Can a Beneficiary of a Charity Challange the Transfer of Assets of a Non-Profit Corporation to Another Charity ?
In Alco Gravure, Inc. v. Knapp Foundation, 64 N.Y.2d 458, 479 N.E.2d 752, 490 N.Y.S.2d 116 (N.Y. 1985), potential beneficiaries of a charitable trust sued to prevent a non-profit corporation from transferring its assets to another charity with a similar, but not identical, purpose.
The court first noted that both the attorney general and a trial judge approved the transfer of assets and implied that it would deny standing to a private plaintiff challenging the administration of a charity.
However, it recognized that the individual plaintiffs' status as preferred beneficiaries would be eliminated had the transfer occurred.
Using a multi-factor approach, the court held that because the remedy sought was to preserve the existence of the charity itself, because the benefited class was small and identifiable, and because beneficiaries would be directly harmed by the transfer of the assets, the plaintiffs had a special interest sufficient to challenge the transfer.