Court Upholds Award to Sierra Club Foundation

SAN FRANCISCO —  A state appeals court Thursday upheld $2.7 million in damages awarded to the Sierra Club Foundation in a dispute with a New Mexico donor who claimed that the organization misused a gift he made in 1970.

The 1st District Court of Appeal said the Sierra Club proved that developer Ray A. Graham III had no basis for his fraud suit and had sued out of malice, to discredit the foundation and hurt its fund-raising.

Graham donated stock in 1970 to a foundation fund that was to be used for financing conservation projects, primarily in New Mexico. He said later that he thought his gift would be used to buy a northern New Mexico ranch where sheep owned by a cooperative could graze.

But the foundation said it never promised any specific use for the gift and that the cooperative did not come into existence until 1984, four years after Graham agreed to let his donation be used for support of the Sierra Club. Foundation officials said they tried unsuccessfully to find suitable land to buy.

The court said Graham did not ask about the status of his gift until 1990, after he clashed with the foundation over ownership of Albuquerque-area marshland claimed by both Graham and the foundation. The dispute was unrelated to his 1970 donation.

After learning that the foundation had not bought any land with his donation, he sued the organization in federal court in San Francisco, claiming breach of contract and fraud in the handling of his gift. A judge dismissed the suit in 1993, ruling that Graham had made a gift with no strings attached.

After the dismissal, the foundation sued Graham in San Francisco Superior Court for malicious prosecution in 1994, winning a jury verdict that was upheld Thursday.