In a previous blog post, we discussed a court ruling on when a party can terminate a license to use property at will. The decision of the New York Appellate Division, Fourth Department in Skaneateles Country Club v. Cambs had created another exception to the general rule that license agreements can be terminated at will. The Court had held that the plaintiff could not terminate the license under the circumstances. The plaintiff appealed to the New York State Court of Appeals which now has rendered a decision reversing the Appellate Division and allowing the plaintiff to revoke the license.
As background, Skaneateles involved an agreement between the plaintiff, a country club, and the defendant, a club member, that granted the defendant a license to use one of the plaintiff’s boat slips. The defendant contributed towards construction of the slip and paid an annual maintenance fee. Subsequently, the parties had a dispute and the plaintiff brought an action to declare the defendant’s slip license to be “terminable at will.” The trial court granted summary judgment to the plaintiff and the defendant appealed.
The Fourth Department, with two dissenting Justices, reversed the trial court’s determination finding that the agreement between the parties contained an explicit right of termination for the defendant but none for the plaintiff, thus, the license could not be terminated by the plaintiff. The matter was appealed by the plaintiff to the Court of Appeals.
In its decision, the Court indicated that neither party disputed that the agreement between them was a license agreement and that the only issue for the Court to consider was whether the plaintiff had the ability to revoke the same. The Court noted that a license is generally a revokable privilege for one party to do one or more acts of a temporary nature upon the land of the other party. In examining the record, the Court found that nothing in the agreement between the parties limited the plaintiff’s right to terminate the license or indicated an intent to alter the general rule that a license is revocable at will.
Notably, the decision did not mention the fact that the defendant had paid for the dock to be built and paid annual maintenance fees to the plaintiff, a fact which the Fourth Department had relied upon in finding for the defendant. The Court of Appeals did acknowledge that licenses may become irrevocable in certain circumstances and cited cases which found that a license can become irrevocable in situations where the conduct of the licensor makes it inequitable for the license to be revoked or where the licensee, in reliance upon the agreement, altered his or her position. However, the Court found that no such circumstances were presented in this case and ordered that the judgment of the Appellate Division, Fourth Department be reversed and that of the Supreme Court, Onondaga County reinstated, meaning the plaintiff prevails and the defendant does not get any of the funds it paid returned to it.
The lesson of this case is that it is best to have an experienced attorney draft the license agreement to ensure it reflects the parties’ understanding of the terms and avoids the possibility of an unfavorable court decision.
If you have a real estate or contract dispute, contact one of our attorneys for a consultation to learn how we can help you effectively resolve your matter.