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Rector, Etc., of St. Stephens Protestant Episcopal Church of City of New York v. Rector, Etc., of Church of the Transfiguration in City of New York

Supreme Court of New York, Appellate Division

January 22, 1909

RECTOR, ETC., OF ST. STEPHENS PROTESTANT EPISCOPAL CHURCH OF CITY OF NEW YORK
v.
RECTOR, ETC., OF CHURCH OF THE TRANSFIGURATION IN CITY OF NEW YORK.

Appeal from Special Term, New York County.

Action by the Rector, Churchwardens, and Vestrymen of St. Stephens Protestant Episcopal Church of the City of New York against the Rector, Churchwardens, and Vestrymen of the Church of the Transfiguration in the City of New York. From a judgment dismissing the complaint on the merits ( 59 Misc. 560, 112 N. Y Supp. 403), plaintiff appeals. Reversed.

[114 N.Y.S. 624] Arthur O. Townsend (Frank D. Wynn, on the brief), for appellant.

Charles Blandy, for respondent.

Argued before PATTERSON, P. J., and McLAUGHLIN, LAUGHLIN, HOUGHTON, and SCOTT, JJ.

SCOTT, J.

Plaintiff appeals from a judgment at Special Term in favor of defendant. Plaintiff and defendant are both religious corporations, and both belong to the same religious denomination. The controversy is marked with considerable acrimony, and arises upon a somewhat unusual state of facts. Prior to the year 1897, the Church of the Transfiguration, defendant herein, whose main church edifice was and is in Twenty-Ninth street in the city of New York, also owned a plot of land about 100 feet square in West Sixty-Ninth street, on the rear portion of which stood a small chapel maintained by defendant. [114 N.Y.S. 625] Circumstances were such that in the spring of 1897 defendant desired to sell this plot and chapel, and to devote the proceeds to paying off certain debts and to other corporate purposes. At the same time St. Stephens Church, plaintiff herein, desired to move uptown, and it was proposed that it should purchase the plot of land and chapel in Sixty-Ninth street owned by defendant. The price of $85,000 was agreed upon. The canon law of the Protestant Episcopal Church, to which both plaintiff and defendant belonged, requires the approval of certain diocesan authorities to the relocation of a church, and owing to the vigorous opposition of certain churches in the vicinity of Sixty-Ninth street to the intrusion into the territory of another church, several years elapsed before the consent of the diocesan authorities could be obtained. In the meantime Mr. George W. Quintard, an officer of plaintiff, purchased the property in his own name, paying to defendant $35,000 in cash, and giving a purchase-money mortgage upon the property to secure his personal bond for $50,000. Although Mr. Quintard purchased this property and executed the bond and mortgage as an individual, without any legal authority from plaintiff to act as its agent, or any contract with it respecting the future acquisition of the property, there seems to be no doubt that when he bought it he expected to convey it to plaintiff when the diocesan consent to a relocation had been obtained.

In the summer of 1897 Mr. Quintard expended some $6,000 in repairing the chapel, and on September 21, 1897, entered into a written agreement with plaintiff whereby the latter was to be entitled to purchase the property within two years for the price of $85,000, and meanwhile was to have the use and occupancy thereof for church purposes. The diocesan consent was not obtained until March, 1900. In the meantime plaintiff had expended some $8,000 of its own money in further repairing the chapel, besides assuming liability for the sums expended thereon by Mr. Quintard. In order to make the sale to Mr. Quintard, defendant, as the statute requires, applied to the Supreme Court for its leave. In the petition, signed by the rector and clerk, and verified by the latter, it was stated that defendant had debts amounting to about $30,000, which it desired to pay, and that the price of $85,000 for which it was proposed to sell the property was its " fair market value." The deed from defendant to said George W. Quintard, dated May 27, 1897, and executed by the rector and clerk of defendant, contains the following restrictive clause:

" And the said party of the second part, for himself, his heirs and assigns, doth covenant and agree to and with the said party of the first part, its successors and assigns, that the party of the second part, his heirs and assigns shall not at any time hereafter occupy or use the said premises or any part thereof hereby conveyed, or permit the same to be occupied or used for any purpose other than church purposes only. And it is expressly understood that the said covenant shall attach to and run with the land."

This clause seems to have been inserted in the deed by the officers who executed it, without any direction or authority from defendant. There is no mention of such a proposed restriction in the resolution authorizing the sale adopted by the vestry of defendant, or in the petition presented to the Supreme Court stating the proposed terms of sale and [114 N.Y.S. 626] asking the leave of the court to carry it out, nor is any such restriction contained in the purchase-money mortgage taken back by defendant. When Mr. Quintard proposed to convey the property to plaintiff, his deed, as tendered, contained a similar restriction. It appears that plaintiff's officers then for the first time learned that Mr. Quintard's title was incumbered by such a covenant, and at first demurred to accepting a deed containing a like covenant, but finally accepted the deed as tendered, including the restrictive covenant.

The neighborhood in which the church is situated has greatly increased in population, and the attendance at the church has steadily increased, so that, after putting in all the additional sittings possible, the plaintiff finds itself hampered in carrying out its church work for lack of accommodations, and it desires to increase the size of its edifice. To do this it must borrow money. The property has increased in value since its purchase from defendant in 1897, and plaintiff is now assured that it can borrow upon the property, at a less rate of interest than it is now paying defendant, enough money to pay off defendant's mortgage of $50,000 as well as to erect the needed additions to and enlargement of the church edifice, provided it can be relieved of the restrictive covenant above quoted. But so long as that covenant stands as an apparent burden upon the title a new loan cannot be negotiated, for the restricted use to which the property is apparently subjected destroys its market value. Mr. Quintard has released the plaintiff from the covenant so far as concerns the deed which he executed, but the covenant in the deed from defendant to Quintard still stands of record. For a long time plaintiff found great difficulty in meeting its interest payments to defendant, and is now in arrears for interest for a considerable amount. As early as 1901, defendant was importuned to reduce the interest rate, but has steadily refused to consider such a request. Plaintiff has also for some time requested defendant to release the property from the restrictive covenant in order that money could be raised to pay off the present mortgage and interest in arrears, and obtain funds wherewith to enlarge the church edifice. These requests have also been steadily refused, and in no gentle terms.

It is argued at length on defendant's brief, and some testimony was erroneously admitted to sustain the plea, that the covenant was inserted because of a religious sentiment against permitting the property which had once been used for church purposes to ever be applied to any secular use, and that, in consequence of the restrictions placed upon its use, the property was sold to Mr. Quintard at less than its real value. This evidence was irrelevant to any issue presented by the pleadings as they stood when the case was tried. Such a defense was attempted to be set up, but was demurred to for insufficiency and the demurrer sustained, and no appeal was ever taken, or is now taken, from the judgment so sustaining the demurrer. That defense was therefore out of the case, and no evidence in support of it should have been received. Having been improperly received, it is our duty to ignore it. And, whatever may have been the original reason for inserting the covenant, the only reason now given for insisting upon its retention, or that has been given during all the correspondence between [114 N.Y.S. 627] the parties, is the purely commercial one that defendant would not release the covenant except upon the payment of a sum of money, the amount being generally fixed at $15,000, with the suggestion of a possible concession to a somewhat smaller sum. In the meantime the defendant has begun an action at law for the recovery of the debt of $50,000. Why it has not foreclosed the mortgage, instead of suing at law for the debt, can only be conjectured. It is suggested, however, that if the property were sold under the mortgage, which contains no restrictive covenant, the whole value of the property might be expected to be realized, while if sold under execution no one could afford to buy it at any fair price except defendant, who could then release the covenant and realize the full value upon a resale. The defendant owns no other property in the neighborhood, its church edifice being about two miles distant.

The plaintiff seeks a judgment that the defendant be required to execute a release of the restrictive covenant, or be perpetually enjoined and restrained from seeking to enforce said covenant, and that upon such release, and the payment of the mortgage debt and interest, the mortgage be satisfied and discharged. The plaintiff insists in the first place that the covenant is one which can never be enforced by defendant, either by an action for damages for its breach, or by injunction to prevent a breach. In Equitable Life Assurance Soc. v. Brennan, 148 N.Y. 661-671, 43 N.E. 173, the Court of Appeals, after remarking that it might not be possible to harmonize all the authorities in this country and England on the subject of negative easements, proceeded to state a few general rules which are well settled, one of which is that there must be found somewhere the clear intent to establish the restriction for the benefit of the party suing or his grantor. An indispensable element of an action to enforce such a covenant is that its enforcement will benefit the party suing, or that its violation will injure him, and that he is the party for whose benefit the covenant was made. The violation of the covenant in the present case could not damage the defendant in any legal sense, nor could its enforcement benefit it, for it stands admitted by the pleadings that defendant owns no property in the vicinity of plaintiff's property. As it stands, it is a mere naked covenant, inserted in the deed to Quintard, without authority of defendant, supported by no valuable consideration, and appurtenant to no dominant tenement, and is of no benefit to defendant unless it can be used as a weapon in terrorem to compel the payment of cash consideration for its release. We say that it is supported by no valuable consideration advisedly. As has been pointed out, the evidence that the property was sold at less than its real value must be disregarded as irrelevant, and while it is true that the insertion of a restrictive covenant in a deed will sometimes justify a presumption that the property was, for that reason, sold for less than its unrestricted value, we consider that such a presumption is rebutted in the present case by the sworn petition presented to the court wherein it is stated that the price by which the property was sold to Quintard was its fair market value, for we cannot assume that the officers of a religious society willfully swore falsely to mislead the court upon a vital and material point. The judgment below was based upon, and is now [114 N.Y.S. 628] sought to be sustained upon, the authority of a line of cases in which a restrictive condition subsequent was enforced. Those cases have no application, because, whatever may be the nature of the restriction in the present case, it is not a condition. It lacks the vital feature of a condition in that it reserves no right of re-entry for a breach. To create a condition, in the absence of words of re-entry and forfeiture, the words " upon condition," or " provided always," or other equivalent words must be used. Gibert v. Petlier, 38 N.Y. 165, 97 Am. Dec. 785.No such words are to be found in the present case. On the contrary, the word " covenant" is expressly used, and no one could spell out of the language of the restriction any reserved right of re-entry or forfeiture. The case of a condition differs also from such a covenant as is involved in this case, because the right of re-entry confers a legal interest to support an action for the enforcement of this condition. Much stress is laid by the defendant, in the brief, upon its desire to uphold the covenant for the purpose of advancing the Christian religion. Apart from the fact that no such issue is raised by the pleadings, the argument finds its obvious answer in the often expressed willingness of the defendant to release the covenant for a money consideration. And it is not apparent that it will tend to advance the propagation of religion to hamper the growth and development of a Christian church by insisting upon a covenant which prevents such growth on the one hand, and secures no benefit to defendant on the other. We think, therefore, that it clearly appears from the undisputed evidence that the covenant from which plaintiff seeks to be relieved could not be enforced by defendant either at law or in equity. It is made quite clear by the evidence, and we can see no reason to doubt its sincerity, that the sole purpose of the plaintiff in seeking to be rid of the covenant as a cloud or incumbrance on its title is that it may be put in a position to extend and expand its church work. The removal or release of the restrictions would leave plaintiff in the same position as to selling its property that practically every other church in the city of New York is in. That is to say, no sale or mortgage can be made without the consent of the church authorities and of the Supreme Court. There can be no doubt that the restrictive covenant in the deed from defendant to Quintard casts a cloud upon plaintiff's title to its real estate which effectually prevents the full use and development of the property for church purposes, and we think that it is equally clear that defendant has no such legal interest in the preservation of the restriction that it could prove any damages if it were violated, or restrain such violation by injunction.

It is objected that the plaintiff is not entitled to equitable relief of the nature sought in this action, but that, even assuming that the covenant is unenforceable, plaintiff must wait until some attempt to enforce it is made by defendant. The jurisdiction of equity to entertain an action to remove or cancel a cloud on title, notwithstanding there may be a complete defense to any attempt to enforce it, is of long standing and is well established. Ordinarily it is invoked when the cloud consists of some instrument dehors the plaintiff's chain of title, like an infant's deed or a fraudulent mortgage, or an illegal tax assessment. No reason is perceived, however, why the same jurisdiction may not be invoked, [114 N.Y.S. 629] in a proper case, to cancel a cloud imposed upon the free use and enjoyment of the property, which, although contained in one of the deeds constituting the chain of title, is of such a nature that its elision from the deed will in no wise affect the devolution of title through the instrument. It is true that no case has been found where this particular relief, under similar circumstances, has been awarded, but it is equally true that no similar case has been found wherein such relief has been refused, and it is the boast and strength of equity jurisdiction that its rules and forms are so elastic that its decrees may be molded to apply to any case to which the settled principles of equity ought to be applied.

It is also objected that no equitable relief should be awarded to the plaintiff in this action because, even if the covenant is not void upon its face, its invalidity arising from the lack of enforceable interest on the part of defendant will necessarily appear in any proceeding taken to enforce the covenant. It is doubtful if this is strictly true, but, even if it is, it is not necessarily an answer to plaintiff's demand. It is true that the rule thus contended for is generally applied in actions to remove clouds on title, but it is a rule which affects not the jurisdiction of the court of equity, but merely the exercise of its discretion in exercising that jurisdiction. In Hamilton v. Cummings, 1 Johns. Ch. 517, Chancellor Kent reviewed at length and with great care the English authorities relating to ...


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