text:
    Joseph Finger et al., Individually and as Parents and Natural Guardians of John Finger and Others, Infants, Appellants, v Omni Publications International, Ltd., Respondent.
    Argued November 14, 1990;
    decided December 27, 1990

      POINTS OF COUNSEL

      Paul L. Gruner for appellants.

      Laura R. Handman, Robert D. Balin and Laurence B. Sutter for respondent.

      Slade R. Metcalf, Mark H. Jackson, Michael D. Remer, Tina A. Ravitz, Robert M. Cavallo, Burton Joseph, Marjorie Scardino, Deborah R. Linfield, Harry M. Johnston, III, and Karen E. Donald for The American Society of Magazine Photographers and others, amici curiae.

   OPINION OF THE COURT

Alexander, J.

Plaintiffs Joseph and Ida Finger commenced this action on behalf of themselves and their six children against defendant Omni Publications International, Ltd. seeking damages for the publication, without their consent, of a photograph of plaintiffs in conjunction with an article in Omni magazine discussing a research project relating to caffeine-aided fertilization.

The salient facts are uncontroverted. The June 1988 issue of Omni magazine included in its "Continuum” segment an article entitled "Caffeine and Fast Sperm”, in which it was indicated that based on research conducted at the University of Pennsylvania School of Medicine, in vitro fertilization rates may be enhanced by exposing sperm to high concentrations of caffeine.

A photograph of plaintiffs depicting two adults surrounded by six attractive and apparently healthy children accompanied the article. The caption beneath the photograph read "Want a big family? Maybe your sperm needs a cup of Java in the morning. Tests reveal that caffeine-spritzed sperm swim faster, which may increase the chances for in vitro fertilization.” Neither the article nor the caption mentioned plaintiffs’ names or indicated in any fashion that the adult plaintiffs used caffeine or that the children were produced through in vitro fertilization.

Plaintiffs commenced this action alleging only violations of Civil Rights Law §§ 50 and 51. Defendant moved to dismiss the complaint, arguing that its use of the photograph in conjunction with the article did not violate Civil Rights Law §§50 and 51 because the picture was not used for trade or advertising but to illustrate a related news article on fertility. Defendant contended that because fertility is a topic of legitimate public interest, its use of the picture fit within the "newsworthiness exception” to the prohibitions of Civil Rights Law § 50. Supreme Court granted the motion on the authority of Arrington v New York Times (55 NY2d 433) and the Appellate Division affirmed. We granted leave to appeal and now affirm the Appellate Division.

Plaintiffs contend that defendant violated Civil Rights Law §§ 50 and 51 by using their photograph without their consent "for advertising purposes or for the purposes of trade.”

We have repeatedly observed that the prohibitions of Civil Rights Law §§ 50 and 51 are to be strictly limited to nonconsensual commercial appropriations of the name, portrait or picture of a living person. These statutory provisions prohibit the use of pictures, names or portraits "for advertising purposes or for the purposes of trade” only, and nothing more (Arrington v New York Times Co., 55 NY2d 433, 439, supra; see also, Freihofer v Hearst Corp., 65 NY2d 135; Stephano v News Group Publs., 64 NY2d 174). The statute was a direct legislative response to our decision in Roberson v Rochester Folding Box Co. (171 NY 538) and was "drafted narrowly to encompass only the commercial use of an individual’s name or likeness and no more.” (Arrington v New York Times Co., 55 NY2d 433, 435, supra.)

Although the statute does not define "purposes of trade” or "advertising,” courts have consistently refused to construe these terms as encompassing publications concerning newsworthy events or matters of public interest (see, Stephano v News Group Publs., 64 NY2d 174, 184, supra; Arrington v New York Times Co., 55 NY2d 433, 440, supra; see also, Gautier v Pro-Football, Inc., 304 NY 354; Humiston v Universal Film Mfg. Co., 189 App Div 467; Lahiri v Daily Mirror, 162 Misc 776). Additionally, it is also well settled that " '[a] picture illustrating an article on a matter of public interest is not considered used for the purpose of trade or advertising within the prohibition of the statute * * * unless it has no real relationship to the article * * * or unless the article is an advertisement in disguise’.” (Murray v New York Mag. Co., 27 NY2d 406, 409, quoting Dallesandro v Holt & Co., 4 AD2d 470, 471, appeal dismissed 7 NY2d 735; see also, Stephano v News Group Publs., 64 NY2d 174, 185, supra; Arrington v New York Times Co., 55 NY2d 433, 440, supra.)

Plaintiffs do not contest the existence of this "newsworthiness exception” and concede that the discussion of in vitro fertilization and the use of caffeine to enhance sperm velocity and motility are newsworthy topics. They contend, however, that their photograph bears "no real relationship” to the article, that none of plaintiffs’ children were conceived by in vitro fertilization or any other artificial means, and that they never participated in the caffeine-enhanced reproductive research conducted at the University of Pennsylvania.

Consequently, according to plaintiffs, there was no "real relationship” between their photograph and the article, and any relationship that may exist is too tenuous to be considered a relationship at all. They argue that there are no "external and objective” criteria, such as were found to exist in Arrington (55 NY2d 433, 441, supra) that would indicate that plaintiffs have any real or legitimate connection with the subject of caffeine-enhanced in vitro fertilization, the subject of the accompanying article and that unlike the plaintiff in Murray v New York Mag. Co. (27 NY2d 406, 409, supra) these plaintiffs had not "voluntarily become part of the spectacle” or "visual[ly] participated] in a public event which invited special attention.”

Plaintiffs misperceive the "newsworthy” theme of the article, which is fertility or increased fertility. Indeed, the article, in its opening sentences, observes that caffeine "can increase a man’s fertility by boosting the performance of his sperm” and further indicates that "those who are looking for a fertility tonic shouldn’t head for the nearest coffee pot” because the concentrations of caffeine used in the experiment "were so high [as to] be toxic.”

The theme of fertility is reasonably reflected both in the caption beneath the picture, "Want a big family?”, and the images used — six healthy and attractive children with their parents to whom each child bears a striking resemblance. Clearly then, there is a "real relationship” between the fertility theme of the article and the large family depicted in the photograph. That the article also discusses in vitro fertilization as being enhanced by "caffeine-spritzed sperm” does no more than discuss a specific aspect of fertilization and does not detract from the relationship between the photograph and the article.

As we have noted, the "newsworthiness exception” should be liberally applied (see, Arrington v New York Times Co., 55 NY2d 433, 440, supra; Stephano v News Group Publs., 64 NY2d 174, 184, supra). The exception applies not only to reports of political happenings and social trends as in Arrington, and to news stories and articles of consumer interest such as developments in the fashion world as in Stephano (see also, Pagan v New York Herald Tribune, 32 AD2d 341, affd 26 NY2d 941) but to matters of scientific and biological interest such as enhanced fertility and in vitro fertilization as well. Moreover, questions of "newsworthiness” are better left to reasonable editorial judgment and discretion (see, Gaeta v New York News, 62 NY2d 340, 349); judicial intervention should occur only in those instances where there is " 'no real relationship’ ” between a photograph and an article or where the article is an " 'advertisement in disguise’.” (Murray v New York Mag. Co., 27 NY2d 406, 409, supra.)

We conclude here that it cannot be said, as a matter of law, that there is no "real relationship” between the content of the article and the photograph of plaintiffs. Thus the use of the photograph does not violate the prohibitions of Civil Rights Law §§ 50 and 51.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Wachtler and Judges Simons, Kaye, Titone, Hancock, Jr., and Bellacosa concur.

Order affirmed, with costs.

       Section 50, entitled "Right of privacy”, states: "A person, firm or corporation that uses for advertising purposes, or for the purposes of trade, the name, portrait or picture of any living person without first having obtained the written consent of such person, or if a minor of his or her parent or guardian, is guilty of a misdemeanor.”
      Section 51 states, in part: "Any person whose name * * * or picture is used within this state for advertising purposes or for the purposes of trade without the written consent first obtained as above provided may maintain an equitable action in the supreme court of this state against the person, firm or corporation so using his name * * * or picture, to prevent and restrain the use thereof; and may also sue and recover damages for any injuries sustained by reason of such use and if the defendant shall have knowingly used such person’s * * * picture in such manner as is forbidden or declared to be unlawful by section fifty of this article, the jury * * * may award exemplary damages” (emphasis supplied).


source: Caselaw Access Project

author: Bellacosa, J. Simons, J.

license: Public Domain

text:
    In the Matter of the Liquidation of Consolidated Mutual Insurance Company. Harold J. Levy, on Behalf of Himself and All Others Similarly Situated, et al., Appellants; New York State Superintendent of Insurance, Respondent.
    Argued November 15, 1990;
    decided December 20, 1990

      POINTS OF COUNSEL

      Michael W. Sculnick, Neal I. Korval and Neil A. Capobianco for appellants.

      Richard R. Lutz and Paul S. Grobman for respondent.
   OPINION OF THE COURT

Bellacosa, J.

Appellants are a certified class of approximately 165 retired employees of Consolidated Mutual Insurance Company (CMIC). CMIC gave them continuation group term life, medical, and health insurance coverage upon their retirements. In May 1979, the New York State Superintendent of Insurance, as liquidator of CMIC (Insurance Law § 7405), terminated all CMIC’s “subsisting contracts and other obligations,” including the contractual benefits at issue here. Since 1979, the retirees have been seeking restoration of their benefits on the ground that they were given lifetime rights protected against termination by the liquidator-Superintendent as successor to CMIC (see, Levy v Lewis, 635 F2d 960 [2d Cir]).

A State Supreme Court Referee reported, after a hearing, that the Superintendent had legal authority under the Insurance Law to withdraw the benefits, and specifically stated that language in CMIC’s Employee Guidebook unambiguously reserved CMIC’s right to terminate. Supreme Court then granted the Superintendent’s motion to confirm the Referee’s findings and ruled against the retirees.

In affirming, the Appellate Division applied “principles of contract law” to “determine whether the parties intended to create a nonterminable right to these benefits” (154 AD2d, at 593). The Appellate Division held that the "reservation of rights” clause, together with certain other unidentified sections of the Guidebook, were “sufficient to apprise the claimants” that CMIC could terminate these particular plans (154 AD2d, at 593-594) and "adequately reserve[d] [CMIC’s and hence the liquidator’s] right to terminate” (154 AD2d, at 593 [emphasis added]). The Appellate Division also relied on the unfunded nature of the insurance plans, and on the express mandate of the judicial order of liquidation. We granted leave to appeal and now reverse.

The parties agree that the benefit plans CMIC gave to its retired employees were "welfare benefit” plans under section 3 (1) of the Employee Retirement Income Security Act of 1974 (ERISA) (29 USC § 1002 [1]), but that the retirees were not protected by ERISA’s automatic vesting or minimum funding requirements (29 USC § 1051 [1]; § 1081 [a] [1]). However, as the parties also acknowledge, the inapplicability of ERISA’s vesting umbrella does not resolve this particular controversy.

Employers can contract to provide nonterminable postemployment welfare benefits to retirees irrespective of ERISA’s vesting protection. Retirees seeking to establish entitlement to such benefits by that route bear the initial and extra burden of proving an employer’s nontermination intent. In the absence of ambiguity, resolution of this issue turns on the benefit plan documents (Heidgerd v Olin Corp., 906 F2d 903 [2d Cir]; Moore v Metropolitan Life Ins. Co., 856 F2d 488 [2d Cir]), and the unfunded status of a plan is not determinative or relevant.

CMIC’s Employee Guidebook, a 32-page booklet summarizing a variety of CMIC-provided employee benefits, is the primary plan document relied on by the retirees. With respect to health and medical benefits, the Guidebook states that "[a]fter retirement, the Company will continue your health care program at no cost to you,” and that coverage "remains the same as when [the retiree was] actively working.” The Guidebook also describes the cap placed on maximum lifetime coverage under the major medical plan. With respect to life insurance benefits, the Guidebook states that protection is provided "during your working years and during retirement”, with premiums "paid for by your Company”. Benefits are reduced after retirement to $5,000 as the "final death benefit.”

The "reservation of rights” clause, which is printed on the inside back cover of the Guidebook following several blank pages and is typed in smaller print than the remainder of the booklet, states that "fmjany of the plans and benefits described herein [but nowhere specified, listed or cross referenced], being completely voluntary on the part of the Company, are subject to modification or termination [upon circumstances or occurrences nowhere described] at the considered discretion of the Board of Directors.” (Emphasis added.) No right to terminate is anywhere expressly referenced in conjunction with the medical, health or life insurance benefits described in the body of the Guidebook, which are at issue in this case. The employees and we, as a Court, are left to speculate which of the "many” plans and benefits described in the Guidebook are terminable. The ambiguity is self-evident.

It is not without significance, though hardly determinative, that the reservation of rights clause does not measure up to ERISA’s uniform technical disclosure requirements (29 USC § 1022 [b]; 29 CFR 2520.102-2 [b]). Although some of the specific regulatory requirements first became effective in 1977, years after CMIC first printed its Guidebook and adopted the benefit plans at issue here, CMIC was required to bring its summary plan description into compliance with ERISA’s requirements by that date at the latest. CMIC is in a better position to deal with and suffer for its use of the small print device and for its failure to measure up than the retirees, who have clearly been prejudiced by the liquidator’s judicially authorized unilateral withdrawal of benefits.

Also, the ambiguity in the reservation of rights clause is not eliminated by reference to relevant insurance certificates or master insurance plans. Although CMIC’s Blue Cross/Blue Shield policy contained a termination provision, by its terms it governed only the relationship between CMIC, as the contract holder, and the insurer — not the relationship between CMIC and its retirees. It appears also that the Employee Medical Reimbursement Plan, referenced by the dissent, was neither filed with the Secretary of Labor as required by ERISA (29 USC § 1021 [b]) nor admitted into evidence by the Referee. Finally, the termination language in the group life insurance policy and certificate adds more confusion than light to the resolution of the central issue. As the dissent notes, both the policy and the certificate provide that the insurance terminates "when the Individual ceases to be a member of a class of Individuals eligible for insurance.” Yet retirees as a class are clearly "eligible for insurance” under the plan, and there is no showing in this case that any of the claimant-retirees "ceased to be a member” of that class. Moreover, the policy and certificate also state, somewhat incongruously, that the insurance terminates "upon termination of employment” — which it clearly did not as to the class of retirees in this case who, in fact, received insurance benefits upon retirement and until the liquidator’s decision to withdraw.

The dissent relies heavily on cases in which an employer expressly and unambiguously reserved the right to terminate benefits. Mere language that benefits "will continue” into retirement in the face of an unambiguous reservation of right, of course, is not sufficient to establish mutual intent and understanding that benefits vest at retirement and continue "as when [the retiree was] actively working”. This, however, despite the repetitive accusation of impropriety at our method of analysis, is not such a case.

The dissent also points to language in the Guidebook describing the life insurance conversion privilege, which kicks in "upon termination of the Insurance Plan by the Company.” However, a preceding paragraph states that "[i]f an employee leaves the employ of the Company for any reason other than retirement, the insurance provided by the Company will be cancelled” (emphasis added), seemingly restricting use of the conversion privilege to nonretirees. That reasonable, intelligent and differing minds must resort to microscopic and selective examination of the documents, which the company was in the best position to write clearly and unambiguously in the first place, tellingly rebuts the certainty of the dissent. The termination clause, central to the Appellate Division’s and the dissent’s view of this case and its documents, is unclear and ambiguous.

Inasmuch as the Employee Guidebook and other plan documents, when read together, do not supply an unambiguous answer to the "simple [issue] of contract interpretation”— whether CMIC intended to provide nonterminable life, health and medical benefits to its retired employees — resort to extrinsic evidence is appropriate and necessary (Smith v ABS Indus., 890 F2d 841 [6th Cir]; Moore v Metropolitan Life Ins. Co., 856 F2d 488, supra). The retirees submitted a variety of letters and memoranda from CMIC to them, some of which stated that upon retirement the retiree would remain covered and that life and health insurance benefits would be available "for the rest of [the retiree’s] life,” that the retirees were "100% vested,” and that the benefit "amount will remain unchanged for the rest of your life.” These unequivocal representations, which the dissent ironically finds ambiguous, are allowable because of the threshold ambiguity, and they satisfy the retirees’ unaltered burden of proving that CMIC intended to provide them with nonterminable benefits.

In sum, the Superintendent’s obligations with respect to this controversy are measured by the particular contractual arrangement between CMIC and its retirees and the retirees’ evidentiary submissions. Tested by those factors, there is an insufficient basis to conclude that the liquidator-Superintendent had authority to terminate the retired employees’ contractually nonterminable benefits.

Finally, if there would be any "evisceration” of anything in this case, it would be of the proven protections of these retired employees by sustaining the liquidator’s actions. We have applied correct, fair and principled analysis and law to protect the retirees from that evisceration.

We have considered the other arguments of the parties and conclude they are without merit or do not affect the result and narrow rationale in this case.

Accordingly, the order of the Appellate Division should be reversed, with costs, and claimants-appellants’ cross motion to reject the Referee’s report granted.

Simons, J.

(dissenting). I would affirm.

The health and life insurance benefits at issue here are nonfunded "welfare benefit plans” which are not protected by ERISA’s automatic vesting requirements (see, 29 USC § 1002 [1]; § 1051 [1]). The issue, therefore, is a simple one of contract interpretation. Claimants, 165 former employees claiming entitlement to such benefits, must prove that the employer intended the welfare benefits to vest upon retirement (see, Howe v Varity Corp., 896 F2d 1107, 1109 [8th Cir]; Anderson v Alpha Portland Indus., 836 F2d 1512, 1517 [8th Cir]). To meet this burden, they must produce written evidence of an employer’s intent to be bound (see, Ryan v Chromalloy Am. Corp., 877 F2d 598, 603 [7th Cir]; Musto v American Gen. Corp., 861 F2d 897, 900-901 [6th Cir]; Moore v Metropolitan Life Ins. Co., 856 F2d 488, 492 [2d Cir]; Anderson v Alpha Portland Indus., 836 F2d 1512, 1517 [8th Cir], supra). The language of the contract controls and under familiar contract principles the Court may not go outside the plan or the plan documents unless the language is ambiguous.

The majority, in finding for claimants, concludes that the documents are ambiguous. I disagree with its holding because in interpreting the contract, (1) it has misapplied the law by failing to consider provisions in the summary plan description (SPD) and plan documents which clearly reserve CMIC’s right to terminate the plans at issue; (2) it has resorted to the use of extrinsic evidence when no ambiguity as to the right to terminate exists in those documents; (3) it has shifted the burden of proof and rather than requiring claimants to prove a vested right to these benefits has required the employer to prove nonvesting; and (4) it has refused to credit a reservation of rights clause in the Guidebook, and in doing so has imposed a legal standard on the employer that did not exist at the time the benefit plans were adopted and the Guidebook was printed by CMIC.

I

ERISA requires that every employee benefit plan be established and maintained pursuant to a written instrument and that a SPD of that benefit plan be provided to participants and beneficiaries (29 USC § 1102 [a] [1]; § 1022 [a]). These are the documents which the court considers in determining whether an employer has reserved its right to terminate or amend a welfare benefit plan (see, Ryan v Chromalloy Am. Corp., 877 F2d 598, 603, supra; Musto v American Gen. Corp., 861 F2d 897, 900-904, supra; Moore v Metropolitan Life Ins. Co., 856 F2d 488, 492, supra).

Thus, the starting point for determining the claimants’ rights is the Employee Guidebook, which is the SPD required under ERISA (29 USC § 1022), and other relevant plan documents, i.e., the Group Life Insurance policy, the Certificate of Group Life Insurance, the Blue Cross/Blue Shield policy, and the CMIC Employee Medical Reimbursement Plan. None of these documents contain language indicating that CMIC intended the welfare benefits to vest at retirement. On the contrary, they expressly reserve CMIC’s right to amend or terminate the plans at issue.

The Guidebook contains an explicit reservation of rights clause which states that the plans and benefits are completely voluntary "on the part of the Company” and are subject to "modification or termination” at management discretion. The reservation is confirmed by other provisions in the Guidebook and plan documents. In referring to the medical benefits, for example, the Guidebook states not only the language quoted by the majority, but also that "[t]he Basic Blue Cross — Blue Shield coverage remains the same as when you were actively working,” i.e., CMIC promised to provide its retirees with continued medical benefits to the same extent that those benefits would be available if the retiree was still an active employee. If the benefits were not available to employees, they would not be available to retirees. Similarly, the Employee Medical Reimbursement Plan states that: "The benefits described herein, being completely voluntary on the part of the Company, are subject to modification or termination at the considered discretion of the Board of Directors.” Moreover, the Blue Cross/Blue Shield policy expressly provides for termination of the medical benefits contract by CMIC upon 15 days’ notice from the anniversary of the effective date.

The Guidebook and plan documents also contain language relating to the life insurance benefits which indicate CMIC did not intend those benefits to vest. While the majority refers to a statement in the Guidebook that the life insurance is provided " 'during your working years and during retirement’ ” with premiums paid by the company (majority opn, at 148), it fails to recognize reservation of rights language on the same page under the heading of "Conversion Privilege”, which states in part that "[a]s set forth in your insurance certificate you may, upon termination of employment or termination of the Insurance Plan by the Company, convert your insurance under the Plan to an individual policy” (emphasis added). Immediately following this language is another paragraph titled "Master Policy to Govern” which states that the controlling contract is the Group Insurance Plan and not the Employee Guidebook. Significantly, the Group Life Insurance policy and the individual certificates, both available to claimants, expressly provide that CMIC retained the power to terminate the policy for any class of individuals previously covered.

In the face of all these statements, it is difficult to comprehend how the company could more clearly and unambiguously reserve its right to terminate these benefits or how claimants can be said to have satisfied their burden of proving that the company intended the benefits to vest on retirement (see, Howe v Varity Corp., supra; Anderson v Alpha Portland Indus., supra).

Nevertheless, the majority contends that various phrases from the SPD and plan documents support vesting. These phrases (see, majority opn, at 148), when considered in the context, establish that the company intended benefits to continue after retirement, but they do not establish that the company intended them to vest at retirement so that management could not later modify or terminate them if the company’s finances required it. The contention that such phrases establish vesting has been rejected repeatedly by the courts (see, e.g., Howe v Varity Corp., supra, at 1109-1110 [summary plan documents stating that welfare benefits "continue in retirement” and plan documents securing employee’s right to claim benefits to which employee "shall have become entitled” prior to termination of plan did not establish retirement as a vesting point]; Anderson v Alpha Portland Indus., supra, at 1518-1519 [collective bargaining agreement stating that benefits provided "until death of retiree” and SPD stating that "coverage will continue for the remainder of your life” did not constitute vesting]; DeGeare v Alpha Portland Indus., 837 F2d 812, 814, 816-817 [promise that future retirees’ benefits "will continue” not a promise of vesting]; Moore v Metropolitan Life Ins. Co., supra, at 490 [benefits described as being for employees "lifetime” at "no cost” did not equal vesting]).

II

The majority believing that the SPD and the plan documents are ambiguous has improperly resorted to the use of extrinsic evidence, such as informal letters and memos. Ironically, if ambiguity is to be found, it is to be found in this extrinsic evidence. It is not clear, for example, whether statements contained in the extrinsic evidence that benefits were "100% vested” referred to health and welfare benefits or employee pension benefits which did vest at retirement. In any event, the use of such evidence is improper. Extrinsic evidence can be considered only when the ambiguity appears on the face of the instruments (Howe v Varity Corp., 896 F2d 1107, 1110, supra; Ryan v Chromalloy Am. Corp., 877 F2d 598, 602, supra; Anderson v Alpha Portland Indus., 836 F2d 1512, supra).

Aside from general contract concerns prohibiting extrinsic evidence, there is an important policy reason for the court’s reluctance to recognize extrinsic evidence to support a claim of vesting for welfare benefits or to infer vesting. As the court stated in Moore v Metropolitan Life Ins. Co. (856 F2d 488, 492, supra): "Congress intended that plan documents and the SPDs exclusively govern an employer’s obligations under ERISA plans. This intention was based on a sound rationale. Were all communications between an employer and plan beneficiaries to be considered along with the SPDs as establishing the terms of a welfare plan, the plan documents and the SPDs would establish merely a floor for an employer’s future obligations. Predictability as to the extent of future obligations would be lost, and, consequently, substantial disincentives for even offering such plans would be created.” (See also, Anderson v Alpha Portland Indus., 836 F2d 1512, 1517; Nachwalter v Christie, 805 F2d 956, 960 [11th Cir]).

Reliance on extrinsic evidence to hold for claimants not only "fl[ies] in the face of ERISA’s plain language” (856 F2d, at 492), but could, as the Moore court noted, decrease protection for future employees and retirees by eviscerating the predictability of future obligations, thus creating substantial disincentives for even offering the welfare benefits in the first place.

III

It is the claimants who must establish vesting. By rejecting the clear language of the SPD and the plan documents, the majority has not only violated established rules of construction in this important area, but it has improperly shifted the burden of proof to the respondent to rebut the significance of isolated phrases in the Guidebook and plan documents when they manifestly contain statements reserving the company’s rights.

There are sound reasons why the burden must remain on claimants. Congress exempted welfare benefits from the automatic vesting requirements and opted for a more flexible approach "because the cost of such plans are subject to fluctuating and unpredictable variables” (Moore v Metropolitan Life Ins. Co., 856 F2d 488, 492, supra). Thus, committees of both the House and Senate noted, in explaining why welfare benefits were not considered "accrued benefits” under ERISA, that " '[t]o require the vesting of these ancillary benefits would seriously complicate the administration and increase the cost of [pension] plans whose primary function is to provide retirement income’ ” (Moore v Metropolitan Life Ins. Co., supra, at 491 [quoting HR Rep No. 93-807, 93d Cong, 2d Sess, reprinted in 1974 US Code Cong & Admin News 4639, 4670, 4726; S Rep No. 93-383, 93d Cong, 2d Sess, reprinted in 1974 US Code Cong & Admin News 4639, 4890, 4935). The rationale is particularly persuasive in this case. The 165 claimants in this case did not contribute funds to purchase the benefits they now seek. They are nonfunded. Thus, any award claimants receive must be paid out of the assets of an insolvent insurance company, assets needed to honor the claims of insureds and injured third parties.

IV

Finally, the majority rely on the fact that the Guidebook does not meet ERISA’s disclosure standards. The benefit plan was adopted by CMIC and the Guidebook printed in 1964, 10 years before ERISA was adopted and 13 years before many of its technical disclosure standards became effective standards. Indeed, most of the claimants retired prior to the effective date of these disclosure provisions and can hardly claim the benefits vested at retirement because of any failure to meet ERISA standards at that time. Thus, the majority’s conclusion that the reservation clause in the Guidebook is not entitled to weight because it does not meet ERISA’s technical disclosure standards, is to impose a legal standard on the employer that did not exist at the time the alleged wrong occurred. But even if defects in the Guidebook are to be considered, the burden rested on claimants to establish " 'significant reliance on, or possible prejudice flowing from the summary’ ” (Anderson v Alpha Portland Indus., 836 F2d 1512, 1520, supra; see generally, Bachelder v Communications Satellite Corp., 837 F2d 519, 523 [1st Cir]). They have failed to do so.

V

In sum, I conclude that claimants have not only failed to carry their burden of proof but that the evidence establishes that the benefits did not vest. Because the majority’s determination relies on evidence which legally should not control under settled principles of law, I dissent.

Accordingly, I would affirm the order of the Appellate Division.

Judges Kaye, Hancock, Jr., and Titone concur with Judge Bellacosa; Judge Simons dissents and votes to affirm in a separate opinion in which Chief Judge Wachtler and Judge Alexander concur.

Order reversed, etc.

      . "Many of the plans and benefits described herein, being completely voluntary on the part of the Company, are subject to modification or termination at the considered discretion of the Board of Directors.

      "The Company, naturally, hopes and expects to continue these plans and benefits indefinitely. In the event of termination of any of the pension plans, any conversion right or benefit vested in the employees will be, of course, paid to the participants as their interests require, pursuant to the trust agreements” (emphasis added).

      . The majority claim that the plan was neither filed with ERISA nor distributed to the retirees. Claimants do not allege the plan was not filed, however, and ERISA does not require that the master plan documents or policies be distributed to employees who have not asked for them (see, e.g., Musto v American Gen. Corp., 861 F2d 897). Additionally, there is evidence in the record that the plan documents were made available to plaintiffs upon their request. The relevant language from these plan documents was provided in the stipulated facts and thus was properly considered by the courts as evidence of CMIC’s nontermination intent.


author: Kaye, J.

text:
    W.W.W. Associates, Inc., Respondent, v Frank Giancontieri et al., Appellants.
    Argued November 19, 1990;
    decided December 27, 1990

      POINTS OF COUNSEL

      John G. Poli III for appellants.

      Matthew Dollinger and Michael J. Spithogiannis for respondent.
   OPINION OF THE COURT

Kaye, J.

In this action for specific performance of a contract to sell real property, the issue is whether an unambiguous reciprocal cancellation provision should be read in light of extrinsic evidence, as a contingency clause for the sole benefit of plaintiff purchaser, subject to its unilateral waiver. Applying the principle that clear, complete writings should generally be enforced according to their terms, we reject plaintiffs reading of the contract and dismiss its complaint.

Defendants, owners of a two-acre parcel in Suffolk County, on October 16, 1986 contracted for the sale of the property to plaintiff, a real estate investor and developer. The purchase price was fixed at $750,000 — $25,000 payable on contract execution, $225,000 to be paid in cash on closing (to take place "on or about December 1, 1986”), and the $500,000 balance secured by a purchase-money mortgage payable two years later.

The parties signed a printed form Contract of Sale, supplemented by several of their own paragraphs. Two provisions of the contract have particular relevance to the present dispute —a reciprocal cancellation provision (para 31) and a merger clause (para 19). Paragraph 31, one of the provisions the parties added to the contract form, reads: "The parties acknowledge that Sellers have been served with process instituting an action concerned with the real property which is the subject of this agreement. In the event the closing of title is delayed by reason of such litigation it is agreed that closing of title will in a like manner be adjourned until after the conclusion of such litigation provided, in the event such litigation is not concluded, by or before 6-1-87 either party shall have the right to cancel this contract whereupon the down payment shall be returned and there shall be no further rights hereunder.” (Emphasis supplied.) Paragraph 19 is the form merger provision, reading: "All prior understandings and agreements between seller and purchaser are merged in this contract [and it] completely expresses their full agreement. It has been entered into after full investigation, neither party relying upon any statements made by anyone else that are not set forth in this contract.”

The Contract of Sale, in other paragraphs the parties added to the printed form, provided that the purchaser alone had the unconditional right to cancel the contract within 10 days of signing (para 32), and that the purchaser alone had the option to cancel if, at closing, the seller was unable to deliver building permits for 50 senior citizen housing units (para 29).

The contract in fact did not close on December 1, 1986, as originally contemplated. As June 1, 1987 neared, with the litigation still unresolved, plaintiff on May 13 wrote defendants that it was prepared to close and would appear for closing on May 28; plaintiff also instituted the present action for specific performance. On June 2, 1987, defendants canceled the contract and returned the down payment, which plaintiff refused. Defendants thereafter sought summary judgment dismissing the specific performance action, on the ground that the contract gave them the absolute right to cancel.

Plaintiff’s claim to specific performance rests upon its recitation of how paragraph 31 originated. Those facts are set forth in the affidavit of plaintiff’s vice-president, submitted in opposition to defendants’ summary judgment motion.

As plaintiff explains, during contract negotiations it learned that, as a result of unrelated litigation against defendants, a lis pendens had been filed against the property. Although assured by defendants that the suit was meritless, plaintiff anticipated difficulty obtaining a construction loan (including title insurance for the loan) needed to implement its plans to build senior citizen housing units. According to the affidavit, it was therefore agreed that paragraph 31 would be added for plaintiff’s sole benefit, as contract vendee. As it developed, plaintiff’s fears proved groundless — the lis pendens did not impede its ability to secure construction financing. However, around March 1987, plaintiff claims it learned from the broker on the transaction that one of the defendants had told him they were doing nothing to defend the litigation, awaiting June 2, 1987 to cancel the contract and suggesting the broker might get a higher price.

Defendants made no response to these factual assertions. Rather, its summary judgment motion rested entirely on the language of the Contract of Sale, which it argued was, under the law, determinative of its right to cancel.

The trial court granted defendants’ motion and dismissed the complaint, holding that the agreement unambiguously conferred the right to cancel on defendants as well as plaintiff. The Appellate Division, however, reversed and, after searching the record and adopting the facts alleged by plaintiff in its affidavit, granted summary judgment to plaintiff directing specific performance of the contract. We now reverse and dismiss the complaint.

Critical to the success of plaintiff’s position is consideration of the extrinsic evidence that paragraph 31 was added to the contract solely for its benefit. The Appellate Division made clear that this evidence was at the heart of its decision: "review of the record reveals that under the circumstances of this case the language of clause 31 was intended to protect the plaintiff from having to purchase the property burdened by a notice of pendency filed as a result of the underlying action which could prevent the plaintiff from obtaining clear title and would impair its ability to obtain subsequent construction financing.” (152 AD2d 333, 336.) In that a party for whose sole benefit a condition is included in a contract may waive the condition prior to expiration of the time period set forth in the contract and accept the subject property "as is” (see, e.g., Satterly v Plaisted, 52 AD2d 1074, affd 42 NY2d 933; Catholic Foreign Mission Socy. v Oussani, 215 NY 1, 8; Born v Schrenkeisen, 110 NY 55, 59), plaintiffs undisputed factual assertions —if material — would defeat defendants’ summary judgment motion.

We conclude, however, that the extrinsic evidence tendered by plaintiff is not material. In its reliance on extrinsic evidence to bring itself within the "party benefited” cases, plaintiff ignores a vital first step in the analysis: before looking to evidence of what was in the parties’ minds, a court must give due weight to what was in their contract.

A familiar and eminently sensible proposition of law is that, when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms. Evidence outside the four corners of the document as to what was really intended but unstated or misstated is generally inadmissible to add to or vary the writing (see, e.g., Mercury Bay Boating Club v San Diego Yacht Club, 76 NY2d 256, 269-270; Judnick Realty Corp. v 32 W. 32nd St. Corp., 61 NY2d 819, 822; Long Is. R. R. Co. v Northville Indus. Corp., 41 NY2d 455; Oxford Commercial Corp. v Landau, 12 NY2d 362, 365). That rule imparts "stability to commercial transactions by safeguarding against fraudulent claims, perjury, death of witnesses * * * infirmity of memory * * * [and] the fear that the jury will improperly evaluate the extrinsic evidence.” (Fisch, New York Evidence § 42, at 22 [2d ed].) Such considerations are all the more compelling in the context of real property transactions, where commercial certainty is a paramount concern.

Whether or not a writing is ambiguous is a question of law to be resolved by the courts (Van Wagner Adv. Corp. v S & M Enters., 67 NY2d 186, 191). In the present case, the contract, read as a whole to determine its purpose and intent (see, e.g., Rentways, Inc. v O’Neill Milk & Cream Co., 308 NY 342, 347), plainly manifests the intention that defendants, as well as plaintiff, should have the right to cancel after June 1, 1987 if the litigation had not concluded by that date; and it further plainly manifests the intention that all prior understandings be merged into the contract, which expresses the parties’ full agreement (see, 3 Corbin, Contracts § 578, at 402-403). Moreover, the face of the contract reveals a "logical reason” (152 AD2d, at 341) for the explicit provision that the cancellation right contained in paragraph 31 should run to the seller as well as the purchaser. A seller taking back a purchase-money mortgage for two thirds of the purchase price might well wish to reserve its option to sell the property for cash on an "as is” basis if third-party litigation affecting the property remained unresolved past a certain date.

Thus, we conclude there is no ambiguity as to the cancellation clause in issue, read in the context of the entire agreement, and that it confers a reciprocal right on both parties to the contract.

The question next raised is whether extrinsic evidence should be considered in order to create an ambiguity in the agreement. That question must be answered in the negative. It is well settled that "extrinsic and parol evidence is not admissible to create an ambiguity in a written agreement which is complete and clear and unambiguous upon its face.” (Intercontinental Planning v Daystrom, Inc., 24 NY2d 372, 379; see also, Chimart Assocs. v Paul, 66 NY2d 570, 573.)

Plaintiff’s rejoinder — that defendants indeed had the specified absolute right to cancel the contract, but it was subject to plaintiff’s absolute prior right of waiver — suffers from a logical inconsistency that is evident in a mere statement of the argument. But there is an even greater problem. Here, sophisticated businessmen reduced their negotiations to a clear, complete writing. In the paragraphs immediately surrounding paragraph 31, they expressly bestowed certain options on the purchaser alone, but in paragraph 31 they chose otherwise, explicitly allowing both buyer and seller to cancel in the event the litigation was unresolved by June 1, 1987. By ignoring the plain language of the contract, plaintiff effectively rewrites the bargain that was struck. An analysis that begins with consideration of extrinsic evidence of what the parties meant, instead of looking first to what they said and reaching extrinsic evidence only when required to do so because of some identified ambiguity, unnecessarily denigrates the contract and unsettles the law.

Finally, plaintiff’s conclusory assertion of bad faith is supported only by its vice-president’s statement that one of the defendants told the broker on the transaction, who then told him, that defendants were doing nothing to defend the action, waiting for June 2 to cancel, and suggesting that the broker might resell the property at a higher price. Where the moving party "has demonstrated its entitlement to summary judgment, the party opposing the motion must demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action or tender an acceptable excuse for his failure so to do.” (Zuckerman v City of New York, 49 NY2d 557, 560.) Even viewing the burden of a summary judgment opponent more generously than that of the summary judgment proponent, plaintiff fails to raise a triable issue of fact (see, Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065, 1068).

Accordingly, the Appellate Division order should be reversed, with costs, defendants’ motion for summary judgment granted, and the complaint dismissed.

Chief Judge Wachtler and Judges Simons, Alexander, Titone, Hancock, Jr., and Bellacosa concur.

Order reversed, etc.


author: Hancock, Jr., J.

text:
    Robert C. Morrison, Appellant, v Roger H. Piper et al., Respondents.
    Argued November 19, 1990;
    decided December 27, 1990

      POINTS OF COUNSEL

      Jeffrey J. Sherrin for appellant.

      Mark A. Lebowitz for Roger H. Piper and another, respondents.

      Edward S. Stewart for Mary T. Owens and another, respondents.
   OPINION OF THE COURT

Hancock, Jr., J.

Two issues are presented on this appeal from an order of the Appellate Division dismissing plaintiff’s claims seeking to enforce a right of first refusal: (1) whether New York’s rule against remote vesting (EPTL 9-1.1 [b]) is applicable to the type of first refusal right involved here: one created in a deed conveying noncommercial, residential property between private parties; and (2) if so, whether the specific provision at issue violates the rule. We agree with the Appellate Division that the rule was intended to apply in a transaction of the type before us. Contrary to the holding below, however, we conclude that the particular first refusal right here does not contravene the rule. Accordingly, we reverse the order of the Appellate Division.

I

In 1977, Lilian T. Maier conveyed a 2.3-acre parcel of residential land to her nephew, plaintiff Robert C. Morrison. Maier retained the contiguous 30-acre parcel. The parcels were part of 38 acres of lakefront property on Balfour Lake which had been family owned since 1904. The deed created mutual rights of first refusal to purchase ("preemptive rights”) as follows:

"The party of the first part [Maier] and the party of the second part [Morrison] agree and covenant that during their life each shall have a right of first refusal to purchase the property conveyed and the property retained, respectively. The party of the first part shall have the right to meet, within sixty (60) days, any bona fide offer for the purchase of all or any part of the land herein conveyed and purchase the same. This right of first refusal is intended to bind the party of the second part, his heirs and assigns only during the life of Lilian Teresa Maier the party of the first part and those persons who directly take as a result of a gift by her or by her death. This right shall continue until the property is either conveyed or assigned by the donees or beneficiaries or until their death, whichever occurs first. The party of the second part shall have the right to meet, within sixty (60) days, any bona fide offer for the purchase of all or any part of the land retained and purchase the same. This right of refusal is intended to hind the party of the first part, her heirs and assigns, only during the life of Robert C. Morrison, the party of the second part and those persons who directly take as a result of a gift by him or by his death. This right shall continue until the property is either conveyed or assigned by the donees or beneficiaries or until their death, whichever occurs first.” (Emphasis supplied.)

In 1979, Maier died, leaving the retained property to her sisters Elizabeth C. Brassel and defendants Mary T. Owens and Helen C. Whelehan as tenants in common. In 1984, the three sisters divided the property by partition. Each of the deeds effectuating the partition — signed by the sisters and Morrison — contained the following recognition of Morrison’s first refusal rights:

"The above described parcel is subject to a 'right of first refusal’ as set forth in the deed given by Lilian Teresa Maier to Robert C. Morrison * * *. Said deed is referred to for a more complete description of this right of first refusal.
"Robert C. Morrison hereby executed and acknowledged this deed for the purpose of consenting to this conveyance.”

In 1987, defendants Owens and Whelehan received an offer from defendants Roger and Drusilla Piper to purchase their part of the retained property. Morrison was not given the opportunity to exercise a preemptive right, and in March 1988 title to both parcels was transferred to the Pipers. Thereafter, in July 1988, plaintiff commenced this action seeking to enforce his right. Supreme Court denied his summary judgment motion on the ground that it was unclear whether, in 1984, plaintiff’s consent to the partition operated to terminate his right of first refusal. Supreme Court, however, went on to hold that the preemptive right violated the statute (EPTL 9-1.1 [b]). Upon plaintiff’s appeal, the Appellate Division modified, on the law, by granting summary judgment in favor of defendants, agreeing with Supreme Court that the first refusal right was invalid because it contravened the rule against remote vesting. This Court granted leave and we now reverse.

II

We agree with the Appellate Division that the rule against remote vesting generally applies to a first refusal right of the type in question here. This Court has recognized that the broad prohibition against remote vesting contained in the 1965 enactment of the rule (Real Property Law § 43 [L 1965, ch 670, § 1], now EPTL 9-1.1 [b]) covers independent options to purchase real property (see, Buffalo Seminary v McCarthy, 86 AD2d 435, 440-443, affd for reasons stated in parts I and II of opn at App Div [Hancock, Jr., J.] 58 NY2d 867). It is true that an option is different from a right of first refusal. Unlike a typical option to purchase property, a right of first refusal or a preemptive right does not, at the time it is given, include an operative offer. The right of first refusal involves a future offer to be made if and when the owner decides to sell to a third party at an agreed price (see, LIN Broadcasting Corp. v Metromedia, Inc., 74 NY2d 54, 60-61).

But, notwithstanding these distinctions, the holder of a right of first refusal, like the holder of any option, has an interest in land which is to vest, if at all, sometime in the future (see, Metropolitan Transp. Auth. v Bruken Realty Corp., 67 NY2d 156, 164-166). Indeed, the right of first refusal effectively ripens into an option upon the happening of a contingency: the decision of the obligated party to accept a third-party’s offer for the property. There is no analytical or logical reason, therefore, why first refusal options or preemptive rights — any less than ordinary options — cannot result in the vesting of interests beyond the permissible period; indeed, we have noted that preemptive rights are ordinarily covered by the rule against remote vesting (see, Metropolitan Transp. Auth. v Bruken Realty Corp., supra, at 164-165; see, e.g., Witt v Disque, 79 AD2d 419, 424; see generally, Annotation, Pre-emptive Rights to Realty as Violation of Rule Against Perpetuities or Rule Concerning Restraints on Alienation, 40 ALR3d 920, 939-948).

In Bruken, however, the Court held that there are some situations where the application of EPTL 9-1.1 (b) to preemptive rights would not serve the purpose of the statute and could not have been contemplated. In that case, we held that the statutory prohibition was not intended to apply to preemptive rights in a "commercial and governmental transaction” where giving effect to the rights would serve the public interest (id., at 168). Bruken concerned a preemptive right covering certain freight yard property granted by the Metropolitan Transportation Authority to a national transportation corporation which already owned the air rights over the property. In holding that the rule against remote vesting did not apply, we observed that neither "lives in being” nor "twenty-one years” were time periods having relevance to commercial preemptive rights involving parties other than individuals (id., at 166). With respect to the provision at issue, we noted that the maximum productive use of the property could be permitted by reuniting the air and ground rights (id.) and that the transaction was a matter of public knowledge between a governmental authority and a transportation corporation, not between "private citizens whose interest[s] might never be discovered with the passage of time” (id., at 167).

Plaintiff Morrison urges the Court to apply the limited Bruken exception here, arguing that preemptive rights affect the rule ¿gainst remote vesting "only marginally”. But plaintiff identifies no ground for extending the Bruken exception to private, noncommercial transactions between individuals in which there is no governmental or public interest. Where the parties to the transactions are individuals the time limitations on vesting in EPTL 9-1.1 (b) — i.e., "twenty-one years” and "lives in being” — have obvious relevance and no reason is suggested why they should not be fully applicable. To hold that the Bruken exception extends to the type of first refusal option employed in this residential transaction would transform the exception into the rule (see generally, Berg, LongTerm Options and the Rule Against Perpetuities, 37 Cal L Rev 1, 21-22; Leach, Perpetuities in a Nutshell, 51 Harv L Rev 638, 660; Simes and Smith, Future Interests §§ 1201-1221, 1224, at 88-105, 159 [2d ed 1956]).

Ill

We turn to the issue of whether the first refusal rights created in the deed in question violate the rule against remote vesting. We conclude that they do not. In determining whether a particular provision violates the rule we, of course, are bound by the special rule of construction which the Legislature has enacted to govern "with respect to any matter affecting the rule against perpetuities” (EPTL 9-1.3 [a]). The statute directs that "[u]nless a contrary intention appears” (EPTL 9-1.3 [a]), ”[i]t shall be presumed that the creator intended the estate to be valid” (EPTL 9-1.3 [b] [emphasis added]; see, Rohan, Practice Commentaries, McKinney’s Cons Laws of NY, Book 17B, EPTL 9-1.3, 1990 Cum Annual Pocket Part, at 244-245).

The language in the deed creating the preemptive rights is contained in the first sentence "[Maier] and [Morrison] agree and covenant that during their life each shall have a right of first refusal to purchase the property conveyed and the property retained, respectively” (emphasis supplied). This language has an important limitation: the rights are to exist only during the lives of Morrison or Maier. In other words, two measuring lives are identified in the grant. Thus, the mutual rights of first refusal during the two measuring lives created in the first sentence are valid under the rule against remote vesting (EPTL 9-1.1 [b]).

Defendants argue that the language contained later in the deed enlarged the preemptive right created in the first sentence and that the right was thus rendered invalid under the rule. The lower courts agreed. But this construction overlooks a critical point. The first refusal provision has two distinct parts: (1) language creating the right itself in the first sentence (i.e., the parties covenant and agree "that during their life each shall have a right of first refusal” [emphasis added]); and (2) language in the remaining sentences imposing limitations and restrictions on who may exercise the right of first refusal created in the first sentence and when they may do so (i.e., the right "is intended to bind ** * * only during the life of [Morrison and his direct donees or beneficiaries]” and the "right shall continue until [direct donees or beneficiaries convey property or die] whichever occurs first” [emphasis added]). In these subsequent sentences, whenever the language alludes to the first refusal right, it identifies it as the right that already exists — i.e., the right created in the first sentence —by specifically referring to it as "[tjhis right of first refusal” (emphasis added). There are no words in these sentences granting or creating a different first refusal right or expanding the right created in the first sentence which, by its very terms, is limited to the life of Maier or Morrison. Unlike the language in the first sentence which creates the right ("during their life each shall have a right of first refusal” [emphasis added]), the subsequent sentences contain language which limits this right.

By simply reading the phrases "[t]his right of first refusal” and "[t]his right” when used in the succeeding sentences as meaning the right as originally created in the first sentence, any conflict between the first sentence and the remaining sentences is avoided and the parts are harmonized into one integrated structure which gives effect to the parties’ evident purpose of narrowly circumscribing the group of persons permitted to exercise the right (see, Matter of Fabbri, 2 NY2d 236, 240-241). The clause, thus read, contains identical reciprocal provisions creating rights of first refusal which may be exercised during the lives of the parties (Maier or Morrison) by either party or, under tightly drawn limitations, by that party’s direct donees or beneficiaries.

Contrary to defendants’ construction, the language following the first sentence does not extend the limited duration of the right which may be exercised only during Maier’s or Morrison’s life. Rather, the language restricts the group of persons who may exercise "[t]his right of first refusal” (created in the first sentence) to Maier or Morrison, themselves, or their direct donees or beneficiaries by death. Thus, persons who acquire the property in other ways — e.g., assignees, purchasers or remote, as opposed to direct, donees and beneficiaries — are not among those permitted to exercise. Moreover, the deed imposes even further restrictions on the narrow group of persons who are permitted to exercise "[t]his right” — the direct donees or beneficiaries of Maier or Morrison — for their right to exercise the first refusal option is carefully limited so as to be personal to them; it may only be exercised during their lives and may not be assigned or transferred to other parties.

By adopting the construction urged by defendants and concluding, as a consequence, that the resultant expanded right of first refusal violated EPTL 9-1.1 (b) the courts below did exactly what the statutory presumption was designed to prevent (see, EPTL 9-1.3 [b]). EPTL 9-1.3 (b) and the common-law rule of construction which it codifies embody the unexceptionable propositions that parties who make grants of real property interests presumably intend their grants to be effective and that reviewing courts should, if at all possible, avoid constructions which frustrate their intended purposes (see generally, Du Bois v Ray, 35 NY 162; Leach, Perpetuities, op. cit., at 657-659; Simes and Smith, op. cit, § 1288, at 227-229). There is nothing in the language of the deed — if read as a whole in an effort to discover the purpose sought to be achieved (see, Matter of Carmer, 71 NY2d 781, 785; Matter of Thall, 18 NY2d 186, 192) — suggesting that the parties had the intention of creating the invalid remote interests which defendants’ construction imputes to them. Thus, because no "contrary intention appears” (EPTL 9-1.3 [a]) we must give effect to the presumption that the parties "intended the [interest] to be valid” (EPTL 9-1.3 [b]; see, Sherman v Richmond Hose Co., 230 NY 462, 471 [an instrument should not be interpreted as violating the rule against remote vesting "unless (it) shows beyond mistake that such was the intent”]).

Finally, the circumstances surrounding the conveyance from Maier to her nephew, Morrison, are consistent with our holding that the grant of the right of first refusal was not violative of EPTL 9-1.1 (b). By the conveyance, an aunt was transferring part of her family owned lakeshore property to her nephew and would, as a result, own the property adjoining his. Under the first refusal provision, the right would have to be exercised, if at all, while one or the other of the parties was still living and possibly still an owner of his or her lakeshore property. Under these circumstances, the language limiting exercise of the right to direct donees and beneficiaries is readily understood as implementing the design of Maier and Morrison to restrict the right of exercise to immediate family members whom they would be likely to know and to prohibit exercise by strangers — e.g., purchasers or remote donees or beneficiaries. The construction we adopt gives effect to this design and, we conclude, to the parties’ intent to avoid the possibility of remote vesting in violation of EPTL 9-1.1 (b).

Accordingly, the order of the Appellate Division should be reversed, with costs, and the case remitted to that court for consideration of issues not reached on the appeal to that court.

Chief Judge Wachtler and Judges Simons, Kaye, Alexander, Titone and Bellacosa concur.

Order reversed, etc.

      . The nature of the rights are explained: each has the right "to meet, within sixty (60) days, any bona fide offer for purchase of all or any part of the land [to which the right applies] and purchase the same”.

      . The rule against remote vesting recognizes that a future interest in land can be judged against two measuring lives (see generally, Simes and Smith, Future Interests § 1223, at 108-112 [2d ed 1956]). The rule simply provides that the "lives measuring the permissible period of vesting [not] be * * * so numerous as to make proof of their end unreasonably difficult” (see, EPTL 9-1.1 [b]). Here, the end of the two measuring lives — that of the aunt and her nephew — is easily susceptible of proof.

      . The provision limiting to Morrison and his direct donees or beneficiaries the right (while either Maier or Morrison is still living) to exercise the first refusal option and bind Maier or her heirs and assigns is as follows: "This right of [first] refusal is intended to bind [Maier], her heirs and assigns, only during the life of Robert C. Morrison * * * and those persons who directly take as a result of a gift by him or by his death.” (Emphasis added.)
      The provision in the next sentence places a further restriction on the right of the direct donees or beneficiaries of Morrison who are empowered to exercise the option and bind Maier and her heirs and assigns as long as either Maier or Morrison is still living. This provision reads: "This right [i.e., the right of Morrison’s direct donees or beneficiaries to exercise the option while either Maier or Morrison is still living] shall continue until the property is either conveyed or assigned by the donees or beneficiaries or until their death, whichever occurs first” (emphasis supplied).


author: Kaye, J. Bellacosa, J.

text:
    In the Matter of Niagara Venture, a Limited Partnership, Respondent, v Sicoli & Massaro, Inc., et al., Appellants, et al., Respondents.
    Argued November 13, 1990;
    decided December 27, 1990

      POINTS OF COUNSEL

      Robert W. Michalak and Lisa G. Massaro for Sicoli & Massaro, Inc., appellant.

      Craig L. Miller for Patterson-Stevens, Inc., appellant, relying on the brief of Sicoli & Massaro.

      Richard G. Collins for Niagara Venture, respondent.
   OPINION OF THE COURT

Kaye, J.

Are private improvement (or mechanics’) liens valid against a property owner’s interest in the undeveloped portion of a tract when, at the time the liens are filed, the owner has conveyed the developed portion of the tract to a third party? For the reasons stated below, we answer that question in the affirmative, and dismiss petitioner property owner’s petition to discharge respondents’ liens.

This controversy centers on the construction of a water theme park — "The Niagara Splash” — in the City of Niagara Falls. The project was initiated by a series of agreements among Niagara Venture (petitioner), the City of Niagara Falls (the City) and the Niagara Falls Urban Renewal Agency, and was funded in part by public grants and loans from the City. Pursuant to an agreement dated October 15, 1986, the City and the Urban Renewal Agency conveyed a total of 20.6 acres to petitioner. As provided in the agreement, the northerly portion of the parcel was to be the site of the theme park structures, and the southerly portion, fronting on Rainbow Boulevard in the City, was to become part of a previously approved hotel complex. The agreement further contemplated a later sale-and-leaseback between petitioner and the City.

In March 1987, petitioner entered into agreements with various contractors and suppliers, including respondents, for labor and materials to construct the theme park. It is undisputed that at the time of these arrangements, petitioner owned the unified 20.6 acre tract upon which the improvements were made.

On September 3, 1987, in accordance with the sale-and-leaseback arrangement contemplated by the October 15, 1986 agreement, petitioner conveyed the developed 16.1-acre portion of the tract, containing the theme park structures, to the City for a nominal amount, and retained the undeveloped 4.5-acre portion of the tract. The City thus became record owner of the 16.1 acres and leased it back to petitioner, who was to pay rent in the amount of its debt service obligations to the City. The agreement specifies that the lease will run until all such obligations are paid, at which time petitioner will repurchase the parcel for a nominal amount. Petitioner, under the agreement and its amendments, is meanwhile obligated to pay taxes based on the full assessment value of the 20.6 acres and in addition is to receive all depreciation and tax losses, deductions or credits relating to the theme park buildings, machinery and equipment.

It is undisputed that petitioner gave respondents no prior notice of the September 3, 1987 conveyance, and that at the time of the conveyance respondents had not yet demanded and been refused final payment for their work. In November 1987 and May 1988, respondents filed public improvement and mechanics’ liens against the entire 20.6 acres. Petitioner soon after instituted the present proceeding under Lien Law §§ 19 and 20 to discharge all liens against the property, on the theory that it was no longer the owner of the improvements.

The trial court denied the request to discharge the public improvement liens, discharged the mechanics’ liens to the extent they encumbered property owned by the City, and upheld the mechanics’ liens on the 4.5 acres. On appeal of so much of the order as upheld the mechanics’ liens as against the 4.5 acres, a divided Appellate Division reversed and discharged those liens, reasoning that petitioner retained no improved property that could be the subject of private improvement liens. We now reverse, agreeing with the trial court and the Appellate Division dissenters that the mechanics’ liens were valid as against the 4.5-acre balance of the tract still owned by petitioner at the time the liens were filed.

A first principle, accepted by the parties and the Appellate Division unanimously, is that a lien filed against a unified parcel operates against the owner’s interest in the entire parcel even if improvements are physically made on only a portion of the property (see, W. L. Dev. Corp. v Trifort Realty, 44 NY2d 489). Thus, had the liens been filed before petitioner conveyed away any portion of the parcel, those liens would have encumbered its interest in the entire parcel, including the 4.5 undeveloped acres (see, Jannotta v Noslac Realty Corp., 231 App Div 864; Woolf v Schaefer, 103 App Div 567). The question that divides the parties and the Appellate Division Justices is whether petitioner is freed of the encumbrances on the 4.5-acre undeveloped portion of the tract because of its prior conveyance of the developed portion. We conclude that it is not.

Our analysis centers on the Lien Law, which creates the interests at issue here, and particularly on sections 3 and 4 of the Lien Law. Section 3 provides that: "[A] contractor [or] subcontractor * * * who performs labor or furnishes materials for the improvement of real property with the consent or at the request of the owner thereof * * * shall have a lien for the principal and interest, of the value, or the agreed price, of such labor * * * or materials upon the real property improved or to be improved and upon such improvement, from the time of filing a notice of such lien as prescribed in this chapter.”

Petitioner contends that the statutory words "upon the real property improved” limit the scope of a lien to the precise site of an improvement — a reading of the statute that would immediately put it at variance with the long-accepted principle that a lien filed against a unified parcel operates against the entire parcel. But additionally, it seems plain that the purpose of those words in section 3 is to differentiate mechanics’ liens from equitable liens created by contract (see, James v Alderton Dock Yards, 256 NY 298, 303) and common-law liens on personal property (see, Deeley v Dwight, 132 NY 59, 63). The mechanic’s lien is, by contrast, a statutory creature, fashioned by the Legislature to protect those who, by their labor and materials, enhance the value of real property (see, Matter of Perrin v Stempinsky Realty Corp., 15 AD2d 48, 49, appeal dismissed 11 NY2d 931; see generally, Bowmar, Lien Priorities in New York § 3.1 [1987]; Jensen, Mechanics’ Liens § 1 [2d ed 1924]; Griffin, Mechanics’ Liens of State of New York §§ 2, 3 [1929]).

It is the function of section 3 to define both who qualifies as a "mechanic” and the type of lien such a person secures. Section 3 does not purport to fix the extent of the lien; indeed, read literally, section 3 provides for a mechanic’s lien to apply to an entire improved parcel, with no protection for a subsequent good-faith purchaser. Lien Law § 4, explicitly captioned "Extent of lien,” defines the scope of the lien.

Section 4 provides that a mechanic’s lien "shall extend to the owner’s right, title or interest in the real property and improvements, existing at the time of filing the notice of lien.” Petitioner urges that the words "real property and improvements” must be read in the conjunctive, that a lien can attach only to real property and improvements coexisting in the possession of the owner at the moment of filing. Again, petitioner’s hypertechnical reading of the statute must be rejected. Section 4 explicitly creates a lien on the owner’s "right, title or interest” in the real property, not in any particular segment of it (see, Gates & Co. v National Fair & Exposition Assn., 225 NY 142, 156). Petitioner’s interest in the improved parcel was subject to the liens prior to the conveyance, and its remaining interest is still subject to those liens.

Petitioner’s strict reading of the relevant sections runs afoul also of Lien Law § 23, which specifies that the statute, being remedial, should be read liberally to secure its beneficial interests and purposes. As the Appellate Division dissenters observed, petitioner’s construction "subverts the beneficial interests and purpose of the Lien Law by permitting an owner of land to escape his responsibility to his contractors and suppliers by enabling him to retain lands free and clear of the mechanic’s liens filed by them, solely because the owner conveys a portion of his lands to another.” (162 AD2d 992,995.)

The result we reach is fully consistent with both the letter of the Lien Law and the policy underlying the statute. The Lien Law may be said to have a dual purpose: first, to provide security for laborers and materialmen and second, to provide notice and a degree of certainty to subsequent purchasers (see, Carl A. Morse, Inc. v Rentar Indus. Dev. Corp., 56 AD2d 30, 37, affd 43 NY2d 952, appeal dismissed 439 US 804). "Time of filing” in the context of section 4 is a balancing of those interests, providing security for the lienor and protection for the subsequent purchaser, not a haven for property owners seeking to escape their commitments to contractors and materialmen. Reading the statute as petitioner urges would be contrary to the first goal of the Lien Law and would not advance the second. But both statutory purposes are served when the lien is recognized as valid against the interest in the improved parcel remaining in the hands of the owner, and invalid against the portion conveyed to good-faith purchasers before the time of filing.

Applying those principles to the facts before us: had respondents’ liens been filed prior to petitioner’s conveyance of the developed portion of the property, they would have operated against petitioner’s interest in the entire parcel, irrespective of the actual physical location of the improvements on that parcel. By reason of the "time of filing” provision of section 4, respondents’ liens can operate only against petitioner’s remaining interest in the parcel at the time the liens are filed; they cannot reach the interest conveyed to good-faith purchasers before respondents’ filings. But to say that petitioner, simply by conveying the developed portion of the parcel, can free itself of all encumbrances relating to the improvements is wholly at odds with the intent of the Lien Law. That result is especially appropriate in the present case, where petitioner continues to enjoy significant benefits of ownership of the entire parcel.

Two matters remain. First, the Appellate Division erred in its conclusion that the liens were invalid because of a failure to apportion the work and materials against distinct and independently owned premises. Such a requirement applies where several transactions, involving the improvement of distinct parcels of property, have been effected at the request of independent owners (see, Contelmo’s Sand & Gravel v J & J Milano, 96 AD2d 1090; Matter of Twin County Tr. Mix v Ingula Bldrs. Corp., 27 AD2d 939). A requirement of apportionment under such circumstances is found in Lien Law § 3; the work must be done at the request or with the consent of the owner of the property, or it would be plainly unfair to allow a lien. But we have no such concern in this case. There is no possibility here that an owner will be burdened with a lien related to improvements it did not request.

Second, there is no merit in petitioner’s contention that respondents are amply protected by the public improvement liens. Public improvement liens are valid against "moneys of the state or of such [public] corporation applicable to the construction or demolition of such improvement, to the extent of the amount due or to become due on such contract.” (Lien Law § 5.) Such liens protect subcontractors who supply labor or material for an improvement on public lands — where mechanics’ liens are unavailable (see, Lien Law § 2 [8]; § 3) — by allowing them to encumber the moneys due the contractor under its contracts with the government entity. Here, the loan-leaseback structure of the transaction creates a cash flow from petitioner to the City, rather than a corpus of government funds subject to public improvement liens.

Finally, we agree that "certainty, reliability and predictability are at a premium” in this area of the law (dissenting opn, at 183). The rule that promotes those desirable objectives is that a laborer or materialman who improves a unified tract can obtain a lien on the interest in the possession of the original owner at the time of filing. To leave to case-by-case determination the question whether, and to what extent, the retained portion of a unified tract has been improved by particular work defeats those objectives.

Accordingly, the order of the Appellate Division should be reversed, with costs, and the petition dismissed to the extent it seeks to discharge the private improvement liens filed against petitioner’s property.

Bellacosa, J.

(dissenting). Individuals who perform labor or provide materials to improve real property are authorized by Lien Law §§ 3 and 4 to file liens upon the real property so improved and upon the improvements; the liens extend to the owner’s right, title or interest in the property and improvements existing at the time the notice of lien is filed. After the owner in this case conveyed the improved property to a third party, the putative lienors filed their liens on the owner’s retained unimproved property. The plain language of Lien Law §§ 3 and 4 does not recognize such a lien. Even the majority concedes that the governing provision does not literally provide this important remedy. Yet, the Court validates the liens filed in this case by deviating from the plain language of the statute regulating real property matters and titles, where certainty, reliability and predictability are at a premium.

Moreover, the majority’s analysis turns on a conjectural factual hypothesis: That it is "appropriate” to construe the Lien Law to protect respondents, despite its plain governing language, because "had respondents’ liens been filed prior to petitioner’s conveyance of the developed portion of the property, they would have operated against petitioner’s interest in the entire parcel” (majority opn, at 181 [emphasis added]).

A review of the Appellate Division cases cited to support this "long-accepted principle” shows that its application has been limited to cases where "[i]t does not appear that there was any separate contract for furnishing material to be used on the different lots, nor does it appear that the owner held title to the lots by virtue of separate conveyances or descriptions, or that they did not in fact constitute but a single parcel.” (Woolf v Schaefer, 103 App Div 567, 571.) This is not such a case. Indeed, the affected owner held title to the two parcels through separate conveyances from two different owners, and contracted with the putative lienors to furnish labor and materials on only one parcel. There is, thus, no basis for this Court to make a finding of fact categorizing the two parcels as "unified” and this Court is powerless to make such a finding.

Nor is this case like W. L. Dev. Corp. v Trifort Realty (44 NY2d 489), where we held that a prior recorded mortgage for materials and labor provided during the construction of street and utility improvements in a subdivision had priority over a subsequently filed mechanic’s lien.

To be sure, if the owner in this case had obtained only the 16.1-acre parcel, and thereafter improved it and conveyed it to the City, a subsequently filed mechanic’s lien on that parcel would have no legal consequence whatsoever. A different result should not obtain merely because the owner, at the same time the 16.1-acre parcel was obtained, also obtained an adjoining parcel from a different party for a different use.

An individual who supplies labor or materials to improve a parcel which is subsequently conveyed before a lien is timely filed in compliance with the Lien Law may have a remedy under contract law, but not under the Lien Law provisions. To acquire the benefit of the latter necessarily requires explicit compliance with the statutory prerequisites because, wherever the equities may lie in this case, this Court should not unsettle statutory legal precepts in this area which are designed to avoid clouds on title, not to create them.

Chief Judge Wachtler and Judges Simons and Hancock, Jr., concur with Judge Kaye; Judge Bellacosa dissents and votes to affirm in a separate opinion in which Judges Alexander and Titone concur.

Order reversed, etc.

      . Contrary to the dissent’s description of the initial series of conveyances (dissenting opn, at 183), the record indicates that the original boundary line between the two parcels was not the basis for the reconveyance to the City — that is, the deed back to the City conveyed "all of 'Parcel F and most of 'Parcel II.’ ” It therefore cannot be said that the 16.1-acre parcel was obtained as a separate and distinct parcel from the City and reconveyed according to those original boundary lines.

      . The premise of the dissent that there was no unified tract here (dissenting opn, at 183) is contrary to the explicit finding by the trial court that the parcel "was, in fact, a unified tract or parcel of land.” The Appellate Division, while disagreeing on the effect of the reconveyance to the City, in no way disagreed with that factual finding by the trial court.

      . There is no suggestion that the liens were untimely; apparently, when the conveyance was made respondents had not yet demanded and been refused final payment for their work.