Caseflicks

Supreme Court of New Hampshire • 1990

Horse Pond Fish & Game Club, Inc. v. Cormier

133 N.H. 648 | 581 A.2d 478 | 1990 N.H. LEXIS 108

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Takeaway

In short, this case holds that a court cannot invalidate a restraint on a club's land as unreasonable without first determining whether the club is charitable, because charitable status may make the restraint enforceable and requires the charitable-trusts director's participation.

Background

Horse Pond Fish & Game Club owned land surrounding Horse Pond in Nashua, including its clubhouse and shooting range. In 1958, the club conveyed the property to two members, who immediately conveyed it back subject to a restriction: no part of the property could be alienated unless every club member approved at a specially noticed meeting or the club was officially dissolved.

As the area around the property became residential, the club proposed exchanging most of the Horse Pond land for hunting and fishing property in Hollis plus $150,000, while retaining its clubhouse and about seven acres. The club contended that the Hollis parcel was better suited to its purposes. Member William Cormier, whose own land abutted the Horse Pond property, voted against the transaction. If enforceable, the unanimous-vote restriction gave his vote the power to defeat the exchange.

The club brought an equity action seeking a declaration that the deed restriction was an unreasonable restraint on alienation. It alternatively sought equitable reformation on the theory that it held the property for charitable purposes, and it argued that Cormier was estopped by a conflict of interest. Cormier responded that, if the club was charitable, restraints on alienation applicable to charitable gifts could be valid. He also moved to join the director of charitable trusts and to continue the trial.

Before resolving the joinder motion, the continuance request, or the club's disputed charitable status, the superior court granted summary judgment for the club. Applying the ordinary reasonable-restraints doctrine, it held that the perpetual unanimity requirement and the dissolution condition were invalid. The court later denied Cormier's motion to set aside the judgment, and Cormier appealed.

Issues

Issue #1

Whether summary judgment was proper when the club's status as a charitable entity had not been resolved.

Holding

No. The club's charitable status was a material factual issue, so the superior court could not properly grant summary judgment.

Reasoning

Summary judgment under RSA 491:8-a is proper only where, viewing the evidence in the nonmovant's favor, no genuine dispute of material fact exists and the movant is entitled to judgment as a matter of law. A fact is material when it can affect the outcome of the litigation.

Ordinarily, restraints on alienation are disfavored because property law generally favors the free transfer of ownership. Such restraints are enforceable only when reasonable in light of the parties' justifiable interests; unreasonable restraints are void.

That ordinary rule may not govern a gift to a charitable trust or charitable corporation. A donor may make a charitable gift perpetual in duration and may, to carry out the charitable purpose, impose an express condition limiting alienation. The Restatement likewise treats the charitable character of the restrained owner as a factor supporting the reasonableness of a restraint.

The record left the club's charitable character unresolved. The club invoked charitable-trust principles in seeking equitable relief, had registered with the charitable trusts division, and later took the inconsistent position that it was not a charitable trust. Because its status determined whether the ordinary reasonable-restraints analysis applied, the unresolved question was material and barred summary judgment.

Issue #2

Whether the Supreme Court should decide on appeal that the deed restriction was valid or invalid.

Holding

No. The Court declined to decide the restriction's validity until the trial court determines whether the club is charitable.

Reasoning

If the club is a noncharitable entity, the ordinary reasonable-restraints rule applies, and the trial court's earlier conclusion that this perpetual unanimity-and-dissolution restraint is unreasonable will stand.

If the club is charitable, the restraint may be valid as a condition attached to charitable property. Even then, a court of equity may permit a sale when unforeseen circumstances make it necessary and the sale would serve the charity's best interests. The Court therefore remanded rather than resolving the restriction's ultimate validity on the incomplete record.

Issue #3

Whether the director of charitable trusts must be joined if the club is found to be charitable.

Holding

Yes. On remand, the director must be joined if the club is determined to be a charitable entity.

Reasoning

The attorney general, acting through the director of charitable trusts, is an indispensable party in proceedings involving the enforcement or supervision of charitable trusts. The State has an interest in ensuring that property devoted to charitable purposes is not diverted from those purposes.

Because the trial court had not first determined whether the club was charitable, it erred by proceeding to final judgment without resolving the status question. If charitable status is established on remand, joinder will ensure that the public interest in the charitable property is represented.