Chapter 7—Creation and Modification of Charitable Trusts
In order to create a charitable trust the testator must satisfy all of the requirements to create a private trust (intent, beneficiaries, res and writing) and intend for the trust to be used for a charitable purpose. Courts have more flexibility when it comes to modifying the terms of a charitable trust. In some cases, courts can even repurpose the funds in the trust.
7.1 Creation of the Charitable Trust
To qualify as a charitable trust, the trust must have a valid charitable purpose that benefits an indefinite class of persons. Charitable purposes include: (1) the relief of poverty; (2) the advancement of education; (3) the advancement of religion; (4) the promotion of health; (5) government or municipal purposes; and (6) other purposes the accomplishment of which is beneficial to the community.
Which of the following trusts have a charitable purpose?
a). A trust to establish a museum to display the love letters the settlor wrote to his wife.
b). A trust to conduct stem cell research.
c). A trust to provide gym memberships to residents that are at least fifty pounds overweight.
d). A trust to plant a community garden.
e). A trust to build a house for the minister of a church.
f). A trust to send the members of a church choir on an annual vacation.
g). A trust to pay the salary of a law professor.
h). A trust to send Tina to college if she promises to teach in the testator’s hometown.
Marsh v. The Frost National Bank, 129 S.W.2d 174
Opinion by Justice Rodriguez.
This is a declaratory judgment action. Appellants, Anna Spohn Welch Marsh, Noel Marsh, and Holly McKee, appeal from a probate order that modified a provision in the will of Charles Vartan Walker, deceased. Appellants raise four issues on appeal: (1) whether the trial court properly applied the cy pres doctrine to reform a will provision and (2) whether the trial court correctly ruled that tract 3 with its associated income, rather than the proceeds of the sale of that land, should be conveyed to the charitable beneficiary based on the cy pres reformation; We reverse and remand.
I. Factual Background
Charles Walker died on March 13, 2000, leaving a holographic will. The will named appellee, Frost National Bank (Frost Bank), as independent executor. On July 11, 2000, Frost Bank filed an original petition for declaratory judgment for clarification of several probate matters including the construction of Article V of the Charles Walker will, the provision at issue in this appeal. Article V reads in relevant part:
I hereby direct my Executor to sell tract 3 of the V.M. Donigan 456.80 Partition for cash and to invest the proceeds in safe and secure tax-free U.S. government bonds or insured tax-free municipal bonds. This trust is to be called the James Madison Fund to honor our fourth President, the Father of the Constitution. The ultimate purpose of this fund is to provide a million dollar trust fund for every American 18 years or older. At 6% compound interest and a starting figure of $1,000,000.00, it would take approximately 346 years to provide enough money to do this. My executor will head the Board of Trustees…. When the Fund reaches $15,000,000 my Executor’s function will cease, and the money will be turned over to the Sec. of the Treasury for management by the federal government. The President of the U.S., the Vice President of the U.S., and the Speaker of the U.S. House of Representatives shall be permanent Trustees of the Fund. The Congress of the United States shall make the final rules and regulations as to how the money will be distributed. No one shall be denied their share because of race, religion, marital status, sexual preference, or the amount of their wealth or lack thereof….
Appellants filed an answer to the petition for declaratory judgment alleging that Article V of the will is void under the rule against perpetuities. Appellee, John Cornyn, Texas Attorney General, intervened in this action pursuant to section 123.002 of the Texas Property Code alleging that a general charitable intent could be found and that Article V of the will created a charitable trust. See Tex. Prop. Code Ann. § 123.002 (Vernon 1995). The Attorney General then moved for the application of the cy pres doctrine to Article V. After a hearing on this issue, the trial court found in relevant part that: (1) the will evidenced a general charitable intent; (2) Article V of the will established a valid charitable trust not subject to the rule against perpetuities; (3) the Attorney General’s request to have the court exercise its cy pres powers should be granted; and (4) attorney’s fees should be awarded to the Attorney General. The order was signed with the modification of the trust and charitable beneficiary to be determined after a second hearing. The second hearing was held before a different judge. After reconsidering the previous order, the second judge confirmed and ratified that order and signed a final judgment establishing the modifications of Article V. This appeal ensued.
II. Interpretation of Article V
In their first issue, appellants argue that Article V does not show a charitable intent and therefore is not subject to reformation under the cy pres doctrine. Furthermore, appellants argue that because Article V violates the rule against perpetuities and cannot be legally reformed, it is void, and the proceeds of the land that would fund the trust should pass through intestate succession.
In Texas, under the rule against perpetuities, an interest is not good unless it must vest, if at all, not later than twenty-one years after some life in being at the time of the creation of the interest, plus a period of gestation. Id. § 112.036; see Foshee v. Republic Nat’l Bank, 617 S.W.2d 675, 677 (Tex. 1981). Both perpetual trusts and trusts for an indefinite duration violate the rule against perpetuities and are void. Atkinson v. Kettler, 372 S.W.2d 704, 711 (Tex. Civ. App.-Dallas 1963), aff’d, 383 S.W.2d 557 (Tex. 1964). The rule against perpetuities does not, however, apply to charitable trusts. See Tex. Prop. Code Ann. . § 112.036 (Vernon 1995); Foshee, 617 S.W.2d at 677. Therefore, we must first address whether Article V of the will establishes a trust for a charitable purpose.
Whether or not a given purpose is “charitable” is a question of law for the court to decide. Frost Nat’l Bank v. Boyd., 188 S.W.2d 199, 206 (Tex. Civ. App.-San Antonio 1945), aff’d, 145 Tex. 206, 196 S.W.2d 497 (1946). When an issue turns on a pure question of law, we apply a de novo standard of review, Tenet Health Ltd. V. Zamora, 13 S.W.3d 464, 468 (Tex. App.-Corpus Christi 2000, pet. dism’d w.o.i. (citing State v. Heal, 917 S.W.2d 6,9 (Tex. 1996), and we are not obligated to give any deference to legal conclusions reached by the trial court Id. at 468-69.
Where the question of whether a given purpose is or is not charitable arises, the words “charitable purpose” have a definite ascertainable meaning in law, and a judicial determination may be made with satisfactory certainty in every case. See Boyd v. Frost Nat’l Bank, 145 Tex. 206, 196 S.W.2d 497, 501-03 (1946). Legal concepts of what are “charitable purposes” are categorized in section 368 of the Restatement Second of Trusts. Id. at 502, Section 368 provides as follows:
Charitable purposes include (a) the relief of poverty; (b) the advancement of education; (c) the advancement of religion; (d) the promotion of health; (e) governmental or municipal purposes; (f) other purposes the accomplishment of which is beneficial to the community.
Restatement (Second) of Trusts § 368 (1959); see Boyd., 196 S.W.2d at 502.
Article V of the will clearly states that the purpose of the fund is to provide a million dollar trust fund for every American eighteen years or older with no one being denied his share due to race, religion, marital status, sexual preference, or the amount of his wealth. Thus, it is clear from the language of Article V that if the purpose is to be found charitable, it must fall under the broad category (f) of section 368 of the Restatement; other purposes the accomplishment of which is beneficial to the community. Restatement (Second) of Trusts § 368 (1959). To be included in category (f), the purpose set out in Article V must go beyond merely providing financial enrichment to the individual members of the community; the purpose must promote the social interest of the community as a whole. See Restatement (Second) of Trusts § 374 cmt. a, f (1959). The Restatement provides this Court with the following illustration applicable to the facts of this case:
[I]f a large sum of money is given in trust to apply the income each year in paying a certain sum to every inhabitant of a city, whether rich or poor, the trust is not charitable, since although each inhabitant may receive a benefit, the social interest of the community as such is not thereby promoted.
Id. § 374 cmt. f. Furthermore, trusts created to distribute money out of liberality or generosity, without regard to the need of the donees and the effect of the gifts, do not have the requisite public benefit necessary to a charity. See G. Bogart, The Law of Trusts and Trustees § 379 (1991). With these concepts in mind, we analyze Article V.
Charles Walker expressly states in Article V that “[t]he ultimate purpose of this fund is to provide a million dollar trust fund for every American 18 years or older.” From this language, it is obvious Walker intended nothing more than to financially enrich the American public. While this act is generous and benevolent, it is not necessarily beneficial to the community. There is no evidence referenced or argument made by appellees to persuade us that the effect of the trust contemplated by Walker would promote the social interest of the community. See Restatement (Second) of Trusts § 374 cmt. a (1959). Article V does not place restrictions or limitations on the beneficiaries of the trust, which would allow them to use the funds for any purpose, whether it be one that benefits the community or one that burdens it. The trust would provide a personal, individual benefit to each beneficiary but would fail to promote the social interest of the community as a whole. See id. § 374 cmt. a, f. Furthermore, the trust is established without regard to the need of the beneficiaries or the effect of the trust and as a result lacks the requisite public benefit necessary to a charity. See G. Bogart, The Law of Trusts and Trustees § 379 (1991). The trust created by Walker is nothing more than a generous distribution of money with no contemplation or recognition of public benefit. We conclude the trust established by Walker is devoid of any charitable intent or purpose and is therefore not charitable as defined by law.
Appellees argue that Texas courts have a long history of favoring charitable bequests and use liberal rules of construction to fulfill the intent of the testator. They also urge that where a bequest is open to two constructions, the interpretation that gives the charity effect should be adopted, and that which will defeat the charity should be rejected. In support of their arguments, appellees cite Boyd; Blocker v. State, 718 S.W.2d 409 (Tex. App.-Houston [1st Dist.] 1986, write ref’d. n.r.e.); Taysum v. El Paso Nat’l Bank, 256 S.W.2d 172 (Tex. Civ. App.-El Paso 1952, writ ref’d; and Eldridge v. Marshall Nat’l Bank, 527 S.W.2d 222 (Tex. Civ. App.-Houston [14th Dist.] 1975, writ. ref’d n.r.e.). We agree with appellees’ contentions and the cases cited in support thereof. However, we find these cases distinguishable and the specific propositions stated inapplicable. In the cases cited, the courts, after finding an existing charitable intent as defined by law, used liberal rules of construction to sustain the charitable trust. In this case, however, we find no charitable intent or purpose. Therefore, these rules of law do not apply. Appellees would have us use these rules to create a charitable intent where none exists. We decline to do so.
Having concluded Article V of the will does not establish a charitable trust, the rule against perpetuities is applicable. In this case, the trust is of indefinite duration and therefore violates the rule against perpetuities. See Atkinson, 372 S.W.2d at 711. Accordingly, appellants’ first issue is sustained.
III. Reformation of Noncharitable Trusts
When a noncharitable trust is in violation of the rule against perpetuities, a trial court is authorized to reform the trust pursuant to section 5.043 of the Texas Property Code Tex. Prob. Code Ann § 5.043(b) (Vernon Supp.2004). (Vernon Supp.2004). A court has the power to reform or construe the trust according to the doctrine of cy pres by giving effect to the general intent of the testator within the limits of the rule. Id., section 5.043 (b). It is clear from the language in Article V that Walker’s general intent in creating the trust was to financially enrich the American public. Therefore, application of section 5.043 requires the court to reform or construe Article V within the limits of the rule against perpetuities and consistent with this intent. If reformation is not possible however, the trust is void as being in violation of the rule.
Appellants contend in their second issue that the court erred in not selling tract 3 of the V.M. Donigan 456.80 partition for cash as stated in Article V. Because of the disposition of appellants’ first issue, we need not address their second issue. However, as noted above, reformation under section 5.043, if possible, provides for the court to give effect to the general intent and specific directives of the creator. Tex. Prob. Code Ann § 5.043(b) (Vernon Supp.2004). The selling of the land provided for under Article V would constitute a specific directive and should be given effect in any reformation contemplated by the court.
Therefore, we remand this case to the trial court to consider the feasibility of reformation of Article V under section 5.043.
Accordingly, we reverse the trial court’s judgment to the extent it established a charitable trust and remand this case for further proceedings consistent with this opinion. We also reverse the trial court’s award of attorney’s fees and remand this issue to the trial court for further consideration.
7.2 Modification/Cy Pres
If property is given in trust to be applied to a particular charitable purpose and it is or becomes impossible, impracticable or illegal to carry out the particular purpose, and if the testator manifested a more general intention to devote the property to charitable purposes, the trust will not fail but the court will rely on the cy pres doctrine to direct the application of the property to some charitable purpose which falls within the general intention of the testator. The three main questions that must be resolved to determine if cy pres is appropriate are the following: 1) Can the original charitable purpose be fulfilled?; 2) Did the testator have a general charitable purpose in mind?; and 3) Will that purpose be carried out by permitting the modification?
Petition of Pierce, 136 A.2d 510
This case is before us upon petition of Lillian S. Sturgis, trustee under the will of Joseph How, asking for a new construction of the will and for instructions concerning the administering of the trust fund under the cy pres doctrine.
The administration of an estate is usually a prosaic procedure. However, the history of this case, throughout the eighty-seven years which have elapsed since the death of Joseph How, is most interesting and presents a set of facts, which one might expect to find in a romantic novel, rather than in the true story of an estate, the assets of which, at the outset and for more than forty years, were considered too small to be worth-while, and which have now grown to a value too large to permit of the administration of the trust in accordance with the seeming directions of the testator.
The testator, Joseph How, was a man of the sea. He was master of the bark known as the Ellen Stevens. Records indicate that he was commissioned master in 1862 and his name appears as captain of this bark in 1869. For the benefit of the uninitiated, a bark is described in Webster’s unabridged dictionary as a three-masted vessel having her foremast and mainmast, square-rigged, and her mizzenmast fore-and-aft rigged. Joseph How was born on July 22, 1820 and died on October 26, 1870. His home was in Portland and he is buried there.
On October 25, 1870, just the day before his death, he executed his last will and testament.
Under the first paragraph of this will he bequeathed the possession and use of all his personal property, including money, bonds, vessels, choses in action and furniture to his wife, Alice W. How. By the second paragraph he bequeathed to his wife the income from all of any real estate of which he may have been seized. Under the provisions of the third paragraph he directed that his real estate as well as his interest in the bark, ‘Eben Stevens,’ be sold and that the proceeds of said sale be invested and the income from said investment paid to his wife, for and during her natural life.
At this point it may be well to point out, that the record copy of the will as we have it, describes his ship as the ‘Eben Stevens.’ This may be a typographical error. The correct name of the shop was the ‘Ellen Stevens’ as indicated by records of the American Ship Masters’ Association. However, this discrepancy is of no moment at this particular time.
Under the provisions of the fourth paragraph of his will, he directed that at the decease of his wife, his executor should pay the entire income to his mother, Eliza How, if she should then be living, for and during her life, and in cash his mother should not be living, then the income was to be paid to his brother, James L. How, for and during his natural life.
The record in the case does not give us the information, but it is assumed that these directions on the part of the testator were carried out.
The controversy now before us, arises under the fifth paragraph of the will which reads as follows:
‘I request and direct that after the decease of my said wife, mother and brother, my said estate, real and personal shall be appropriated to the founding of a home for indigent seamen, and I authorize and empower my executor to invest the said property and the income thereof and to use and employ the same in such manner as will do the most good to the class of indigent seamen.’
The will was filed in the Probate Court within and for the County of Cumberland and on the third Tuesday of November, 1870 duly allowed. The executor named in the will, James P. Baxter, was appointed. He later resigned, and on June 15, 1875, Lewis Pierce was appointed administrator de bonis non with the will annexed.
The inventory shows that the entire value of the estate was only about $1,500. There is nothing in the record to indicate how long the widow lived, nor when the mother or the brother named in the will, as contingent beneficiaries, died. All we know is that the matter remained in abeyance until at the April Term, 1912 of the Supreme Judicial Court for Cumberland County, a bill in equity was filed by Lewis Pierce, the administrator, asking the Court to construe the fifth paragraph of the will and to determine the ownership of the assets in the estate. This bill was reported to the Law Court for determination upon bill and answer.
It was contended by the heirs at law, that the attempted trust under consideration had failed, both for indefiniteness and because the amount available was so small as to render it impossible to carry out the provisions of the trust even if one were created.
In an opinion dated November 15, 1912, written by then Associate Justice Cornish, later to become Chief Justice, this Court held that the bequest constituted a good public charitable trust. The opinion provided that a trustee appointed to administer this trust was to invest the residuum of the estate and employ the income for the benefit of indigent seamen. It was stated that the trustee could do this directly, or he could turn over the income to some worthy society or association organized for that purpose. The manner in which the money was to be expended was left to the sitting Justice who was to determine to whom the income should be paid and through what channel this kindly gift could be made most effective. This case is reported in 109 Me. 509, 84A. 1070.
Although the mandate of the Law Court directed that a decree should be entered in accordance with its opinion, no such decree was written and again the matter remained in abeyance for a long period of years. Eventually this case was dismissed from the docket. For twenty-five years the estate was apparently forgotten, probably because the available amount was too small to really be worth-while.
Now we come to a very interesting part of the story. It appears that a short time before his death, Captain How had invested the reported amount of $3,000 in a new corporation, which was then being organized by a friend of his in Chicago. Subsequent developments indicate that the captain probably did not place must value upon this investment, and if the certificate representing his stock ownership in this corporation ever came into the possession of the executor, administrator or trustee, they too probably felt there was little value attached to this item, as such poor care was given to the certificate that it became lost, misplaced or destroyed. However, the corporation which was engaged in the leather business prospered to an extent never dreamed of by its founder, and through a series of stock dividends and accretions in value, the estate of Captain How now amounts to more than $300,000, with more than $100,000 of income ready to be expended for the purposes provided for in his will.
When the Court was apprised as to the situation, the case was restored to the docket and a decree, pursuant to the opinion of the Law Court in the Pierce case, to be found in 109 Me. 509, 84 A. 1070, was entered nunc pro tunc on December 12, 1938, and this decree holds that the bequest contained in the fifth paragraph of the last will and testament of Joseph How is in its terms a good public charitable trust; that the purpose of this public charitable trust is definite in its objects, is lawful and is to be regulated by the trustee of the estate of Joseph How, who has been or may be appointed and qualified in the Probate Court within and for the County of Cumberland. The trustee was ordered to invest the residuum of the trust fund and employ the income thereof for the benefit of indigent seamen, doing this directly or turning over the income to some worthy society or association organized for that purpose, but before so doing, the trustee was ordered to apply to a Justice of the Supreme Judicial Court for determination to whom and in what amounts the income should be paid. On April 8, 1937, a trustee was appointed. He subsequently resigned, and on March 8, 1944, Lillian S. Sturgis, the petitioner herein was appointed as successor trustee.
On December 29, 1954, Lillian S. Sturgis filed a petition in the Supreme Judicial Court in Equity in Cumberland County in the name of Lewis Pierce, Administrator, asking the Court to determine to whom and in what amounts the income of the trust estate should be paid.
On July 16, 1956, the sitting Justice of the Supreme Judicial Court in Equity instructed the trustee to pay to the Portland Seamen’s Friend Society the amount of $10,000, to be used exclusively by it for assistance for the indigent, needy and destitute seamen, and for no other purpose, this money to be expended under the supervision of the Attorney General under the provisions of Section 4, Chapter 20, R.S.1954, which provides that the Attorney General shall enforce due application of funds given or appropriated to public charities within the state and to prevent breaches of trust in the administration thereof.
On August 13, 1956, the trustee filed another petition in the Supreme Judicial Court in Equity for a new construction of the will and for instructions concerning the administering of the fund under the cy pres doctrine. It seems to have been assumed by all parties that the beneficiaries of the trust were supposed to be seamen of the class to which Captain How belonged. Based upon this assumption, in her petition, she alleged that after paying the amount of $10,000 to the Portland Seamen’s Friend Society, in accordance with decree of Court, she still has income of over $100,000 in her possession, which she is unable to expend for the benefit of indigent seamen, for the reason that there are not a sufficient number of this class to allow for the expenditure of the money available, and she further asked for instructions as to whether or not she may be permitted to expend the funds under the cy pres doctrine for the benefit of seamen of other classes such as fishermen, lobstermen, and others.
Various organizations claiming to have been organized for the purpose of rendering assistance to indigent seamen, or who throughout the years have been rendering such assistance, filed appearances and were heard by the sitting Justice at the time of the hearing. The heirs-at-law of Captain How who comprise grandnephews, grandnieces, great-grandnephews, and great-grandnieces also appeared.
The State of Maine because of the provisions of Section 4, Chapter 20, R.S.1954, previously referred to, was represented by the Attorney General. The trustee, and those who appeared, with the exception of the heirs-at-law, take the position that the fund now available should be administered under the cy pres doctrine, and the class of beneficiaries extended to include seamen of types other than that to which Captain How belonged.
The heirs-at-law argue, first that the trust has failed; second, that there was no general charitable intent on the part of Captain How; and third, that the matter has been judicially settled and is res judicata by reason of the decree of the Supreme Judicial Court in Equity dated July 16, 1956, at which time the trustee was instructed to pay the sum of $10,000 to the Portland Seamen’s Friend Society. The heirs-at-law, therefore, contend that a resulting trust has arisen in the entire fund for their benefit.
Before passing to a discussion of the cy pres doctrine, and its applicability to the instant case, we can readily dispose of the third argument advanced in behalf of the heirs-at-law, to the effect that the matter has been judicially settled by the decree of the Supreme Judicial Court previously referred to. One of the essential elements of the doctrine of res judicata is identity of issue. It is clear that the issue for our determination at this time is not at all the issue which was concluded in the hearing which culminated in the decree of July 16, 1956. Consequently, it is our opinion that there is no strength to this argument in behalf of the heirs-at-law.
The words ‘cy pres’ are Norman French for ‘as near.’ The phrase when expressed to its full implication was ‘cy pres comme possible’ which means ‘as near as possible.’
The doctrine of cy pres is the principle that equity will, when a charity is originally or later becomes impossible or impractical of fulfillment, substitute another charitable object which is believed to approach the original purpose as closely as possible. It is the theory that equity has the power to mold the charitable trust to meet emergencies.
Where property is given in trust for a particular charitable purpose, the trust will not ordinarily fail even though it is impossible to carry out the particular purpose. In such a case the court will ordinarily direct that the property be applied to a similar charitable purpose. The theory is that the testator would have desired that the property be so applied if he had realized that it would be impossible to carry out the particular purpose. The theory is that although the testator intended that the property should be applied to the particular charitable purpose named by him, yet he had a more general intention to devote the property to charitable purposes. The settlor would presumably have desired that the property should be applied to purposes as nearly as may be like the purposes stated by him rather than that the trust should fail altogether. The principle under which the courts thus attempt to save a charitable trust from failure by carrying out the more general purpose of the testator and carrying out approximately though not exactly his more specific intent is called the doctrine of cy pres.’ Scott on Trusts, Vol. 3, § 399.
‘Cy pres means ‘as near to,’ and the doctrine is one of construction, the reason or basis thereof being to permit the main purpose of the donor of a charitable trust to be carried out as nearly as may be where it cannot be done to the letter.’ 14 C.J.S. Chapter § 52 a., p. 512.
The cy pres doctrine is properly applied in a case where there is a general charitable purpose, but a literal compliance with the terms of the trust becomes impossible or impracticable in which case the court directs the administration of the trust as nearly as possible in conformity with the intention of the donor or testator.’ 14 C.J.S. Charities § 52 c., p. 514. The doctrine of cy pres does not apply to private trusts.
A very fine exposition of the prerequisites to the application of the doctrine of cy pres can be found in Chapter 5, of the book entitled The Cy Pres Doctrine in the United States by Edith L. Fisch.
The author points out that before the cy pres doctrine will be applied three prerequisites must be met. First, the court must find that the gift creates a valid charitable trust. Second, it must be established that it is to some degree impossible, or impractical to carry out the specific purpose of the trust, for the cy pres doctrine is inapplicable when the particular purpose of the settlor can be effectively carried out. The third prerequisite is the requirement of a general charitable intention, and it is this prerequisite which has given rise to most of the litigation in cy pres cases. This requirement of general charitable intent grew up as a result of the theory that the cy pres doctrine is a device to carry out the intent of the settlor of the trust.
The first prerequisite, :-That the gift creates a valid charitable trust, has been taken care of by the decision of this Court in509, 84A 1070, Petition of Pierce, 109 Me. 509, 84A. 1070, in which the Court held that the bequest in the How will is in terms a good public charitable bequest.
Passing now to the second prerequisite, that it must be established that it is to some degree impossible or impractical to carry out the specific purpose of the trust, we find a situation where all the interested parties are agreed, and this statement applies to the heirs-at-law as well, that while the number of indigent seamen of the class seemingly intended by the testator has become substantially reduced, it has not entirely disappeared. Moreover, the record clearly indicates that there are still indigent seamen in existence, even of the class to which the testator belonged. Consequently, the trust has not entirely failed. However, it is also clear that the trust fund now available is in an amount too large to permit its application for the relief of indigent seamen of the class to which the testator belonged. It has, therefore, become impossible to carry out the specific purpose of the trust, if the specific purpose was to render assistance only to indigent seamen of the class to which the testator belonged.
The important issue, therefore, for determination is whether or not the testator expressed in his will a general charitable intent. If so, then the application of the cy pres doctrine would be in order and the scope of the beneficiaries seemingly covered in the trust can be broadened and enlarged. In other words, seamen of a type different from that to which the testator belonged can be included as beneficiaries.
We give our attention, therefore, to the issue of determining whether or not Captain How manifested a general charitable intention when he created the trust which is now before us for construction.
Legal authors all describe this general charitable intention as a desire to give to charity generally, rather than to any one party, object or institution.
The question of whether or not a testator is making a charitable bequest has evinced a general charitable intent or is making a specific bequest to a specific beneficiary for a specific charitable purpose is a question of interpretation of the particular will under consideration. To attempt to formulate a general rule which would solve all such cases would be an attempt to achieve the impossible. Nor do the cases from our own or other jurisdictions materially aid in deciding the particular question of interpretation with which we are here concerned, as distinguished from a decision of the fundamental principles of law from which the authority of the Court to apply the cy pres doctrine arises.’ First Universalist Soc., Bath v. Swett, 148 Me 142, 150, 90 A2d 812, 817.
Authors on the subject of trusts are all in accord that if property is given in trust to be applied to a particular charitable purpose, and at the time when the property is given it is possible and practical and legal to carry out the particular purpose, but subsequently owing to a change of circumstances it becomes impossible or impractical or illegal to carry out the particular purpose, it is easier to find a more general charitable intention of the settlor than it is where the particular purpose fails at the outset.
A review of the cases decided by this Court in which the principle of the cy pres doctrine was involved may be of interest. The doctrine was discussed in Allen v. Trustees of Nasson Institute, 107 Me. 120, 77 A 638. In this case, the Court pointed out that the doctrine applies only when two prerequisites exist, viz., when the court may see in the instrument a general charitable purpose as well as a specific gift, which has failed. In deciding that the cy pres doctrine did not apply, the court found that neither of these prerequisites existed. The trust had not failed and there was no evidence of a general charitable intent.
In Brooks v. Belfast, 90 Me. 318, 38 A. 222, the Court found that there was a gift for a specific purpose with no general charitable intent and so the doctrine was not applied. Again in Doyle v. Whalen, 87 Me. 414, 32 A. 1022, 31 L.R.A. 118, it was held that the trust created in this instance was for the benefit of definite persons who could be identified, and so the doctrine was not applied.
The doctrine was applied in Manufacturers National Bank v. Woodward, 141 Me. 28, 38 A.2d 657; in Stevens v. Smith, 134 Me. 175, 183 A. 344; in Snow & Clifford v. President and Trustees of Bowdoin College, 133 Me. 195, 175 A. 268 and in Lynch v. South Congregational Parish of Augusta, 109 Me. 32, 82A. 432.
The doctrine was not applied in Dupont v. Pelletier, 120 Me. 114, 113 A. 11; Bancroft v. Maine State Sanatorium Association, 119 Me. 56, 109 A. 585; Gilman v. Burnett, 116 Me. 382, 102 A. 108, L.R.A. 1918A, 794 in Merrill v Hayden, 86 Me. 133, 29 A. 949.
In the case of Merrill v. Hayden, supra, a testator had left all of his property to one of his two daughters, to hold during her lifetime, and at her death the residue was to go to the Maine Free Baptist Home Missionary Society. During the lifetime of the testator this society was dissolved by act of the Legislature and all its property transferred to another Association created for a different purpose. It was held that the legacy lapsed and the cy pres doctrine not applicable.
In Gilman v. Burnett, supra, and Bancroft v. Maine State Sanatorium Association, supra, the cy pres doctrine was not applied because the Court found no evidence of general charitable intent.
In the case of Lynch v. South Congregational Parish of Augusta, supra, the Court found that after reading the will in the light of existing conditions, the testator had evinced a general charitable intention and the doctrine of cy pres was applied.
In the cases of Snow & Clifford v. President and Trustees of Bowdoin College, supra, and Stevens v. Smith, supra, the Court reached the conclusion that the testators had evinced a general charitable intention and upon inability to comply with the original purpose of the trust, the doctrine of cy pres became applicable.
Two cases from other jurisdictions where the doctrine was applied are of interest. In the case of Society for Promoting Theological Education v. Attorney General, 135 Mass. 285, a trust was set up providing that indigent students in theology who should be deemed worthy of assistance would be paid sums not exceeding one hundred or one hundred fifty dollars a year for three years. The trust income increased substantially and there was not a sufficient number of indigent students to exhaust the income. The court ruled that under the cy pres doctrine the payments could be increased.
In the case of Hoyt v. Bliss, a Connecticut case, 93 Conn. 344, 105 A. 699, a trust was set up providing for the support of one student. A surplus of money developed and the court ruled that the trustee could use the money to support additional students.
While, as previously stated, it seems to have been assumed by all interested parties that the beneficiaries of the trust created by Captain How were indigent seamen of the class to which he belonged, we are not thoroughly convinced that this is so. At times much earlier than the year when Captain How’s will was executed, our Court had described crewmen of other types of vessels as seamen.
It seems apparent that even in 1870, the term ‘seamen’ was not limited to mariners of the type who manned vessels such as the Ellen Stevens.
That this is so, is shown by a decision of this Court in Lewis v. Chadbourne, 54 Me. 484; a case decided prior to 1868, in which fishermen in the mackerel industry were described as seamen. Another is Holden v. French, 68 Me. 241, decided in 1878, in which this Court described the crewmen of a fishing vessel as seamen.
If we endeavor to project ourselves into the past and contemplate upon the intention of Captain How, we may well suppose that while he was perhaps primarily interested in crewmen of ships such as he was master of, he nevertheless had in mind that wider group of men whose major means of livelihood was gained from the sea. He used the expression, in his will ‘the class of indigent seamen.’ Webster describes the word ‘class’ as ‘a group of individuals ranked together as possessing common characteristics or as having the same status;’ and also ‘a group of persons, having common characteristics or attributes.’
Webster defines the word ‘indigent’ as follows: ‘Destitute of property or means of comfortable subsistence; needy; poor; in want; necessitous’; and Joseph Addison the English poet and essayist said: ‘Charity consists in relieving the indigent.’
After making provision for those most dear and close to him, his wife, mother and brother, Captain How gave all of his estate for a public charity. The will neither provides for forfeiture or limitation over. We are convinced that when he executed his will on the day before he died, he was imbued with a deep charitable intent, and that he intended all of his wordly goods and effects to be devoted forever to the relief of indigent seamen, not only of the class to which he belonged, but to all classes of indigent seamen.
It is, therefore, our opinion that the scope of the beneficiaries of this kindly gift should be widened and enlarged. We reach this conclusion not necessarily through the application of the cy pres doctrine, but rather through an interpretation of the intention of the testator at the time be executed his will. See Guilford Trust Company v. LaFleur (Inhabitants of Gulford), 148 Me. 162, 91 A.2d 17.
The trustee is, therefore, authorized to use and employ the income for the benefit of indigent seamen not only of the class to which Captain How belonged, but to other classes, by way of illustration and not of limitation, such as crewmen of merchant vessels, oil tankers and fishing vessels.
In the determination of who shall be classed as indigent seamen, the trustee may give consideration to the modern laws and latter day adjudications as to the interpretation of what a ‘seaman’ is.
A good definition is to be found in 79 C.JH.S. Seamen §, (a.) p. 490.
‘While the word ‘seaman’ is a flexible word, the meaning of which ordinarily depends on the circumstances in which it is used, in the broad sense of the word a seaman is a mariner of any degree, including one who does any sort of work aboard a ship in navigation.’
In her petition, the trustee requested instructions as to whether or not lobster fishermen may be included among the beneficiaries. We are of the opinion that lobster fishermen are not seamen within the meaning of the foregoing definition, nor within the intention of the testator.
The trustee is given the right to employ agents for the purpose of investigating cases, and to pay such agents reasonable compensation for their services and charge the same to the trust fund. The trustee in using and employing the income for the benefit of indigent seamen of the classes above described, may do this directly or she may turn over the income to some worthy association or associations organized for that purpose; the exact details to be left to a Justice of the Supreme Judicial Court who is to determine to whom the income shall be paid and through what channel the gift can be made most effective.
Associations to whom any portion of the income is paid may charge a reasonable commission for expenses of administration, the amount of such commission to be determined by the trustee, subject to the approval of a Justice of the Supreme Judicial Court. Any association to whom any of the income is paid shall file at least annually an account of its disbursements with the trustee. The Portland Seamen’s Friend Society to whom the sum of $10,000 has already been paid shall forthwith file an account of its disbursements with the trustee. Copies of all accounts of the trustee which are filed in the Probate Court, as well as copies filed by associations to whom any portion of the income has been paid are to be filed with the Attorney General of the State of Maine.
Case remanded to the sitting Justice for a decree in accordance with this opinion.
In the Matter of the Lucas Charitable Gift, 261 P.3d 800
Opinion of the Court by LEONARD J.
Petitioner–Appellant Hawaiian Humane Society (HHS) appeals from the following judgment and orders of the Circuit Court of the First Circuit, sitting in Probate (Probate Court): (1) Order Denying Petition to Approve Land Exchange Free and Clear of Use Restrictions (Order Denying Petition), filed on May 18, 2009; (2) Order Denying Petition for Relief from Order Denying Petition to Approve Land Exchange Free and Clear of Use Restrictions and for Entry of Final Judgment, filed on December 21, 2009 (Order Denying Relief); and (3) Judgment Pursuant to Order Denying Petition to Approve Land Exchange Free and Clear of Use Restrictions (Judgment), filed on December 21, 2009. In this case, the Probate Court declined to apply the doctrine of cy pres to modify a charitable gift of land. The position of all parties on appeal is that the Probate Court erred in failing to apply cy pres to approve the proposed land transaction. We agree and, accordingly, vacate the Judgment and remand with instructions.
A. The Charitable Gift
The underlying petition in this case stems from HHS’s acquisition of an interest in certain land in the Niu Valley, obtained through a charitable gift. On December 28, 1976, Elizabeth J.K.L. Lucas (Mrs. Lucas) granted HHS a 50.6183968% undivided interest in the land by way of deed. On December 30, 1982, she conveyed an additional 1.4% undivided interest in the land to HHS by way of a second deed. Both deeds contain the following use restriction:
[F]or and as a charitable gift, [Mrs. Lucas] does hereby grant, bargain, sell and convey the property hereinafter described unto the HAWAIIAN HUMANE SOCIETY … so long as the same shall be used for the benefit of the public for the operation of an educational preserve for flora and fauna, to be made accessible as an educational experience for the public under the control and administration of said Hawaiian Humane Society and its successors and assigns, and, if not so used, then to State of Hawaii and its successors and assigns, for and as a public park.
Upon Mrs. Lucas’s death in 1986, her remaining 47.981603% interest in the land passed through her estate to her daughter, grandchildren, and great-grandchildren (the Thompsons), all of whom have resided on the land for many years. The Thompsons formed a Hawai’i general partnership, Respondent–Appellee Tiana Partners, to which they transferred their interest in the land.
B. Attempts to Use the Gifted Land
After receiving the land, HHS made numerous attempts to plan a feasible use for the land in furtherance of the deed restrictions. In consultation with Tiana Partners, HHS considered many different ideas for effectuating the purpose stated in the deeds, but ultimately rejected them as physically or economically unfeasible.
In 2003, HHS commissioned a feasibility study for a proposed low-intensity development that would be accessible to the public. The study led HHS to conclude that using the land for a public educational preserve would be extremely expensive and impractical. It would require disrupting the Thompson residences and surrounding neighborhood.
During 2004 and 2005, HHS and Tiana Partners conducted a series of meetings with various community organizations, including the Honolulu Zoo, the Hawai’i Nature Center, and the Department of Education. The purpose of the meetings was to identify potential uses for the land that would be consistent with the intent of the gift, beneficial to the community, and physically and economically feasible. Due to the residential character of the surrounding neighborhood, an overriding consideration was maintaining peaceful coexistence with the Thompsons and other residents in the area. Access to the property was also a key consideration. The land is remote; much of it is steep; and it is accessible only by two residential roads. Using either road for public access would have a disruptive impact on the neighboring residents.
The State of Hawai’i (State) Department of Land and Natural Resources (DLNR) likewise determined that the land was not suitable for use as a public park. However, it determined that a portion of the land, Parcel 2, was best-suited for watershed and forest reserve purposes.
C. Land Exchange Agreement
HHS and Tiana Partners began considering other ways to further the intent of the original gift. On September 11, 2006, after extensive negotiations, they signed a Memorandum of Understanding (MOU). The MOU contemplates a three-way land exchange and sale between HHS, Tiana Partners, and the State. HHS and Tiana Partners agreed to convey their interests in Parcel 2 to the State. In exchange, the State would release its executory interest in the remaining parcels. HHS also agreed to convey its interest in the remaining parcels (1, 20, and 21) to Tiana Partners, free and clear of the use restriction, for $1,082,850. HHS would use the proceeds to establish a segregated fund known as the “Charles and Clorinda Lucas Educational Fund” (Educational Fund). The principal and interest would be dedicated exclusively to HHS’s educational programs. These programs are designed to foster compassion and caring for all life, focusing on the interdependent relationship between animals, humans, and the environment and our role as stewards and caregivers.
The MOU conditioned the proposed land exchange upon: (1) the agreement of the State Board of Land and Natural Resources (BLNR); (2) the approval of the Hawai’i Legislature, pursuant to Hawaii Revised Statutes (HRS) § 171-50 and (3) the approval of the Probate Court. At board meetings on December 8, 2006 and December 14, 2007, the BLNR approved in principle the land exchange transaction. In December of 2007, the Legislature also approved the transaction.
D. Petition to Approve Land Exchange
On October 28, 2008, HHS filed a Petition to Approve Land Exchange Free and Clear of Use Restrictions (Petition) with the Probate Court. The Petition sought an order approving the proposed land transaction and eliminating the use restriction on the land. HHS maintained that the Probate Court had authority to modify the terms of the charitable gift because its stated purpose was impracticable and could not reasonably be accomplished.
The Attorney General, acting as parens patrie, filed a response to the Petition on November 19, 2008. He stated no objection to the relief sought and affirmed that the use restriction “has been proven demonstrably impracticable or impossible and … the relief sought in the petition is fair and reasonable and is consistent with the doctrine of cy pres.” The State filed a joinder in the Petition on November 21, 2008. The Administrator of the Division of Forestry and Wildlife of the DLNR filed a declaration attesting that the DLNR had inspected and reviewed the properties described in the Petition. The DLNR “determined that these properties are not presently suitable for use as a public park, and in particular that Parcel 2 is best used for watershed and forest reserve purposes.”
Laura Thompson (Thompson), Mrs. Lucas’s daughter, filed a declaration attesting that Mrs. Lucas would have fully supported the land exchange “as a compromise necessary to further her deep interest in all things natural and her strong commitment to education, which can be accomplished far better through the broad reach of the Hawaiian Humane Society than in a narrow urban valley.” She attested that Mrs. Lucas “was actively involved with the Hawaiian Humane Society throughout her life” and served on its Board of Directors. Mrs. Lucas fully supported its mission “to promote the bond between humans and animals and to foster the humane treatment of all animals.” Thompson believed her mother was not aware of the obstacles preventing development of the land in accordance with the deeds. She believed her mother’s original intent in gifting the land was “to benefit the people of Hawai’i through the work of the Hawaiian Humane Society” and to “help the Society provide an educational experience for the public.”
E. Probate Court Order and Judgment
Following a hearing, the Probate Court entered the Order Denying Petition on May 18, 2009. The court stated the following grounds as its basis for the denial:
1. The deeds provide, “… for and as a charitable gift, does hereby grant, bargain, sell and convey the property hereinafter described unto the Hawaiian Humane Society, … so long as the same shall be used for the benefit of the public for the operation of an educational preserve for flora and fauna, to be made accessible as an educational experience for the public under the control and administration of said Hawaiian Humane Society, … and if not so used, then to State of Hawaii, its successors and assigns for and as a public park, …”
2. Even if the Court finds that the deeds create a charitable trust, the Memorandum of Understanding does not involve the use of the properties as stated in the deeds. The Memorandum of Understanding states that the Petitioner will receive cash in exchange for conveying its interest in the properties and will use the cash “… to establish a segregated fund to be known as the ‘Charles and Clorinda Lucas Educational Fund,’ the principle [sic] and interest of which fund shall be used exclusively to pay the costs associated with educational programs designed to foster compassion and caring for all life, focused on the interdependent relationship between animals, humans and the environment and on our roles as stewards and caregivers.”
3. Mrs. Lucas’ charitable purpose as stated in the deeds is to use the properties for the operation of an educational preserve for flora and fauna, to be made accessible as an educational experience for the public. The deeds also provide that if the petitioner does not use the properties for the stated charitable purpose, the properties would go to the State of Hawaii.
4. The doctrine of cy pres does not apply to the Petitioner since the deeds provide for an alternative if the properties are not used by the Petitioner as Mrs. Lucas intended.
On August 3, 2009, HHS filed a petition for relief from the Probate Court’s Order Denying Petition. The Attorney General and Tiana Partners filed joinders in the petition for relief, and the State filed a memorandum of no opposition. All interested parties agreed that the Probate Court misconstrued the cy pres doctrine and that it should have approved the transaction.
On December 21, 2009, the Probate Court entered the Order Denying Relief and the Judgment. HHS timely appealed.
II. POINTS OF ERROR
On appeal, HHS argues that the Probate Court erred in denying the Petition and refusing to modify the terms of the charitable gift to approve the proposed land exchange. Tiana Partners filed an Answering Brief in support of HHS’s position. The State filed an Answering Brief expressing its non-opposition and joinder in HHS’s request for relief.
III. STANDARDS OF REVIEW
Hawai’i courts have not addressed the applicable standard of review for a lower court’s refusal to apply the doctrine of cy pres. In applying an analogous doctrine to reform the terms of a private trust, the supreme court analyzed the issue as a question of law. In re Estate of Chun Quan Yee Hop, 52 Haw. 40-45, 46, 469 P.2d 183, 186-87 (1970). Other jurisdictions have held that whether cy pres applies is a question of law, reviewable de novo. See, e.g., Koln v. City of Storm Lake, 736 N.W.2d 546, 552-53 (Iowa 2007); In re R.B. Plummer Memorial Loan Fund Trust, 266 Neb. 1, 661 N.W.2d 307, 311 (2003); Puget Sound Nat’l Bank of Tacoma v. Easterday, 56 Wash.2d 937, 350 P.2d 444, 447 (1960); ABC for Health, Inc. v. Comm’r of Ins., 250 Wis.2d 56, 640 N.W.2d 510, 515 (Wis. Ct. App. 2001). Accordingly, we hold that the issue of whether the doctrine of cy pres is applicable is a question of law, reviewable de novo. Once cy pres is determined to be applicable, the lower court has discretion in determining the appropriate modification of the charitable gift. Obermeyer v. Bank of America, N.A., 140 S.W.3d 18, 22 (Mo. 2004).
A. Cy Pres Generally
The doctrine of cy pres “permits a gift for a charitable purpose which cannot, for one reason or another, be carried out as directed by the donor, to be applied ‘as nearly as may be’ to the fulfillment of the underlying charitable intent.” 15 Am. Jur.2d Charities § 149 (2011)(Am.Jur.2d). Under the doctrine’s traditional formulation, three elements are required: (1) there must be property given in trust for a charitable purpose; (2) it must be impossible, impracticable, or illegal to carry out the specified charitable purpose; and (3) the settlor must have manifested a general intent to devote the property to charitable purposes. Id.
Hawai’i courts have not directly addressed or applied the cy pres doctrine. However, the supreme court has recognized the doctrine in dictum. Chun Quan Yee Hop, 52 Haw. at 45, 469 P.2d at 186. It noted that “[i]f it is impossible, impractical or illegal to carry out the specific terms of a charitable trust in which the settlor has indicated a general charitable purpose, many courts will authorize the substitution of another charitable scheme within the testator’s general purposes.” Id. The court went on to apply an analogous doctrine to save a private trust from failing due to its contravention of the Rule Against Perpetuities. Id. 45-46, 469 P.2d at 186-87.
Cy pres is only applicable to charitable trusts. Restatement (Third) of Trusts § 67, cmt. a (2003) (Restatement 3d ); Am.Jur.2d § 149. Various policy considerations underlie its application. First and foremost, the doctrine stems from the inability of charitable settlors to foresee the future. Restatement 3d, Reporter’s Notes, cmt. a (recognizing that without cy pres, “many charities would fail by change of circumstances and the happening of contingencies which no human foresight could provide against”). Circumstances change and contingencies frequently arise that the settlor did not or could not anticipate. This is particularly true for charitable trusts, as they may be perpetual in duration. Id.; Ronald Chester, George Gleason Bogert, and George Taylor Bogert, The Law of Trusts & Trustees § 431, at 117 (3d. ed. 2005)(Bogert on Trusts ). The “needs and circumstances of society evolve over time,” impacting the potential benefit of the trust. Restatement 3d § 67, cmt. a. Rather than allowing the trust to fail, cy pres preserves the settlor’s charitable intent by conforming the trust to the contingencies that arise. Thus “[j]ust as it is against the policy of the trust law to permit wasteful or seriously inefficient use of resources dedicated to charity, trust law also favors an interpretation that would sustain a charitable trust and avoid the return of the trust property to the settlor or successors in interest.” Id. at cmt. b. Similarly, because charitable trusts impact a broad spectrum of the public and “are allowed by the law to be perpetual,” they often merit a greater exercise of judicial discretion than a private trust. Id. at Reporter’s Notes, cmt. a.
Courts widely recognize that the charitable purpose need not be impossible to warrant applying cy pres. It is sufficient that achieving the settlor’s stated purpose would be impracticable or unreasonable to effectuate. Restatement 3d § 67, cmt. c (“The doctrine of cy pres may also be applied, even though it is possible to carry out the particular purpose of the settlor, if to do so would not accomplish the settlor’s charitable objective, or would not do so in a reasonable way.”) (second emphasis added); Bogert on Trusts § 438, at 194-96 (recognizing insufficiency of funds as basis for doctrine); Scott on Trusts § 39.5.2, at 2717–20; § 39.5.4, at 2740–41; Am.Jur.2d § 151 (doctrine is applicable where donor’s directions “cannot beneficially be carried into effect”) (emphasis added; punctuation altered). “An impractical restriction is one that is not capable of being carried out in practice.” Am.Jur.2d § 157. If literal compliance would “defeat or substantially impair” the purposes of the trust, cy pres is applicable. Restatement 2d § 399, cmt. a. The purpose of the trust becomes impaired if “the application of [trust] property to such purpose would not accomplish the general charitable intention of the settlor.” 88 Am. Jur. Proof of Facts 3d 469, § 10 (2006) (Am.Jur. Proof of Facts 3d).
Thus, cy pres is applicable where a settlor creates a charitable trust of real property to be used for a particular purpose, but the property turns out to be unsuitable for that purpose. See Scott on Trusts § 39.5.2, at 2724–25; Roberds v. Markham, 81 F.Supp. 38, 40 (D.D.C. 1948) (recognizing that courts may order sale of gifted land if conditions have drastically changed or land otherwise becomes unsuitable for its dedicated purpose); Bd. of Educ. Of Rockford v. City of Rockford, 372 Ill. 442, 24 N.E.2d 366, 369-73 (1939) applying cy pres to allow sale of land in charitable trust where its dedicated use as school became impracticable due to shifting populations, deterioration of existing building, and existence of another school that met needs of the area). In one case, for example, a settlor gifted certain land to a charity for the purpose of building a public library upon the land. Bosson v. Woman’s Christian Nat’l Library Ass’n, 216 Ark. 334, 225 S.W.2d 336, 337 (1949). The land turned out to be unsuitable for constructing a library. Id. The charity reached an agreement with a county library board under which it would sell the land and use the proceeds to build a public library upon property owned by the county board. Id. The board agreed to operate the library for the benefit and use of the public. Id at 337-38. On appeal, the court applied cy pres to approve the transaction. Id at 338-39. It noted that cy pres applies where the circumstances “have changed to such an extent that in order to carry out properly the charitable intention of the donor, it is necessary to dispose of the trust property and devote the funds to the acquisition of a more suitable location[.]”. Id at 338. (internal quotation marks and citation omitted).
Similarly, a California court applied cy pres where the stated purposes of the gifted properties became impracticable. In re Estate of Zahm, 16 Cal. App.3d 196, 93 Cal.Rptr. 810 (1971). There, the testatrix left two residential properties to the Salvation Army. Id at 811. She directed the Flower Street property to be used as a home for Christian women, and the Keniston Avenue property as a music home. Id. After her death, the Flower Street property was taken pursuant to eminent domain and the Keniston Avenue property was deemed unsuitable for development due to zoning issues. Id at 813. The Salvation Army proposed to use the funds from the Flower Street property to erect and furnish a new building on a different site. Id. It further proposed to sell the Keniston Avenue property and use the proceeds to either construct a music conservatory on another site or endow a music room under construction at another Salvation Army center. Id.
The court confirmed that cy pres was applicable. Id at 814. It concluded that because neither property was suitable for carrying out the testatrix’s declared intentions, the lower, court “properly directed that her charitable purposes be given effect at some other suitable locations.” Id.; see also Bogert on Trusts § 439, at 218-20 (noting that cy pres is applicable where trust property is taken under eminent domain).
The third element—general charitable intent—has been a source of uncertainty and reform. Under the traditional rule, cy pres may only be applied if the settlor possessed a general charitable intent. Am.Jur.2d § 153. His or her intent must have encompassed “something beyond the specific terms used in designating the beneficiary or purpose of the gift or how it shall be carried into effect.” Id.; see also Restatement 2d § 399; Bogert, on Trusts § 431, at 119; § 436, at 157–60. The donor must have had a general charitable intent, as opposed to a narrow intent to benefit only a “particular project, objective, or institution[.]” Am.Jur.2d § 153. For example, where a settlor’s dominant intent is to restrict the charitable gift to the exact purpose specified, courts may presume that the donor would not have wanted the property to be applied to any other purpose, however closely related, even if the original purpose fails. Restatement 2d § 399, cmt. d. / In such situations, cy pres is not applicable because the settlor did not have a general charitable intent. Id.; see also Shoemaker v. Am. Sec. & Trust Co., 163 F.2d 585, 588 (D.C. Cir. 1947) (noting that cy pres does not apply if settlor’s “dominant purpose has become altogether impossible of achievement”). In contrast, if the settlor’s designation of a particular property or site is incidental to the dominant charitable purpose, then courts will presume that the settlor’s primary intent was to dedicate the property to charitable purposes. Shoemaker, 163 F.2d at 589; see also In re Wilkey’s Estate, 337 Pa. 129, 10 A.2d 425, 428 (1940) (recognizing that cy pres applies where “the physical location of the edifice or institution provided for in a charitable trust has been held to be of secondary importance in comparison with the general purpose for which the erection of the building or the carrying on of the charitable activity was designed”). In such cases, cy pres is readily applicable to effectuate the settlor’s general charitable intent. Shoemaker, 163 F.2d at 589.
Increasingly, the “general charitable intent” requirement has shifted to an “opt-out” framework under which the settlor is presumed to have a general charitable intent unless the terms of the trust provide otherwise. See Restatement 3d § 67, cmt. b; Reporter’s Notes, cmt. b; Unif. Trust Code § 413(a). 7C U.L.A. 509 (2006); Bogert on Trusts § 436, at 160 (noting that “it would seem preferable” either to employ presumption in favor of general intent or apply cy pres regardless of whether settlor’s charitable intent was general or specific); but see Am.Jur. Proof of Facts 3d § 6 (noting that “presumption of general charitable purpose has not yet been discussed in the reported decisions”). Commentators have noted that the “general intent” requirement is vague and difficult to apply consistently. Ronald Chester, Cy Pres or Gift Over?: The Search for Coherence in Judicial Reform of Failed Charitable Trusts, 23 Suffolk U.L. Rev. 41, 45-46 (1989); accord Bogert on Trusts § 436, at 183-89; § 437, at 183–89 (noting widespread inconsistency in applying this requirement). It turns on a fine, and often subjective, distinction between a settlor’s dominant and incidental or subsidiary objectives. See Bogert on Trusts § 437, at 183-89. In contrast, the opt-out rule provides a clearer delineation that avoids guesswork as to the subtleties of the settlor’s intent.
Finally, in applying cy pres, courts must generally seek a purpose that conforms to the donor’s objective “as nearly as possible.” Am.Jur.2d § 157. This may be attained by limiting or modifying the objective; by diverting the funds to another use in the “same generally contemplated field”; or by directing sale of the subject property. Id.; Am.Jur. Proof of Facts 3d § 10; Restatement 2d § 399, cmt. p (cy pres allows sale of land even if “the settlor in specific words directed that the land should not be sold and that the institution should not be maintained in any other place”). In the case of a sale, the proceeds may be applied to purchase a new, more suitable site, or to further the settlor’s charitable intent in another manner. See Am.Jur. Proof of Facts 3d § 21. Where a charitable gift of property is subject to use restrictions, the court may apply cy pres to modify or eliminate those restrictions. Id. at § 22; Bogert on Trusts § 431, at 115; Scott on Trusts § 39.5.2, at 2716.
In determining the appropriate modification, courts must consider a variety of factors and evidence to ascertain what the settlor’s wishes would have been had he or she anticipated the circumstances. Restatement 3d § 67, cmt. d. Chief among them is the settlor’s probable intent. Id. Where the settlor is deceased, this intent may be discerned from extrinsic evidence as well as the language of the trust instrument. Such evidence includes the interests and attitudes that motivated the settlor’s gift; his or her involvement or interest in particular charitable institutions; and the settlor’s “relationships, social or religious affiliations, personal background, charitable-giving history, and the like.” Id.; accord Bogert on Trusts § 442, at 257-58. The language of the trust instrument is also pertinent. Restatement 2d § 399, cmt. d.
The modern approach to cy pres also emphasizes considering the efficiency and beneficial impact of the proposed use. Restatement 3d § 67, cmt. d. As the settlor’s intent cannot be known for certain, applying cy pres necessarily involves some level of speculation. Id.; accord Scott on Trusts § 39.5.2, at 2709 (noting that courts must make “an educated guess” as to settlor’s wishes). Thus, it is generally “reasonable to suppose that among relatively similar purposes, charitably-inclined settlors would tend to prefer those most beneficial to their communities. Restatement 3d § 67, cmt. d (emphasis omitted; punctuation altered). To an increasing extent, courts thus seek to apply the trust property toward “a scheme which on the whole is best suited to accomplish the general charitable purpose of the donor.” Restatement 2d § 399, cmt. b. Finally, the wishes of the trustees, the Attorney General as parens patrie, the beneficiaries, and other interested parties also warrant consideration. Id. at cmt. f; Bogert on Trusts § 442, at 258.
B. Gift over Rule
Having established the broad contours of the cy pres doctrine, we now turn to the heart of the issue on appeal: whether the Probate Court erred in concluding that cy pres is not applicable in this case. The Probate Court reasoned that cy pres does not apply because the deeds provide an alternative distribution in the event that the primary charitable purpose fails. It concluded that “if [HHS] does not use the properties for the stated charitable purpose, the properties would go to the State of Hawaii.”
The Probate Court’s rationale appears to invoke the gift over rule. A gift over is a provision that sets forth an alternative distribution in the event that the primary purpose of the charitable gift fails. Am.Jur.2d § 151. The presence of a gift over provision may potentially preclude application of cy pres in two ways: (1) by negating the existence of a general charitable intent, and (2) by providing an alternative distribution in the event that the settlor’s original purpose fails. Restatement 2d § 399, Reporter’s Notes, cmt. c; Am.Jur.2d § 151; Scott on Trusts § 39.5.2, at 2710–13; § 39.7.5, at 2795–97; 14 C.J.S. Charities § 56 (2011).
The first application of the gift over rule is only relevant to the traditional requirement that the settlor exhibit a general charitable intent. Under this reasoning, the gift over confirms the settlor’s narrow and specific intent. 14 C.J.S. Charities § 56. This is especially true where the gift over is to a non-charity, such as a possibility of reverter. Nelson v.Kring, 225 Kan. 499, 592 P.2d 438, 444 (1979); In re Goehringer’s Will, 69 Misc.2d 145, 329 N.Y.S.2d 516, 521 (N.Y. Surr. Ct 1972) (noting that presence of gift over provision “is a clear manifestation that [the] testator had a particular rather than general charitable intention”); Roberds, 81 F.Supp. at 40-42 (concluding that because deed contained possibility of reverter if land ever ceased to be used for its prescribed purpose, settlor’s intent was specific to that purpose). Such a provision indicates that the settlor only wished to dedicate the property to a specific purpose and, if that specific purpose failed, to not dedicate it to charity at all. In re Goehringer’s Will, 329 N.Y.S.2d at 521 (“[A] specific gift over will almost conclusively preclude any determination that he had other than an intent to benefit the particular charity.”).
In contrast, where the gift over is to another charity or charitable purpose, many courts recognize that it confirms a general charitable intent. See Bogert on Trusts § 437, at 165-70; Scott on Trusts § 39.5.2, at 2713; First Nat’l Bank of Chicago v. Elliott, 406 Ill. 44, 92 N.E.2d 66, 74 (1950). Such a provision illustrates the settlor’s intent to dedicate the property to charity, even if the original purpose fails. Bogert on Trusts § 437, at 165-70.
Here, the deeds provide an alternative charitable purpose: for the land to be used by the State as a public park. Under the traditional formulation of the charitable intent requirement, the gift over in this case confirms Mrs. Lucas’s general charitable intent. Thus, regardless of the continuing viability of the general intent requirement, the gift over provision does not prevent application of cy pres under the first rationale.
In any event, it does not appear that the Probate Court applied the first rationale of the gift over rule. The Order Denying Petition contains no mention of general charitable intent. Instead, the Court’s reasoning conforms to the second rationale. It concluded that because the deeds direct an alternative distribution, cy pres is inapplicable.
This second application of the gift over rule provides that cy pres is inapplicable as the trust property should be applied toward its alternative purpose. 14 C.J.S. Charities § 56. The rule reasons that the settlor foresaw the potential failure of the first purpose and accordingly provided an alternative purpose. Id. Thus, effectuating the alternative distribution matches the settlor’s intent more closely than applying cy pres to maintain the first, failed purpose.
A number of cases affirm the straightforward application of this rule. In Roberdss v. Markham, for example, the settlor conveyed property in trust to a church for its continuing operation as a church or place of worship. 81 F.Supp. at 39. The deed provided that if the property ever ceased to be used for church purposes, it would revert to the settlor’s heirs and assigns. Id. Many years later, when the character of the surrounding neighborhood had changed and the church’s population had shifted, the trustees sought to sell the property and re-erect the church at another, more suitable location. Id. The court concluded that because the deed contained a possibility of reverter, the settler had intended the land to revert to her heirs and assigns if its use as a church ever became impracticable or impossible. Id at 40-42. It therefore did not apply cy pres to permit the sale. Id at 42; see also First Nat’l Bank of Chicago v. Am. Bd. of Comm’rs for Foreign Missions, 328 Ill. App. 481, 66 N.E.2d 446, 448-49 (1946) declining to apply cy pres where will impliedly provided for substitute distribution); accord Conn. Bank & Trust Co. v. Cyril and Julia C. Johnson Mem’l Hosp., 30 Conn. Supp. 1, 294 A.2d 586, 591-93 (1972); Hail v. Cook, 294 S.W.2d 87, 88-89 (Ky. 1956).
Yet this application of the gift over rule is subject to an important caveat. Where the alternative distribution is unfeasible, impracticable, or impossible, then the gift over rule does not preclude the application of cy pres to save the first charitable purpose. Am.Jur. Proof of Facts 3d § 19; 14 C.J.S. Charities § 56; Restatement 3d § 67, cmt. b. In such cases, applying the alternative purpose would likewise frustrate or substantially impair the settlor’s intent. Cy pres is thus necessary to save the trust from failure.
It appears that only one reported case has addressed this relatively rare scenario. Burr v. Brooks, 75 Ill. App.3d 80, 30 Ill. Dec. 744, 393 N.E.2d 1091 (1979), aff’d, Burr v. Brooks, 83 Ill.2d 488, 48 Ill. Dec. 200, 416 N.E.2d 231 (1981). In Barr, the testator bequeathed certain real property and funds to the City of Bloomington for the construction and operation of a memorial hospital. Id. at 1093. The will directed the hospital to be constructed on the site where the testator had resided. Id. It was to be operated especially for the benefit of indigent accident victims. Id. The will also directed an alternative distribution in the event that the City declined the bequest. Id. The substitute purpose required the trustees to construct and maintain an “Industrial School for Girls” on the site of his former residence. Id.
The City adopted a resolution purporting to accept the bequest. Id. at 1094. However, it determined that the site was not suitable for construction of a hospital, that there were already sufficient hospitals in the area, and that it could not obtain the requisite permission from governing authorities. Id. It thus sought to sell the real property and apply the proceeds and remaining funds toward three related purposes that were more suitable to the City’s present needs: (1) to provide health care for indigent persons; (2) to establish a memorial family care and diagnostic center that would offer free services to indigent persons; and (3) to establish an emergency medical services program. Id.
The intervenors, the city school district and a non-profit successor to the county Women’s Industrial Home, opposed application of cy pres on the basis that the will provided for an alternative charitable distribution. Id. They maintained that because the first purpose was impracticable, the court should apply the funds toward housing and educational programs in conformance with the alternative distribution. Id.
The parties agreed that neither proposed use of the property effected literal compliance with the will; both the primary and alternative distributions were impracticable or impossible. Id. at 1095. Because the alternative distribution was also impracticable, the presence of the gift over provision did not defeat application of the cy pres doctrine. Id. at 1095, 1097. The court noted that it would “make[ ] no sense” to apply the gift over rule in cases where the alternative distribution, like the primary one, is incapable of literal performance. Id. at 1097. It concluded that cy pres is applicable where a trust instrument “(1) provides for a primary and alternate charitable gift, neither of which can be carried out, and (2) also indicates a strong desire that the charitable interest of the document be followed.” Id. at 1097 (punctuation altered). The appellate court thus held that the trust property should not be summarily redirected to its alternative distribution because the alternative beneficiaries, “like the City, would be unable to comply with the terms of either charitable gift and could also make only a [c]y pres use of the property.” Id. It remanded for the lower court to apply cy pres and determine which proposed use “most nearly follow[s] the interest of the [testator].” Id. at 1098.
Burr v. Brooks thus recognizes that where the settlor provides for an alternative charitable distribution, but that secondary purpose is also impracticable or impossible, cy pres may apply to save the first. See Am.Jur. Proof of Facts 3d § 19 (“Where the donor provides that on failure of the primary charitable purpose the gift shall be used for a second charitable purpose, but makes no provision concerning the failure of the second purpose, and both purposes fail, cy pres may be applied.”) (citing Burr v. Brooks); accord 14 C.J.S. Charities § 56 (“Where the donor provides that on failure of the primary charitable purpose, the gift will be used for a second charitable purpose, but makes no provision concerning the failure of the second purpose, and both purposes fail, cy pres may be applied.”) (citing Burr v. Brooks). As one commentator recognized, if the alternative distribution “requires cy pres in order to be viable, the presumption for saving the initial gift is strengthened. This is because the second gift’s only practical advantage over the first—that it can be plugged in automatically—no longer remains.” Chester, Cy Pres or Gift Over?, 23 Suffolk U.L. Rev. at 62 (citing Burr v. Brooks). The Third Restatement of Trusts has also expressly adopted this approach:
A trust provision expressing the settlor’s own choice of an alternative charitable purpose will be carried out, without need to apply the cy pres doctrine, assuming not only that the initially specified purpose cannot be given effect or continued but also that the alternative purpose is one that properly can be given effect.
Restatement 3d § 67, cmt. b (emphasis added).
The approach expounded in Burr v. Brooks comports with the policies underlying cy pres. Fundamentally, the doctrine exists to save a charitable trust from failure while preserving the settlor’s original, charitable intent. Restatement 3d § 67, cmt. b. Thus where both the primary and alternative charitable distributions are impracticable, courts may presume that the settlor would have intended one or both purposes to survive under application of cy pres.
Here, the deeds provide that if the first purpose—an educational nature preserve operated by HHS—fails, the property passes to the State “for and as a public park.” This secondary purpose, however, is likewise impracticable. The DLNR determined that the land was unsuitable for use as a public park, and that only a portion of the land could be used as a forest preserve and watershed. Thus, the Legislature approved the proposed land exchange, and the State filed a joinder in HHS’s Petition. Redirecting the land to the State would not effectuate Mrs. Lucas’s charitable intent. Rather, it would result in the failure of the trust. As in Burr, both the primary and alternative purposes of the gift are impracticable, as the land cannot feasibly be used for either purpose. Burr, 30 Ill. Dec. 744, 393 N.E.2d at 1095. The Probate Court therefore erred in concluding that the gift over rule precludes application of cy pres.
HHS, Tiana Partners, and the State request this court to remand the case with instructions to apply cy pres to approve the proposed land exchange free and clear of the use restrictions. We agree that cy pres so applies in this case.
As discussed above, cy pres applies where: (1) property is given in trust for a charitable purpose; (2) it is impracticable to carry out the specified charitable purpose; and (3) the settlor manifested a general intent to devote the property to charitable purposes. Supra part IV(A). Here, those elements are met. Mrs. Lucas conveyed the land to HHS for charitable purposes for the use and benefit of the public. The parties do not dispute, and the evidence readily establishes, that Mrs. Lucas’s specified purposes for the land are both impracticable.
The conveyance also satisfies the traditional requirement of general charitable intent. In determining whether the settlor possessed a general charitable intent, courts consider the language of the instrument, the nature and duration of the gift, the character of the recipient organization, the presence or absence of a reversionary clause, and the mode for effectuating the gift. Am.Jur.2d § 154. Courts may also consider extrinsic evidence of the settlor’s probable intent. Am.Jur. Proof of Facts 3d § 20; accord Bogert on Trusts § 437, at 160-73. If the settlor intended the gift to “be continued within the limits of its general purpose” rather than cease upon the failure of its specific purpose, this constitutes a general intent. Obermeyer, 140 S.W.3d at 24. Gifts in support of educational goals often demonstrate a general charitable intent because there is a perpetual need and use for them. Id.; accord Bogert on Trusts § 436, at 157.
In this case, the deeds convey the land “for and as a charitable gift” for the purpose of educating the public. They specify an alternative means of achieving the charitable purpose in the event the first method fails. The deeds thus confirm that Mrs. Lucas did not intend the trust to fail should use of the land become impracticable. See Bogert on Trusts § 437, at 165-70 (gift over to another charitable purpose confirms general charitable intent); accord Scott on Trusts § 39.5.2, at 2713; First Nat’l Bank of Chicago, 92 N.E.2d at 74. The declaration of Mrs. Lucas’s daughter, evidencing Mrs. Lucas’s probable wishes regarding the property had she been alive, further supports a general charitable intent.
Finally, the proposed land exchange closely conforms to Mrs. Lucas’s original purpose. The deed restriction contemplates a nature preserve to function “as an educational experience for the public.” Mrs. Lucas’s daughter attested that her mother intended to generally benefit the people of Hawai’i by enabling HHS to provide “an educational experience for the public.” The Educational Fund preserves those goals by promoting educational programming that focuses on the natural environment. This use of the funds also comports with Mrs. Lucas’s lifelong interest and involvement with HHS. It accomplishes her probable wishes regarding the use of the land had she been aware of the obstacles preventing its development. Unlike in Burr v. Brooks, the interested parties all agree that the proposed land exchange effectuates Mrs. Lucas’s charitable intent as nearly as possible. Cf. Burr, 30 Ill. Dec. 744, 393 N.E.2d at 1095. This unanimous accord further supports applying cy pres to approve the transaction. See Restatement 2d 399, cmt. f; Bogert on Trusts § 442, at 258 (recognizing that wishes of trustees, beneficiaries, attorney general, and other interested parties warrant consideration). There is no evidence, either extrinsic or in the deeds themselves, to support a contrary conclusion.
For these reasons, we conclude that the Probate Court erred in concluding that cy pres is not applicable to approve the proposed transaction on the basis that the deeds provide for an alternative distribution. Accordingly, we vacate the Judgment and remand to the Probate Court to apply cy pres consistent with this Opinion.
Class Discussion Tool One
Aaron’s will contains the following provision:
“The rest, residue and remainder of my estate, real, personal, intangible and mixed, of whatsoever kind and wherever situated I leave in trust to my wife Diane for her life. After Diane dies, the funds in the trust are to go to State Bank in trust to be used to send five members of my church choir a year to the Oak River Wellness Center. The trustee is to use the annual net income of the trust property to fund the trips, and has the discretion to select the five members. The trustee must select the five members by May 1st of each year. The trust is to continue until the death of Pastor Ben Franklin and Choirmaster Joy Williams. Then, the trust corpus is to be divided between any of my living blood descendants.”
After Diane died, the trustee started following the terms of the trust. A few years later, the church choir decided to go in another direction, so the church discharged Williams. The church hired Kirk, Pastor’s Franklin’s son. Kirk recruited younger members. Thus, the average age of the choir went from 58 to 24. Given the youngness of the choir and the congregation, Kirk decided to start performing hip hop gospel music. He added other instruments, including drums and cymbals, to accompany the piano and organ.
During a storm, the roof of the church started leaking. As a result, the church’s piano and organ were damaged. The church does not have the money to replace the equipment. The members of the church believe that, in order to make a joyful noise unto the Lord, they need music. Therefore, they refuse to continue performing without music. The choir requested that the trustee use some of the annual trust income to purchase new musical equipment.
The town of Play, located 45 minutes away from the church, recently opened up a new age spa. Oak River is a resort town located four hours away from where the church is located. The members of the choir asked the trustee to send members to the new spa instead of the wellness center. It would be cheaper to go to the new spa than the wellness center, so more than five choir members would be able to attend.
Pastor Franklin was injured in a car accident and is in a coma. It is unclear when, or if, he will regain consciousness. He is not brain dead.
The trustee would like to know what he should do. Please analyze all of the relevant legal issues.
Class Discussion Tool Two
Judy was a practicing vampire priestess. During her lifetime, she spent a great deal of money supporting activities sponsored by members of the local vampire temple. Judy believed that vampires had evolved and were able to live normal lives. As a consequence, Judy and the members of the temple believed that modern vampires could walk in sun light without being injured. The members of the temple also believed that, although vampires were immortal, they aged. In her will, Judy created the following trust. “I leave one million dollars in trust to the town of Bloodville in order for them to build a retirement home for aging vampires.”
After Judy died, the City Council of Bloodville accepted the trust funds. At that time, the vampire temple had been destroyed by fire and most of the practicing vampires had left the area. The City Council voted to use the million dollars in the trust to build an apartment complex for low-income senior citizens who lived in the town.
After the apartment complex was partially built, the executor of Judy’s estate sued to get an injunction to prevent the City Council from using the trust money to build the apartment complex. What result?