Tuesday, November 12, 2013

Manhattan Eye, Ear and Throat Hospital v. Spitzer case brief

Manhattan Eye, Ear and Throat Hospital v. Spitzer case brief summary
715 N.Y.S.2d 575 (1999)

Petitioner specialty hospital, a Type-B charitable corporation, sought authorization to sell substantially all of its assets, pursuant to N.Y. Not-For-Profit Corp. Law § 511. Respondent, attorney general of the State of New York, opposed the petition on the ground that other offers had been submitted which would have preserved the charitable hospital.


Faced with decreasing revenues, the board of directors (board) for petitioner hospital voted to sell its assets, primarily its real estate to two buyers, a cancer treatment and research hospital and a real estate developer which proposed to erect an apartment building. Because the proposed sale would have effectively closed petitioner's specialty hospital, a trial court had to approve any fundamental changes in the life of a Type B charitable corporation underN.Y. Not-For-Profit Corp. Law § 511. Respondent attorney general, a required party which acted as parens patinae under the statute, opposed the petition. 

  • After reviewing petitioner's original corporate mission, the trial court concluded that the board deliberately chose a course of action which would have led to the hospital's sale and closure. 
  • The trial court then denied the petition, concluding that petitioner failed to show that the proposed transaction was fair and reasonable or that it would have furthered petitioner's corporate purposes.

Because petitioner's proposal to sell its assets failed to meet the two pronged test under the Not-For-Profit Corporation Act, i.e. the terms of the transaction were not fair and reasonable and there was no showing that the sale would have promoted the corporation's purposes, the trial court disapproved the proposed sales transaction.

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