Smithers v. St. Luke

Brief Fact Summary.

R. Brinkley Smithers and the plaintiff, Adele Smithers made a gift to the defendant, St. Luke’s Roosevelt Hospital Center of $10 million over time for the establishment of an alcoholism treatment center (the “Gift”). The trustees of the center misappropriated the funds. After Smither’s death, the plaintiff brought suit to enforce the agreement between that was made between herself and Smithers, and the St. Luke’s Roosevelt Hospital Center.

Synopsis of Rule of Law.

A donor of a gift has standing along with the Attorney General to enforce the terms of their own gifts.

Facts.

Smithers and the plaintiff, Adele Smithers made a gift to the defendant, St. Luke’s Roosevelt Hospital Center of $10 million over time for the establishment of an alcoholism treatment center (the “Gift”). In his letter to the Hospital creating the Gift, Smithers wrote, “Money from the $10 million dollar grant will be supplied as needed. It understood however, that the detailed project plans and staff appointments must have my approval.” The Hospital purchased a building at 56 East 93rd Street in Manhattan to house the rehabilitation program which the Hospital agreed with Smithers it would create with the funds from the Gift. Smithers remained active in the management and affairs of the Center. In 1995, over a year after Smithers died after years of successfully soliciting millions for the restoration of the building, the Hospital announced that it was going to move the Smithers Center into a hospital and sell the East 93rd street building. Two months later, the Hospital
disclosed that it had been misappropriating funds from the Endowment Fund since before Smithers died. The plaintiff founded the Center with her husband with the vision of “first class alcoholism treatment and training.” The husband reserved to himself the right to veto the Hospital’s project plans and staff appointments for the Smithers Center. Smithers and her husband remained actively involved in the affairs of the Center until his death. During his life, the deceased found that certain things that were understood between him and the Center had not been carried out. Consequently, he decided not to donate the balance of the Gift. Smithers completed the Gift only when the Hospital expressly agreed to the various restrictions imposed by Smithers. The Attorney General did not act to prevent the Hospital from diverting the funds until the plaintiff brought her lawsuit. Followed by his initial investigation of the Hospital’s administration of the Gift, the Attorney General acqui
esced in the Hospital’s sale of the building, its diversion of the appreciation realized on the sale, and its relocation of the rehabilitation unit. Without the vigilance of the plaintiff, the Attorney General would have resolved the matter between himself and the Hospital without permission from any court. The plaintiff’s accountants discovered and informed the Attorney General about the Hospital’s misappropriation of funds. The plaintiff was the court appointed administratix of the estate of her deceased husband. After Smither’s death, the plaintiff brought suit to enforce the agreement between her and Smithers and the St. Luke’s Roosevelt Hospital Center.

Issue.

Whether the plaintiff has standing as a donor to enforce the charitable gift which she and her husband donated?

Held.

Yes. The plaintiff is the donor of the gift and donors have standing with the Attorney General to enforce the terms of their own gifts. There is a need for coexistent standing of the donor and the Attorney General. Donors are more likely to pursue litigation and conduct the necessary research for litigation. The plaintiff provided the initial research for the Attorney General’s case; she is not a person who has not conducted appropriate investigations. The plaintiff conducted the investigations that caused the Attorney General to get involved. Since the plaintiff is not a beneficiary, there is no risk of vexatious litigation by irresponsible parties who do not have a tangible stake in the matter. Furthermore, the desire to prevent vexatious litigation by irresponsible parties who do not have a tangible stake in the matter and have not conducted appropriate investigations has no application to the plaintiff. Also, the plaintiff has a right to sue because she is the admi
nisratix of the estate of her husband and both he and the plaintiff made an agreement with the defendant that the latter use the gift in a specific manner.

Discussion.

Here the plaintiff provided most of the investigation for the Attorney General’s preliminary case and she had conducted various fundraising activities for the Center. She had a manifested stake in the outcome of the case and her actions were a catalyst for the resolution of the case.

Dissent.

The plaintiff does not have standing to bring this action. The general rule is that when a charitable gift is made, without any provision for a reversion of the gift to the donor or his heirs, the interest of the donor and his heirs is permanently excluded. The right to seek enforcement of the terms of the gift is restricted to the Attorney General, absent a right to reverter. Standing is restricted to the Attorney General to prevent vexatious litigation by parties who do not have a tangible stake in the outcome of the litigation. The rule is designed to prevent a case-by-case inquiry. Therefore this concern applies to the current case even though the majority believes that the donor’s motives are altruistic. Furthermore, the plaintiff does not have standing as the administratrix because Mr. Smither’s right to exercise control over the gift abated upon his death. Finally, the plaintiff does not have standing because the donor did not expressly reserve a right of revers.

ion.