| Female Academy of the Sacred Heart v Doane Stuart School |
| 2012 NY Slip Op 00452 [91 AD3d 1254] |
| Jnury 26, 2012 |
| Appellate Division, Third Department |
| Female Academy of the Sacred Heart et al., Respondents, v DoaneStuart School, Appellant. |
—[*1] Ganz, Wolkenbreit & Siegfeld, Albany (Robert E. Ganz of counsel), forrespondents.
Mercure, A.P.J. Appeal from an order of the Supreme Court (Connolly, J.), entered May 12,2011 in Albany County, which, among other things, denied defendant's cross motion forsummary judgment dismissing the complaint.
Defendant was formed by the 1975 merger of two parochial schools, including one locatedon property owned by plaintiff Female Academy of the Sacred Heart (hereinafter FemaleAcademy), whose parent religious order is plaintiff Society of the Sacred Heart, United StatesProvince, Inc. (hereinafter Sacred Heart). The interested parties executed a memorandum ofunderstanding (hereinafter MOU) contemplating that they would execute a formal contractleasing a portion of the Female Academy's property to defendant for 99 years. The MOU furtherstated that the lease should have "a cancellation clause built in so that[,] should [defendant]merge or relocate, . . . neither party would be in breach of contract."
While a lease embodying those terms was never executed,[FN1]defendant nevertheless [*2]rented the property. By 2000,defendant owed over $500,000 in back rent, forcing Sacred Heart to advance funds to the FemaleAcademy for maintenance of the property. In an effort to resolve the situation, the partiesexecuted a loan forgiveness agreement and a lease running through 2012, with Sacred Heartagreeing to forgive a portion of the debt for every month that defendant timely paid rent. Both thelease and the loan forgiveness agreement could be terminated by plaintiffs in the event ofdefendant's breach.
After defendant vacated the premises and ceased paying rent in 2009, Sacred Heart canceledthe loan forgiveness agreement and demanded that defendant repay the full debt. Plaintiffsthereafter commenced this action to recover both the outstanding debt and the rent owed bydefendant through the remaining term of the lease. Defendant answered and asserted severalaffirmative defenses, including claims that the cancellation provision in the MOU barredplaintiffs' action and that the 2000-2012 lease was void pursuant to Religious Corporations Law§ 12 (1). Plaintiffs thereafter moved for partial summary judgment, while defendantcross-moved for summary judgment dismissing the complaint. Supreme Court granted plaintiffs'motion in part, dismissed the two affirmative defenses, and denied defendant's cross motion in itsentirety. Defendant appeals and we affirm.
Initially, we agree with Supreme Court that the MOU's lease provisions are unenforceable,because they lack "a manifestation of mutual assent sufficiently definite to assure that the partiesare truly in agreement with respect to all material terms" (Matter of Express Indus. & Term.Corp. v New York State Dept. of Transp., 93 NY2d 584, 589 [1999]; see Matter of 166Mamaroneck Ave. Corp. v 151 E. Post Rd. Corp., 78 NY2d 88, 91 [1991]). While severalsubparagraphs in the MOU address aspects of a future lease of the Female Academy's property, itwas explicitly deemed a "preliminary agreement" that contemplated further negotiations andexecution of "a formal contract" (seeFollender v Prior, 63 AD3d 1458, 1459 [2009]). Indeed, the MOU failed to specifyseveral material terms of the future lease, including the amount of rent to be paid, when the leasewas to take effect and what portion of the property would be leased (see Matter of ExpressIndus. & Term. Corp. v New York State Dept. of Transp., 93 NY2d at 591; JosephMartin, Jr., Delicatessen v Schumacher, 52 NY2d 105, 109-110 [1981]; Uniland Partnership of Del. L.P. v BlueCross of W. N.Y. Inc., 27 AD3d 1131, 1132-1133 [2006], lv denied 7 NY3d713 [2006]).[FN2]The MOU therefore constituted an unenforceable agreement to agree on terms in a future lease,and does not bar plaintiffs' claims (see Uniland Partnership of Del. L.P. v Blue Cross of W.N.Y. Inc., 27 AD3d at 1132-1133; St. Regis Paper Co. v Rayward, 16 AD2d 130,133 [1962], affd 12 NY2d 1033 [1963]; cf. Sunshine Steak, Salad & Seafood v W. I.M. Realty, 135 AD2d 891, 893 [1987]).[*3]
We further agree with Supreme Court that defendantlacked standing to argue that the 2000-2012 lease is invalid pursuant to Religious CorporationsLaw § 12 (1), which prohibits a religious corporation from leasing its real property "for aterm exceeding five years" absent judicial approval. Religious Corporations Law § 12 wasintended to protect the members of such corporations "from loss through unwise bargains andfrom perversion of the use of the property" (Church of God of Prospect Plaza v FourthChurch of Christ, Scientist, of Brooklyn, 76 AD2d 712, 716 [1980], affd 54 NY2d742 [1981]; accord Diocese of Buffalo v McCarthy, 91 AD2d 213, 217 [1983], lvdenied 59 NY2d 605 [1983]). Inasmuch as the statute was thus intended to give thereligious corporation relief from "unwise bargains," the lease was voidable at the FemaleAcademy's option and defendant lacked standing to challenge it (see Congregation Atzei Chaim v 26 AdarN.B. Corp., 27 AD3d 412, 412-413 [2006]; Matter of Bridge to SpiritualFreedom, 304 AD2d 574, 575 [2003]; see also Lawas v Cole, 116 AD2d 936,936-937 [1986]; Martin v Bankers Trust Co. of Albany, N.A., 51 AD2d 411, 412-413[1976]).
Contrary to defendant's contention, the failure to obtain judicial approval of the lease, byitself, did not render the lease void ab initio. The Female Academy was incorporated solely as a"seminary of learning" and, assuming without deciding that it is a "religious corporation," it doesnot meet the definition of an incorporated church (see Religious Corporations Law§ 2; Matter of Prall, 78 App Div 301, 303-304 [1903]; cf. Matter ofLueken, 97 Misc 2d 201, 203-204 [1978]). Thus, episcopal consent was not required to enterinto the lease, and the Female Academy continues to hold "the power either to avoid or tovalidate" it (Diocese of Buffalo v McCarthy, 91 AD2d at 218; cf. ReligiousCorporations Law § 12 [3]; Soho Ctr. for Arts & Educ. v Church of St. Anthony ofPadua, 146 AD2d 407, 410-412 [1989]).
Peters, Rose, Lahtinen and Garry, JJ., concur. Ordered that the order is affirmed, with costs.
Footnote 1: From 1975 to 2000, the partiesexecuted only one lease agreement, for a term of one year from 1984-1985.
Footnote 2: Contrary to defendant'scontention, the amount of rent owed cannot be objectively determined using the MOU'sdefinition of "the cost of operating the part of the facility used for school purposes." The MOUfails to specify what part of the property would be leased and, furthermore, neither the MOU norextrinsic evidence specifies an objective method for determining or apportioning the costs(see Joseph Martin, Jr., Delicatessen v Schumacher, 52 NY2d at 110-111; cf. CobbleHill Nursing Home v Henry & Warren Corp., 74 NY2d 475, 483-485 [1989], certdenied 498 US 816 [1990]; Village of Lansing v Triphammer Dev. Co., 193 AD2d919, 920-921 [1993]).