Real Property Law

Donor's Grandson Lacks Standing to Enforce Charitable Deed Restriction

Board of Education of Mamaroneck Union Free School District v. Attorney General

NYLJ 2/6/06, p. 39, col. 2

AppDiv, Second Dept

(memorandum opinion).

In an action by school district for a declaration that reconfiguration of property was consistent with the terms of a restrictive covenant, and an article 78 proceeding by grandson of the original grantors of the property challenging the reconfiguration, the school district appealed from a Supreme Court order and judgment consolidating the action and proceeding, determining that the grandson had standing, and declaring that the proposed reconfiguration violated the covenant. The Appellate Division reversed and awarded summary judgment to the school district, holding that the grandson lacked standing to bring the proceeding.

The subject real property was given to the school district in 1945, subject to a restrictive covenant requiring that the property be 'held and maintained in perpetuity for public and school uses as a memorial to' grantors' grandson and other students, and former students who gave their lives in the service during World War II. The school district brought a declaratory judgment action against the state attorney general to establish the right to reconfigure the property to accommodate current needs. The attorney general did not object to the reconfiguration, concluding that it respected the expressed intent of the donors. Grantors' grandson, however, brought this article 78 proceeding challenging the reconfiguration, and Supreme Court held that he had standing, and that the reconfiguration was inconsistent with the terms of the 1945 deed. The school district appealed.

In reversing, the Appellate Division concluded that the grandson had no continuing 'special interest' in the gifted property, and thus lacked standing to contest the reconfiguration. Only the attorney general had power to represent the beneficiaries of the charitable disposition, and the court saw no reason to upset the attorney general's conclusion that the reconfiguration respected the donors' expressed intent.

COMMENT

While the attorney general has standing to enforce a charitable gift on behalf of the gift's beneficiaries, a living donor has concurrent standing to enforce the terms of his own gift. In Associate Alumni of General Theological Semi-nary v. General Theological Seminary, 163 N.Y. 417, the court held that even though alumni of a seminary were not entitled to recover their donation to seminary upon allegations of seminary's misuse of the gift because there was no right of reversion, the alumni had standing to enforce the terms of their gift. In Associate Alumni, the alumni made a $25,000 gift in trust to seminary for the endowment of a professorship. When a dispute arose regarding seminary's compliance with certain gift conditions, the alumni had standing to enforce the trust.

If donor is not alive, donor's heir, acting as donor's legal representative, may have standing to sue on donor's behalf where heir's interest in enforcing the gift is commensurate with donor's interest, putting her in the best position to protect donor's intent. However, the status of 'heir' alone may be insufficient to merit standing. In Smithers v. St. Luke's-Roosevelt Hospital Center, 281 A.D.2d 127, the court held that donor's wife had standing to enforce the terms of donor's gift, but emphasized that the wife was actively involved with the gift before and after donor's death, and that her personal interest in enforcing her husband's gift put in her in a better position to sue than attorney general. In Smithers, donor made a $10 million gift to St. Luke's-Roosevelt's Hospital Center (the Hospital) for the establishment of an alcoholic rehabilitation center separate from the Hospital. After donor died, the Hospital announced its intention to relocate the rehabilitation center to a hospital ward and disclosed that it had been misappropriating funds from donor's endowment since before donor's death. After the court appointed her special administratrix of donor's estate, wife sued to enforce the terms of the gift. Noting that wife had no financial stake in the gift, the court reasoned that only someone with an interest equivalent to that of donor would conduct such an extensive investigation and bring this type of action. In contrast, the court in the instant case denied donor's grandson standing because despite grandson's deep concern in the matter, grandson had no continuing special interest in the gifted property. Accordingly, while Smithers indicates that courts will extend standing beyond donor to donor's heirs under certain circumstances, it is unclear after Board of Education of Mamaroneck Union Free School District precisely how far standing extends.

In addition to the Attorney General and the donor, beneficiaries have standing to enforce a trust's terms when the grant defines a class of beneficiaries limited in number, and entitled to a preference in the distribution or use of the gift. For example, in Alco Gravure, Inc. v. The Knapp Foundation, 64 N.Y.2d 458, the court held that where an action concerns the dissolution of a charitable corporation in which a defined class of beneficiaries has a tangible financial stake, the intended beneficiaries have standing. In Alco Gravure, beneficiaries sought to enjoin a Foundation's trustees from dissolving the Foundation, which was set up to provide financial assistance to employees of certain corporations. In contrast, in Matter of Estate of May, 213 A.D.2d 838, the court held that a Roman Catholic church, an unnamed beneficiary of donor's charitable gift, lacked standing to contest donor's gift because the church was merely one possible beneficiary among an unlimited and undefined group lacking known rights and a preferential interest.

 

Purchaser Cannot Unilaterally Waive Marketable Title Provision

Zilinsky v. Graziano

NYLJ 1/30/06, p. 27, col. 4

AppDiv, Second Dept

(memorandum opinion)

In an action by purchasers for specific performance of a contract to sell real property, purchasers appealed from a Supreme Court judgment dismissing the complaint and directing return of the contract deposit to purchasers. The Appellate Division reversed and reinstated the complaint, holding that questions of fact about sellers' alleged inability to convey clear title precluded award of summary judgment to either party.

Sellers owned the parcel on which their home was located, together with the neighboring vacant parcel. Sellers contracted to sell the vacant parcel to purchasers for $85,000, and contracted to convey clear and unencumbered title to purchaser. The purchasers' title report revealed that the mortgage on sellers' home also encumbered the vacant parcel. Ultimately, purchasers waived the right to insist on clear and unencumbered title, and demanded that sellers close title. Sellers refused to close, and purchasers brought this action. Supreme Court found that the contract provisions providing remedies if seller were unable to convey marketable title inured to both parties, and that purchasers could not unilaterally waive those provisions. That court then awarded summary judgment to sellers, and dismissed the complaint.

In reversing, the Appellate Division first agreed that purchasers could not waive the provisions dealing with consequences of seller's inability to convey good title. But the court also held that sellers had not produced evidence to establish that they would be unable to convey clear title. In particular, they never proffered a copy of their mortgage or an affidavit from a representative of the mortgagee. Hence, there was insufficient basis, on the papers, to establish that the mortgage encumbered both parcels or that a foreclosure action would be commenced upon a transfer of title. As a result, summary judgment was inappropriate.

COMMENT

A purchaser of real property may waive the right to receive marketable title by explicit language in the sale contract. Thus, in Knight, et al. v. McClean 148 A.D.2d 421, where the express language of a contract rider gave purchaser, 'the right to accept such title as the seller is able to convey, without any claim on the part of the purchaser for abatement for defects or objections,' the court held that purchaser was entitled to specific performance even if seller could not convey marketable.

For a seller to invoke a contract provision limiting purchaser's remedies for seller's inability to convey marketable title, seller must demonstrate a good faith effort to remedy defects. Thus, in Emp-tage & Associates, Inc. v. Cape Hamp-ton, LLC, 19 AD3d 536, the court held that seller could rely on a limitation of liability provision when purchaser had unsuccessfully litigated to remove a cloud on title. In that case, seller could not deliver marketable title to Emptage because it had previously contracted to sell the property to another purchaser. When the prior purchaser brought an action for specific performance, seller un-successfully moved to dismiss. On these facts, the court held that Emptage was limited by the contract provisions, be-cause purchaser had make a good faith, albeit unsuccessful, effort to clear title.

By contrast, in Barnett v. Star Mechanical Corp., 171 AD2d 142, the court held that seller could not rely on a liquidated damage provision in the sale contract to avoid purchaser's specific performance action when seller could have, by reasonable expenditure of money, provided marketable title. In Barnett, a mortgage prevented seller from conveying marketable title. The mortgagee had refused to record a discharge of a mortgage because of a dispute with the seller on issues unrelated to the mortgage. The court noted that seller had agreed to resolve that dispute for $8500, and then failed to follow through on the agreement. The court held that seller had not demonstrated that it was 'unable' to convey marketable title, and as a result, purchaser was entitled to specific performance.

Donor's Grandson Lacks Standing to Enforce Charitable Deed Restriction

Board of Education of Mamaroneck Union Free School District v. Attorney General

NYLJ 2/6/06, p. 39, col. 2

AppDiv, Second Dept

(memorandum opinion).

In an action by school district for a declaration that reconfiguration of property was consistent with the terms of a restrictive covenant, and an article 78 proceeding by grandson of the original grantors of the property challenging the reconfiguration, the school district appealed from a Supreme Court order and judgment consolidating the action and proceeding, determining that the grandson had standing, and declaring that the proposed reconfiguration violated the covenant. The Appellate Division reversed and awarded summary judgment to the school district, holding that the grandson lacked standing to bring the proceeding.

The subject real property was given to the school district in 1945, subject to a restrictive covenant requiring that the property be 'held and maintained in perpetuity for public and school uses as a memorial to' grantors' grandson and other students, and former students who gave their lives in the service during World War II. The school district brought a declaratory judgment action against the state attorney general to establish the right to reconfigure the property to accommodate current needs. The attorney general did not object to the reconfiguration, concluding that it respected the expressed intent of the donors. Grantors' grandson, however, brought this article 78 proceeding challenging the reconfiguration, and Supreme Court held that he had standing, and that the reconfiguration was inconsistent with the terms of the 1945 deed. The school district appealed.

In reversing, the Appellate Division concluded that the grandson had no continuing 'special interest' in the gifted property, and thus lacked standing to contest the reconfiguration. Only the attorney general had power to represent the beneficiaries of the charitable disposition, and the court saw no reason to upset the attorney general's conclusion that the reconfiguration respected the donors' expressed intent.

COMMENT

While the attorney general has standing to enforce a charitable gift on behalf of the gift's beneficiaries, a living donor has concurrent standing to enforce the terms of his own gift. In Associate Alumni of General Theological Semi-nary v. General Theological Seminary, 163 N.Y. 417, the court held that even though alumni of a seminary were not entitled to recover their donation to seminary upon allegations of seminary's misuse of the gift because there was no right of reversion, the alumni had standing to enforce the terms of their gift. In Associate Alumni, the alumni made a $25,000 gift in trust to seminary for the endowment of a professorship. When a dispute arose regarding seminary's compliance with certain gift conditions, the alumni had standing to enforce the trust.

If donor is not alive, donor's heir, acting as donor's legal representative, may have standing to sue on donor's behalf where heir's interest in enforcing the gift is commensurate with donor's interest, putting her in the best position to protect donor's intent. However, the status of 'heir' alone may be insufficient to merit standing. In Smithers v. St. Luke's-Roosevelt Hospital Center, 281 A.D.2d 127, the court held that donor's wife had standing to enforce the terms of donor's gift, but emphasized that the wife was actively involved with the gift before and after donor's death, and that her personal interest in enforcing her husband's gift put in her in a better position to sue than attorney general. In Smithers, donor made a $10 million gift to St. Luke's-Roosevelt's Hospital Center (the Hospital) for the establishment of an alcoholic rehabilitation center separate from the Hospital. After donor died, the Hospital announced its intention to relocate the rehabilitation center to a hospital ward and disclosed that it had been misappropriating funds from donor's endowment since before donor's death. After the court appointed her special administratrix of donor's estate, wife sued to enforce the terms of the gift. Noting that wife had no financial stake in the gift, the court reasoned that only someone with an interest equivalent to that of donor would conduct such an extensive investigation and bring this type of action. In contrast, the court in the instant case denied donor's grandson standing because despite grandson's deep concern in the matter, grandson had no continuing special interest in the gifted property. Accordingly, while Smithers indicates that courts will extend standing beyond donor to donor's heirs under certain circumstances, it is unclear after Board of Education of Mamaroneck Union Free School District precisely how far standing extends.

In addition to the Attorney General and the donor, beneficiaries have standing to enforce a trust's terms when the grant defines a class of beneficiaries limited in number, and entitled to a preference in the distribution or use of the gift. For example, in Alco Gravure, Inc. v. The Knapp Foundation, 64 N.Y.2d 458, the court held that where an action concerns the dissolution of a charitable corporation in which a defined class of beneficiaries has a tangible financial stake, the intended beneficiaries have standing. In Alco Gravure, beneficiaries sought to enjoin a Foundation's trustees from dissolving the Foundation, which was set up to provide financial assistance to employees of certain corporations. In contrast, in Matter of Estate of May, 213 A.D.2d 838, the court held that a Roman Catholic church, an unnamed beneficiary of donor's charitable gift, lacked standing to contest donor's gift because the church was merely one possible beneficiary among an unlimited and undefined group lacking known rights and a preferential interest.

 

Purchaser Cannot Unilaterally Waive Marketable Title Provision

Zilinsky v. Graziano

NYLJ 1/30/06, p. 27, col. 4

AppDiv, Second Dept

(memorandum opinion)

In an action by purchasers for specific performance of a contract to sell real property, purchasers appealed from a Supreme Court judgment dismissing the complaint and directing return of the contract deposit to purchasers. The Appellate Division reversed and reinstated the complaint, holding that questions of fact about sellers' alleged inability to convey clear title precluded award of summary judgment to either party.

Sellers owned the parcel on which their home was located, together with the neighboring vacant parcel. Sellers contracted to sell the vacant parcel to purchasers for $85,000, and contracted to convey clear and unencumbered title to purchaser. The purchasers' title report revealed that the mortgage on sellers' home also encumbered the vacant parcel. Ultimately, purchasers waived the right to insist on clear and unencumbered title, and demanded that sellers close title. Sellers refused to close, and purchasers brought this action. Supreme Court found that the contract provisions providing remedies if seller were unable to convey marketable title inured to both parties, and that purchasers could not unilaterally waive those provisions. That court then awarded summary judgment to sellers, and dismissed the complaint.

In reversing, the Appellate Division first agreed that purchasers could not waive the provisions dealing with consequences of seller's inability to convey good title. But the court also held that sellers had not produced evidence to establish that they would be unable to convey clear title. In particular, they never proffered a copy of their mortgage or an affidavit from a representative of the mortgagee. Hence, there was insufficient basis, on the papers, to establish that the mortgage encumbered both parcels or that a foreclosure action would be commenced upon a transfer of title. As a result, summary judgment was inappropriate.

COMMENT

A purchaser of real property may waive the right to receive marketable title by explicit language in the sale contract. Thus, in Knight, et al. v. McClean 148 A.D.2d 421, where the express language of a contract rider gave purchaser, 'the right to accept such title as the seller is able to convey, without any claim on the part of the purchaser for abatement for defects or objections,' the court held that purchaser was entitled to specific performance even if seller could not convey marketable.

For a seller to invoke a contract provision limiting purchaser's remedies for seller's inability to convey marketable title, seller must demonstrate a good faith effort to remedy defects. Thus, in Emp-tage & Associates, Inc. v. Cape Hamp-ton, LLC, 19 AD3d 536, the court held that seller could rely on a limitation of liability provision when purchaser had unsuccessfully litigated to remove a cloud on title. In that case, seller could not deliver marketable title to Emptage because it had previously contracted to sell the property to another purchaser. When the prior purchaser brought an action for specific performance, seller un-successfully moved to dismiss. On these facts, the court held that Emptage was limited by the contract provisions, be-cause purchaser had make a good faith, albeit unsuccessful, effort to clear title.

By contrast, in Barnett v. Star Mechanical Corp., 171 AD2d 142, the court held that seller could not rely on a liquidated damage provision in the sale contract to avoid purchaser's specific performance action when seller could have, by reasonable expenditure of money, provided marketable title. In Barnett, a mortgage prevented seller from conveying marketable title. The mortgagee had refused to record a discharge of a mortgage because of a dispute with the seller on issues unrelated to the mortgage. The court noted that seller had agreed to resolve that dispute for $8500, and then failed to follow through on the agreement. The court held that seller had not demonstrated that it was 'unable' to convey marketable title, and as a result, purchaser was entitled to specific performance.