Meyer & Anna Prentis Family Foundation, Inc. v. Barbara Ann Karmanos Cancer Institute
266 Mich. App. 39, 698 N.W.2d 900 (2005)
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Rule of Law:
A naming provision in a charitable endowment agreement is an unenforceable gratuitous promise if the language expresses recognition and appreciation rather than a bargained-for exchange. Furthermore, the settlor of a charitable trust generally lacks standing to bring a lawsuit to enforce its terms.
Facts:
- In 1985, the Prentis Family Foundation, Inc. (plaintiff) entered into an endowment agreement with several parties, including the Comprehensive Cancer Center of Metropolitan Detroit (the center).
- Under the agreement, the Prentis Foundation agreed to donate $1.5 million to be used solely for cancer research.
- The agreement stated that 'in recognition of' and 'in appreciation to' the Prentis Foundation for its contributions, the center would be renamed the 'Meyer L. Prentis Comprehensive Cancer Center of Metropolitan Detroit.'
- The law firm Honigman Miller Schwartz and Cohn (HMSC) represented the center in the creation of the 1985 agreement.
- In 1994, the center merged with the Michigan Cancer Foundation. A representative of the Prentis Foundation sat on the center's board and was present for discussions about the merger.
- In 1995, the newly merged entity received a large donation from Peter Karmanos and voted to rename itself the Barbara Ann Karmanos Cancer Institute.
- The Prentis Foundation's representative was also present when the Karmanos gift and renaming were discussed and voted on.
- The center was never officially renamed in honor of Meyer L. Prentis.
Procedural Posture:
- Prentis Family Foundation, Inc. filed suit against the Barbara Ann Karmanos Cancer Institute and the law firm Honigman Miller Schwartz and Cohn (HMSC) in state trial court.
- The trial court granted summary disposition in favor of HMSC, dismissing it as a defendant.
- The trial court also granted summary disposition dismissing the Foundation's claim for legal damages against the Karmanos Cancer Institute.
- Following a bench trial on the remaining issues, the trial court found that the Karmanos Cancer Institute had breached the 1985 agreement.
- The Prentis Family Foundation appealed the trial court's dismissal of HMSC and the dismissal of its damages claim to the Michigan Court of Appeals.
- The Karmanos Cancer Institute filed a cross-appeal, challenging the trial court's finding that it had breached the agreement.
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Issue:
Does a naming provision in a charitable endowment agreement constitute an enforceable contract where its language indicates a gift, and does the settlor of that agreement have standing to sue for its enforcement?
Opinions:
Majority - PER CURIAM
No. A naming provision in a charitable endowment agreement is not an enforceable contract without valid consideration, and the settlor of a charitable trust lacks standing to sue for its enforcement. The court reasoned that the donation created a charitable trust, and under established Michigan law, a settlor (the donor) may not bring suit to enforce the terms of such a trust; that power is reserved for the Attorney General, a cotrustee, or a person with a special interest. Furthermore, the naming provision lacked consideration because the contract's language—'[in] recognition of and appreciation to'—did not indicate a bargained-for exchange, but rather a gratuitous promise made in gratitude for a gift. The court also held that the law firm, HMSC, owed no fiduciary duty to the Prentis Foundation because its client was the center, and an attorney's duty to a client does not extend to third parties with potentially adverse interests. Finally, any potential claim against HMSC would be barred by the three-year statute of limitations, as the Foundation's representative on the center's board knew or should have known of the breach when the center was renamed in 1995.
Analysis:
This decision reinforces the strict requirement of bargained-for consideration in contract law, distinguishing legally enforceable promises from gratuitous ones made in the context of charitable giving. It serves as a crucial precedent for non-profits and donors, clarifying that naming rights or other conditions on a gift must be framed with explicit contractual language to be enforceable. The ruling also affirms the established legal doctrine that limits a settlor's ability to enforce a charitable trust, channeling oversight through the state Attorney General to prevent charities from being subjected to endless litigation from donors. This protects the autonomy of charitable organizations while maintaining a mechanism for public accountability.
