Review of the CyPres Doctrine in Michigan
BY KENNETH M. WISSBRUN
Charitable trusts are created for philanthropic reasons, for tax reasons and as vehicles to attain a certain sense of immortality among other reasons. Sometimes it becomes impossible to accomplish the intent of the donor. When this happens the parties must turn to the courts to seek equitable relief.
This article arose from the author’s experience in reviewing a trust and concluding that its original purpose had been frustrated, Agreement was eventually reached between the income and remainderman beneficiaries to terminate the trust and divide the proceeds equitably, in a manner which would carry out the donor’s original intent.
Statement of the Law in Michigan
Cy pres has its origin in the French expression “cy pre comme possible,” meaning “as near as possible.”
The Restatement of Trusts (2d, Section 399) defines the cy pres doc trine as follows:
- If property is given in trust to be applied to a particular charitable purpose, and it is or becomes impossible or impractical or illegal to carry out the particular purpose, and if the settlor manifested a more general intention to devote the property to charitable purposes the trust will not fail but the court will direct the application of the property to some charitable purpose which falls within the general charitable intention of the settlor.
Only recently have Michigan courts recognized the cy pres doctrine. One of the first such cases was In re Hannan’s Estate, 227 Mich 569 (1924), in which the Court included as dictum that it would not hesitate to apply the cy pres doctrine if necessary, but that this particular case did not require it.
Three years later, in Scudder v Security Trust Co., 238 Mich 318 (1927), the Court stated that the statute authorizing charitable trusts intended that the doctrine of cy pres would be applicable in an appropriate factual situation. A decade later, in John Robinson Hospital v Cross, 279 Mich 407 (1937), the Court applied the cy pres doctrine without mentioning it by name.
In this particular case the trustee was given a sum of money to be invested; the income to be used to maintain a hospital room and bed bearing the name of the testatrix. The bequest named a particular charitable hospital, but the hospital was in time taken over by different management, and was no longer operated as a charitable institution.
Could the bequest to maintain a bed and room be applied to a different hospital? The Court said that it could, thereby adopting in principle what has been designated the cy pres doctrine.
Cy pres was first expressly affirmed and applied in Michigan in Gifford v First National Bank of Menominee, 285 Mich 58 (1938). The testator had provided for formation of a trust fund to be devoted to certain charitable purposes. The fund had shrunk in value, and in order to carry out the testator’s plan, the Probate Court approved a compromise agreement. The question in the suit was whether the legacy had been rendered void as impractical and impossible of performance. The Court held that the rule of cy pres was recognized in Michigan, and authorized the purpose of the testator be earned out as nearly as possible to the testator’s original intent.
The charitable purpose in Gifford was very broad. The terms were partially as follows:
- … be set aside and held in a trust fund known as the Marshall M, Lloyd Fund which with subsequent additions thereto, should be devoted to charitable uses such as “furthering of the medical arts, the practice of medicine, the care of the sick, medical education, the spreading of knowledge of hygiene and care of the sick, child welfare, the establishment and operation of hospitals, laboratories, dispensaries and medical diagnostic institutions, or any or either of said purposes which may properly come within charitable uses.” The testator further recommended in his will the establishment of “an institution in Menominee, Michigan, for medical diagnosis and temporary care of the sick.”
Addressing the issue of whether the proposed plan was quite different than the testator’s original intent the Court said: “The record fairly indicates that the proposed plan is somewhat of a deviation from that contemplated by the Testator; but notwithstanding this the proposed plan devotes the trust fund to the same general field of charitable activity contemplated by the· Donor” (emphasis added).
Thirty-four years later, the Court refined the concept and the application of cy pres. In In re Rood Estate, 41 Mich App 405, the Court stated:
- “Before the Cy pres Doctrine can be applied three (3) prerequisites must be met. First, the Court must determine whether the gift creates a valid charitable trust; second, it must be established that it is impossible or impractical to carry out the specific purpose of the trust; and finally the Court must determine whether in creating the charitable trust the Testator (or Settlor) had a general charitable intent” (emphasis added).
In the Rood estate, a will and codicil created a testamentary trust in which the residue and remainder of the estate was devised to three Michigan colleges. The trustees were to be the three college presidents or their successors. The provisions of the will and the codicil required that political science be taught by the colleges as specified therein, and that books written by Rood be distributed in a required manner.
In 1965 a trustee filed a complaint seeking construction of the will and codicil. An amended complaint was filed stating the “impossibility, impracticality, and illegality of various provisions of the will and codicil.” The pleadings requested that relief in the form of the construction of the trust be permitted in order to permit the income to be used in accordance with the rules, regulations, and teaching practices of each institution as to how it taught political science.
Testimony from political science professors at each institution showed that the requirements placed upon the teachers by the will and codicil would infringe upon their academic freedom because the “testator’s books” presented a philosophy that was viewed with disfavor, was poorly written, out of date, and could not be used as textbooks. The plaintiffs therefore, requested that the cy pres doctrine be applied to permit compliance with the intent of the trust.
Applying three tests, the Court found that a valid charitable trust was created. The will and codicil were properly witnessed and attested to, and the beneficiaries were proper charitable beneficiaries.
In regard to the second test, the Court determined that Rood’s purpose was impossible or impractical to carry out. The Court quoted from the trial court’s opinion
- “He wanted the income of the residue of his Estate to be used to pro mote the teaching of certain defined political and economic theories. He wanted these theories to receive greater emphasis in the college undergraduate classroom than they would have received but for his gift.” (418)
- “No legitimate institution of higher learning could permit this kind of control of the classroom from the grave. It is the opinion of this Court that the dominant purpose of William R. Rood as above defined are impossible to achieve. If the income of the residue of the Testamentary Trust are to be used to promote special understanding hy students of those political and economic theories favored by Rood, it must be of necessity be done outside the undergraduate classroom.” (419)
The third test was whether the testator had expressed a general charitable intent. The Court determined that he had. It relied on the following:
- Charitable trusts are construed liberally and given effect wherever possible. John Robinson Hospital v Cross, 279 Mich 407 (1937), and Wanstead v Fisher, 278 Mich 68 (1936).
- There was an absence of a gift over in the event that Rood’s purpose failed.
- The Court found it significant that the bulk of the donor’s property was given for charitable purposes, deriving from this a general charitable intent.
- The Court found that the testator directed that his educational goals be fulfilled by another school or college in the event that the named trustees failed to fulfill them. The Court concluded that this clearly indicated that Rood intended some educational institution to benefit, and therefore, his intent was a general charitable one.
The statutory basis for cy pres is contained in MCLA 554.352.
This statute provides that the judicial power rests with the circuit court. The statute predates the Revised Probate Code, in which Article 1, Section 21 gives the probate court exclusive jurisdiction of trusts and trustees in the execution of wills, and the administration of estates of deceased persons.
In an address to Oakland County attorneys, Wayne County Probate Judge Ernest C. Boehm pointed out that new RJA section 847 must be kept in mind regarding jurisdiction of the probate courts. RJA section 847 reads as follows:
- In the exercise of jurisdiction vested in the probate court by law, the probate court shall have the same powers as the circuit court, to hear and determine any matter and make any proper orders to fully effectuate the probate court’s jurisdiction and decisions.
Judge Boehm went on to state that RJA section 847 was enacted to do two things: “First, in any case in which the probate court has jurisdiction, both in section 22 and in all the other sections of the probate code as well as in all other law giving the probate court jurisdiction, to give the probate judge the same powers, equitable or law, inherent or statute or rule, as a circuit court judge; and, second, to have the powers of the circuit court judge to hear, determine and fully effectuate the probate judge’s jurisdiction and decisions. “
Since we are dealing with a charitable trust pursuant to Section 554.352 of MCLA, the Michigan Attorney General’s Office will be involved as an interested party. A copy of the petition, the brief if necessary, and/or an order either terminating or modifying the trust, along with notice of hearings and/or waivers and consents, must be submitted to the Attorney General’s Of fice, at the following address:
Attorney General’s Office
Charitable Trusts and Charities
525 West Ottawa
Lansing, Ml 48913
As long as the parties are in agreement as to settlement, and all interested parties have been represented, the court and Attorney General’s Office will most likely agree to a settlement.