## Facts

- Taxpaying residents of a Union Free School District challenged the Board of Education’s approval of the superintendent’s resignation agreement.
- The board voted to accept the superintendent’s resignation and to pay a lump sum of $65,000 plus continued health-insurance benefits.
- The taxpayers alleged the district had no preexisting contractual obligation to make the payment or provide the benefits, rendering the transaction an unlawful gift of public money.
- The board asserted the payment was a good-faith settlement of a bona fide dispute or potential claim, supported by consideration (including securing resignation and avoiding litigation).
- The papers submitted did not clearly show what contractual rights the superintendent had, what claims he asserted or could assert, or how the amount related to any exposure or damages.

## Issues

1. Whether the record permitted a court to decide, as a matter of law, that the superintendent’s $65,000 payment and benefits were a lawful settlement rather than a prohibited gift of public funds.
2. Whether the trial court properly directed an evidentiary hearing to develop facts necessary to classify the payment as a settlement supported by consideration or an unlawful gratuity.

## Decision

- The Appellate Division affirmed the order directing a hearing.
- On the existing record, the court could not determine whether the payment reflected settlement of a legitimate claim or an unlawful gift of public moneys.
- The matter was remitted for fact-finding on the nature of the dispute, any viable claims, and whether the agreement was supported by consideration.

## Legal Principles

- Public bodies may not make gratuitous transfers of public funds; expenditures must be for lawful public purposes and not constitute gifts.
- A payment made to settle a bona fide, nonfrivolous claim against a public entity may be lawful because it is supported by consideration (e.g., release of claims, avoidance of liability).
- When the record does not establish whether a challenged payment is supported by consideration or is gratuitous, a court may require an evidentiary hearing before upholding or invalidating the expenditure.

## Conclusion

The court required factual development because the papers did not allow a legal determination of whether the superintendent’s resignation payment was a permissible settlement of a bona fide claim or an impermissible gift of public funds.


Ingram v. Boone, 91 A.D.2d 1063, 458 N.Y.S.2d 671 (N.Y. App. Div. 2d Dep’t 1983)