author: Kaye, J.

text:
    Spectrum Systems International Corporation, Respondent, v Chemical Bank, Appellant.
    Argued September 12, 1991;
    decided October 24, 1991

      POINTS OF COUNSEL

      Robert F. Mullen, Vicki Share Fleiss and Sandra E. Nickel for appellant.
    I. The court below misinterpreted the nature and purpose of the memorandum and therefore the breadth of the protection afforded it. (Upjohn Co. v United States, 449 US 383; Bacon v Frisbie, 80 NY 394; Rossi v Blue Cross & Blue Shield, 73 NY2d 588.) II. Affirmance of the decision of the court below would have a deleterious affect on the practice of law in this State. III. The opinion of the court below contravenes well-settled precedent protecting the documents from disclosure. (Upjohn Co. v United States, 449 US 383; Rossi v Blue Cross & Blue Shield, 73 NY2d 588; Hickman v Taylor, 329 US 495; Lane Bryant, Inc. v Cohen, 86 AD2d 805; People v Marin, 86 AD2d 40; Diversified Indus. v Meredith, 572 F2d 596; In re Grand Jury Investigation, 599 F2d 1224.)

      Marianne Stecich and Regina F. Kelly for respondent.
    I. The requested documents are not protected from disclosure by the attorney-client privilege. (Rossi v Blue Cross & Blue Shield, 73 NY2d 588; People v Osorio, 75 NY2d 80; Spectrum Sys. Intl. Corp. v Chemical Bank, 157 AD2d 444; Matter of Grand Jury Subpoena [Bekins Record Stor. Co.], 62 NY2d 324; Matter of Priest v Hennessy, 51 NY2d 62; Upjohn Co. v United States, 449 US 383; Matter of Civil Serv. Employees Assn. v Ontario County Health Facility, 103 AD2d 1000; Barber v Town of

      Northumberland, 88 AD2d 712; Kenford Co. v County of Erie, 55 AD2d 466; Hickman v Taylor, 329 US 495.) II. The requested documents are not protected from disclosure as an attorney’s work product. (Chemical Bank v National Union Fire Ins. Co., 70 AD2d 837; Graf v Aldrich, 94 AD2d 823; Matter of Condon v Niagara County Dist. Attorney’s Off., 115 AD2d 270; Hoffman v Ro-San Manor, 73 AD2d 207; Matter of Grand Jury Subpoena [Bekins Stor. Co.], 118 Misc 2d 173; Zimmerman v Nassau Hosp., 76 AD2d 921; Spectrum Sys. Intl. Corp. v Chemical Bank, 157 AD2d 444; Corcoran v Peat, Marwick, Mitchell & Co., 151 AD2d 443; Kenford Co. v County of Erie, 55 AD2d 466.) III. The requested documents are not protected from disclosure as materials prepared for litigation. (Oppedisano v New York Mut. Underwriters, 111 AD2d 452; Matos v Akram & Jamal Meat Corp., 99 AD2d 527; Westhampton Adult Home v National Union Fire Ins. Co., 105 AD2d 627; Crazytown Furniture v Brooklyn Union Gas Co., 145 AD2d 402; Graf v Aldrich, 94 AD2d 823; New England Seafoods v Travelers Cos., 84 AD2d 676; Merrick v Niagara Mohawk Power Corp., 144 AD2d 878; Spectrum Sys. Intl. Corp. v Chemical Bank, 157 AD2d 444.) IV. Disclosure of the requested documents would best serve the public interest. (Allen v Crowell-Collier Publ. Co., 21 NY2d 403; Rossi v Blue Cross & Blue Shield, 73 NY2d 588; Upjohn Co. v United States, 449 US 383; Hickman v Taylor, 329 US 495.)

      Daniel J. Capra and Dierdre A. Burgman for The Committee on Professional Responsibility of the Association of the Bar of the City of New York, amicus curiae.

    I. The attorney-client privilege should ordinarily be applicable to investigative reports by counsel concerning possible employee misconduct. (Rossi v Blue Cross & Blue Shield, 73 NY2d 588; Upjohn Co. v United States, 449 US 383; United States v Shyres, 898 F2d 647; Pritchard-Keang Nam Corp. v Jaworski, 751 F2d 277, 472 US 1022; In re International Sys. & Controls Corp. Sec. Litig., 91 FRD 552, 693 F2d 1235; Barr Mar. Prods. Co. v Borg-Warner Corp., 84 FRD 631; Root v Wright, 84 NY 72; Yates v Olmsted, 56 NY 632; Bacon v Frisbie, 80 NY 394; Matter of Levinsky, 23 AD2d 25.) II. Counsel’s report on an internal investigation should ordinarily be protected by the doctrine of work-product immunity. (People v Grady, 130 Misc 2d 677, 125 AD2d 1011, 69 NY2d 880; People v Marin, 86 AD2d 40; Hickman v Taylor, 329 US 495; Corcoran v Peat, Marwick, Mitchell & Co., 151 AD2d 443; Central Buffalo Project Corp. v

      Rainbow Salads, 140 AD2d 943; People v Edney, 39 NY2d 620; Matter of Grand Jury Subpoena [Bekins Stor. Co.], 118 Misc 2d 173, affd sub nom. Matter of Grand Jury Subpoena [Bekins Record Stor. Co.], 94 AD2d 643, 62 NY2d 324; Niesig v Team I, 76 NY2d 363; International Business Machs. Corp. v Edelstein, 526 F2d 37; Weisgold v Kiamesha Concord, 51 Misc 2d 456.) III. Public policy favors protection from disclosure for lawyers’ investigative reports. (Auerbach v Bennett, 47 NY2d 619; In re Grand Jury Subpoena Duces Tecum v United States, 731 F2d 1032; People v Edney, 39 NY2d 620; Hurlburt v Hurlburt, 128 NY 420; United States v Schwimmer, 892 F2d 237; Pritchard-Keang Nam Corp. v Jaworski, 751 F2d 277; Hickman v Taylor, 329 US 495; People v Marin, 86 AD2d 40; Republic Gear Co. v Borg-Warner Corp., 381 F2d 551.)

      William B. Pennell, Joseph T. McLaughlin, Arthur Norman Field and James F. Stronski for the Executive Committee of the New York County Lawyers Association, amicus curiae.

    I. The court below’s decision marks a dramatic departure from well-established case law. (Upjohn Co. v United States, 449 US 383; In re Grand Jury Investigation, 599 F2d 1224; Hickman v Taylor, 329 US 495; Diversified Indus. v Meredith, 572 F2d 596; In re Grand Jury Subpoena v United States, 599 F2d 504; Carter-Wallace, Inc. v Hartz Mountain Indus., 553 F Supp 45.) II. State courts recognize the importance of the attorney-client privilege and attorney work-product doctrine in the corporate context. (Rossi v Blue Cross & Blue Shield, 73 NY2d 588.) III. Strong public policy considerations support application of the attorney-client privilege and work-product doctrine to counsel’s investigative reports. (Radiant Burners v American Gas Assn., 320 F2d 314, 375 US 929; Upjohn Co. v United States, 449 US 383; Trammel v United States, 445 US 40; Fisher v United States, 425 US 391; Hunt v Blackburn, 128 US 464.)
   OPINION OF THE COURT

Kaye, J.

In an action to recover fees for consulting services, Spectrum Systems International Corporation demanded that defendant, Chemical Bank, produce certain documents pertaining to the bank’s internal investigation of possible fraud by employees and vendors, including Spectrum. Chemical responded by seeking a protective order, asserting that the documents were protected from disclosure by the attorney-client privilege, by the attorney work product doctrine, and as material prepared in anticipation of litigation. This appeal requires us to consider whether a report prepared by Chemical’s specially retained outside counsel is privileged and therefore immune from discovery.

I.

The facts are simply stated. Spectrum is a computer software consulting firm that provided services to Chemical Bank until the spring of 1987. According to the affidavit of a partner in the New York City law firm of Schulte Roth & Zabel, in June 1987 Chemical’s general counsel retained the firm to perform an investigation and render legal advice to Chemical regarding possible fraud by its employees and outside vendors, and to counsel Chemical with respect to litigation options. According to the affidavits of Spectrum, Chemical’s own investigation began even earlier. Over the next months, Schulte Roth conducted interviews of Chemical employees, of a former officer responsible for the bank’s arrangements with Spectrum, and of representatives of Spectrum itself.

In a letter report dated August 20, 1987, signed by John S. Martin, Jr., then a partner, the law firm summarized the results of its investigation. After three pages of narrative regarding the central problem and the facts bearing on it, the final paragraph of the Spectrum section sets forth the law firm’s opinion as to a possible claim against Spectrum, an estimate of Chemical’s damages, a potential weakness if such a claim were to be asserted, and the firm’s view that there was insufficient proof to establish particular matters described in the letter. The report was addressed to Chemical’s vice-chairman — the company’s senior legal officer — with copies to Chemical’s general counsel and senior auditor.

Spectrum commenced the present action in October 1988, seeking $33,600 in fees, and Chemical counterclaimed for damages of at least $100,000 on the ground that Spectrum had falsified invoices and overcharged the bank.

After the close of pleadings, and before any other discovery, Spectrum demanded that Chemical turn over "[a] report and/ or notes or written documents of investigation conducted by or on behalf of Chemical Bank of the business relationship between Chemical Bank and vendors.” Spectrum’s president had been told of the investigation by Chemical’s former employee, and had himself been questioned in July 1987 by a Chemical investigator and again in August by the law firm, where he appeared with his counsel. Apparently, the Chemical investigator made a memorandum regarding his conversation with Spectrum’s president, as did a Schulte Roth attorney of the later interview.

In response to Chemical’s motion for a protective order, Supreme Court — without examining the documents — ordered them produced, holding that "an independent investigation cannot obtain privileged status merely because it may have been communicated to an attorney.” The court subsequently denied Chemical’s motion for reargument or for an in camera inspection of the documents in issue.

While agreeing that Chemical’s motion for a protective order should be denied — the documents were not privileged, work product or material prepared in anticipation of litigation —the Appellate Division, having itself reviewed the documents, modified Supreme Court’s orders and granted Chemical’s alternative request for remittal for an in camera inspection to determine materiality and necessity (CPLR 3101 [a]). The Appellate Division, further, granted leave to appeal to this Court, certifying the following question: "Was the order of this Court, which modified the orders of the Supreme Court, properly made?”

We now answer the certified question in the negative, concluding that the Appellate Division erred in denying Chemical’s claim of privilege with respect to the Spectrum section of the Schulte Roth report — the only portion of the report in issue on this appeal.

II.

The CPLR directs that there shall be "full disclosure of all evidence material and necessary in the prosecution or defense of an action.” (CPLR 3101 [a].) "The test is one of usefulness and reason.” (Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406.) This statute embodies the policy determination that liberal discovery encourages fair and effective resolution of disputes on the merits, minimizing the possibility for ambush and unfair surprise (see, 3A Weinstein-Korn-Miller, NY Civ Prac ¶¶ 3101.01-3101.03).

By the same token, the CPLR establishes three categories of protected materials, also supported by policy considerations: privileged matter, absolutely immune from discovery (CPLR 3101 [b]); attorney’s work product, also absolutely immune (CPLR 3101 [c]); and trial preparation materials, which are subject to disclosure only on a showing of substantial need and undue hardship in obtaining the substantial equivalent of the materials by other means (CPLR 3101 [d] [2]).

Obvious tension exists between the policy favoring full disclosure and the policy permitting parties to withhold relevant evidence. Consequently, the burden of establishing any right to protection is on the party asserting it; the protection claimed must be narrowly construed; and its application must be consistent with the purposes underlying the immunity (Matter of Priest v Hennessy, 51 NY2d 62, 69; Matter of Jacqueline F., 47 NY2d 215, 218-219; Koump v Smith, 25 NY2d 287, 294; see generally, Note, The Attorney-Client Privilege and the Corporate Client: Where Do We Go After Upjohn?, 81 Mich L Rev 665 [1983]).

Against this backdrop, we consider Chemical’s claims for a protective order.

III.

The attorney-client privilege, the oldest among common-law evidentiary privileges (8 Wigmore, Evidence § 2290 [McNaughton rev 1961]; Upjohn Co. v United States, 449 US 383, 389), fosters the open dialogue between lawyer and client that is deemed essential to effective representation (see, Matter of Vanderbilt [Rosner — Hickey], 57 NY2d 66, 76; Matter of Priest v Hennessy, 51 NY2d 62, 67-68, supra).

A century ago this Court referred to the attorney-client privilege statute as a "mere re-enactment of the common-law rule” (Hurlburt v Hurlburt, 128 NY 420, 424); reliance on the common law continues to this day. CPLR 4503 (a) states that a privilege exists for confidential communications made between attorney and client in the course of professional employment, and CPLR 3101 (b) vests privileged matter with absolute immunity. For definition of what is encompassed by the privilege, courts still must look to the common law (see, Siegel, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C310L25, at 37).

Although typically arising in the context of a client’s communication to an attorney, the privilege extends as well to communications from attorney to client. The privilege is of course limited to communications — not underlying facts (Upjohn Co. v United States, 449 US, at 395-396, supra). In order for the privilege to apply, the communication from attorney to client must be made "for the purpose of facilitating the rendition of legal advice or services, in the course of a professional relationship.” (Rossi v Blue Cross & Blue Shield, 73 NY2d 588, 593.) The communication itself must be primarily or predominantly of a legal character (id., at 594).

As is plain from mere statement of the principles, whether a particular document is or is not protected is necessarily a fact-specific determination (Rossi v Blue Cross & Blue Shield, 73 NY2d, at 592-593, supra), most often requiring in camera review.

Here, Spectrum does not challenge the confidential nature of the Schulte Roth report. Moreover, it is uncontested that the law firm was specially retained as outside counsel for the purpose of conducting an internal investigation into possible fraud on Chemical and rendering legal advice about that problem, including counseling about litigation options. Clearly the requisite professional relationship was established when Chemical retained the law firm to render legal assistance (Radiant Burners v American Gas Assn., 320 F2d 314, cert denied 375 US 929).

The report itself, after presenting facts, sets forth the firm’s assessment regarding a possible legal claim, its approximate size and weaknesses. As a confidential report from lawyer to client transmitted in the course of professional employment and conveying the lawyer’s assessment of the client’s legal position, the document has the earmarks of a privileged communication.

The arguments against privilege in this case center on Schulte Roth’s conceded investigative function, which led the Appellate Division to conclude that the report and other documents were not clearly communicated by counsel in the role of attorneys rendering legal advice. In the Appellate Division’s view, the report was aimed at assisting Chemical in its business operations, as by suggesting measures to prevent future corruption and terminate or discipline implicated employees. We disagree.

That nonprivileged information is included in an otherwise privileged lawyer’s communication to its client — while influencing whether the document would be protected in whole or only in part — does not destroy the immunity. In transmitting legal advice and furnishing legal services it will often be necessary for a lawyer to refer to nonprivileged matter (see, Code of Professional Responsibility EC 4-1 [lawyer should be fully informed of all facts]).

As we made clear in Rossi, the privilege is not narrowly confined to the repetition of confidences that were supplied to the lawyer by the client (compare, Mead Data Cent. v United States Dept. of Air Force, 566 F2d 242, 254 [DC Cir]). That cramped view of the attorney-client privilege is at odds with the underlying policy of encouraging open communication; it poses inordinate practical difficulties in making surgical separations so as not to risk revealing client confidences; and it denies that an attorney can have any role in fact-gathering incident to the rendition of legal advice and services (see, In re LTV Sec. Litig., 89 FRD 595, 602; Wolfram, Modern Legal Ethics § 6.3.5 [Prac ed]). The memorandum in Rossi included the lawyer’s conversations with plaintiff’s counsel and with third parties as well as the lawyer’s opinion and advice. Yet we determined, from reviewing the full content and context of the communication, that its purpose was to convey legal advice to the client, and we held the entire document exempt from discovery. We reach that same conclusion here.

Both Supreme Court and the Appellate Division were properly concerned that the attorney-client privilege not be used as a device to shield discoverable information. As they correctly observed, an investigative report does not become privileged merely because it was sent to an attorney. Nor is such a report privileged merely because an investigation was conducted by an attorney; a lawyer’s communication is not cloaked with privilege when the lawyer is hired for business or personal advice, or to do the work of a nonlawyer (People v Belge, 59 AD2d 307, 308-309). Yet it is also the case that, while information received from third persons may not itself be privileged (see, Kenford Co. v County of Erie, 55 AD2d 466), a lawyer’s communication to a client that includes such information in its legal analysis and advice may stand on different footing. The critical inquiry is whether, viewing the lawyer’s communication in its full content and context, it was made in order to render legal advice or services to the client.

Here we conclude that facts were selected and presented in the Schulte Roth report as the foundation for the law firm’s legal advice, and that the communication was primarily and predominantly of a legal character. We reach this conclusion both from our review of the document and from the undisputed facts in the record. While a court is not bound by the conclusory characterizations of client or counsel that the retention was for the purpose of rendering legal advice, here there is no reason to disregard the sworn statements describing the ¿ngagement as one for legal not business advice, which is evident in the report itself. The report offers no recommendations for desirable future business procedures or corruption prevention measures, or employee discipline — indeed, it reflects that the individuals involved in the challenged practices were no longer working for Chemical. Rather, the narration relates and integrates the facts with the law firm’s assessment of the client’s legal position, and evidences the lawyer’s motivation to convey legal advice.

The Appellate Division, in rejecting Chemical’s claim of privilege, additionally relied on the fact that the Schulte Roth report did not focus on any imminent litigation, that the report reflected no legal research, and that no conclusion was reached with regard to the parties’ legal position. None of these factors changes the privileged character of the document.

The prospect of litigation may be relevant to the subject of work product and trial preparation materials, but the attorney-client privilege is not tied to the contemplation of litigation (see, Root v Wright, 84 NY 72, 76; Bacon v Frisbie, 80 NY 394, 400). Legal advice is often sought, and rendered, precisely to avoid litigation, or facilitate compliance with the law, or simply to guide a client’s course of conduct. Proximity to litigation — as was the case in Rossi — may itself reveal that the motive in a lawyer’s communication was to give legal advice, but the absence of pending or prospective litigation does not otherwise bear on the privilege analysis.

That the Schulte Roth report was inconclusive, looking toward future discussion, is also without significance. Legal advice often begins — and may end — with a preliminary evaluation and a range of options. More than that may not be possible upon an initial investigation (see, State ex rel. Great Am. Ins. Co. v Smith, 574 SW2d 379, 385 [Mo]). Similarly, the absence of legal research in an attorney’s communication is not determinative of privilege, so long as the communication reflects the attorney’s professional skills and judgments. Legal advice may be grounded in experience as well as research.

Finally, we have several times noted that the privilege may give way to strong public policy considerations (see, Matter of Priest v Hennessy, 51 NY2d, at 67-68, supra). Surely this is not such an instance. Spectrum urges that disclosure would best serve the public interest, but Chemical underscores that it does not seek to deny disclosure of facts gathered during the Schulte Roth investigation, only of its attorney’s expression of legal advice drawn on those facts. Spectrum has no right whatever to the production of this privileged communication, least of all on extraordinary public policy grounds.

Chemical argues, alternatively, that the Schulte Roth report is absolutely protected as attorney’s work product, in that it reflects its lawyer’s mental impressions and legal analysis (see, e.g., Hoffman v Ro-San Manor, 73 AD2d 207, 211). Whether or not privileged, a record may qualify in whole or in part as attorney work product, or even trial preparation materials. Our conclusion that the Schulte Roth report is privileged makes further inquiry along those lines unnecessary.

IV.

The Appellate Division further held that the disputed documents are not protected as work product or trial preparation materials, conclusions Chemical challenges.

We note, however, that no document other than the Schulte Roth report has been put before the Court, or described with any particularity, or analyzed by the parties in their argument to us. Chemical’s affidavits speak of memoranda of conversations with Spectrum’s president, its briefs mention unspecified investigative records, and the Appellate Division refers to Chemical documents labeled “Attorney Work Product.” A party’s own labels are obviously not determinative of work product, and the generalized descriptions — lacking identification of persons, time periods and circumstances — do not convey the information and analysis necessary to decide whether a particular document should be immunized from disclosure under CPLR 3101 (c) or (d). Chemical’s offer to deliver the remaining documents for our in camera review obviously does not fill this gap.

Determining document immunity claims, and reviewing them, are largely fact-specific processes (see, e.g., Rossi v Blue Cross & Blue Shield, 73 NY2d 588, supra; Matter of Grand Jury Subpoena [Bekins Record Stor. Co.], 62 NY2d 324). Indeed, we join in the observation of the Appellate Division that it would have been better practice for the trial court in this case, when first considering Chemical’s motion, to have conducted an in camera review "to have allowed for a more informed determination as to whether the information was indeed protected from disclosure” on any of the grounds alleged. (157 AD2d 444, 447.) The present record, similarly, leaves us with inadequate basis for determining whether the Appellate Division correctly concluded that Chemical’s remaining documents were neither attorney’s work product nor trial preparation materials. We therefore do not reach these issues, or the additional arguments propounded by the parties and amici curiae regarding CPLR 3101 (c) and (d).

Accordingly, the order of the Appellate Division should be modified, with costs to defendant, in accordance with this opinion and, as so modified, affirmed. The certified question should be answered in the negative.

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

Order modified, etc.


source: Caselaw Access Project

author: Bellacosa, J. Kaye, J.

license: Public Domain

text:
    Suffolk Business Center, Inc., Appellant, v Applied Digital Data Systems, Inc., Respondent.
    Argued September 12, 1991;
    decided October 17, 1991

      POINTS OF COUNSEL

      Eugene L. Wishod, Conley E. Brian, Jr., and Scott M. Karson for appellant.
    I. The repurchase provision contained in the contract and deed did not create a future interest and was enforceable in a traditional specific performance action. (Pacamor Bearings v British Am. Dev. Corp., 108 AD2d 191; Towle v Remsen, 70 NY 303; Matter of Nelson, 154 AD2d 378; Nicoll v New York & Erie R. R. Co., 12 NY 121; City of New York v Coney Is. Fire Dept., 259 App Div 286, 888, 285 NY 535; City of Buffalo v Day, 8 Misc 2d 14; Turiano v State of New York, 136 Misc 2d 596; Munro v Syracuse, Lake Shore & N. R. R. Co., 200 NY 224; Fausett v Guisewhite, 16 AD2d 82.) II. The result in this case cannot rationally turn on whether or not the repurchase provision contained in the contract is found to have "merged” in the like provision contained in the deed. (Davis v Weg, 104 AD2d 617; Ting-Wan Liang v Malawista, 70 AD2d 415; Staff v Lido Dunes, 47 Misc 2d 322.) III. Since there are no triable issues of fact on the issue of liability, summary judgment should be granted to plaintiff and the case remitted to Special Term to fashion an appropriate remedy. (Alvarez v Prospect Hosp., 68 NY2d 320; Olan v Farrell Lines, 64 NY2d 1092; Nidzyn v Stevens, 148 AD2d 592; Winegrad v New York Univ. Med. Center, 64 NY2d 851; Zuckerman v City of New York, 49 NY2d 557; Janos v Peck, 21 AD2d 529, 15 NY2d 509; James Talcott, Inc. v Bloom, 29 AD2d 390; J. C. Penney Co. v 1700 Broadway Co., 104 Misc 2d 787; Trustees of Hamilton Coll. v Cunningham, 70 AD2d 1048; Industrial Dev. Found. v United States Hoffman Mach. Corp., 11 Misc 2d 625, 8 AD2d 579, 7 NY2d 706.) IV. Even if RPAPL 1953 was applicable to this case, the lower courts should have retained jurisdiction, decided the case on the merits and awarded plaintiff restitutionary damages upon a finding that plaintiff lacked a substantial interest in enforcing a reconveyance. (Rich v Lefkovits, 56 NY2d 276; Dunn v City of Syracuse, 83 AD2d 783; Cole

      v City of Albany, 80 AD2d 656; Kraft v Sheridan, 134 AD2d 217.)

      Thomas S. DAntonio, Karen B. Newman and Robert W. Ñapóles for respondent.
    I. Appellant’s failure to proceed under RPAPL 1953 mandates affirmance. (Orange & Rockland Utils. v Philwold Estates, 52 NY2d 253; Clintwood Manor v Adams, 29 AD2d 278, 24 NY2d 759; Board of Educ. v Miles, 15 NY2d 364; Pacamor Bearings v British Am. Dev. Corp., 108 AD2d 191; Nielsen v Corbo, 35 AD2d 580; People v Cosme, 48 NY2d 286; Town of Massena v Niagara Mohawk Power Corp., 45 NY2d 482; People v Gruttola, 43 NY2d 116; Marino v Dwyer-Berry Constr. Corp., 146 AD2d 751.) II. The record is devoid of proof sufficient to support an action under RPAPL 1953. (Rich v Lefkovits, 56 NY2d 276; Dunn v City of Syracuse, 83 AD2d 783; Rovello v Orofino Realty Co., 40 NY2d 633; Zuckerman v City of New York, 49 NY2d 557; Percia v Zdanowicz, 116 AD2d 558; Greer v Ferrizz, 118 AD2d 536.) III. Although not reached by the court below, the record sufficiently supports denying summary judgment to appellant and granting summary judgment to Applied Digital dismissing the complaint. (City of Rochester v Chiarella, 86 AD2d 110, 58 NY2d 316, cert denied sub nom. Quality Packaging Supply Corp. v City of Rochester, 464 US 828; International Sys. v Delcrete Corp., 134 AD2d 947; Omowale v State of New York, 72 AD2d 955; Eastern Shopping Centers v Trenholm Motels, 33 AD2d 930; Groesbeck v Morgan, 206 NY 385; Metropolitan Transp. Auth. v Bruken Realty Corp., 67 NY2d 156; Buffalo Seminary v McCarthy, 86 AD2d 435, 58 NY2d 867; LIN Broadcasting Corp. v Metromedia, Inc., 74 NY2d 54; Concert Radio v GAF Corp., 108 AD2d 273, 73 NY2d 766.)
   OPINION OF THE COURT

Bellacosa, J.

The issue is whether the parties intended that a construction and repurchase clause should constitute a covenant running with the land, enforceable by specific performance, or a future interest on a condition subsequent, enforceable only under Real Property Actions and Proceedings Law (RPAPL) § 1953. We hold that the parties’ intention, reflected in a merged obligation found in the deed of sale, produced a covenant and we therefore modify by denying the defendant’s cross motion for summary judgment and remitting to Supreme Court for further proceedings.

Plaintiff, Suffolk Business Center (SBC), was formed to acquire and develop, as an industrial park, a 302-acre tract of land in Smithtown, Suffolk County. In 1978, SBC contracted to sell an approximately 8.17-acre parcel within the proposed industrial park to defendant, Applied Digital Data Systems, Inc. (Applied) for $408,695. Applied owned an adjoining seven-acre parcel, improved with a building and used to its maximum capacity under the local zoning code. Applied planned to use the combined parcels to expand its facilities under a project denominated the "Phase I Improvements”. It consisted of a 12,600-square-foot warehouse addition to Applied’s existing building, to be located partially on both parcels, and a 23,250-square-foot office building.

The contract of sale contained a requirement by which Applied agreed to commence construction on the Phase I improvements within one year after it acquired title and then to continue with due diligence until Phase I was completed. Under the agreement, if Applied failed or fell short in that regard, SBC on written notice was entitled but not obligated to repurchase the subject parcel and Applied was required to sell it back at the original purchase price. One month after entering into the contract, the parties closed on the title, and the deed, reciting the construction/repurchase provision, was recorded. Applied began and substantially completed construction of the warehouse addition. It concedes its failure to commence construction of the office building improvement of Phase I, due apparently to unfavorable economic conditions. Based on that failure, SBC exerted its option to repurchase the subject parcel, as partially improved by Applied. Applied rejected SBC’s overture and this lawsuit ensued.

SBC sued for specific performance, among other related and alternative forms of relief. On cross motions for summary judgment, Supreme Court, Suffolk County, granted Applied’s cross motion and dismissed the complaint, without prejudice to SBC commencing an action pursuant to RPAPL 1953. The Appellate Division affirmed, agreeing with Supreme Court that SBC had conveyed a fee to Applied, subject to a future interest on a condition subsequent, enforceable only under RPAPL 1953 (162 AD2d 677). This Court granted SBC’s motion for leave to appeal and now modifies the order of the Appellate Division, which is final (see, McDermott v Manhattan Eye, Ear & Throat Hosp., 15 NY2d 20, 23, n 2).

We hold that the words used in the critical documents and the omission of any right of reentry effecting a forfeiture manifests the commercially sophisticated parties’ intent to create a covenant running with the land enforceable in equity. Contrary to the holdings of the lower courts, the right at issue in this transaction is not one of reacquisition subject to a condition subsequent, which would relegate the parties solely to the statutory remedy of RPAPL 1953.

SBC’s rights flow from the deed into which the contractual obligations merged, as the lower courts properly concluded (Schoonmaker v Hoyt, 148 NY 425, 429-430; 3 Warren’s Weed, New York Real Property, Merger, § 3.01; 1A Warren’s Weed, op. cit., Contracts, § 20.02). The parties had expressly agreed that "the deed to be delivered by the Seller under this Agreement shall contain such provisions as are necessary to implement the [construction/repurchase] provisions * * * so that such provisions shall constitute covenants running with the land.” (Emphasis added.) This particularized expression and characterization of their specific intent as to the provision at issue should control and is superior to the boilerplate survival-of-contract-rights-and-obligations clause, found in paragraph 22 of the contract.

This case turns essentially on the proper classification of the construction/repurchase provision: Is it a covenant enforceable in equity or a future estate on a condition subsequent enforceable only under RPAPL 1953? A covenant is a promise to do or refrain from doing certain things with respect to real property (1A Warren’s Weed, op. cit., Conditions and Limitations, §§ 1.03, 2.01; 1A Warren’s Weed, op. cit., Deeds, § 14.01; 4A Warren’s Weed, op. cit., Restrictive Covenants, §§ 1.03, 1.05). A covenant for the construction of improvements on a parcel may be enforceable in an action at law for money damages for breach or where, as here, the covenant runs with the land, in an equitable action for specific performance (1A Warren’s Weed, op. cit., Conditions and Limitations, §§ 1.03, 2.01), the precise remedy to be fashioned to suit the competing equitable circumstances between the parties.

On the other hand, a right of reacquisition retained by a grantor upon the simultaneous creation of an estate, and triggered by a condition subsequent, is classified as a future estate (EPTL 6-4.6). A future interest on a condition subsequent is one that by failure or nonperformance may operate to forfeit an estate that is otherwise conditionally vested (Munro v Syracuse, Lake Shore & N. R. R. Co., 200 NY 224, 230; Towle v Remsen, 70 NY 303, 309, 311-312; 1A Warren’s Weed, op. cit., Conditions and Limitations, §§ 1.03, 5.01; EPTL 6-1.1, 6-4.6).

Whether the construction/repurchase provision in this deed qualifies as a covenant of a condition subsequent is dependent upon the parties’ intent. Intent is drawn from the governing instrument itself and from the particular language selected to reflect the goals and understandings of the parties.

While not alone dispositive, the provision in this deed uses the real property word of art, "covenants,” with respect to the contemplated construction/repurchase option. That helps to pin down the parties’ intent to create a covenant to allow repurchase, not a future interest on the happening of a condition subsequent which may effect a forfeiture (Graves v Deterling, 120 NY 447). The ultimate inclusion of the key provision in the deed instrument is likewise not alone dispositive in view of the covenant language used and the absence of the critical term "condition”. Again, particular words alone are not determinative and no particular words need be used (Munro v Syracuse, Lake Shore & N. R. R. Co., 200 NY, at 231, supra; Post v Weil, 115 NY 361, 369-372, 374; Towle v Remsen, 70 NY 303, supra; 1A Warren’s Weed, op. cit., Conditions and Limitations, §§ 2.01, 2.03). However, terminology is highly significant and launches the analysis because legal terms of art in a conveyance are presumed to have been used with their accustomed meaning, especially where the context and circumstances reveal no contrary direction (Graves v Deterling, 120 NY, at 457, supra). None of the traditional future interest language was used anywhere in this deed (Trustees of Union Coll. v City of New York, 173 NY 38; 1A Warren’s Weed, op. cit., Conditions and Limitations, § 3.01). Also supportive of our interpretation is the lack of any language parallelling the statutory language for the creation of future estates (see, EPTL 6-3.2 [a] [1] [C]; 6-4.6).

Examined from another perspective, we observe that a future interest may be deemed present where a grantor reserves a right to reenter to effectuate a forfeiture upon a grantee’s failure to perform a condition subsequent. While an express reentry reservation is not essential (Post v Weil, 115 NY, at 371, supra; 1A Warren’s Weed, op. cit., Conditions and Limitations, § 5.02), it is well established that inclusion of such a right is one of the clearest and strongest manifestations supporting a finding of intent to create a future interest on a condition subsequent (Munro v Syracuse, Lake Shore & N. R. R. Co., 200 NY, at 231, supra). Conversely, the weight of authority indicates that a covenant is intended and preferred where, as here, the deed is tellingly silent as to any reentry authorization (Cunningham v Parker, 146 NY 29, 33; Graves v Deterling, 120 NY, at 457, supra; Post v Weil, 115 NY, at 371-372, supra; Stillwell v Morley, 26 AD2d 740; 2 Powell, Real Property ¶ 188, at 13-69; 1A Warren’s Weed, op. cit., Conditions and Limitations, § 2.04; Restatement of Property § 45, illustration 13, at 144). This deed gives SBC only the discretionary option to repurchase the parcel on notice at the original purchase price as an agreed-upon remedy for Applied’s breach of the construction/repurchase provision.

Our conclusion that the deed contains a covenant and not a future estate is fortified by the plain meaning and operation of the deed’s repurchase provision; the provision does not effect a forfeiture, which is usually an essential component of a future interest on a condition subsequent (Trustees of Union Coll. v City of New York, 173 NY 38, supra; Upington v Corrigan, 151 NY 143, 154; Matter of Nelson, 154 AD2d 378). Although enforcement of the repurchase provision could lead to SBC’s reacquiring the subject land with its improvements, SBC’s payment to Applied of the original purchase price — as required by the deed repurchase provision — avoids forfeiture as that term of art is usually understood in such matters. The type of estate created should be determined with reference to the time the parties make their agreement and consummate their transaction. The subsequent improvement and appreciation of the land does not retroactively or by itself convert the critical provision into a future estate. These are matters requiring certainty and reliable predictability. Thus, they cannot be left to vary on a case-by-case basis. Indeed, one wonders what the effect and rule would be if the land here had not been improved and had depreciated in value. The case-by-case approach would deny effect to the parties’ agreement and intent and concentrate on extrinsic subsequent events, some of which are not even in the control of the contracting, transacting parties.

The legislative history of Real Property Law § 347, predecessor to RPAPL 1953, also indicates that the purpose of the statute is to limit the enforceability of forfeiture provisions (1958 Report of NY Law Rev Commn, at 227-228, 233, reprinted in 1958 McKinney’s Session Laws of NY, at 1709, 1713; see, 2A Powell, Real Property ¶ 271 [3], at 20-29 et seq.; 1A Warren’s Weed, op. cit., Conditions and Limitations, § 1.05; Board of Educ. v Miles, 15 NY2d 364, 367-368). Enforcement of this covenant does not effect a forfeiture. The Law Revision Commission Report, which proposed the statute as originally adopted, specifically distinguished future interests subject to conditions subsequent, a forfeiture species covered by section 1953, from nonforfeiture covenants such as a right of reconveyance enforceable in equity (1958 McKinney’s Session Laws of NY, at 1709). Parenthetically, an intention to preserve a future interest on a condition subsequent must be periodically refiled, which may shortly extinguish many such future interests through inadvertent failure to file (Real Property Law § 345; see, 2A Powell, Real Property ¶ 271 [3], at 20-32; Board of Educ. v Miles, 15 NY2d 364, supra).

Finally, therefore, the provision at issue is cogently distinguishable in character and effect from conditions in instruments which provide a right of reentry, which effect a forfeiture, and which use language reflecting a clear intent to create a future interest sufficient to overcome the presumption against conditions subsequent (see, Munro v Syracuse, Lake Shore & N. R. R. Co., 200 NY, at 230, supra; Upington v Corrigan, 151 NY, at 153-154, supra). We, thus, find more reasonable the conclusion that this repurchase provision, characterized in the deed as a "covenant” and lacking a reentry authorization or forfeiture effect, was intended by the parties to create a covenant enforceable in equity.

Denial of summary judgment to both parties leaves the defendant’s affirmative defenses to be resolved, as they have not been ruled on by any court thus far. We note also that Supreme Court has the broad, discretionary, equitable power to mold the appropriate remedy under all the circumstances pertaining to this dispute within the framework of this action.

Accordingly, the order of the Appellate Division should be modified, with costs to plaintiff, by denying defendant’s cross motion for summary judgment and remitting the case to Supreme Court for further proceedings in accordance with this opinion and, as so modified, affirmed.

Kaye, J.

(dissenting). The Court is called upon to decide whether the repurchase provision in issue is a condition subsequent or a restrictive covenant, a determination that obviously has significant impact on plaintiff’s remedy.

If — as plaintiff grantor, Suffolk Business Center (SBC), argues — defendant violated a covenant or contract right, the remedy will be specific performance by reconveyance of property or the monetary equivalent. If, on the other hand, the provision is a condition subsequent, enforcement must take place through the procedural vehicle of RPAPL 1953. Under the statute, defendant’s interest could be divested only on a determination that plaintiff possessed a substantial interest in enforcing its right. Moreover, the statute states that if it appears that the relief provided would be inequitable, Supreme Court may shape an appropriate remedy in order to avoid forfeiture of improved property or other unjust enrichment. A conclusion that a condition subsequent was intended would require dismissal of SBC’s complaint without prejudice to bringing the appropriate RPAPL 1953 proceeding, which in fact has already been commenced by SBC and stayed pending the determination of this appeal.

I agree wholeheartedly with the majority’s premises. The parties’ intent is controlling in determining whether they created a restrictive covenant or condition subsequent. Moreover, all contractual obligations of these parties merged into the deed, and the rights of SBC flow only from the deed; thus, we must determine the parties’ intent from the words of the deed and the surrounding circumstances. These premises, however, together with the time-honored proposition that equity abhors a forfeiture, lead me to the opposite conclusion: Supreme Court and the Appellate Division were clearly correct in holding that the parties intended to create a condition subsequent enforceable under RPAPL 1953, not a contract right enforceable in specific performance.

I.

With the fundamental premises in mind, a brief review of the facts points to affirmance of the Appellate Division order.

In 1978, SBC conveyed an eight-acre tract to defendant, Applied Digital Data Systems (ADDS), for $408,000. ADDS already owned an adjacent seven-acre tract which housed its manufacturing, engineering and general office operations. A provision contained in the deed provided that ADDS would construct a warehouse addition to its existing building — 12,600 square feet of which was to be located on the subject premises —and a separate office facility. Construction was to commence within one year of the date of the deed and was to be completed with due diligence. If ADDS failed to perform, SBC was given the option of repurchasing the property at the original purchase price. According to SBC, the provision served important purposes within the context of the development of its industrial park: to accelerate sales (and thereby increase the price of other property) and to ensure that lots were sold to purchasers who intended to construct substantial improvements, not to mere speculators.

In 1978 and 1979, ADDS constructed a 35,000-square-foot warehouse addition to its existing facility — 18,500 square feet on the subject premises (50% more than required in the deed). Underground utilities, parking facilities, paving and landscaping work were also completed at that time. These improvements cost ADDS $700,000.

Nearly six years later — on December 21, 1984 — SBC notified ADDS that it was in breach of the construction obligation for failure to build the office facility, that SBC was therefore exercising its right to repurchase at the original price of $408,000, and scheduling the closing in 30 days. At the time notice was sent by SBC, all marketable parcels in the original 300-acre tract had been sold. In 1985, when SBC tendered the $408,000 to ADDS, SBC’s own expert valued the property at $1.7 million. ADDS valued the property at $3.3 million in June 1988, when the summary judgment motion was submitted to the trial court.

On these facts, the majority now holds that the parties intended to create a restrictive covenant, one that gave SBC the option to repurchase the subject parcel at cost if the specified improvements were not made within the prescribed period. That analysis is flawed, as the ensuing sections demonstrate.

II.

As the majority acknowledges, in deciding the issue of intent "particular words alone are not determinative and no particular words need be used” (majority opn, at 388; see, Towle v Remsen, 70 NY 303, 311). The Court then concludes that the repurchase provision was intended as a restrictive covenant based on: the absence of traditional future interest language (id., at 388); failure of the parties to explicitly reserve a right to reenter (id., at 388-389); and the conclusion that enforcement of the provision would not effect a forfeiture of defendant’s estate (id., at 389).

Under the majority’s own standard, the first two grounds for deciding the issue of intent are not determinative. As for the third, there can be no question that enforcement of the repurchase provision would have the effect of terminating the defendant’s estate by operation of law, and therefore work a forfeiture of that estate.

Turning to the majority’s concern with the absence of particular words from the provision in issue, the reservation of an express right to "reenter” is not necessary (see, Post v Weil, 115 NY 361, 371). That point can have no clearer expression than the 1966 amendments to the EPTL, which replaced the term "right of reentry” with "right of reacquisition” (L 1966, ch 952, adding EPTL 6-4.6). The changes in language were made to eliminate "historical nomenclature which has become obsolete” (Report of Commn in Law of Estates on Estates, Powers and Trusts Law, 1966 McKinney’s Session Laws of NY, at 2936, 2942).

Rather than emphasizing the absence of "magic words” in the repurchase provision — an exercise we all agree is of little value in determining intent — the analysis should turn on the words used in the context of the parties’ transaction. That these parties intended to create a condition subsequent, rather than a covenant, is evident from the characteristics of the interest created — a personal right exercisable at the option of the grantor.

Like a covenant, a condition subsequent runs with the burdened land. But while the benefit of the covenant may also run with the land, the benefit of a condition subsequent is always personal to the grantor (see, Post v Weil, 115 NY, at 372-373, supra; 1A Warren’s Weed, New York Real Property, Conditions and Limitations, §§ 1.04, 5.07).

A personal right to reacquire the property was created in the deed over to ADDS, indicating that a condition subsequent was intended, not a covenant. The parties provided in the deed that the benefits of other restrictions — prohibiting certain uses of the subject premises, such as for a tavern or banking institution — were to run with the retained land. The repurchase provision, by contrast, contained no such limitation on the right of enforcement, thereby indicating that the parties intended to create a personal benefit in SBC.

The nature of the repurchase provision further indicates an intent to create a condition subsequent. Contrary to the majority’s emphasis on SBC’s "discretionary option” to repurchase the land (majority opn, at 389) as a basis for finding a covenant, the discretionary nature of the right to reacquire the property only serves to support the conclusion that a condition subsequent was intended. Indeed, one of the distinguishing characteristics of a condition subsequent is that the fee estate is terminated "only at the option of the grantor” (2 Powell, Real Property ¶ 188 [emphasis in original]; Upington v Corrigan, 151 NY 143, 153 [when condition occurred, it became optional with the grantor to have the forfeiture declared]).

Finally, as strong support for concluding that the provision created a covenant, the majority relies on its conclusion that exercise of the repurchase option would not work a forfeiture of defendant’s estate. The majority claims that repayment of the purchase price avoids a forfeiture as that term of art is usually understood in such matters (majority opn, at 389). The Court cites no authority for a definition of that term, and its conclusion is erroneous.

The Law Revision Commission defined forfeiture as related to "a restriction on the use of land under which the estate subject to the restriction is terminated by operation of law, either automatically or at the election of the grantor.” (1958 Report of NY Law Rev Commn, at 226, reprinted in 1958 McKinney’s Session Laws of NY, at 1708.) Under the common law, if a condition subsequent were found to exist, the court had no authority to change its terms and would be required to order the conveyance. Emphasis is on the inevitable loss of the estate by operation of law, which often involves a windfall for the grantor (see, e.g., RPAPL 1953 [3] [justice may require that the court "avoid a forfeiture of the value of improvements or other unjust enrichment”]).

The majority cites to the report made by the Law Revision Commission in support of the amendments to the Real Property Law made in 1958, for the proposition that repurchase provisions must be characterized as "nonforfeiture.” Absence of "forfeiture” leads the majority to conclude that no condition subsequent was intended.

Examination of the relevant authority, however, establishes that a forfeiture would result if the repurchase provision were specifically enforced. The case cited by the Law Revision Commission, Teachers Coll. v Goldstein (273 App Div 11, affd 297 NY 969), was a cy pres case that did not involve any discussion of a condition subsequent. The Law Revision Commission merely pointed out that such agreements may resemble nonforfeiture restrictions. Obviously, the facts and circumstances at the time of the creation of the interest must be examined in order to determine forfeiture.

That was precisely the course taken by the court in Pacamor Bearings v British Am. Dev. Corp. (108 AD2d 191), where the provision called for the repurchase of the land for $35,000 per acre if a certain facility was not under construction within two years of the transfer. The court was faced with the issue whether the relevant language created a condition subsequent or a covenant running with the land. Citing the need for additional facts to determine the intent of the parties, the court denied summary judgment.

It is a clear indication that a condition subsequent was intended when the continued enjoyment of the estate is made dependent upon the performance of a certain stipulation (Munro v Syracuse, Lake Shore & N. R. R. Co., 200 NY 224, 230; Craig v Wells, 11 NY 315, 320-321). A "forfeiture” takes place when the condition is violated, enjoyment of the estate is terminated and the property is reclaimed (see, Graves v Deterling, 120 NY 447, 457).

There can be no doubt that defendant’s estate was intended to depend on its fulfillment of the building requirement. As SBC’s counsel and secretary, who participated in the transaction, testified, SBC "intended only to sell property to purchasers who were going to construct a substantial improvement on the property.” If no construction was undertaken within the stated period, the intention was that the parties would return to their original positions — as if the conveyance had never occurred. In sum, ADDS would forfeit its right to continued enjoyment of the estate, albeit upon the repayment of the original purchase price.

Any test other than one that looks to the intent of the parties to have the estate terminate upon failure of the condition or stipulation would require the courts to establish a baseline figure for repurchase agreements. Should the rule be that repayment of the original purchase price — no matter what the increase in value due to the grantee’s efforts — always denotes a nonforfeiture restriction? SBC’s only attempt to distinguish Pacamor is based on the fact that the relevant provision there was contained solely in the deed, not in the governing contract. We agree with the majority that only the deed provision survives in the present case, making plaintiffs distinction inapplicable. Rather, the court must look to the facts surrounding the transaction and the effect of enforcement on the grantee’s estate — in this case the mandatory reconveyance of improved property for a fraction of its fair market value, or payment of the equivalent in money damages. Such a result, if ordered by the court, would indeed be forfeiture.

III.

Where the intent of the parties is not plainly manifested, courts will construe words of limitation as covenants in order to avoid the harsh consequences of forfeiture that sometimes result from enforcement of a condition subsequent. That very rule of construction, however, in this case argues for concluding that the language creates a condition subsequent.

The policy that courts will strive to avoid forfeiture and therefore interpret ambiguous provisions as creating covenants rather than conditions was applied with vigor prior the 1958 revisions to the Real Property Law (see, e.g., Lipton v Bruce, 1 NY2d 631, 637; Munro v Syracuse, Lake Shore & N. R. R. Co., 200 NY, at 230, supra). That policy must now be reevaluated in light of radical amendments to the statute (see, Glasser, Practice Commentary, McKinney’s Cons Laws of NY, Book 17B, EPTL 6-4.6, at 86 [revisions, including RPAPL 1953, "radically affect the common law learning on the right of reacquisition” incident to a fee on condition subsequent]).

Under the revised RPAPL 1953, one seeking to enforce a right of reentry (now known as a "right of reacquisition” under EPTL 6-4.6) must bring an action to compel conveyance of the property. The statute further provides that the relief requested — conveyance—will only be granted upon a showing that plaintiff has a "substantial interest in enforcement of the restriction.” (RPAPL 1953 [3].) Finally, the statute grants Supreme Court broad equitable power to "grant alternative relief’ or impose additional conditions "as justice may require.” (RPAPL 1953 [3].) These broad powers were granted to avoid "the chief evil of forfeiture restrictions,” namely their immunity to the doctrine of relative hardship and the unavailability of substitute forms of relief such as money damages (see, 1958 Report of NY Law Rev Commn, at 233, reprinted in 1958 McKinney’s Session Laws of NY, at 1713). With the "chief evil” exorcised, mechanical application of the nonforfeiture policy may actually undermine the goals of the revised statute.

The inapplicability of the policy to the present case is amply demonstrated by the parties’ respective positions. It is the grantee that seeks to have the provision interpreted as a condition subsequent, while the grantor argues that it is a covenant or a contract right. Clearly, SBC seeks to avoid the strictures placed upon the enforcement of the right of reacquisition by RPAPL 1953 — namely the showing of "substantial interest” in enforcement. Rather, SBC demands specific performance of the contract right, working the very inequity that section 1953 was intended to alleviate.

I therefore dissent.

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

Order modified, etc.

       Contrary to the majority’s characterization (majority opn, at 389), it is not intended that forfeiture be determined by reference to events occurring subsequent to creation of the interest. Rather, consistent with the analysis of the parties’ intent, it must be determined if defendant’s estate was meant to terminate by operation of law upon nonperformance of the condition. That this might lead to loss of valuable improvements by the one in possession indicates only that the forfeiture would work an inequitable hardship that should be avoided if possible (see, RPAPL 1953 [3]).