Cathedral of the Incarnation in the Diocese of Long Island, Inc. v. Garden City Co.

In 1891 Cornelia Stewart’s heirs sold her property in Garden City to the Cathedral of the Incarnation in the Diocese of Long Island, Inc. (Cathedral) (plaintiff). The deed restricted its use for the church, specifying that the property could not be “used or occupied for any other use or purposes than . . . religious uses or educational purposes.” In 1893 the Stewart heirs conveyed other property from Cornelia’s estate to the predecessor of Garden City Company (GCC) (defendant), along with any interest the heirs retained in Cathedral property. Cathedral used the property for the church for the next century. In 1993 Cathedral filed for bankruptcy. The bankruptcy court directed some of Cathedral’s properties sold. Cathedral contracted to sell parcels and petitioned under the New York stale-conditions statute to lift the deed restrictions. GCC responded that it owned interests in the property because the Stewart heirs conveyed less than fee simple title to Cathedral, and that the deed restrictions created either a condition subsequent or a conditional limitation such that GCC owned the property once Cathedral stopped using it for religious purposes. GCC also argued that extinguishing its rights deprived it of property interests without due process. Cathedral submitted a chancellor’s affidavit stating that continuing to own the property was a financial burden that drained resources that it could use to provide other services and programs to the community. A GCC executive gave deposition testimony that constructing smaller homes on the property could negatively affect GCC’s commercial properties. The trial court granted summary judgment for Cathedral, reasoning that the deed reserved a right of reentry (now called a right of reacquisition) that GCC could not enforce because it was not assignable when the deeds were created, meaning the Stewart heirs could not convey that right to GCC’s predecessor. The court found that the circumstances fell within the scope of the stale-conditions statute, found the statute constitutional, and granted summary judgment lifting the restrictions. GCC appealed.