Opinion
Index No. 903418-20 RJI No. 01-20-135179
04-28-2021
ELIZABETH HALEY ROCKWELL, AS EXECUTOR OF THE ESTATE OF MARJORIE D. ROCKWELL, Plaintiff, v. THE AUDUBON SOCIETY OF NEW YORK STATE, INC. Defendant.
LETITIA JAMES Attorney General of the State of New York By Nathan M. Courtney Assistant Attorney General Charities Bureau The Capitol Albany, NY 12224 GLEASON, DUNN, WALSH &O'SHEA RICHARD C. REILLY, ESQ. EMILY E. KEABLE; ESQ. Attorneys for Plaintiffs Rockwell . Christopher M. McDonald, Esq. Whiteman Osterman &Hanna LLP Attorneys for Defendant, The Audubon Society of New York State, Inc.
Unpublished Opinion
LETITIA JAMES Attorney General of the State of New York By Nathan M. Courtney Assistant Attorney General Charities Bureau The Capitol Albany, NY 12224
GLEASON, DUNN, WALSH &O'SHEA RICHARD C. REILLY, ESQ. EMILY E. KEABLE; ESQ. Attorneys for Plaintiffs Rockwell .
Christopher M. McDonald, Esq. Whiteman Osterman &Hanna LLP Attorneys for Defendant, The Audubon Society of New York State, Inc.
DECISION AND ORDER
The subject action was reassigned to the undersigned in 2021.
INTRODUCTION
Marjorie D. Rockwell was a true philanthropist Following her demise, her Last Will and Testament dated August 4,1994 (the "Will") was duly admitted to probate on March 30, 1995 Pursuant to Article Second of the Will, her Executors were authorized to (1) grant to one or more "qualified organizations," one or more historical preservation restrictions or conservation restrictions in and to all or any part of her real estate located in said Loudonville; (2) convey same real estate to a charitable or non-for-profit entity for no consideration provided the transfer was tax deductible; (3) grant an endowment up to $1,000,000.00 in the event a transfer was made in accord with the foregoing; or (4) sell the real estate for market value (with a preference to sell to her neighbors) and add the proceeds to the Testamentary Trust in the Will,
NYSEF Doc. No. 25 and 26.
In 1997, the Executors implemented a plan to convey its Loudonville real estate to Defendant, including a 26-acre tract restricted as "forever wild." In 2013, Defendant conveyed the 26-acre tract to Thomas Despart, restricted as "forever wild".
The Attorney General has moved to intervene in this action, and seeks, inter alia, vacatur of the 2013 deed and cy pres relief to convey title to a new entity to maintain the parcel in a "forever wild" condition.
Distinct and not squarely raised in this action, is the issue of whether the restriction should be enforced or extinguished pursuant to RPAPL § 1951 (1). The later issue is squarely raised in a separate plenary action Rockwell v Despart. and the Attorney General seeks to intervene in and consolidate the actions. As more fully appears in the Decision and Order of even date issued in Rockwell, v. Despart, incorporated herein by reference, this Court denied the Attorney General's motion to intervene therein. I also decline to add the Desparts' as parties to this action under CPLR §1001 or 1002, more fully discussed below.
Albany County Index No. 03096-19.
STATEMENT OF FACTS
In the exercise of the Executor's discretion, by an exchange of letters dated October 27, 1997 (the "Offer") and October 29,1997 (the "Acceptance") (hereinafter referred to as the "Agreement"), the Estate agreed to convey, and Defendant agreed to accept title to the subject real estate. The Agreement provided that the charitable gift was being made in furtherance of Defendant's mission.
NYSEF Docs. 12 and 32. The Court notes that the October 27, 1997 letter incorporated the 12/5/96 letter from the Audubon Society, which provided a detailed cost description for their then proposal as to how they would "administer" the building and grounds (see NYSEF Doc. No. 10).
Defendant is a not for profit corporation. It's mission is described in the Certificate of Incorporation, to wit: "The purposes for which the Corporation is formed are: "to promote a better understanding of and appreciation for our wildlife, natural resources and environment through involvement in research, education and literary works." Defendant's mission is broad, and not limited to ownership of any one parcel of land.
NYSEF Doc. No. 66- Certificate of Incorporation.
The Agreement contemplated that a 10-acre parcel with improvements thereon, designated parcel A as described below, could "be used for Research and Education with a Management Area for Urban Wildlife Conservation and Water Resource Protection containing executive offices, retail sales area, research library and art gallery allowing for garden concerts, outdoor exhibits and fund raising activities." Defendant applied for and received municipal approval to establish its headquarters on parcel A, and Plaintiff paid an endowment in the sum of 3500,000.00 to Defendant in accord with the Agreement. The contiguous 26 acres, designated parcel B, were to be maintained "forever wild." The Agreement also contemplated the sale of a 7 acre-tract, designated Parcel C, with the proceeds to be used to improve the facilities on Parcels A and B.
NYSEF Docs. 12.
NYSEF Doc. No. 11, 12,32, and 38,
NYSEF Docs. 12.
NYSEF Docs. 12.
On June 1, 1998, Plaintiff conveyed title to three parcels of land in Loudonville to Defendant, each by separate deed with separate restrictions described below, and designated Parcels A, B, and C, respectively.
NYSEF Doc. Nos. 13 (Parcel A comprised of a house and 10 acres), 14 (parcel B consisting of 26 acres), and 15 (Parcel C consisting of 7 acres). See also NYSEF Doc Nos. 34, 35, and 36. The parcels were created by subdivision-see NYSEF Doc No 33.
The deed to Parcel A contained the following restriction, to wit:
"PARTY of the second part may remodel the house, but may not demolish it for a period of 10 years from the date of this deed. The property must be used to further the mission of The Audubon Society of New York State. Inc.; and the property can only be sold in one parcel for use as a single family dwelling. All of these restrictions shall run with the land." (emphasis added)
See NYSEF Doc No. 45 - See Corrective deed dated 6/21/2002, which added after the phrase: "Provided, that no purchaser of the property from the Audubon Society of New York, Inc", nor any grantee of the property subsequent to such a purchaser, shall be subject to the restriction that the property must be used to further the mission of the Audubon Society of New York, Inc."
The restriction specifically authorized the sale of parcel A for use as a single-family residence, i.e. not a research nor education center.
NYSEF Doc. No. 13.
The deed to Parcel B contained the following restriction:
"The land shall be forever wild and shall be used as a research, education and management area for urban wildlife conservation and water resource protection. No new permanent structures greater than 100 square feet shall be constructed on the premises, excluding necessary and accessory use structures to carry out research and education projects and programs for urban wildlife management and water resource conservation efforts. The property must be used to further the mission of The Audubon Society of New York State, Inc. These restrictions shall run with the land." (emphasis added)
The deed to Parcel C contained the following restriction:
"The property must be used to further the mission of The Audubon Society of New York State, Inc. If sold, the property can only be subdivided into two (2) lots. These restrictions shall run with the land." (emphasis added)
See NYSEF Doc No. 40 - See Corrective deed dated 6/22/99, which added the following language, to wit: "until the property is sold by the Audubon Society of New York, Inc", after the phrase "the property must be used to further the mission of the Audubon Society of New York, Inc."
The common denominator in the foregoing deed restrictions is that the properties were to be used to "further the mission of The Audubon Society of New York State, Inc" and the restrictions ran with the land.
With respect to the sale of real property, the Agreement provided:
"Monies received from the sale of real property and/or by way of an endowment shall be placed in a fund maintained by the Society, the income and principal of which can be used for the upkeep of the property. If principal is not invaded for such purpose, any income not so used for upkeep may be spent for the furtherance of the mission of the Society." (emphasis added)
NYSEF Doc. No. 11 and 12.
This is a recognition that liquid assets derived from a sale were intended to be used to further "the mission of the society." The Agreement did not expressly limit this provision to Parcels A and C. Defendant sold Parcel A to Paul and Denise Gorman on March 2, 2001, subject to enforceable restrictions of record. Defendant sold Parcel C to J.S. Standish on December 20, 2002, with the following restriction: "if sold, the property can only be subdivided into two (2) lots. These restrictions shall run with the land." It is manifest that the parties (i.e. the Estate and
NYSEF Doc. No. 17.
NYSEF Doc. No. 18.
Defendant) initially contemplated the research and education center was to operate in conjunction with the maintenance of the 26-acre forever wild tract. Upon the authorized sale of parcel A for use as a single family residence, however, the 26-acre tract was left without a research and education facility. The sale proceeds could, however, be used to further the mission of the Audubon Society.
NYSEF Doc. No. 73, Defendant's plan for the Rockwell "Ecological Preserve", which provided, inter alia" p.6: "In addition to ecological restoration of the Preserve, as outlined above, the Audubon Society of New York State also plans to address the infrastructure issues necessary to fulfill the deed requirement that the land "be used as a research, education, and management area for urban wildlife conservation and water resource protection." (emphasis added).
Defendant sold Parcel B to Thomas Despart on April 12,2013, with the following deed restriction, to wit:
"The land shall be forever wild and shall be used as a research, education and management area for urban wildlife conservation and water resource protection. No new permanent structures greater than 100 square feet shall be constructed on the premises, excluding necessary and accessory use structures to carry out research and education projects and programs for urban wildlife management and water resource conservation efforts. The property must be used to further the mission of The Audubon Society of New York State, Inc. These restrictions shall run with the land." (emphasis added)
NYSEF Doc. No. 19.
Here, as distinguished from the deeds to Gorman and Standish, the Despart deed does restrict the use of the land to further the mission of the Audubon Society.
RELIEF SOUGHT In relevant part, Plaintiff Rockwell sought the following relief, to wit:
"(c) to Plaintiff against Defendant, directing that pursuant to the cy pres doctrine Defendant disgorge to the Estate-or another qualified organization designated by the Estate-Defendant's right of enforcement of the Forever Wild Restriction and all portions of the Endowment not used for the preservation, conservation and maintenance of the Preserve Lands."
NYSEF Doc. No. 1 Complaint p. 13, Wherefore Clause.,
By Decision and Order dated December 29,2020 (Connolly, J.), Defendant's motion to dismiss the Complaint was partially granted, to the extent that Plaintiff's challenge to the foregoing title transfers to third parties was time-barred by the 6-year limitations period. At this point, issue is joined and the action is pending.
NYSEF Doc. No. 61,
ATTORNEY GENERAL MOTION
By Motion dated March 8,2021, the Attorney General of the State of New York seeks the following relief, to wit: (1) to intervene as a party pursuant to CPLR §1012 (a) (7) and/or § 1013; (2) to reargue the December 29,2020 Decision, to the extent that the challenge to the subject deed transfers to third parties was determined to be time-barred pursuant to CPLR R 2221, all in furtherance of additional relief to declare the 2013 deed from Audubon to Despart null and void, and "cy pres relief to authorize the transfer of the Rockwell Preserve and Rockwell Endowment to a land trust organization that is capable of carrying out the intentions of Marjorie Rockwell and her Executors"; (3) to add officers of Defendant, in their individual capacity, Thomas Despart as owner of Parcel B, as well as his son Daniel Despart, as necessary and/or permissive parties pursuant to CPLR §§1001-1002; (4) to consolidate this action with a related action Rockwell v. Despart (Albany County Index No.03096-19), in which Rockwell seeks to enforce the forever wild provisions of the deed to parcel B, pursuant to CPLR § 602 (a); and (5) to establish a new discovery schedule and amend the caption to reflect the new parties and consolidation.
See NYSEF Doc. No. 67 - proposed AG Complaint ¶ 10.
In this Court's view, the motion is not in proper form. The caption of the motion should have had the titles of both actions. The motion to intervene and consolidate should have been made with respect to both actions so that all parties could be put on notice. Notwithstanding this procedural error, on April 1, 2021, the Attorney General filed a separate motion in Rockwell v. Despart (Index No.03096-19), to intervene and consolidate the actions. Accordingly, the Court will address the motion on the merits.
The motion in Rockwell v. Despart (Index No.03096-19) is returnable April 27, 2021, the same date as oral argument herein.
MOTION TO INTERVENE
CPLR §1012 (a) (2) provides:
"Intervention as of right. Upon timely motion, any person shall be permitted to intervene in any action:
2. when the representation of the person's interest by the parties is or may be inadequate and the person is or may be bound by the judgment"
CPLR §1013 provides:
"Upon timely motion, any person may be permitted to intervene in any action when a statute of the state confers a right to intervene in the discretion of the court, or when the person's claim or defense and the main action have a common question of law or fact. In exercising its discretion, the court shall consider whether the intervention will unduly delay the determination of the action or prejudice the substantial rights of any party."
EPTL §8-1.1 (f) provides:
The attorney general shall represent the beneficiaries of such dispositions for religious, charitable, educational or benevolent purposes and it shall be his duty to enforce the rights of such beneficiaries by appropriate proceedings in the courts.
EPTL § 8-1.4(m) provides:
"The attorney general may institute appropriate proceedings to secure compliance with this section and to secure the proper administration of any trust, corporation or other relationship to which this section applies. The powers and duties of the attorney general provided in this section are in addition to all other powers and duties he or she may have. No court shall modify or terminate the powers and responsibilities of any trust, corporation
or other trustee unless the attorney general is a party to the proceeding, but nothing in this section shall otherwise impair or restrict the jurisdiction of any court with respect to the matters covered by it. The failure of any trustee to register or to file reports as required by this section may be ground for judicial removal of any person responsible for such failure." (emphasis added)
The record evidences that the public has an interest in the charitable bequest at issue, and the
Attorney General is statutorily charged with protecting that interest. Motion to intervene is granted.
REARGUMENT/STATUTE OF LIMITATIONS
CPLR R2221 (d) provides:
"A motion for leave to reargue:
1. shall be identified specifically as such;
2. shall be based upon matters of fact or law allegedly overlooked or misapprehended by the court in determining the prior motion, but shall not include any matters of fact not offered on the prior motion..." (emphasis added)
The Attorney General argues that the Court (Connolly, J.) mistakenly overlooked the fact that the deed from Audubon to Despart was void ab initio, and, as such, the action was not barred by the 6-year limitations period. The Attorney General relies on the holdings in Faisony, Lewis, 25 N.Y.3d 220 [2015], St. Joseph's Hospital v, Bennett, 281 N.Y. 115 [1939], and the cy pres doctrine to support its contention. The Attorney General's reliance is misplaced on all accounts.
Notably, the Attorney General does not challenge the 2001 deed from Audubon to Gorman, notwithstanding the fact that site was for the proposed research and education center that was an integral part of the gift plan.
Faison v. Lewis
In Faison v, Lewis. 25 N.Y.3d 220,222 [2015], the Court held,
"Under our prior case law it is well-settled that a forged deed is void ab initio, meaning a legal nullity at its inception. As such,
any encumbrance upon real property based on a [2] forged deed is null and void. Therefore, the statute of limitations set forth in CPLR213 (8) does not foreclose plaintiffs claim against defendant."
Here, as distinguished, there was no forged deed. Frankly, it is undisputed that Plaintiff conveyed fee simple title to Defendant, which, in turn, conveyed fee simple title to Despart.
St. Joseph's Hospital v. Bennett
In St. Joseph's Hospital v, Bennett, 281 N.Y. 115 [1939], the decedent bequeathed 1/9 of his residuary estate to St. Joseph's Hospital, a charitable corporation, "to be held as an endowment fund and the income used for the ordinary expenses of maintenance." (id at 117; emphasis added) The Court interpreted the language of the gift as follows:
"The term "endowment" has been defined as the bestowment of money as a permanent fund, the income of which is to be used in the administration of a proposed work. In still further restriction, direction is given to use only the income. Giving to these plain words their ordinary meaning, the intention of the testator is clear to direct the holding of a permanent fund, the income of which is to be used in the administration of the work, (id at 118119)
The Hospital sought to invade the principal to pay the mortgage and other expenses. Finding that the gift terms were enforceable, that Court held,
"No authority has been brought to our attention that a gift to a charitable corporation with the express direction that it be applied to a specific corporate purpose in a specific manner may be accepted by the corporation, and then used for a different corporate purpose in a different manner. No trust arises, it is true, in a technical sense, from such a gift for trustee and beneficiary are one. The charitable corporation is not bound by all the limitations and rules which apply to a technical trustee. It may not, however, receive a gift made for one purpose and use it for another, unless the court applying the cy pres doctrine so commands." (id at 123) (emphasis added)
Here, as distinguished from St. Joseph's Hospital v. Bennett, the plain language of the subject gift instruments was very broad, i.e. to "further the mission of The Audubon Society of New York State, Inc." (see Lefkowitz v, Cornell University, 35 A.D.2d 166, 171 [4th Dept. 1970], aff'd on op below 28 N.Y.2d 876, where the Court held,
"In order to find that a restriction has been placed upon the use of a gift to a charitable corporation, such restriction must be clearly expressed. (Si, Joseph's Hosp, v. Bennett, supra; Restatement, Trusts 2d, § 351.) In the instant case there is no clear expression of intent that the gift to Cornell was subject to the restriction that it be forever used as a research laboratory for the public benefit. In fact, an examination of the deed, bill of sale and the list of proposals submitted to Cornell by Curtiss-Wright leads one to the opposite conclusion.'')
In context, sale of the 26-acre tract and use of its proceeds constituted a single purpose to further the mission of the Society, not for another use, CY PRES DOCTRINE/EPTL §8-1.1 (a) and (c) (1)
The cy pres doctrine was codified in New York upon the adoption of EPTL §8-1.1 (a) and (c) (1), which provides:
(a) No disposition of property for religious, charitable, educational or benevolent purposes, otherwise valid under the laws of this state, is invalid by reason of the indefiniteness or uncertainty of the persons designated as beneficiaries. If a trustee is named in the disposing instrument, legal title to the property transferred for such a purpose vests in such trustee; if no person is named as trustee, title vests in the court having jurisdiction over the trust.
(c) (1) "The supreme court and, where the disposition is made by will, the surrogate's court in which such will is probated have jurisdiction over dispositions referred to and authorized by paragraphs (a) and (b), and whenever it appears to such court that circumstances have so changed since the execution of an instrument making a disposition for religious, charitable, educational or benevolent purposes as to render impracticable
or impossible a literal compliance with the terms of such disposition, the court may, on application of the trustee or of the person having custody of the property subject to the disposition and on such notice as the court may direct, make an order or decree directing that such disposition be administered and applied in such manner as in the judgment of the court will most effectively accomplish its general purposes, free from any specific restriction, limitation or direction contained therein; provided, however, that any such order or decree is effective only with the consent of the creator of the disposition if he is living." (emphasis added)(see People v Kermit Gitenstein Found., Inc., 2016 N.Y. Misc. LEXIS 4977, p. 44 [Sup Ct. Nassau Co. 2016], the Court held, Estates Powers and Trust Law (EPTL) $8-1.1(a) is a codification of the cy pres doctrine").
With respect to the relatively recent closure of two (2) hospitals in the Capital District which were the recipients of charitable gifts, the Court applied the cy pres doctrine to afford relief. In Matter of Lally, 112 A.D.3d 1099 [3d Dept. 2013], the charitable gifts were made to "the St, Clare's Hospital of Schenectady, N.Y. Foundation, Inc. (hereinafter the Foundation). The Foundation was established in 1981 and served as a fundraising entity exclusively for St. Clare's Hospital." (id at 1100) St. Clare's Hospital closed, but the Foundation continued to exist. The Court made the following fact findings, to wit:
"Here, the gift instruments, in which the donors also made various other charitable dispositions, revealed a general charitable intent. With regard to the gifts in question, the intent was to benefit a hospital. At the time the pertinent gift instruments were executed, St. Clare's Hospital operated as a hospital and gifts to the Foundation went exclusively to St. Clare's Hospital. The stipulated facts reveal that the Foundation has stopped providing any charitable grants. Its previous sole beneficiary, St. Clare's Hospital, ceased operating as a hospital, modified its corporate name and changed its corporate function to promoting health and wellbeing. Ellis Hospital assumed all responsibility for the hospital and related healthcare services previously provided by St. Clare's Hospital." (emphasis added)
Notwithstanding the continued existence of the Foundation, the Court upheld the grant of cy pres relief to Ellis Hospital, holding,
"The relevant gifts were all undisputedly charitable in nature and, for cy pres relief, it was further necessary that the instruments establishing the gifts revealed a general charitable intent and that circumstances had changed rendering impracticable or impossible strict compliance with the terms of the gift instruments" (id at 1100) (emphasis added)(see also, Matter of Hummel, 30 A.D,3d 802, 804 [3d Dept. 2006], where Court upheld cy pres relief to AMCH upon the closure of Child's hospital in Albany).
As applied, the real estate transfer from Plaintiff to Defendant was clearly charitable in nature. The Rockwell Will evidenced a general charitable intent (c.f. Matter of Gurney, 152 A.D,3d 1122 [3d Dept. 2017]). There has not been, however, any "indefiniteness or uncertainty of the persons designated as beneficiaries" for the Audubon Society remains intact, and still has its mission. The question distills to whether the title transfer of the proposed education and research center and "forever wild" sites to unrelated third parties, constituted such a change of circumstances as to render it impracticable or impossible to achieve strict compliance with the terms of the gift instruments. I think not.
By the express terms of the gift instruments (i.e. the Agreement and deed restrictions), the parties specifically contemplated the sale and residential use of parcels A and C, as well as use of the sale proceeds to further its mission. While the deed to parcel B (the 26-acre forever wild tract) did not expressly authorize a sale, it did not prohibit same. Same deed also affirmatively stated the property use was to further Defendant's mission. Recognizing the authorized sale of the research and education center site was a fait accompli, and rather than maintaining the 26-acre site as a free standing forever wild parcel, Defendant's election to sell and use the proceeds to further its mission is wholly compatible with the intent of the gift instruments. This is not to say that a 26-acre tract, standing alone, could never be maintained "forever wild" (see e.g. Nature Conservancy. v. Congel, 296 A.D.2d 840, 841 [4th Dept. 2002], where the Court noted, "The property obviously is capable of remaining in its "natural state.")Rather, it is a recognition of the broad scope of the gift instruments, i.e. the gift intent remained the same, with or without the real estate, to further Defendant's mission.
NYSEF Doc. No, 77. See also NYSEF Doc, No, 75, Board Minutes p. 4-5, when the Board voted to sell parcel A, due to the financial constraints.
Determining whether the restrictive covenant should be extinguished pursuant to RPAPL 1951 (1) is not squarely raised in this case, but is squarely raised in Rockwell v. Despart.,
The Attorney General cites the Decision and Order (Hon. Pettit, S.) issued "In the Matter of the Cy Pres Petition by Bank of America, N.S., as Trustee, for the Estate of Robert Rienow, Deceased", to support its claim the transfer from Defendant to Despart was null and void under the cy pres doctrine Such reliance is misplaced.
NYSEF DOC 80.
In his Last Will and Testament, Robert Rienow provided the specific charitable bequest to the Audubon Society of New York State, Inc:
SIXTH: All the rest and remainder of my tangible personal property except intangible property such as stocks, bonds, and other instruments for the payment of money, and my Farm known as Hollyhock Hollow 'Farm, located in the Town of Bethlehem, County of Albany, State of New York, including the four acre parcel purchased from John Rarick immediately across the Onesquethau Creek, and the one half acre piece purchased from the Haynes Estate down at the comer of the road, consisting in all of about 138 acres with all the improvements and structures thereon, I give and bequeath to The Audubon Society of New York State, Inc. subject to the uses and upon the Trusts hereinafter specified.
A. Subject to the express condition and limitation that the premises herein devised shall forever be held as a wildlife sanctuary for scientific, educational and conservation purposes, and shall be kept entirely in its natural state...
K. In the event that The Audubon Society of New York State, Inc. shall not hold the property upon the uses and Trusts above stated under this devise and bequest then its estate tn said property and trust shall terminate, and in that event Wildlife Rehabilitation &Education Network, Inc., whose principal office is located at 36 East Wiggand Drive, Glenmont; New York shall become the holder of said real and personal property subject to the same uses, trust and limitation as the Audubon Society of New York State, Inc," (emphasis added)
See NYSEF Doc, No. 70 Last Will and Testament of Robert Rienow dated June 17, 1988.
Hollyhock Hollow 'Farm was deeded to the Audubon Society in 1990. In 2018, the Audubon Society notified the Trust that it no longer wished to be the beneficiary of the Sanctuary. The Wildlife Rehabilitation &Education Network is no longer an active charitable entity, and the Court approved Mohawk Hudson Land Conservancy as the successor beneficiary.
The Rienow case is vastly different from the subject. First, Rienow made a specific bequest to Audubon, and provided a successor beneficiary if Audubon was no longer willing to serve. Here, as distinguished, Rockwell did not make a specific bequest, and gave her Executors the option of donating the land to charity or to sell it for market value. Second, the intent of the charitable gift was to further the interests of Hollyhock Hollow 'Farm, not the interests of Audubon. Here, as distinguished, the gift instruments evidence an intent to further the mission of Audubon. Third, due to the provision of a successor beneficiary, Audubon had no ability to sell the Hollyhock Hollow Farm. Once again, as distinguished, the gift instruments gave express authorization to sell parcels A and C, and did not restrict the sale of parcel B. Last, Audubon has not expressed an unwillingness to serve as beneficiary; to the contrary, they converted the hard asset, i.e. 26-acres, to a liquid asset, and may use the sale proceeds to further their mission.
The Attorney General candidly acknowledges that she could not find any New York precedent to cause vacatur of a deed under the cy pres doctrine. The Attorney General has, however, cited Cohen v, Lynn. 33 Mass.App.Ct. 271 [1991] for the proposition that a deed may be vacated pursuant to cy pres relief.
NYSEF Doc. No. 82 Memo of Law p. 24.
In Cohen, the City of Lynn acquired two (2) parcels of land for $28,000.00 from private parties in 1893, subject to deed restrictions that the land be "forever for park purposes", (id at 272) In 1982, the City conveyed the land by deed to a private developer, claiming the lands were no longer suitable for park use. Plaintiffs (taxpayers) sought to vacate the 1982 deed conveyance as a violation of a public charitable trust. The City and the developer applied for cy pres relief to authorize the 1982 conveyance.
The Court held,
"Property conveyed to a governmental body ... for particular public purposes may be subject to an enforceable general public obligation or trust to use the property for those purposes., .[and] The conveyances in the present case contain direct and unambiguous language, clearly declaring that the grantors divested themselves of all their interests in the land "forever for park purposes." Similar conveyances of land for parks, where the grantors specified the land be used "forever" or "in perpetuity," without other limitation, have been found to establish a public charitable trust." (id at 275)
Finding "that the city and Gilberg [the developer] have not demonstrated that it had become impossible or impracticable to carry out the original park purposes of the 1893 conveyances", the Court denied their request for cy pres relief, (id at 289) In turn, the Court upheld the vacatur of the 1982 deed as a violation of the public charitable trust.
Cohen is readily distinguishable. Clearly, the challenged conveyance herein was not made to a governmental body. Next, the public charitable trust in Cohen was for an express parcel and public purpose. Here, the subject conveyance was made at the discretion of the Executors, who authorized sale of 2 of the 3 dependent parcels, and specified the entire conveyance was for the purpose of promoting the "mission" of die Audubon Society; the "mission" comports with the provisions of N-PCL§ 513 (a), i.e. "with a direction to apply the same to, any purpose specified in its certificate of incorporation." (emphasis added)
In fine, the Executor's plan was and continues to be structurally unsound to support cy pres relief pursuant to EPTL §8-1.1 (a) and (c) (1), for the following reasons, to wit: (1) the Testator did not make a specific bequest of the 26-acre tract to anyone; (2) the Testator's broad intent authorized sale at market value, with a preference given to her neighbors, which would necessarily be inclusive of Despart; (3) the gift documents specifically authorized the sale of 2 of the 3 dependent parcels, including and correspondingly undermining the contemplated research and education center, (4) the intent of the gift documents was to further Defendant's mission, not that Defendant permanently own and maintain the 26-acre "forever wild" parcel; (5) the gift instrument did not limit the use of sale proceeds to pay expenses of the property, but, rather specifically authorized the use of the endowment for its mission, and (6) Defendant conveyed the 26-acre tract to Despart subject to the "forever wild" restriction.
Distinct from limiting the remedy to cy pres relief, the Executors could have inserted a reverter clause in the deed, yet they failed to do so (c.f, Paul Smith's Coll, of Arts &Sciences v Roman Catholic Diocese of Ogdensburg, 186 A.D.3d 1817 [3d Dept. 2020]). Absent a reverter clause, any deed provision restricting sale would be void (see Witt v. Disque, 79 A.D.2d 419, 425 [2d Dept. 1981], where the Court held,
"the rule against restraints on alienation is not now codified, but remains a doctrine controlled by decisional law. It was early stated that where an estate was conveyed in fee simple, a condition forbidding alienation by the grantee was void. The reason for the rule was said to be that the ownership of the fee could not exist in one person while the ownership of the right of alienation existed in another. That statement, of course, embodies a conceptual difficulty; but the public policy in favor of facilitating the free transfer of property is undoubtedly a more substantial ground for the rule." Emphasis added); Continental Ins, Co, v. New York &H, R, Co,, 187 N.Y. 225,237 [1907] where the Court held,
"Ever since the decision in De Peyster v, Michael (6 N, Y. 467) it has been the settled law in this state that a covenant restraining alienation by the owner of the property in fee is void, and that such a covenant can be supported only where the covenantee has a reversion in the property" (emphasis added); see also, Wiesenthal v. Young, 280 A.D. 590 [1st Dept. 1952]).
Not-For-Profit Corporation Law (N-PCL)
The Attorney General's reliance on Not-For-Profit Corporation Law (N-PCL) § 513 to support its claims is misplaced. N-PCL § 513 provides:
"(a) A corporation which is, or would be if formed under this chapter, a charitable corporation shall hold full ownership rights in any assets consisting of funds or other real or personal property of any kind, that may be given, granted, bequeathed or devised to or otherwise vested in such corporation in trust for, or with a direction to apply the same to, any purpose specified in its certificate of incorporation, and shall not be deemed a trustee of an express trust of such assets. Any other corporation subject to this chapter may similarly hold assets so received, unless otherwise provided by law or in the certificate of incorporation.
(b) Except as may be otherwise permitted under article eight of the estates, powers and trusts law or section 555 (Release or modification of restrictions on management, investment, or purpose), the governing board shall apply all assets thus received to the purposes specified in the gift instrument as defined in section 551 (Definitions) and to the payment of the reasonable and proper expenses of administration of such assets. The governing board shall cause accurate accounts to be kept of such assets separate and apart from the accounts of other assets of the corporation. Unless the terms of the particular gift instrument provide otherwise, the treasurer shall make an annual report to the members (if there be members) or to the governing board (if there be no members) concerning the assets held under this section and the use made of such assets and of the income thereof." (emphasis added)N-PCL § 513 [b] and § 522 "expressly incorporate a quasi-cy pres principle with respect to both the administration and use of its assets" (see Alco Gravure v. Knapp Found, 64 N.Y.2d 458,462 [1985]). Whether the charitable gift has been diverted to an unauthorized use, implicating donor intent, is dependent on the facts (see Matter of Help Me See, Inc, v Wonderwork, Inc., 157 A.D.3d 455 [1st Dept. 2018], where the Court held,
"Contrary to respondent's contention, the award did not improperly redirect specific charitable donations based on a determination of donor intent... As such, New York's public policy protecting donor intent was not implicated").
In this Court's view, Defendant's use of the sale the proceeds, in lieu of continuing ownership of the 26-acre tract, is not a diversion of the gift, nor does it implicate donor intent, as long as the funds are used to further its mission. The record does not support a violation of N-PCL § 513.
The Attorney General also relies on Rose Ocko Found., Inc, v, Lebovits, 259 A.D.2d 685, 688 [2d Dept. 1999] and Solar Line, Universal Great Bhd., Inc, v Prado, 100 A.D.3d 862 [2d Dept. 2012] to seek vacatur of the Despart deed pursuant to Not-For-Profit Corporation Law §§ 510 and 511. Such reliance is misplaced.
In Rose Ocko, the Court found the following facts:
"The plaintiff, Rose Ocko Foundation, Inc. (hereinafter the Foundation), was incorporated as a Type B not-for-profit corporation in 1978. The principal purpose of the Foundation was to construct and operate a facility for the care of resident and nonresident elderly Jewish people in Rockland County. All of the Foundation's assets, including approximately 34 acres located in the Town of Ramapo (hereinafter the property), were donated by Hany M. Ocko, who envisioned that the senior citizens center would be built on the property." (id at 686)
In a convoluted scheme to sell and then repurchase a comparable parcel to build the center, the Court "declared that the contract of sale and the deed were null and void ab initio" (id at 687), finding, "The Supreme Court properly determined that the sale of the property fell within the ambit of Not-For-Profit Corporation Law 510 and 511, which set forth the procedure for the "sale, lease, exchange or other disposition of all, or substantially all, the assets of a [not-for-profit] corporation". Although the Not-For-Profit Corporation Law does not define what constitutes "all or substantially all" of the assets of a corporation, it is clear that the purpose of the statutes is to protect the beneficiaries of a charitable organization from "loss through unwise bargains and from perversion of the use of the property", (emphasis added)
In Solar Line, Universal Great Bhd., Inc, v Prado, supra., the defendant conveyed to himself certain real property owned by the plaintiff, a not-for-profit corporation. The court found the deed was void, finding,
"The plaintiff established that the deed is void on the ground that Prado did not obtain court approval for the transfer and, thus, the
transfer violated Not-For-Profit Corporation Law §§510 and 511, which require Supreme Court approval for the disposition of all or substantially all of the assets of a not-for-profit corporation. Contrary to AHL's contention, the plaintiff showed that it is a duly registered not-for-profit corporation and that the transferred property constitutes all or substantially all of the plaintiffs assets." (id. at 863) (emphasis added)
Here, as distinguished from Rose Ocko and Solar Line, there has not been any showing that the sale of the 26-acre tract was a conveyance of substantially all the Defendant's assets. To the contrary, the sale evidences Defendant's effort to liquidate the real estate and use the proceeds to further its mission, i.e. the sale does not fall within the ambit of Not-For-Profit Corporation Law §§510 and 511 in the first instance.
The Court notes that the Attorney General did not assert a cause of action under N-PCL 510 and 511 in its Complaint (NYSEF Doc. No. 67). Notably, the Complaint contains the following allegation: "136. Pursuant to its 2019 Financial Report, filed with the Charities Bureau, as of June 30,2019, Audubon International had a total net fund balance of approximately $1.7 million, including investments in publicly traded securities of approximately $1.1 million."
In paragraph 1 (a) of the ad damnum clause of the proposed Complaint, the Attorney General seeks recission of the deed pursuant to Not-For-Profit Corporation Law §720 (a) (2) This Court has already determined that the 2013 deed was not void ab initio, and recission is denied.
NYSEF Doc. No. 67.
It is the determination of this Court that the deed from Audubon to Despart was not void ab initio. To the contrary, the deed conveyed fee simple title of the tract to Despart, with no restriction on alienation. Accordingly, the December 29,2020 determination of the Court (Connolly, J.) that the challenge to the validity of the 2013 deed is time-barred, stands. Motion to reargue is denied,
JOINDER OF PARTIES
The Attorney General seeks to add Thomas and Daniel Despart, as well as officers of Defendant Corporation, as necessary parties.
In its proposed Complaint, the Attorney General alleges, inter alia:
"119. During 2013 and continuing through the present, Defendants Bassett, Hiers, Beljan and Aylesworth, in a continuing violation of Article 8 of the EPTL and the Agreement, failed to restore the principal of the Rockwell Endowment and improperly commingled the restricted assets of the Rockwell Endowment with other funds of Audubon International.
120. By engaging in the foregoing conduct, Defendants Bassett, Hiers, Beljan and Aylesworth did breach their fiduciary duties in violation of §§ 112,513,717 and 720 of the NPCL and are liable to Audubon International for their breaches of duty." (emphasis added)
See NYSEF Doc. No 67.
Clearly, the crux of the allegations against the corporate officers is distinct from the validity of the 2013 deed, and the enforcement of the restrictions therein.
CPLR §1001 provides:
(a) Parties who should be joined. Persons who ought to be parties if complete relief is to be accorded between the persons who are parties to the action or who might be inequitably affected by a judgment in the action shall be made plaintiffs or defendants. When a person who should join as a plaintiff refuses to do so he. may be made a defendant.
Since the challenge to the validity of the 2013 deed is time-barred, at this juncture, there is no necessity to join the Desparts' as parties to this action. This action is, however, being expanded to include the corporate officers in their individual capacity, relative to the cy pres claim against the endowment and sale proceeds; clearly Desparts' have nothing to do with this claim. The Attorney General's motion to add Bassett, Hiers, Beljan and Aylesworth, in their individual capacity as parties is granted, and the caption shall be amended accordingly. The motion to add the Desparts as parties is denied.
CONSOLIDATION OF ACTIONS
CPLR § 602 (a) provides:
"Generally. When actions involving a common question of law or fact are pending before a court, the court, upon motion, may order a joint trial of any or all the matters in issue, may order the actions consolidated, and may make such other orders concerning . proceedings therein as may tend to avoid unnecessary costs of delay."(see Korn v Korn, 2021 N.Y.App.Div. LEXIS 84 [3d Dept. 2021], where the Court held,
"When actions involving a common question of law or fact are pending before it, Supreme Court may, upon motion and at its discretion, consolidate the actions, so long as such consolidation does not prejudice a substantial right of the party opposing consolidation") (emphasis added)
The issues in Rockwell v. Despart are narrow, confined to the enforceability of the deed restrictions. The issues in Rockwell v. Audubon et al are far broader, entailing an accounting of the endowment and sale proceeds, a determination under the cy pres doctrine relative thereto, and a determination of whether there was a breach of a fiduciary duty. Consolidation will result in unnecessary costs and delay in the determination of the issues in Rockwell v. Despart.
Accordingly, the motion to consolidate is denied.
DISCOVERY
After issue is fully joined, the Court will schedule a conference to establish a new discovery schedule.
CONCLUSION
For the reasons more fully stated above, the Attorney General's motion is granted in part, and denied in part, and it is further
ORDERED, that the Attorney General's motion to intervene in this action is granted, and it is further, ORDERED, the Attorney General's motion to reargue that part of the December 29,2020 Decision (Connolly., J.) which determined the claim to vacate the 2013 deed to Despart was time-barred, is denied, and it is further, ORDERED, that the Attorney General's motion to add Thomas and Daniel Despart as parties to this action is denied, and it is further, ORDERED, that the Attorney General's motion to add Clarence Bassett, Timothy Hiers, Jan Beljian, and Ryan Aylesworth as party defendants to this action is granted, the caption shall be amended accordingly, and the Attorney General is directed to file and serve its Complaint within thirty (30) days of the date hereof, and it is further, ORDERED, that the Attorney General's motion to consolidate this action with Rockwell v Thomas Despart is denied.
All other motions raised but not specifically addressed in this decision are found to be without merit and are denied.
A compliance conference is scheduled to take place on July 1,2021 @ 1:00 p.m. via Teams.
This memorandum constitutes both the decision and order of the Court.
Notice of Entry and service in accord with CPLR R 2220 is required.
PAPERS CONSIDERED:
1. All e-filed pleadings and exhibits; and
2. Reply Affirmation of Nathan Courtney dated April 26, 2021; and 04/28/2021
3. Reply Memorandum of Law of Nathan Courtney dated April 26,2021; and
4. Exhibit "47"- Real Estate Titles; and
5. Exhibit "48" - Deed from Norstar Trust to the Audubon Society dated 1/3/90.