Opinion ID: 2284440
Heading Depth: 1
Heading Rank: 2

Heading: Standing to Enforce a Charitable Trust[8]

Text: As distinguished from a private trust, which is characterized by identified beneficiaries who enjoy equitable ownership of the property and for whose benefit the trustees are obliged to act, in a charitable trust the obligation of the trustee is to apply the trust res for some form of public benefit, and persons who receive[] advantages from the administration of the trust do so because they are conduits through whom the social gains flow, and not necessarily because they have a property interest in the trust assets. G. BOGERT, THE LAW OF TRUSTS AND TRUSTEES § 411, at 407 (2d ed. rev. 1977); RESTATEMENT (SECOND) OF TRUSTS, chap. 11 introductory note (1959) (fundamental distinction between private and charitable trusts is that, in charitable trust, property is devoted to purposes beneficial to the community). Though specific individuals or members of a class of individuals may receive a benefit from time to time, because the interest in ensuring that charitable trust property is put to proper purposes is properly that of the community at large, the traditional rule has been that only a public officer, usually the state Attorney General, has standing to bring an action to enforce the terms of the trust. See RESTATEMENT (SECOND) OF TRUSTS, supra, § 391 & comment a ; 4A W. FRATCHER, THE LAW OF TRUSTS § 391, at 356-60 (4th ed. 1989); G. BOGERT, supra, § 411, at 409-11. [9] Principally, the rationale for vesting exclusive power in a public officer stems from the inherent impossibility of establishing a distinct justiciable interest on the part of a member of a large and constantly shifting benefited class, and the recurring burdens on the trust res and trustee of vexatious litigation that would result from recognition of a cause of action by any and all of a large number of individuals who might benefit incidentally from the trust. G. BOGERT, supra, § 411, at 414.
An exception to the general rule, recognized by this court, exists in situations where an individual seeking enforcement of the trust has a special interest in continued performance of the trust distinguishable from that of the public at large. YMCA v. Covington, supra, 484 A.2d at 591-92; RESTATEMENT (SECOND) OF TRUSTS, supra, § 391 & comment c. In these situations, though the private beneficiary is the conduit through which broader community benefits flow, the plaintiff sues to secure an individualized interest in the trust, and the problems presented by suits from a practically limitless and wholly indefinite group of persons, Mount Vernon Mortgage Corp., supra note 9, 98 U.S.App.D.C. at 430, 236 F.2d at 725, are less pronounced. While special interest is a term of uncertain scope, it appears that at least a clearly identified intended beneficiary has a justiciable interest in enforcement of the trust. Comment c of section 391 of the Restatement sets out examples of what constitutes a special interest within the meaning of the exception. Most address situations where the trust was created to benefit identified persons ( e.g., the current minister of a specific church) or entities ( e.g., a specific church or charitable organization). See RESTATEMENT (SECOND) OF TRUSTS, supra, § 391 comment c. In the present case, however, persons for whose benefit the Edes trust was created are not identified with that degree of particularity, but instead categorically. In these situations, the general rule is that one who is merely a possible beneficiary ... or a member of a class of possible beneficiaries, is not entitled to sue for enforcement of the trust. Alco Gravure, Inc. v. Knapp Found., 64 N.Y.2d 458, 465, 490 N.Y.S.2d 116, 119, 479 N.E.2d 752, 755 (1985); RESTATEMENT (SECOND) OF TRUSTS, supra, § 391 comment c; Kania v. Chatham, 297 N.C. 290, 291-93, 254 S.E.2d 528, 530 (1979). Older cases treat persons who fairly represent a class of identifiable (but not identified) beneficiaries as mere possible beneficiaries, denying them standing. See, e.g., Revici v. Conference of Jewish Material Claims Against Germany, 11 Misc.2d 354, 174 N.Y.S.2d 825 (N.Y.Sup.Ct.1958) (where trust was to benefit persons suffering damage as a result of Nazi persecution, suit could only be maintained by Attorney General; person injured by Nazis lacked standing). [10] The Restatement goes on to state, however, that where a charitable trust is created for the members of a small class of persons, a member of the class can maintain a suit on behalf of himself and the other members of the class [to enforce the trust]. Thus, where a charitable trust is created for the poor members of a particular church, any such member of the church can maintain a suit against the trustees.... RESTATEMENT (SECOND) OF TRUSTS, supra, § 391 comment c (emphasis added). This may reflect what Professor Bogert identifies as a modern trend in cases suggest[ing] some change from the more traditional approach by permitting persons deemed to represent a class of actual or prospective beneficiaries to bring suit to enforce the charitable trust. G. BOGERT, supra, § 411, at 446 (emphasis added). These decisions recognize that application of the strict traditional rule denying standing to potential beneficiaries of a charitable trust may be inimical to trust purposes in cases where a suit to enforce the trust does not present the dangers the rule was intended to guard against. Illustrative is Alco Gravure, supra, in which the court, while noting the general rule that excludes member[s] of a class of possible beneficiaries, defined the exception as embracing a particular group of people [which] has a special interest in funds held for a charitable purpose ... and the class of potential beneficiaries is sharply defined and limited in number .... 64 N.Y.2d at 465, 490 N.Y.S.2d at 119, 479 N.E.2d at 755 (emphases added). Appellants contend the trial court erred in concluding that, to have standing to enforce the trust, the plaintiffs must be present beneficiaries of the trust, in the sense that they must already have been selected by the Board of Trustees to reside in the House. They argue that the Trustees' discretion cannot encompass the power to confer or deny standing on persons who otherwise meet the admission criteriapersons in the very class the settlor intended to benefitwhen such persons do not challenge denial of benefits to them specifically, but to the class of intended beneficiaries. The Trustees state the legal proposition on which they prevailed below as follows: when trustees are invested with discretion to choose the beneficiaries of a trust from potential candidates, a person has no standing to sue the trust unless he or she has been chosen as a beneficiary, even though he or she may meet the threshold requirements of eligibility. In support of their arguments, both sides cite YMCA v. Covington, supra , in which this court held that members of a YMCA branch which the YMCA proposed to relocate had a special interest in the trust distinct from that of other members of the public. 484 A.2d at 592. According to the Trustees, YMCA compels the conclusion that standing is limited to persons with a current right to enjoy the trust benefits. Appellants counter that YMCA does not limit standing to current beneficiaries, and that there we conferred standing on the members not because they were members per se but because of the nature of their interest in the particular facility, the closing of which would injure them in a way different from the general public. YMCA, we conclude, does not decide the issue presented here. In that case the persons challenging the trustees' action in fact were members of the branch, and we had no occasion to decide whether, or under what circumstances, non-members desirous of membership would have standing to bring suit. For our purposes YMCA merely underscores that the essence of a special interest in a charitable trust is a particularized interest distinct from that of members of the general public. See Lokey v. Texas Methodist Found., 479 S.W.2d 260, 265 (Tex.1972), cited with approval in YMCA v. Covington, supra, 484 A.2d at 591. The Trustees also rely (as did the trial judge) on Kania v. Chatham, supra , as establishing the general rule that a potential, as opposed to current, recipient of trust benefits cannot enforce the trust. The Supreme Court of North Carolina in Kania did regard the plaintiff's asserted status as a potential beneficiary as fatal to his claim, noting that the mere fact that a person may, in the discretion of the Trustees, become a recipient of the benefit under the trust does not entitle him to maintain a suit for the enforcement of the trust. The opinion went on to state, however, that we do not mean to imply that a potential beneficiary of a charitable trust can never avail himself of legal process to enforce the provisions of such a trust. 297 N.C. at 293, 254 S.E.2d at 530. Key to Kania was a factor to be discussed momentarily: the avoidance of a multiplicity of lawsuits challenging the trustee's discretionary day-to-day administration of the trust. We reject a current beneficiary restriction which, at least as alleged in this case, would reserve to the Trustees the power to confer or deny standing to question their actions by refusing to act on applications and awaiting the natural diminution of the class of current beneficiaries by attrition. [11] The better reasoned view consistent with the Restatement's recognition of representative standing for a member of a small class of personsis that a particular class of potential beneficiaries has a special interest in enforcing a trust if the class is sharply defined and its members are limited in number. Alco Gravure, supra, 64 N.Y.2d at 465, 490 N.Y.S.2d at 119, 479 N.E.2d at 755. See also St. John's-St. Luke Evangelical Church v. National Bank, 92 Mich.App. 1, 13-19, 283 N.W.2d 852, 858-60 (1979) (where class of beneficiaries not uncertain and indefinite, standing should not be denied), distinguishing Oleksy v. Sisters of Mercy, 74 Mich.App. 374, 253 N.W.2d 772 (1977); Gray v. St. Matthews Cathedral Endowment Fund, 544 S.W.2d 488, 491 (Tex.Ct. Civ.App.1976) (problems of identification of beneficiaries and of undue harassment are not present when the class of persons to be benefited is a small, identifiable group, as distinguished from the public generally). We go further, however, and adopt another limiting factor as well. Even when a class of potential beneficiaries is small and distinct enough that its members appear to have an interest distinguishable from the public's, the problem of subjecting the trustees to recurring vexatious litigation may exist. Where potential beneficiaries are identified categorically (for example, as elderly indigent widows), the eligible class by nature will expand and contract continuously, and recognizing a representative member's right to challenge any action by the trustees raises the danger of proliferation of wasteful lawsuits which the exclusivity rule avoids. Thus, in addition to the nature of the class, we think it necessaryin the case of potential beneficiariesalso to consider the nature of the challenge to the trustees' acts in deciding whether to apply the special interest exception. In Alco Gravure, supra, the trustees of a foundation established to aid employees of the founder's corporations and their families decided, for tax reasons, to dissolve the foundation and transfer its assets to a kindred but tax-exempt foundation. In conferring standing to sue on employees of one of those corporations who were entitled to a preference in the distribution of the foundation's assets, the New York Court of Appeals observed that the present action concerns not the ongoing administration of a charitable corporation, but the dissolution of that corporation and the complete elimination of the individual plaintiffs' status as preferred beneficiaries; and thus, it concluded, the policy reasons for limiting standingto prevent vexatious litigation and suits by irresponsible parties who do not have a tangible stake in the matter did not apply. 64 N.Y.2d at 466, 490 N.Y. S.2d at 120, 479 N.E.2d at 765. In Alco Gravure, as noted, the trustees proposed an extraordinary measure threatening the existence of the trust, hence raising an issue that, by its nature, could only be tried once. By contrast, where the challenge is to an ordinary exercise of discretion on a matter expressly committed to the trustees, recurring litigation is much more probable. For example, in Kania v. Chatham, supra , the appellate court denied standing to a student who had been nominated for a scholarship (but not selected by the trustees) to sue the trustees for abuse of discretion. 297 N.C. at 291-93, 254 S.E.2d at 530. The court emphasized the large size of the class of nominees for the scholarship, and recognized the danger that, if standing were conferred on this plaintiff, every spurned nominee (some 930 in number) could file an action challenging a decision committed to the trustees' discretion. The court was unwilling to allow rejected potential beneficiaries to clog court dockets and dissipate trust assets with attacks on ordinary exercises of trustees' judgment. In Kania also, unlike in Alco Gravure, the challenged exercise of discretion involved denial of a benefit to an individual and not the class as a whole. A suit by a representative of a class of potential beneficiaries should aim to vindicate the interests of the entire class and should be addressed to trustee action that impairs those interests, not the interests of a given individual.

Undeniably, Margaret Edes sought to confer the benefits of secure housing and companionship on a particular class of persons, creating an interest in its members distinct from that of the general public in the administration of those benefits. Nevertheless, we must decide whether the standards established in the Edes will, the charter, and the by-laws sufficiently narrow the class of potential beneficiaries. We conclude that they do. The Trustees argue that the class of potential beneficiaries includes all women and so is limitless, because any woman could possibly become poor and widowed. They contend that membership in the beneficiary class is not limited by threshold criteria as the beneficiary class was in Alco Gravure.  In that case, the court defined the class as the employees of corporations in which [the settlor] was involved and the employees of successors of such corporations. 64 N.Y.2d at 466, 490 N.Y.S.2d at 120, 479 N.E.2d at 756 (emphasis added). We think there are definite criteria narrowing the instant class and identifying its present members with at least as much particularity as the limitation in Alco Gravure. The will and charter require the beneficiary to be (1) female, (2) indigent, (3) aged, and (4) widowed. The by-laws further require her (5) to be in good health (certifiably) and (6) to have been for at least five years immediately preceding the date of application [a] resident[] of Georgetown (although the Board has discretion to waive this requirement on unanimous vote). [12] Moreover, the Trustees' own representations provide evidence that the class of potential beneficiaries is limited. Their reason for seeking the sale and transfer of the home was, according to the probate complaint, that [i]n recent years, the number of applications from the group of beneficiaries specified in the Edes will, namely `aged and indigent Widows residing, or to reside, within ... Georgetown' has decreased significantly, and that [a]lthough the Trustees have actively sought to attract aged and indigent Georgetown widows, very few applications have been received from this group. At oral argument they cited as a partial reason for transferring the functions of the Edes Home to the Washington Home the difficulty of finding aged, indigent widows in sufficiently good health to satisfy the by-laws' requirement, and the unwillingness of otherwise eligible residents to risk living in a home where an illness requiring nursing care (which the Home does not provide) would result in expulsion.
Appellants argue vigorously that they are not alleging a simple abuse of discretion by the Trustees, and that the prospect of recurring vexatious litigation predicated on ordinary exercises of the Trustees' judgment is not present here. They argue that the Board here seeks to change the face of Edes, effecting a transfer of functions that will change the Home's character fundamentally; indeed, if the Board is successful, no present or potential beneficiary will ever be able to reside in the Edes House in Georgetownand this issue will only be litigated once. The trial court responded that the Trustees do not seek to dissolve the trust or put its assets to a purpose different from that required by the will, charter and by-laws, but instead desire to relocate the functions of the Edes Home to the Washington Home so that the purposes of the Edes trust can continue to be fulfilled. According to the Trustees' probate complaint, the Edes Home will continue to exist as a corporate entity and to administer the trust assets, including the proceeds of the sale of the House, for the benefit of those residing in living units dedicated to the purposes of the Edes trust within the Washington Home. It is beyond dispute that the proposed merger and transfer of functions to the Washington Home represent a major change from the manner in which the trust has been administered in the past. While the sale of trust propertyincluding Edes House itselfis undoubtedly a matter within the Trustees' discretion, the intent of the Board in selling the House and the planned transfer of its functions to another entity raise substantial questions about the compatibility of this action with the settlor's intent; and these issues in turn distinguish the proposed action from an ordinary exercise of day-to-day discretion committed solely to the trustees' judgment. Moreover, the merger proposal places more at stake than just the loss of an opportunity to live at a certain address in Georgetown; it also portends the loss of Edes Home's independent identity, which may adversely affect the interests of all beneficiaries as a class. As the Trustees acknowledge, they plan to transfer some of the Home's most important functions, including day-to-day maintenance and operation of the Edes living units and selection of residents, to the Washington Home. Notably, this latter function is one which the Edes charter reserves specifically to the Trustees. Although the Board alleges in the probate complaint that the corporation (and presumably the Board) will continue to exist and administer the trust, it is unclear exactly what the Trustees' duties will be. The Trustees also acknowledge, that Edes House in the past has provided relatively self-sufficient elderly individuals in good health a place in which to share the society of others like themselves. [13] Yet the proposed merger would place the functions of the Edes Home in a considerably different setting, a nursing home heretofore dedicated to care of the chronically ill and dying. At oral argument, the Trustees asserted that whether to provide medical and nursing care to Edes residents lies within their discretion, and that the historical limitation on eligibility to healthy individuals was a measure unrelated to Margaret Edes' intent. Without reaching the merits of this question, it is enough to note that the Trustees have operated Edes Home for some time under the assumption that limiting its housing opportunities to healthy widows was most consistent with the will and charter. Merger into a nursing home and hospice represents a basic change in the nature of the institution that at least raises an issueon which we voice no opinionwhether the proposal is consistent with the settlor's will. It is not an exaggeration, in other words, to say that the Trustees, and all present and future residents of the Edes Home, stand at a crossroads they are unlikely to face again. It may in fact be that the merger the Trustees propose is, as they contend, essential to preserving the trust in changed timesagain, an issue not for us presently to decide. What is clear is that the outcome of this action will determine whether the institution undergoes the fundamental change the Trustees propose. When, as in Kania, the injury flows from an ordinary exercise of discretion by the trustees in the course of administering the trustsuch as the selection among eligible recipients of a benefitthe need to prevent costly and recurring judicial intervention in decisionmaking justifies denial of standing to individual potential beneficiaries. But when, as here, the Trustees decide upon a basic change affecting the interests of the entire class of intended beneficiariesand one alleged to be inconsistent with the settlor's willthe value of denying representatives of the class access to judicial process to challenge that decision is greatly diminished. We conclude, therefore, that elderly, indigent widows satisfying the Trustees' own eligibility requirements have standing to challenge the actions proposed by the Board here, which may affect their special interest as a class in the continued administration of the Edes trust in a manner consistent with the will and charter. All such members have a present opportunity to enjoy a direct benefit differing markedly from the incidental and indirect benefit the public realizes from the housing of indigent elderly widows. Since the suit here is to vindicate a collective interest in the continued availability of that benefitan interest affected by a proposed exercise of discretion that will change the nature of the institutionthe prospect of recurrent, vexatious litigation is minimal. It remains for us only to point out that undisputed record facts conclusively established appellant Mary Hooker's membership in the class of potential beneficiaries, and at least raised material issues of fact regarding Alice Ruddiman's and Willie Mae Stanley's membership. The trial court's grant of summary judgment was therefore improper. According to her affidavit submitted in opposition to the motion for summary judgment, Ms. Hooker is a 60-year-old widow in good physical and mental health who has resided in the District for 31 years, who now desires to live at Edes House, and whose annual income is $4,596. Ms. Ruddiman averred that she is a healthy 79-year-old, widowed lifelong resident of the District with a $16,000 annual income, and in their complaint appellants assert that Ms. Stanley is a widowed 74-year-old resident of the District of Columbia. While we cannot determine on this record whether Ms. Stanley is an eligible potential beneficiary, and venture no opinion as to whether Ms. Ruddiman's $16,000 income constitutes indigency, these plaintiffs' status as elderly widows desiring to reside at Edes House alone raised a question of material fact as to their membership in the class Margaret Edes intended to benefit. [14] Since Ms. Hooker has standing to enforce the trust as a representative member of the class, however, it is unnecessary to remand for findings as to Ms. Stanley's and Ms. Ruddiman's eligibility, because the suit may proceed without them. The class has a representative in Ms. Hooker and a sufficiently distinct and tangible stake in the outcome of this controversy to confer standing on its members. Accordingly, the judgment in No. 89-1316 is reversed; [15] the appeal in No. 89-1534 is dismissed as moot.