2014-09-18 / Front Page

Deed Adds to Dispute

Reverter interest in Newport Grand land cited
By Barry Bridges

While there is no shortage of opinions on the proposal to introduce table games in Newport, other questions are percolating around a 40-year-old deed to the land adjacent to the existing slot parlor and whether language in that document means that the city can reclaim 10 acres presently occupied by the facility’s parking lot. The situation could potentially create problems for developers who hope to spend $40 million to transform the business into a boutique casino.

The issue stems from a 1975 deed executed when Arthur Silvester, the father of Newport Grand’s current owner, Diane Hurley originally bought the property from the city subject to a “reverter clause.” A provision in the deed reads: “This conveyance is made subject to the condition that if the property is not developed within 24 months from the date hereof for use as, and thereafter is not used continuously and exclusively in connection with, or as part of, a jai alai fronton development and/or a civic center, then and in that event, title to said property shall revert to [the city who shall] repay the purchase price.”

Some Newporters are arguing that since the conditions specified in the deed are not being satisfied (i.e., since the parcel is not being used for jai alai or a civic center), the reverter clause has given the city a restored interest in the land.

At-large City Councilor Michael T. Farley was among the first to bring the question to the forefront several weeks ago. After examining the relevant documents and researching the issue, he says a case can be made that title to the tract has returned to the city.

Interim Newport Solicitor Christopher Behan and Interim Newport City Manager Joseph Nicholson disagree, saying that the clause has expired and is no longer in play. They rely on the authority of Rhode Island General Laws § 34-4- 19, which states that a reverter interest is void if not exercised within 20 years from the deed’s execution.

Behan told Newport This Week, “The reverter is null and void, and this is the opinion I’ve given to the city. It expired pursuant to statute after 20 years in 1995.” Playing devil’s advocate, however, Behan continued to say that even if it did not expire, it’s highly unlikely that a court would use its equitable powers to allow the city to demand rights to the parcel after 40 years have passed. “Equity abhors a forfeiture,” he said. “There are constitutional rights to property ownership, and courts are reluctant to order a forfeiture, which would be the effect of this.”

He also commented that if the possibility of a reversion was still viable, it would have arisen as a stumbling block earlier in the process when the developers were making financing arrangements for the project.

Similarly, a review of the legalities has convinced Nicholson that the clause is void, but he and Behan have forwarded the matter to outside counsel for an additional opinion. “It’s always helpful to have another set of eyes on something,” he said.

Farley conceded that Rhode Island law contains a 20-year expiration period, but went a step further and argued that exceptions to the law apply in this case. He pointed to a separate statute, § 34-4-20(3), which specifies that the provisions relied upon by Nicholson and Behan “shall not apply to a possibility of reverter or right of entry for condition broken in [a] … grant, gift or devise for public, charitable, or religious purposes.”

“Because there was a ‘public purpose’ (protecting the interests of the City of Newport) in the deed’s language, there is no expiration here,” he said.

Farley also distinguished between a “possibility of reverter,” where the subject property automatically goes back upon the satisfaction of a condition, and a “right of reverter,” which is a weaker interest and requires a party to initiate a court action before reclaiming land.

The 1975 deed language seems to be of the first type, a possibility of reverter, Farley maintained. He feels there is support for an argument that the condition triggering the return of the land to the city was satisfied in 2003 when jai alai ceased operations. Moreover, additional reversion language in a 1997 deed signed when Silvester conveyed the property to Hurley could provide Newport with an additional justification to go into court and claim an interest in the acreage, Farley added.

Whatever the formal legal conclusions, Farley also referenced the “moral obligation bonds” that have often been mentioned in the news since the downfall of 38 Studios.

“Even if the reverter did expire in 1995 and even if it was not retriggered in 1997, one could argue that Ms. Hurley has a moral obligation to honor the commitments made by her father in 1975,” he offered.

Although outside counsel has not specified a timeline in advising the city on the deeds, Farley looks forward to receiving the additional legal analysis. “It’s good that we have an independent attorney to look at the reverter issue and to expand upon what constitutes a ‘public purpose,’” he said.

Return to top