Case Name: The Little Rock Junior College v. The George W. Donaghey Foundation
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1955-03-28
Citations: 224 Ark. 895
Docket Number: 5-622
Parties: The Little Rock Junior College v. The George W. Donaghey Foundation.
Judges: The Chief Justice, Mr. Justice Holt and Mr. Justice McFaddin dissent.
Reporter: Arkansas Reports
Volume: 224
Pages: 895–917

Head Matter:
The Little Rock Junior College v. The George W. Donaghey Foundation.
5-622
277 S. W. 2d 79
Opinion delivered March 28, 1955.
Bailey, Warren & Bullion, for appellant.
II. M. Armistead and Barber, Henry & Thurman, for appellee.

Opinion:
Robinson, J.
This is a suit for a declaratory judgment whereby the beneficiary of a trust asks that a deed in trust be construed. George W. Donaghey and his wife, Louvenia Donaghey, conveyed by a deed in trust to named trustees, "for the exclusive use and benefit of the present Little Rock Junior College," certain real estate in the City of Little Rock. The deed provides, inter alia:
"It is the object and purpose of this deed to convey the property herein described to said Trustees, their successors and assigns for the purpose of creating a fund or foundation to be used for the sole and exclusive benefit of the present Little Rock Junior College, an institution of learning in said city, at the present time operated under the management of the Board of School Directors of the Special School District of Little Rock, Arkansas, investing said Trustees with full discretion to select some other public school or schools in said city, operated by or under the management or supervision of the Board of School Directors of the said Special School District of Little Rock, and their successors in charge of the public schools in the said City of Little Rock, in the event the present Little Rock Junior College or its successors, should at any time cease to be operated by or under the supervision of the public school authorities in said City.
"Said Trustees, their successors or assigns, shall have the sole and exclusive management, control and direction of said property, with the right to extend, renew, change or refinance the present or any future indebtedness against said property, its income or proceeds, or any part thereof, with the right to create additional liens or encumbrances on said property, the income therefrom or proceeds thereof, or any part thereof, and in every respect to deal with and handle and manage said properties as an individual could do, said Trustees or their successors to he guided and limited only by the exercise of their best judgment in the interest of the fund and foundation and its objects and purposes."
The deed further provides:
"After paying all interest, principal, fixed charges, upkeep, insurance and all operating expenses maturing during any year, the Trustees may annually (or more frequently, if they deem best) pay over on January 1st of each year all or such part of the net income from the said properties as they deem best; such payments shall be made to the proper public school authorities so that the same shall be applied for the maintenance and operation of said Little Rock Junior College, or its successors, or any other public school in said City of Little Rock, selected by the said Trustees in accordance with the authority heretofore expressed. In the event there should at any time be accumulations of net income under the terms hereto, the same may be expended for the purposes of this trust at such times and in such amounts as the Trustees think best. ' '
At the time the trust was set up the Little Rock Junior College was a two year school. During the first years of the trust, due to a mortgage indebtedness on the property conveyed to the trust, only a comparatively small amount was paid to the college; but subsequent to 1939 payments increased. In 1950 the payment by the trust to the college was in the sum of $45,037.50, and in 1953 it was $75,050.00. In May, 1954, the trustees of the college decided to expand it to a four year college and wrote to the Donaghey trustees as follows:
"It is recommended that the Little Rock Junior College be expanded to a four year senior college, the third year to he added in September, 1954, and the fourth year in September, 1955."
As a result of this letter from the college, the Donaghey trustees adopted the following resolution:
"Tt is the sense of the trustees of the George W. Donaghey Foundation that it is their duty to exercise their discretion within the scope of Governor Donaghey's deed in"'trust to determine a proper worthy beneficiary of the Foundation: That, because of their knowledge of the vastly greater requirements of an adequate four year college over those of a Junior College, the present program of the'Board of Trustees of Junior College for its expansion into a four year college has created grave doubts in the minds of the Donaghey Foundation Trustees arid that they are therefore not in position at this time to obligate Foundation Funds to Junior College for the érisúing year, as requested by President Gran-ville Davis'''
The effect of this resolution was to deprive the college of any funds from the Donaghey trust, and it appears that the school could not survive without such aid. Hence the college rescinded its action in expanding to a four year school, and following this step the Donaghey trust again allotted $75,000.00 to the school for the year 1954H955. There is no contention that the trustees of the Donaghey trust adopted the resolution stopping payment of trust funds to the school for any reason other than that the college intended to expand.
The college then filed this suit asking that the deed in trust be construed to mean that it is the duty of the trustees of the Donaghey Foundation to pay the profits of the trust to the school, and that the trustees do not have authority to withhold such profits from the college merely because it expands to a four year school. The Chancellor held that the trustees were acting within the authority vested in them by the deed in trust in stopping payment to the school when it was expanded.
On appeal the college contends that a four year school would have the same rights, powers, duties and obligations as a two year school; that the Donaghey trustees acted arbitrarily in withholding the profits of the trust from the college upon its being expanded to a four year institution; and that the college may compel a distribution of the profits from the trust.
Appellees contend a four year college would not be the same school as or a successor to the present Little Rock Junior College; and further that since the founding of the trust the school has become a corporation, is not supervised by the Board of Directors of the Little Rock school district, and hence is no longer entitled to receive anything from the trust.
Considerable argument is devoted to the question of whether a four year college would be a successor to the present school; however, in our opinion the proposition of a successor does not enter into the picture, for the mere fact that the school authorities decided to expand into a four year college in no way changes the identity of the school and does not make of it a school other than the one that the trust was set up to help. Little Rock Junior College is merely the name of the school; it is inconceivable that the settlors of the trust used the words in any other way. Loving the college as they did, it is unthinkable that they wanted to help it only if it remained limited in the educational advantages it had to offer, and did not want to give it any further aid if through their generosity the school was able to grow and become a great institution of learning. It is true the deed uses the words "the present Little Rock Junior College." The deed provides: "It is the object and purpose of this deed to convey the property herein described to said trustees, their successors and assigns, for the purpose of creating a fund or foundation to be used for the sole and exclusive benefit of the present Little Rock Junior College." But "the present Little Rock Junior College" is the very same school that wants to expand into a four year college, and by so expanding it does not become another school. When John Doe, a boy 15 years of age, grows up and becomes a man 21 years of age, he is still the same John Doe. It is suggested that the name of the school has now been changed to Donaghey College; in the future another school may adopt the name Little Rock Junior College. That is when the wording in the deed in trust "the present Little Rock Junior College" would come into play; the new school adopting that name would not be the present Little Rock Junior College.
It is argued that Governor Donaghey was interested only in a junior college because he knew of the trials and tribulations of those unable to obtain a higher education, and he wanted to make a junior college available to those unable to bear the expense of a full four year course and that he endowed a "junior college" as such and gave the trustees of the Donaghey Foundation the discretion of selecting some other school as a beneficiary of the trust in the event the Little Rock Junior College ceased to be a junior college. But it is shown conclusively by the writings of both the Governor and Mrs. Donaghey that it was their fondest hope that the Little Rock Junior College would grow into a four year school. Governor Donaghey wrote in his Autobiography: "My health is most excellent. Sometimes I have to remind myself that I have celebrated 81 birthdays. . I believe that I can say, in all truth, that I am living for the Junior College which I have endowed. . . . When the Donaghey Foundation Board meets, we have great plans for improving the property, and perhaps for constructing a building on the site where the burned theater stood. Shall our plans and dreams lead to a four year college, with a fine new plant of its own? The very thought makes me feel stronger and younger." And the Governor wrote in his volume Home Spun Philosophy: "Then, whoever aids in the development of this human power, for any of the vocations of life, renders his community and State a forward service. That is the object of the establishment of the Donaghey Foundation. Today it is sponsoring the fortunes of Little Rock Junior College. This college is affording the young people of Greater Little Rock and the contiguous territory the opportunity of a two-year course in college work with the object of eventually making it four years. " It is shown that Mrs. Donaghey stated "that her greatest wish was to see the aim of her husband fulfilled — a four year college in Little Rock."
Where there is an ambiguity in a deed, extrinsic evidence is admissible, not to contradict or vary the terms of the deed, but to place all the facts, circumstances, and position of the parties before the court to the end that the true intent of the grantor may be determined. Swayne v. Vance, 28 Ark. 282; Barnett v. Morris, 207 Ark. 761, 182 S. W. 2d 765. It is argued in this case that the extrinsic evidence is not admissible because there is no ambiguity, but the mere fact that appellees are able to make a stout argument in favor of a construction of the deed with which we do not agree in itself shows there is an ambiguity.
Appellants further contend that the declarations of the settlor, made subsequent to the establishment of the trust, are not admissible for the purpose of showing intention, and they strongly rely on the case of Rufty v. Brantly, 204 Ark. 32, 161 S. W. 2d 11. However, in the Rufty case, after pointing out that extrinsic evidence is incompetent to show the testator's intention in the disposition of property, the court further says:
"In the construction of ambiguous expressions, the situation of the parties may very properly be taken into view. The ties which connect the testator with his legatees, the affection subsisting between them, the motives which may reasonably be supposed to operate with him and to influence him in the disposition of his property, are all entitled to consideration in expounding doubtful words and ascertaining the meaning in which the testator uses them."
Here the principal issue in dispute is the meaning in which the settlor of the trust used the words '1 the present Little Rock Junior College." Were the words used as meaning a Junior College only, or were they used in the sense of meaning the name of the school endowed? Governor Donaghey's feeling toward the school, and his hopes and ambitions for it, are of paramount importance in arriving at the true meaning of the words used.
Appellants also rely heavily on the case of United States National Bank of Denver v. Brunton, 112 Colo. 442, 150 P. 2d 297, but in that case the court carefully points out that the trust agreement was not ambiguous, and says:
"We believe the trust agreement is complete and unambiguous, and that there is no need to go beyond its four corners to interpret it."
Here, if we had to construe the deed in trust by staying within its four corners, it would appear that the words "the present Little Rock Junior College" refer to the name of the school. However, since the appellants contend that the words have a different meaning and are used as pertaining only to a Junior College as such, we may go beyond the deed in trust for aid in its construction. It would be hard to find any evidence more satisfactory than the writings of the settlor.
In Elliott v. Gordon, 10 Cir., 70 F. 2d 9, the court says:
"It is asserted that such declarations were not admissible because they were in derogation of her title. It is well settled that once a trust is established, declarations of the donor thereafter made in derogation of it are not admissible because the estate is irrevocable and it is immaterial what the donor may say after it is created. But the challenged testimony was not offered to overthrow a trust estate. It was not in derogation of appellant's title. That was not the purpose of the testimony. Its purpose was to show that Howerton did not intend to make her a then present gift of the equitable title to the property; that she never had such title. That was the issue in the case; not that a trust had been created and subsequently terminated. The declarations were admissible to show Howerton's intention and his interpretation of what had been done. Adams v. Hagerott, 8 Cir., 34 F. 2d 899; Stoehr v. Miller, 2 Cir., 296 F. 414."
In Adams v. Hagerott, 8 Cir., 34 F. 2d 899, it is said:
' ' The statements made by Mr. Gaines prior to March 15,1920, were however, admissible as showing intent, and his subsequent statements were admissible as showing his interpretation of -what had been done. Talbot v. Talbot, 32 R. I. 72, 90, 78 A. 535, Ann. Cas. 1912C, 1221; Supple v. Suffolk Sav. Bank, 198 Mass. 393, 84 N. E. 432, 126 Am. St. Rep. 451."
Likewise the declarations of Governor Donaghey were admissible for the purpose of showing his interpretation of what he had done. Such declarations show, beyond any .shadow of a donbt, that he had endowed, a school which he hoped would some day grow into a four-year college.
It appears that in attempting to develop a four-year college the school authorities were doing exactly what Governor Donaghey hoped would be done. The trustees of the Donaghey Foundation cannot arbitrarily withhold profits of the trust from the college; and on the other hand, of course, the school authorities cannot expend such money in a manner that would amount to waste. Undoubtedly under the terms of the deed in trust, the trustees have full management and supervision of the trust property, and have full authority to exercise good business practices in connection therewith; but the profits must be paid to the beneficiary of the trust, Little Rock Junior College, and the trustees of that institution are the ones who are charged with the responsibility of conducting a school that will use the funds received from the trust to the very best advantage.
But little need be said about appellee's contention that since the college has. incorporated, it is no longer under the supervision of the Little Rock School Board and is therefore not entitled to receive anything from the trust. Surely appellees do hot have much confidence in that theory, for the payments to the college were continued after the four-year program was abandoned.
The deed provides that the school be "under the supervision of the public'school authorities in said city." The college was incorporated in 1947; section one of Article 5 of the Articles of Incorporation provides: "The management and administration of the affairs of the corporation shall be vested in a Board of Trustees which shall always be composed of and limited to duly elected and installed Directors of the Little Rock School District." Hence the college is under the supervision of the public school authorities of Little Rock just as much as it is possible to be under such supervision. By incorporating the institution and limiting the personnel of the Board of Trustees to duly elected and installed Directors of the Little Rock School District, the provision in the deed in trust pertaining to the college being supervised by the school authorities of Little Rock is fully complied with.
Reversed with directions to enter a decree not inconsistent herewith.
The Chief Justice, Mr. Justice Holt and Mr. Justice McFaddin dissent.