Rekis v. Lake Minnewaska Mountain Houses, Inc.

OPINION OF THE COURT

Casey, J.

Plaintiff commenced this action seeking, inter alia, a judgment declaring his rights to a five-acre parcel of property which was formerly part of a large tract of land consisting of several thousand acres in Ulster County known as Lake Minnewaska. The large tract was owned by defendant Lake Minnewaska Mountain Houses, Inc. (hereinafter LMMH), which had employed plaintiff for several years prior to 1987. As part of his compensation, plaintiff was allowed to reside in a house located on the five-acre subject parcel of property.

In May 1987, plaintiff was asked to appear at the offices of LMMH’s attorneys to sign some documents related to his staying on the property for a period of time. Among the documents was an agreement between LMMH and plaintiff which provided, in pertinent part, that:

"whereas, 'Lake Minnewaska’ is about to be conveyed to the Nature Conservancy and thereafter to the State of New York for use as a public park and recreation area in order to avoid condemnation; and

"whereas, the State of New York has permitted LMMH to express its gratitude and appreciation to [plaintiff] for his many years of service by permitting LMMH to provide a residence for [plaintiff] on a portion of the Lake Minnewaska property. * * *

"1. LMMH agrees to convey to [plaintiff] the real property together with improvements thereon as described in Schedule 'A’ annexed hereto.

"2. The Deed of Conveyance shall be executed simultaneously with this agreement and recorded prior to the closing of title with the Nature Conservancy. * * *

"4. Simultaneously with the execution of this Agreement, [plaintiff] shall execute and deliver the deed of conveyance of the property in Schedule B to LMMH.

"5. The Deed shall be held in escrow * * * until the closing of title with [the] Nature Conservancy and recorded * * * immediately after the conveyance to the Nature Conservancy.

"8. LMMH agrees to contribute the sum of $5,000 towards the costs of improving the premises described in Schedule A and agrees to pay the costs of installation and connection of a new well for potable water.”

When plaintiff executed this agreement with LMMH and the deed referred to in paragraph 4 of the agreement, he was unaware that the contract of sale of the large tract of land to the Nature Conservancy contained the following provision: "Notwithstanding anything to the contrary contained in this Agreement, the parcels described in Exhibits C-l and C-2 attached thereto * * * shall not be included in the Premises to be conveyed by Seller to Purchaser as provided herein. At or before the Closing, Seller shall convey or cause to be conveyed to [plaintiff] * * * the parcel[] described in Exhibit C-l” (emphasis in original).

It is undisputed that the parcel to be conveyed to plaintiff pursuant to the foregoing provision is the same parcel as that described in the deeds executed by LMMH and plaintiff pursuant to their agreement. When plaintiff learned of the provision in the Nature Conservancy contract which required conveyance to him of the subject parcel, he commenced this action, alleging that the deed executed by him in favor of LMMH was void, that he was a third-party beneficiary under the Nature Conservancy contract and that LMMH was guilty of fraud. Following a hearing before a Judicial Hearing Officer (hereinafter JHO), plaintiff’s complaint was dismissed for failure to prove entitlement to any relief. These appeals followed.

At the hearing, plaintiff testified that the deed signed at the offices of LMMH’s attorneys in May 1987 contained no description of the property to be conveyed by the deed, and defendants presented no evidence to the contrary. The JHO specifically found that plaintiff "was asked to and did sign a deed in blank, which was filled in later to convey his house and five acres to LMMH”. A deed which contains a blank space instead of a description when signed is not an instrument of conveyance, and if the necessary words are inserted thereafter, the completed instrument is not one which was executed by the signer (see, Hulburt v Walker, 258 NY 8, 11). Thus, the deed executed by plaintiff was void and it was not made valid by the filling in of a description after its delivery (1 Rasch, New York Law and Practice of Real Property § 24:34, at 809 [2d ed]). The court in Hulburt v Walker (supra, at 20) indicated that a party who signs a blank deed and has it acknowledged may be estopped from repudiating the deed because of his negligence. It is apparent from the court’s discussion of the estoppel doctrine in relation to blank instruments (supra, at 16-21) that the doctrine is available to innocent third parties who have no knowledge of the defect and rely upon the subsequently completed instrument. Here, however, LMMH procured plaintiffs signature and acknowledgment on the blank deed, which was prepared by LMMH’s agent, and, therefore, LMMH knew or should have known that the deed was void. Accordingly, there is no basis for LMMH to assert the doctrine of estoppel, and based upon the JHO’s finding that plaintiff signed a blank deed, plaintiff is entitled to a declaration that the deed was void.

As to plaintiffs claim concerning the provision of the contract of sale of the large tract of land to the Nature Conservancy,^* the JHO concluded that plaintiff had no rights in the absence of privity to the contract. Lack of privity, however, does not preclude plaintiff from seeking to enforce the contract. "It is old law that a third party may sue as a beneficiary on a contract made for his benefit” (Port Chester Elec. Constr. Corp. v Atlas, 40 NY2d 652, 655). "Nonparty enforcement of a contractual promise is limited to an 'intended’ as contrasted with an 'incidental’ beneficiary * * *. One is an intended beneficiary if one’s right to performance is 'appropriate to effectuate the intention of the parties’ to the contract and either the performance will satisfy a money debt obligation of the promisee to the beneficiary or 'the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance’ ” (Lake Placid Club Attached Lodges v Elizabethtown Bldrs., 131 AD2d 159, 161, quoting Restatement [Second] of Contracts § 302 [1] [a], [b] [emphasis in original]).

We find that the relevant contractual provision in this case admits of no other interpretation than that plaintiffs right to the conveyance provided for in the contract is appropriate to effectuate the intention of the parties and that the promisee (the Nature Conservancy) intended to give plaintiff the benefit of the conveyance. Our conclusion concerning the intent of the promisee is based on the fact that this is not a case where several parties, including those who are party to the contract and those who are not, will benefit by the promisor’s performance (see, e.g., Fourth Ocean Putnam Corp. v Interstate Wrecking Co., 66 NY2d 38). Instead, plaintiff is the direct and only beneficiary of the promise to convey the property, and conveyance of the property to plaintiff was necessary to carry out the Nature Conservancy’s intent, manifest in the agreement, that the promisor retain no interest in any of the property subject to the agreement. That the Nature Conservancy intended the conveyance to plaintiff to occur is further established by the requirement that the property be conveyed to plaintiff at or before the closing of the Nature Conservancy’s purchase of the remainder of the property, not at some future time long after the other provisions of the contract had been performed. The promisor’s intent to recognize plaintiff’s years of service as a faithful employee could have been satisfied by a provision requiring a life estate or a fixed term, but instead, at the promisee’s insistence, article X of the contract requires a conveyance to plaintiff. It is clear, therefore, that the conveyance provision of article X is not solely for the purpose of satisfying the promisor’s intent, but also is in furtherance of the promisee’s intent that the entire tract of land, including the subject parcel, be conveyed by the promisor so that upon closing of the contract the promisor would retain no interest in any of the land. With respect to the subject parcel, the promisee’s intent could only be satisfied by a conveyance to plaintiff and, therefore, plaintiff is a third-party beneficiary entitled to enforce the provision despite the absence of privity.

Next, we find no error in the dismissal of plaintiff’s causes of action based upon the allegations of fraud. It is true that LMMH’s failure to disclose the existence of the provision in the Nature Conservancy contract concerning the conveyance to plaintiff may have constituted a false representation because LMMH had a superior knowledge which was not available to plaintiff when he executed the agreement with LMMH (see, Young v Keith, 112 AD2d 625, 626-627). To succeed on his claim, however, plaintiff was required to show concealment with intent to defraud (see, Nasaba Corp. v Harfred Realty Corp., 287 NY 290, 295), and the evidence is insufficient to show the necessary intent. It is apparent from the record that LMMH’s principals acted under the belief that the conveyance required by the provision in the Nature Conservancy contract would be satisfied by giving plaintiff some lesser interest in the property than fee title, and the agreement with plaintiff was an inept attempt to provide plaintiff with the right to reside on the property for a period of time. Although the principals of LMMH were wrong in their belief as to what was required by the provision in the Nature Conservancy contract, evidence of an intent to deceive is lacking.

As to the contract between plaintiff and LMMH, which plaintiff seeks to have declared null and void, it is the general rule that a contract is voidable under the equitable remedy of rescission if the parties entered into the contract under a mutual mistake of fact which is substantial and existed at the time the contract was entered into (Ryan v Boucher, 144 AD2d 144, 145; Brauer v Central Trust Co., 77 AD2d 239, 243, lv denied 52 NY2d 703). Here LMMH entered into the contract under a mistaken belief as to plaintiff’s rights under the Nature Conservancy contract and plaintiff had no knowledge of those rights. In addition, although the parties were of the belief that the purpose of their agreement was to provide plaintiff with the right to reside on the property for a period of time, the contract contains no provision giving him any such right. In these circumstances, we are of the view that the contract was entered into under a mutual mistake of fact and should, therefore, be rescinded.

Inasmuch as we have declared void plaintiff’s deed to LMMH, plaintiff becomes the owner of title to the property pursuant to the deed executed by LMMH. Although LMMH’s deed to plaintiff was executed pursuant to the contract which should be rescinded, the deed should remain in full force and effect because it provides plaintiff with that to which he is entitled as third-party beneficiary under the Nature Conservancy contract.

* Although the dissent characterizes this claim as raising the key issue for resolution of the entire dispute between the parties, the claim is only one of several raised by the parties and the issue is no more dispositive of the parties’ rights than any of the other issues.