role in this dispute is necessary.

This case has little or no significance for the law, but it has caught the public eye like few cases in this court's history. Much of the reason for this attention, apparently, is the supposition that here at stake are grand principles -- sportsmanship and tradition -- pitted against the greed, commercialism and zealotry that threaten to vulgarize sport. In the end, however, the outcome of the case is dictated by elemental legal principles.

I am in full agreement with the court's resolution of this dispute pursuant to those principles. Just as nothing in the America's Cup Deed of Gift prohibited Mercury Bay's unorthodox challenge, which successfully eliminated all other challengers, nothing in that instrument prohibited San Diego's unorthodox defense, which was equally successful. The case should end there.

The dissent, however, would have us go beyond the provisions of the trust instrument and, in the interest of sportsmanship and tradition, impose a duty on the defender to -- well, to do just what? To not try too hard to win, it seems. To choose a vessel, not for its potential to win, but for its potential to lose. There is no legal basis for the imposition of such a duty.

More important, perhaps, is that the standard articulated by the dissent would encourage repetition of the most distasteful innovation of all in this case -- resolution of the competition in court. If the defender were legally bound to choose a vessel that would ensure a "close" race with the challenger, no defender could be secure in victory without a court order attesting to the fact that it had not won too easily.

It is tempting, of course, to confuse our authority to construe the trust instrument with a license to mold the America's Cup competition in accord with our notions of sporting ideals. Ultimately, however, it must be the contestants, not the courts, who define the traditions and ideals of the sport. No one wishes to see the competition debased by commercialism and greed. But if the traditions and ideals of the sport are dependent on judicial coercion, that battle is already lost.


HANCOCK, JR., J. (dissenting):

The San Diego Yacht Club and Sail America Foundation said they would meet New Zealand on the water in a three-race series for the America's Cup. But, San Diego officials also said they believe they have the right to set up conditions they think will make it virtually impossible for New Zealand to win (San Diego Tribune, Dec. 3, 1987 [emphasis added]).[n 1]

This newspaper comment frames the issue before us: was San Diego[n 2] faithful to its responsibilities as trustee under the New York State America's Cup charitable trust in contriving a catamaran defense for the express purpose of turning the sailing competition into a mismatch and aborting New Zealand's[n 2] lawful challenge?

This is not a dispute over whether the contest between the monohull and the catamaran was a fair match. It clearly was not.[n 3] San Diego never intended that it should be. It conceded this point by virtually proclaiming a victory before the start of the races. Indeed, Sail America's President, Malin Burnham, publicly acknowledged in December 1987 that "the speed difference between a large multi-hull and any size monohull would turn this race into a farce" (emphasis added).[n 4]

From the record, there can be no doubt that San Diego chose the catamaran to race against the monohull for one reason: to be certain that there could be no reasonable possibility of losing. Its purpose was plain -- to make sure that it retain the America's Cup so that it could proceed with its plans for the 12-meter competition planned for 1990 or 1991 in San Diego.[n 5]

But, that San Diego concededly construed the Deed of Gift to permit its catamaran defense for the purpose of nullifying the New Zealand challenge does not, without more, end the matter. All agree that the issue is not that simple. The question is whether it was permissible for San Diego to do this. Could San Diego make this construction of the deed, as allowing a catamaran in order to foreclose any possibility of a New Zealand victory, without violating the terms of its trust and thwarting the donors' very aim in establishing the trophy: viz., that "it shall be preserved as a perpetual Challenge Cup for friendly competition between foreign countries" (emphasis added)? Can it be consistent with the duties of a holder and defender as trustee of the America's Cup to meet a lawful challenge by a monohull with a catamaran for the express purpose of avoiding the very competition which the gift of the cup was intended to promote?

A majority of the court concludes that San Diego's conduct was not in breach of the trust obligations it expressly assumed under the Deed of Gift when it accepted the cup. It adopts the argument that because there is no express language stating that a yacht must be a monohull and because the Deed of Gift refers to the yacht selected to defend against a challenger as "any one yacht or vessel", the author of the Deed of Gift could not have intended to exclude a catamaran. Defending with a catamaran comes within the literal terms of the Deed of Gift, the majority says, and, for that reason, it concludes that San Diego has remained faithful to its trust. We disagree.[n 6]

The cup donors -- the record clearly shows -- never conceived of a catamaran as a vessel that might be entered by either a challenger or defender in America's Cup competition. But, that aside, it is unthinkable that the donors could ever have intended that the trophy holder and defender could construe the Deed of Gift in its favor for the express purpose of creating a mismatch to retain the trophy, thereby subverting the very purpose of their gift in trust. We therefore dissent. We would declare the September 1988 races to be nullities but permit San Diego to have a rematch, if it is so minded, in lieu of forfeiting the America's Cup by default.

I

There must be no confusion about New Zealand's contentions or the precise issue before us. Whether San Diego's conduct in construing the Deed of Gift so as to fix in advance the outcome of the races could, as an abstract matter of ethics, be deserving of approval is, of course, not the central point. The real question, as the majority repeatedly reminds us, involves established rules of New York trust law. Was San Diego's unilateral construction of the Deed of Gift to permit a catamaran defense consistent with the trust obligations it agreed to undertake as the custodian of the trophy? This is the precise issue.

It is to resolve this central point and to ascertain the intent and purposes of the donors in establishing the express condition of their gift that the dominant concept of a fair match on equal terms -- which is evident in the Deed of Gift and so thoroughly permeates the 130-year history of America's Cup competitions -- becomes highly relevant. For it is within the sport of international yacht racing that this charitable trust was created by the experienced yachtsmen who first won the trophy in 1851 by defeating a fleet of British yachts in a race around the Isle of Wight. No one suggests (see Majority Opn, pp 9-10, 19-20; Concurring Opn, p 2) that it would be appropriate for the courts to attempt to mediate disputes concerning racing rules or standards of what is fair or appropriate in the actual conduct of yacht races. But certainly the long-accepted general notions of fair competition in yacht racing -- and, indeed, the obvious point that sailing two mismatched boats against each other is not a race but a pointless exercise -- are significant. They help to determine what the yachtsmen who established the trust had in mind in donating the America's Cup "upon the condition that it shall be preserved as a perpetual Challenge Cup for friendly competition between foreign countries" (emphasis added).

And let there be no mistake about this. Contrary to the implications of the majority (pp 6-7, 16) and concurring (pp 1,2) opinions, the dispute is not about the propriety of New Zealand's conduct in issuing its challenge. Supreme Court, in a prior proceeding, held that the 90-foot monohull fully conformed with all requirements of the Deed of Gift. In the same proceeding, Justice Ciparick dismissed any suggestion that New Zealand should have adhered to the recent pattern of 12-meter competitions and rejected San Diego's efforts to have the Deed of Gift amended to reflect such requirement (see, Mercury Bay Boating Club Inc. v San Diego Yacht Club, Dec of Ciparick, J. [dated 11-25-87], [CA 72, JA 821, CA 81-82, JA 830-831]). Justice Ciparick, in her decision, noted, moreover, that although "San Diego has declined to negotiate with the challenger, Mercury Bay expresses its willingness to participate in a multi-national elimination series, in 1988 using ninety footers, for the right to challenge for the cup and to negotiate other terms". (Emphasis added.) San Diego chose not to appeal Justice Ciparick's rulings. The challenge by New Zealand was unquestionably proper in every respect.[n 7]

Finally, before turning to the merits of the appeal, a comment must be made concerning one other point raised by San Diego. It argues (and the majority appears to give the argument some credence [Slip Opn, pp 10-12, 19-20]) that the dispute over interpretation of the Deed of Gift should have been referred to an international jury of "IYRU-certified racing judges of vast experience in international repute" (id. at 11) and that the propriety of races between monohulls and multi-hulls vessels is not a question "suitable for judicial resolution" (id., at 20). There is simply no support for this argument in the Deed of Gift or elsewhere. The suggestion that a jury of yachtsmen would be the appropriate forum for deciding a question pertaining to the construction of a trust instrument established under New York's Charitable Trust Law is, we believe, best answered in the legal brief submitted jointly on behalf of the 12 amici curiae, eight renowned yachtsmen from the United States, Great Britain and Australia and four yacht clubs of unquestioned standing:[n 8]

First, it is important to bear in mind that the issue here is not whether one vessel or another cut inside or outside a marker. The courts are not being asked to decide whether a foul was committed or to second guess on-the-spot officials by affording the loser a judicial "replay" of a particularly close finish. Such issues are and should be left to the yachting officials. The issue in this case goes to the fundamental nature of the America's Cup competition and calls for a judicial construction of a trust instrument which SDYC accepted with the express understanding that the "Deed of Gift shall be governed by, and construed in accordance with" the laws of New York and that "any proceeding for amendment or interpretation of such terms and conditions [would] be brought before the courts of the State of New York." (Amici Brf, p 25, n 11) (emphasis added).

II

The holder and defender of America's Cup acts as a trustee. In setting the time and place for the races, in establishing the rules, the courses and other conditions for the competition and in construing the Deed of Gift to decide upon a proper boat to meet the challenger, the defender must act in all respects with nothing less than irreproachable fairness. A defender owes a duty as trustee to any yacht club which may file a challenge against it. But it owes a duty as well to past defenders and trustees of the America's Cup, those who have engaged in America's Cup competitions and to interested members of the international yacht racing community. All have a legitimate concern that an America's Cup challenge be administered in a way that is fully consistent with the underlying concept of maintaining "a perpetual Challenge Cup for friendly competition between foreign countries".

The standards governing the conduct of an America's Cup defenders are those which apply to trustees generally. The classic statement of the standard is that of Chief Judge Cardozo in Meinhard v Salmon (249 NY 458, 464)(quoted by the majority [Slip Opn, p 17-18]), "[n]ot honesty alone, but the punctilio of an honor the most sensitive" (see generally, Restatement, Second, Trusts § 170; IIA Scott on Trusts [4th ed] §§ 170, 170.25). But, as with any legal duties involving standards of ethics and integrity, it is difficult to define the defender's responsibilities as trustee in other than general terms. There are, nevertheless, aspects of the defender's role as trustee which are particularly instructive. First, of course, the defender's duty as trustee arises in a sport -- a context totally foreign to the circumstances where "the morals of the marketplace" prevail (see, Meinhard v Salmon, supra at 464). As put by A. Bartlett Giamatti, "the basic convention for any game is the assumption of a level field, that all begin as equals, above board. Without that convention, there is no contest. * * * The highly moralized (because rule bound) world of any sport is very fragile in the face of the amoral quest for betterment, the hunger to win at any cost, even at the cost of destroying the game * * *".[n 9]

Second, the defender's role is made more sensitive and its actions subjected to a stricter scrutiny because it is a competitor as well as a trustee (see, IIA Scott on Trusts [4th ed] § 170.25 ["a trustee occupies a position in which the courts have fixed a very high and very strict standard for his conduct whenever his personal interest comes or may come into conflict with his duty to the beneficiaries" (emphasis added)]; see generally, Restatement, Second, Trusts, § 170). In managing the race, construing the Deed of Gift and selecting a proper defending boat the defender is a trustee. Once the first warning gun of the race goes off, the trustee becomes a competitor. The decisions which the defender makes as trustee will obviously affect the ensuing competition, even predetermine it. It would, at the very least, be contrary to the accepted standards of ethics in any sporting event for a competitor, in a position to make a unilateral rule interpretation affecting his opponents' competitive positions, to bend the rule or stretch the language to virtually assure victory for himself.

It is on the dual role of the America's Cup holder as first a trustee and then a competitor that we have a sharp disagreement with the majority. The majority view, apparently, is that the holder-defender in deciding upon a proper boat to meet a challenge is perfectly free, in its role as a competitor, to adopt an adversarial approach in construing the Deed of Gift for the purpose of defeating the challenge without the constraints of its trust obligations.[n 10] Thus, it concludes that San Diego's "anything goes" policy in giving the Deed of Gift its narrow reading so as to make New Zealand's victory "virtually impossible" was proper. The majority's conclusion is based on a proposition of law for which no precedent has been found.

Although agreeing that Meinhard v Salmon (249 NY 458) states the rule (Slip Opn, pp 17-18), the majority fails to follow it. Instead, it holds that it is "inappropriate and inconsistent with the competitive trust purpose to impose upon the trustee of a sporting trust such as this one the strict standard of behavior which governs the conduct of trustees who are obligated not to compete with the trust beneficiaries" (id. at 18-19 [emphasis added]). No authority is cited for this proposition. But, that aside, the America's Cup trust is not a so-called "sporting trust" (compare examples of false charitable trusts for "the mere promotion of sports" [IV A Scott on Trusts (4th ed) § 374.6(a); Restatement, Second, Trusts § 374, p 262]). There is no question that the America's Cup trust is a valid New York charitable trust. Indeed, the majority points out that no one disputes this (Slip Opn, p 18, n 4). Nevertheless, the majority offers no explanation of why, in assessing the conduct of this trustee, there should be any deviation from the general rules which would otherwise apply -- particularly the rule fixing the very strict standard when the trustee's own interest comes into conflict with the duty owed to the beneficiaries (see, IIA Scott on Trusts [4th ed] § 170.25).

The provisions of the trust, contained in the amended Deed of Gift of October 24, 1887 signed by Mr. George Schuyler -- in three explicit instructions --leave no doubt as to the purposes for which the holder and defender of America's Cup must carry out its responsibilities (see generally, Restatement, Second, Trusts § 164, comment a; IIA Scott on Trusts § 164.1). Two of these instructions are set forth in the key sentence expressing the condition of the gift:

The Cup is donated upon the condition that it shall be preserved as a perpetual challenge cup for friendly competition between foreign countries (emphasis added).

The condition of the gift has two components: (1) that the cup "shall be preserved as a perpetual Challenge Cup" and (2) that it be preserved "for friendly competition between foreign countries". The words "shall be preserved" are mandatory, not precatory (see, McKinney's Statutes, § 171; Spencer v Childs, 1 NY2d 103, 106-109). It seems self-evident that a defense of the cup which is calculated to circumvent a lawful challenge and to avoid any competition would flatly contradict these two instructions.

The third instruction is that a challenger "shall always be entitled to the right of sailing a match for this Cup" (emphasis added). Again, the language is mandatory, and again, it seems self-evident that a defender cannot act deliberately to prevent "a match" without violating this unequivocal mandate.

There exists compelling evidence of how the original donors intended that the Deed of Gift should be interpreted and the trust carried out. In a letter dated April 15, 1871, George Schuyler, an original America's Cup donor and the signer of the 1887 amended Deed of Gift, ruled that the Deed of Gift did not permit a defending yacht club to defend against a challenge by racing a fleet of yachts against a challenger's single yacht. The ruling was made in connection with a rematch against the New York Yacht Club sought by Mr. James Ashbury of the Royal Thames Yacht Club. Mr. Ashbury's first challenge in 1870 in his yacht "Cambria" had been met by the New York Yacht Club with a fleet of 14 defending yachts. "Cambria" had finished l0th. In connection with his 1871 challenge Mr. Ashbury sought a ruling -- which the New York Yacht Club opposed -- that a "fleet defense" would not be permitted and that the race would, instead, be one-on-one (see Affdvt of James Michael, Appdx, Vol II CA 843-845, JA 2292-2294; John Rousmaniere, The Mismatch Question and the America's Cup, CA 766, JA 2056). Although there was nothing in the Deed precluding such a "fleet defense", Mr. Schuyler left no doubt that the instrument would not permit what he viewed as an unacceptable effort by the defending New York Yacht Club to retain the America's Cup at all costs. Mr. Schuyler stated:

It seems to me that the [position of the New York Yacht Club] renders the America's trophy useless as "a Challenge Cup" and that for all sporting purposes it might as well be laid aside as family plate. I cannot conceive of any yachtsman giving six months' notice that he will cross the ocean for the sole purpose of entering into an almost hopeless contest for this Cup (emphasis added) (Letter of George Schuyler, Spirit of the Times, April 15, 1871). (CA 514, JA 1318).

In resolving the controversy and holding that the Deed of Gift contemplated only a "one-on-one" competition -- despite the absence of any limiting language -- Mr. Schuyler held that "match" means "one side against the other side" (CA 507, JA 1311). But, significantly -- although not necessary to settle the precise dispute before him -- Mr. Schuyler set forth his complete definition of "match" in which he included the underscored words which follow:

but the cardinal principle is that, in the absence of all qualifying expressions, "a match" means one party contending with another party upon equal terms as regards the task or feat to be accomplished" (emphasis added).

These words -- of critical importance in the instant controversy -- can mean only that, in Mr. Schuyler's mind (and in the minds of the original donors), a race to be considered a "match" as contemplated in America's Cup competition would have to be one which was fair and on equal terms.

That the notion of a fair match on equal terms is inherent in the concepts of a "Challenge Cup" and "friendly competition between foreign countries" is confirmed by the history of America's Cup races. In the 26 matches conducted since the original gift in 1857, the competing yachts have borne a close resemblance to each other with each vessel having a reasonable chance to win. In all of the races until 1988, the defenders and challengers have been monohulls. With the exception of the challenge in 1870 (the year of the controversial "fleet defense" victory over the British yacht "Cambria"), the defenders and the challengers have been of virtually the same length on the water-line.[n 11]

Again, in 1887, George Schuyler -- in his handling of another problem that had arisen in connection with a challenge -- underscored the dominant theme of his 1871 letter: that the governing principle of America's Cup competition is fairness, that a race between a challenger and defender for the "Challenge Cup" should be a fair match on equal terms. When the Scottish challenger "Thistle" arrived in New York for her challenge against the New York Yacht Club, it measured l.4 feet longer on the water-line than had been represented, giving it a speed advantage over the defending yacht which had been built to match the shorter length. Although George Schuyler chose not to disqualify "Thistle", he gave her a time handicap to make it a fair match on equal terms.

In 1890, another noted New York yachtsman reemphasized the recurring theme of fairness. Joseph Busk, who had served on the New York Yacht's Club America's Cup committee, in explaining the 1887 Deed of Gift in reply to a letter from the Earl of Dunraven which had criticized it, wrote:

In drawing the new rules the idea was to eliminate, as much as possible, the chance of the Cup being won or held by trick, device or surprise and to make it a trophy to be run by fair sailing in a match between the best representative boats that could be produced by either side (CA 787, JA 2077).[n 12] (Emphasis added.)

III

It is basic that a trustee is legally bound to carry out its trust solely for the interests of the beneficiaries (see, Restatement, Second, Trusts § 170[1]; IIA Scott on Trusts § 170). Ordinarily a court will not inquire into the motives of the trustee. But, if it is shown that its motives were improper the court will intervene. Thus, "if the trustee in exercising or failing to exercise a power does so because of spite or prejudice or to further some interest of [its] own or a person other than the beneficiary, the court will interpose" (Restatement, Second, Trusts § 187, comment g, p 404 [emphasis added]; see, Matter of Bruches, 57 AD2d 456, 462; IIA Scott on Trusts [4th ed] § 170.25). It is in the light of these rules that San Diego's conduct as trustee must be examined.

In deciding whether San Diego has acted properly in construing the Deed of Gift to permit its catamaran defense, we must not analyze the language as if it were contained in a contract drawn between two parties dealing at arm's length. We must construe the Deed of Gift as a trustee should construe it. The question is whether San Diego -- charged with acting solely for the interest of the beneficiaries and not for its own interests -- has fairly and objectively construed the language of the Deed of Gift.

The question is not the hypothetical one of whether under any circumstances a catamaran could be permitted -- e.g., whether a challenger could test the Deed of Gift by making a challenge with a catamaran. The challenging yacht club is not a trustee; only the defending yacht club is. Only the defender must act with the objectivity required of a trustee. Thus, resolution of the decisive issue -- whether the Deed of Gift has been properly construed -- depends not on whether the Deed of Gift can be read to encompass a catamaran but on whether San Diego, as trustee, ought to have read it that way. In other words, could San Diego give it its literal and narrow construction so as to permit itself to defend with a catamaran against a monohull without violating the trust?

Forget, for the moment, the defender's obligations as trustee and ignore everything in the Deed of Gift except the FIFTH and SIXTH paragraphs dealing with yacht dimensions and notice requirements. Even then, the conclusion is inescapable that a catamaran as a putative America's Cup contender could not have been contemplated. The only dimension restriction is one that can have no relevance to a catamaran: length on the load water-line (not less than 44 feet, nor more than 90 feet for a single masted yacht). No one can seriously dispute the proposition that water-line length serves as a rough measure for the hull speed of a monohull sailing vessel, but does not do so for a catamaran. (See supra n 11, p 16 regarding rule-of-thumb -- hull speed in knots of monohull equals square root of twice load water-line length in feet.)

For many reasons, this relationship of water-line length to hull speed does not apply to catamarans. For example, the twin hulls of the catamaran can be long, narrow and widely spaced. Because it can achieve its necessary stability from the wide-spacing of its two hulls, a catamaran can be much lighter than a monohull (e.g., 75,000 pounds for monohull "New Zealand" as contrasted with 6,000 pounds for the catamaran "Stars and Stripes"). And because of their long, narrow shape, the two hulls create considerably less wetted surface than would be the case for a comparable monohull. The result is that the catamaran has a vastly superior power to weight ratio, and far less drag. Also, of course, a catamaran has the additional advantage of being able, under certain conditions, to lift one hull from the water (i.e., to "fly a hull"), thereby reducing drag even further and increasing speed.[n 13]

But the very facts in this case provide the ultimate proof of the proposition that the general relationship between load water-line and hull speed does not hold true for catamarans. San Diego, knowing that "New Zealand" measured 90 feet on the load water-line, built a catamaran of 60 feet, 30 feet shorter, yet was assured that the race would be "no contest". The catamaran's speed potential was estimated at more than 22 knots.[n 14] Applying the monohull rule-of-thumb to the 60-foot catamaran produces the figure 10.95, a mathematical result without any nautical, physical or other significance.

The requirements in the 1887 amended Deed of Gift, signed by Mr. Schuyler, that the challenger must give the defender ten months' notice of its load water-line length and that the challenger's yacht may not exceed that length (reflecting Mr. Schuyler's experience in the "Thistle" controversy) serve the obvious purpose of giving the defender definite and binding advance notice about the challenger's speed so that it can construct a defending yacht of comparable size and capability. Indeed, George Schuyler, in his letter of September 24, 1887 referring to the "Thistle" controversy, emphasized the great "importance of accuracy in giving the dimensions [i.e., water-line length] of a yacht challenging for the Cup" (emphasis added) (Appdx CA 1004, JA 2562). But there would have been no "importance" if catamarans were permitted. The requirement for specification and notification of load water-line would have had no meaning if considered applicable to catamarans. It can hardly be thought that Mr. Schuyler, a lawyer and yachtsman of unquestioned competence, would have sanctioned the drafting of a provision which could have served no purpose.[n 15]

Another provision in the 1887 Deed of Gift specifically permits "centre-board or sliding keel vessels" and prescribes that there be no limitation "upon the use of such centre-board or sliding keel" and that "the centre-board or sliding keel" shall not be considered a part of the vessel for measurement purposes. It is a reasonable inference from the fact that "centre-board or sliding keel" is invariably referred to in the singular that the drafter had in mind a vessel with one hull, using one centre-board or sliding keel, not a catamaran having two hulls and two centre-boards or sliding keels.

San Diego, in dismissing what, at the very least, are compelling signs that only monohulls were contemplated, relies almost entirely on the reference in the October 24, 1887 amended Deed of Gift to the defender's yacht as "any one yacht or vessel constructed in the country of the Club holding the Cup" (emphasis added). In its argument, San Diego rejects the primary meaning[n 16] of the word "any" and the sense in which it clearly appears Mr. Schuyler, who added it, intended that it be understood -- i.e., as limiting the defending yacht club to a defense by only "one" yacht as opposed to more than one (see discussion infra, pp 14-15). Instead, San Diego adopts a secondary meaning[n 17] of "any" and reads the word as signifying that there should be no limit on the types or kinds of yachts or vessels chosen to meet a challenger and that Mr. Schuyler, therefore, must have intended that the phrase "against any one yacht or vessel" be read broadly to include catamarans.

Nothing in the Deed of Gift or its history suggests that Mr. Schuyler thought that the word "any" would ever be understood as having some relation to the types or kinds of vessels or that the word would be given a meaning other than its primary one. On the contrary, the history of the amendment of the Deed of Gift shows conclusively that San Diego's construction is wrong. Mr. Schuyler used the word "any" -- juxtaposed in the added phrase with the word "one" -- in its primary and restrictive sense to mean one yacht or vessel as opposed to more than one. The phrase "against any one yacht or vessel" (emphasis added) was added by Mr. Schuyler solely to assure that future America's Cup defenses would be in a single yacht, thus preventing any possibility of another attempted "fleet defense" of the type the British challenger "Cambria" had been forced to meet in 1870. (See supra, at 14-15; Letter of George Schuyler, Spirit of the Times, Apr. 15, 1871, CA 505, 514, JA 1309, JA 1318.)[n 18]

San Diego goes to great lengths to make it appear that in this country in the late 19th century catamarans were customarily accepted as competitors in ocean yacht racing. The unrefuted record demonstrates just the contrary. Catamarans were small, largely experimental and certainly not generally accepted in established yacht races. Indeed, the research reveals that only 48 catamarans existed in this country between 1820 and 1890. (See Affidavit of Daniel Charles, CA 590-598, JA 1491-1499.)[n 19] What is clear, moreover, is that catamarans were never considered in connection with America's Cup races. Indeed, in the 19th century they were too small and not sufficiently seaworthy to make the open ocean voyage which would ordinarily be required to get to the site of the race.[n 20]

It adds nothing to note (Majority Opn, p 15) that the dimension specifications in the Deed of Gift would theoretically permit the absurd spectacle of a 44-foot monohull racing against a much faster 90-foot monohull. Obviously, the argument is not germane to the question of whether the Deed of Gift permits a catamaran. Beyond that, if the point is that the Deed of Gift would permit a defender to assure its victory by overwhelming a smaller monohull with a larger and faster monohull, the argument overlooks the point that the defender is trustee. One could hardly suggest that such conduct would promote "friendly competition between foreign countries". The history of America's Cup, of course, proves that such an obvious mismatch created by a defender would never have been tolerated.[n 21]

The foregoing (and the balance of the evidence in this voluminous record), we are convinced, establishes that the Deed of Gift, in its original and amended forms, contemplated only monohulls. But, even if that issue were much closer than we believe it to be, the critical question would remain. Did San Diego, in resolving the disputed issue in its own favor, adhere to the "very high and very strict standard [which the courts have fixed for the conduct of a trustee] whenever [its] personal interest comes or may come into conflict with [its] duty to the beneficiaries"? (emphasis added) (IIA Scott on Trusts, [4th ed], § 170.25). We believe that, based on facts in the record which are either conceded or not seriously controverted and on established rules of New York trust law, the answer must be "no". The following analysis demonstrates why.

Under settled principles of trust law (see e.g., Restatement, Second, Trusts § 187, comment g, p 403), it would ordinarily follow that San Diego's construction of the Deed of Gift for its own purposes so as to permit a catamaran defense would make it liable for breach of its trust. San Diego argues, however, that the fact that it acted for its own interests is irrelevant because its construction of the Deed of Gift was unquestionably correct. In effect, it contends that it did the right thing, although, perhaps, for the wrong reasons. This is obviously its posture in contending that the "any one yacht or vessel" clause gives it a total license as to the type of vessel and that it, therefore, had the absolute "right to set up conditions [it believed would] make it virtually impossible for New Zealand to win" (emphasis added) (comment, San Diego Tribune, Dec. 3, 1987, supra, at 1; see similar comments and expressions in footnotes 3,4 and 5 supra at 2-3).

Thus, the question ultimately comes to this: was San Diego's choice of the catamaran a cut-and-dried decision made as a matter of routine? Is San Diego correct in construing the Deed of Gift as giving it the power to stifle any chance of a New Zealand victory by choosing a catamaran defense? In no sense, regardless of any of San Diego's arguments on the Deed of Gift, was the question cut-and-dried or the choice a matter of routine. Under any reasonable view, San Diego would have to concede the existence of ambiguity in the Deed of Gift on the question of permitting a catamaran defense and substantial doubt as to the correctness of its construction. At the very least, the decision required San Diego to exercise reasoned judgment which "could typically produce different acceptable results" (Tango v Tulevich, 61 NY2d 34, 41) -- i.e., a judgment, as trustee, that was quasi-judicial in nature. Because, as trustee, it could make decisions of competitive advantage to itself and disadvantage to challenger-beneficiaries, it was bound to adhere to the "very high and very strict standard" which the law imposes (see, IIA Scott on Trusts [4th ed], § 170.25).

San Diego, in making a rigid and overly literal construction of the Deed of Gift, did so for its own interest and contrary to the interests of the beneficiaries. San Diego, therefore, violated its duty as trustee under the Deed of Gift in defending with a catamaran, and should not have been declared the winner of the two races.

IV

At the root of this appeal, we submit, is a fundamental disagreement as to the standards by which San Diego's conduct as trustee should be measured. San Diego has obviously applied the standard "of the marketplace" (Meinhard v Salmon, supra at 464) in assuming, as it did, that it was completely justified in adopting an "anything goes" interpretation of the Deed of Gift for the purpose of making it "virtually impossible for New Zealand to win". Thus, without hesitation, San Diego has adopted a literal construction of the "against any one yacht or vessel" clause. It has consistently approached the case as though it involved a dispute over the meaning of a business contract made between two parties at arm's length. San Diego's attitude, we believe, is epitomized in a statement given by Dennis Conner to Life Magazine concerning his assessment of America's Cup competition:

Sportsmanship is nonexistent. This isn't tiddlywinks; it's business * * * there has never been any sportsmanship in the America's Cup. Anyone who thinks so is kidding himself. (Article, NO MATCH America's Cup 1988, CA 971, JA 2515 [quoting Life Magazine, September 1989]).[n 22]

There are certainly those who, like Mr. Conner, believe that America's Cup has become a business, even one debased by "greed, commercialism and zealotry" (see Concurring Opn, p 1). Perhaps, the reality is that it has come to that. Still, there are those who believe that America's Cup remains and should remain a sporting event in the accepted tradition where "identical conditions and norms [are imposed] upon play, [and] the essential assumption of all the rules is that skill or merit * * * will win out" (Giamatti, Take Time for Paradise: Americans and Their Games, Summit Books 1989, p 60). Whether the more cynical assessments of America's Cup are correct is for the yacht racing community and public to decide.

But, irrespective of one's attitude toward America's Cup competition, one thing is certain: the standards of "the marketplace" cannot be the measure of San Diego's conduct as defender and as a trustee under New York law. San Diego and New Zealand cannot be viewed as parties who are in dispute over some terms in a bargained-for agreement. One is a trustee, the other is not. It is the law of trusts which applies, not the law of contracts.

It is this critical aspect of San Diego's role as holder and defender of America's Cup and its attendant obligations as trustee which the Attorney General overlooks in his criticism of the trial court for her application of a "different standard in assessing the propriety of San Diego's defense than it did in evaluating Mercury Bay's initial Notice of Challenge" (emphasis added) (Brf, Attorney General, p 28). Indeed, the majority rejects this same crucial distinction in its comment that because San Diego considered New Zealand's monohull to be "unorthodox", San Diego's conduct was fully justified when it "responded to Mercury Bay's competitive strategy [i.e., its legal monohull challenge] by availing itself of the competitive opportunity afforded by the broad specifications in the deed". (Slip Opn, p 17) (Emphasis added.)

But, Justice Ciparick was quite correct in holding San Diego to the higher standard in "assessing the propriety of [its] defense", for only San Diego was a trustee. When it won the America's Cup at Freemantle in February 1987, San Diego formally agreed to accept it in trust pursuant to the following provision in the Deed of Gift:

[San Diego] hereby accepts the said Cup subject to the said trust, terms, and conditions, and hereby covenants and agrees to and with the said party of the first party that it will faithfully and fully see that the foregoing conditions are fully observed and complied with * * * (emphasis added).

Judge Titone and I would "impose a duty on the defender to -- well, to do just what?", the concurrer asks (Concurring Opn, p 2). This question as to San Diego's duty is, of course, the critical one. We think it has been clearly answered. As trustee under the Deed of Gift, San Diego had the legal duty to meet the "very high and very strict standards" which the law imposed upon it because, in its dual role as competitor and trustee, its interests were in conflict with the interests of the beneficiaries, including the challenger (see, IIA Scott on Trusts [4th ed] § 170.25). It is this duty which San Diego ignored in adopting a strictly literal reading of the "any one yacht or vessel" clause to sanction its choice of a catamaran and assure New Zealand's defeat.

V

There remains the question of appropriate relief. In our opinion, the races held on September 7 and September 9, 1988 should be declared nullities. San Diego should not, however, be held to have automatically forfeited the America's Cup. The matter should be remanded to Supreme Court for the purpose of fashioning an order which would give San Diego a reasonable period of time, if it so desires, to arrange for and conduct a new series of races in which it can meet the New Zealand challenge in a defending yacht or vessel which complies with the Deed of Gift. In the event that San Diego does not avail itself of this option, it should be considered to have defaulted in the face of New Zealand's lawful challenge and the America's Cup should be awarded to the Mercury Bay Boating Club, Inc. We believe this outcome is compelled, under the circumstances, by notions of fairness, considering particularly: (1) that the September 1988 races were held pursuant to an order of Supreme Court without a ruling as to the legality of the catamaran defense, and (2) that San Diego's interpretation of the Deed of Gift was approved by the New York State Attorney General.

F O O T N O T E S

1. (Appdx, Vol I, CA 437, JA 1157 [cited in Mercury Bay Brf on App, p l8]).

2. "San Diego" will be used throughout to refer to San Diego Yacht Club, Inc. and to groups or individuals directly associated with it such as Sail America Foundation, Manager of San Diego Yacht Club's America's Cup defense.

"New Zealand" will be used to refer to the challenger, Mercury Bay Boating Club, Inc., and persons or groups directly associated with it such as Michael Fay, head of the New Zealand Yachting Group and the monohull's chief backer.

3. The catamaran won the first race by two and one half miles and by 18 minutes, 15 seconds; the second race by more than four miles, and by 21 minutes, 10 seconds. The overwhelming consensus of opinion was that it was "one of the greatest mismatches in history" (David Poe, Santana "A-Cup XXVII", Oct. 1988; Appdx, Vol II, CA 959, JA 2503; see similar comment of Frank Snyder, Commodore of the New York Yacht Club, Affdvt, Appdx, Vol II, CA 755-756, JA 2045-2046). Moreover, the post race consensus was that the catamaran had not been sailed to its speed potential. David Poe who followed the catamaran in the press boat observed that "Dennis did a lot of dawdling on the race course to make it look close * * * [and that] it was obvious that Dennis was frequently pointing too high, even luffing his jib and the instant the hull came out of the water, plop back down it went" (Santana, Oct. 1988 "A-Cup XXVII" id., CA 959, JA 2503; see, Mercury Bay, Brf on App, pp 22-24 for similar observations, for editorial comments, and for other relevant record citations).

4. San Diego Union, Thursday, Dec. 3, 1987 (Appdx, Vol II, at CA 433, JA 1153). (See also comment of Dennis Conner, Skipper of Stars and Stripes, made in USA Today, Sept. 9, 1988 that "[t]he catamaran is a tool to deal with the problem -- an unwanted problem" [id., CA 1037, JA 2826]; Comment of Britton Chance, a member of San Diego's Design Team: "The ability to beat the monohull with a multi-hull would not be an issue. The multi-hull is going to win every time barring bad design, bad construction or bad execution." [Providence Journal, Dec. 23, 1987, id., Vol I, CA 441, JA 1167]).

5. Malin Burnham could not have been more frank in announcing the San Diego group's overriding objective: "If we have to race Fay [the chief backer of the "New Zealand"] in 1988, we want to be sure we can put his challenge away with little trouble. We don't want to do anything to risk San Diego losing the 1991 series." (Sports Illustrated, Dec. 7, 1987, id., CA 331, JA 1012). (For references to additional similar comments see Mercury Bay Brf on App, p 18).

6. The concurrence misreads the dissent as maintaining that the court should impose some undefined duty on the defender "in the interest of sportsmanship and tradition" -- a duty "not to try too hard to win, it seems." (Concurring Opn, p 2). This is not the position of the dissent and plainly not what it says. As is fully apparent (infra, pp 5, 6), the position of the dissent is that San Diego had a legal duty as trustee of the America's Cup -- a valid New York State charitable trust -- to make a fairly considered and unbiased construction of the Deed of Gift in its selection of a defending yacht. It is whether San Diego violated this legal duty -- not some dispute over ethics in sports or racing rules or what would "ensure a 'close' race" (Concurring Opn, p 2) -- which is the central question. The position of the dissent is simply stated: San Diego violated its duty as trustee in deliberately construing the Deed of Gift for its own benefit so as to permit a catamaran defense for the express purpose of avoiding the very competition for which the donors established the America's Cup trust. There is no disagreement that "elemental legal principles" (Concurring Opn, p 1) dictate the outcome of this case. Our disagreement is over what these principles are and how they should be applied. It is the question of San Diego's legal duty under the New York law of trusts --irrespective of its importance to society or to the law as a precedent -- which we must decide. It is solely this question we address.

7. San Diego, nevertheless, persists in its efforts to cast doubt on the propriety of New Zealand's conduct, suggesting that New Zealand's departure from the 12-meter format of recent years, while concededly legal, was somehow improper. The suggestion apparently viewed with some favor by the majority (Majority Opn, pp 6,16) is surprising in view of Justice Ciparick's unappealed decision, in which she stated, inter alia, that it "is not at all clear that challenges involving 90-footers would be more expensive in racing 12-meter yachts" and that "it appears that 90-footers may be ideal in 12-meter boats ill-suited for a competition to be held in San Diego with its light winds". The suggestion is all the more surprising in view of the letter to Fred Frye, Commodore of the San Diego Yacht Club, sent by James Michael before San Diego decided on a catamaran (CA 176, JA 122; CA 177, JA 123) stating, in part, that "a match between 90-foot load water-line yachts surely comes closer to the contemplation of George L. Schuyler * * * than do 12-meters" and that such a match "could be every bit as competitive as one between two 12-meters, and very likely would be of much more world-wide interest, considering that the yachts could be expressly designed for the San Diego conditions." James Michael, among other things, is past commodore of the Cruising Club of America, past president of the U.S. Yacht Racing Association and a former trustee of the New York Yacht Club who served on its America's Cup committee from 1971 to 1983.

8. The four yacht clubs are: Courageous Sailing Center of Boston, Inc., Ischoda Yacht Club, South Norwalk, Connecticut, St. Francis Yacht Club, San Francisco, California, and Yale Sailing Associates: Yale-Corinthian Yacht Club, Branford, Connecticut. The eight individual amici (Robert N. Bavier, Jr., John Bertrand, Briggs Cunningham, William P. Ficker, Sir James Hardy, Frederick E. "Ted" Hood, Arthur Knapp, Jr. and Graham Mann) are some of the most highly respected and widely known yachtsmen in recent yacht racing history. All have had extensive connection with and experience as skippers of competing boats in America' Cup competitions. Five are former skippers of yachts which won the America's Cup trophy (Cunningham [Columbia, 1958], Bavier, Jr. [Constellation, 1964], Ficker [Intrepid, 1970], "Ted" Hood [Courageous, 1974], Bertrand [Australia II, 1983]). The yachting background and experience of these men, their trophies and awards and the numerous yachting committees and boards on which they have served are fully summarized in the amici brief, at pp 8-14. In view of San Diego's contention that the dispute over the construction of the Deed of Gift should have been referred to an international jury of yacht racing officials certified by the International Yacht Racing Union (IYRU), it is, perhaps, worthy of note that among the amici are at least three certified judges of the U.S. Yacht Racing Union, one former representative of the U.S. to the International Yacht Racing Union (IYRU) and one former chairman of the Appeals Committee of the U.S. Yacht Racing Union.

9. Giamatti, Take Time for Paradise: Americans and Their Games (Summit Books, 1989, pp 62-63).

0. See, e.g., the majority's statement that San Diego was justified in responding to the challenge "by availing itself of the competitive opportunity afforded by the broad specifications in the deed". (Slip Opn, p 16). (Emphasis added.)

1. The importance of having closely matched load water-line lengths in racing monohulls is that the length on the load water-line of a monohull keel yacht bears a direct relationship to its hull speed. An accepted rule-of-thumb is that the square root of twice the load water-line length of a monohull keel yacht in feet is approximately equal to the yacht's hull speed in knots. For example, for a yacht with a load water-line length of 32 feet, the hull speed is approximately equal to the square root of 64, or 8 kts.

Except for four occasions during the history of America's Cup from 1870 until 1958, when the 12-meter competitions began, the defenders were shorter on the water-line than the challengers. In the case of the four exceptions, the defenders were very slightly longer (see Chart of Dimensions of America's Cup defender and challenges from 1870-1983, Appdx, CA 879-882, JA 2387, 2390).

2. Joseph Busk, commenting on the concept that most matches would be held under the "mutual agreement clause" also stated in his letter to the Earl of Dunraven: "the whole of the present deed hinges on this idea as it was never supposed that any club would refuse to make a fair sporting match * * *" (CA 788, JA 2078 [emphasis in original]).

3. See Mr. Justice Rubin's succinct explanation in Mercury Bay Boating Club, Inc. v San Diego Yacht Club (150 AD2d 82, 106-107) (Rubin, J. concurring); see also, Affidavit of John Brian Shuttleworth (CA 992, CA 996, JA 2536, JA 2540).

4. (See e.g., Ballard, Sailing Back to the Future, Sports Illus., Dec. 7, 1987, CA 330, JA 1011; see also, article, The America's Cup -- An Irish Joke, CA 394, JA 1112; article, 'Time's a Wasting,' Says Designer of U.S. Cup Defender, Providence Jour., December 13, 1989, CA 441, JA 1161; article, Counterpoint: The Views of Dick Newick, Sailing World, March 1988, CA 387, JA 1105; article, Mono v Multi: An America's Cup Scenario, Sailing World, April 1988, CA 390, JA 1103).

5. It is, of course, the identity of the dimension which the Deed of Gift specifies -- i.e., length on the load water-line -- and the importance attached to the accurate submission of this dimension which are so highly relevant and helpful on the question of whether catamarans were contemplated. Because this "important" load water-line dimension has meaning when applied to monohulls but none when applied to catamarans, it seems quite evident that catamarans were never considered. It is of no significance to this central point that only the challenger is required under the Deed of Gift to give notification of the dimensions of the challenging yacht and that, of course, only the challenger is bound by the dimensions it submits to the defender (see Majority Opn, p 14)(see discussion infra, p 24-25).

6. The primary definition of "any" in Webster's New 20th Century Dictionary, Second Edition is:

l. one (no matter which) of more than two; as any boy may go.

7. The secondary definition of "any" in the Webster's New 20th Century Dictionary, Second Edition is:

2. some (no matter how much, how many, or what kind); as, do you have any apples?

8. The Schuyler letter of April 15, 1871 establishes beyond doubt that the only purpose of adding the phrase "against any one yacht or vessel" was to clarify what Mr. Schuyler thought was already implicit in the original Deed of Gift -- that one challenger should race against one defender. Indeed, it appears from that letter that Mr. Schuyler in 1871 thought that adding the words in the phrase "against any one yacht or vessel" (later added to the Deed of Gift in 1887) "would have been unnecessary and superfluous" (CA 506, JA 1310 [emphasis added]).

9. John Rousmaniere, a yacht historian, writing in "Sailing World" stated that "* * * there is every reason to believe that George Schuyler would have found the prospect [racing multi-hulls in America's Cup competition] ludicrous both then and now. First, the legal standing of multihulls as racing yachts was severely questioned in the 1870s and after. While multihulls were not unknown in European and American yachting before then, they were not considered anything more than experimental toys until Nathanael Herreshoff turned up at some Long Island Sound regattas in 1876 in his ingenious 25-foot LOA cat Amaryllis. * * *[e]ven proponents of catamarans admitted that they were dangerous in rough water. Certainly they were not seaworthy enough to cross an ocean to sail in a Cup match" (emphasis added). (See CA 334-335, JA 1047-1048.)

0. See References in Schuyler Letter, April 15, 1871 to necessity for challengers to make ocean crossings, CA 510 JA 1314, CA 512 JA 1316, CA 514, JA 1318; Majority Opn at pp 4-5 (Deed of Gift was amended in 1956 "to eliminate the requirement that the challenger sail to the match 'on its own bottom', a requirement which had disadvantaged foreign challengers"); comment of yacht historian Rousmaniere, underscored last sentence, n 19 supra, p 24.

1. See Discussion of the "Thistle" challenge, supra, pp 16-17; see also, history of America's Cup challenges, supra, pp 14-16; Chart of Dimensions of America's Cup Defender and Challenges from 1870-1983 showing closeness of load water-line lengths of challengers and defenders, Appdx, CA 879, JA 2387.

2. This same feeling is reflected in a statement made by the concurrer at the Appellate Division that he could not "agree, however, with the proposition that the America's Cup competition is now, if it ever was, a paradigm of good sportsmanship" (150 AD2d 82, 107, Concurring Opn, Rubin, J.).

* * * * * * * * * * * * * * * * *

Order affirmed, with costs. Opinion by Judge Alexander in which Chief Judge Wachtler and Judges Simons, Kaye and Bellacosa concur, Chief Judge Wachtler in a separate opinion. Judge Hancock dissents and votes to reverse in an opinion in which Judge Titone concurs.