Opinion ID: 2087782
Heading Depth: 1
Heading Rank: 4

Heading: Whether the Cy Pres Doctrine in Section 633A.5102 Applies in this Case.

Text: Courts and commentators typically apply a three-part test to determine whether the common law doctrine of cy pres applies. See, e.g., Obermeyer v. Bank of America, N.A., 140 S.W.3d 18, 24 (Mo. 2004); E. Fisch, The Cy Pres Doctrine in the United States 128-38 (1950). The test requires the presence of three criteria: (1) a charitable trust, (2) a specific trust purpose that is illegal, impractical, or impossible, and (3) a general charitable intention by the donor. See, e.g., Restatement (Second) of Trusts § 399 (1959). We have recognized this test in our case law. See, e.g., Simmons, 256 N.W.2d at 227. Section 633A.5102 has not changed the basic tripartite test. See Iowa Code § 633A.5102(1) (requiring a charitable trust to become [] impracticable, unlawful, or impossible); id. § 633A.5102(2) (requiring a settlor to have general charitable purposes); id. § 633A.1104 (noting the common law supplements the Iowa Trust Code). The statute does, however, begin with a caveat: Unless the terms of the trust provide to the contrary the following apply. . . . Id. § 633A.5102. Thus, the requirements of the statute, which embody the common law tripartite test, will not apply if the trust directs otherwise. This is where we begin our analysis in this case.
The terms of the trust do not indicate the trust should fail in the event a particular purpose of the trust becomes impracticable, unlawful, or impossible. See id. § 633A.5102(1) (stating the trust does not fail when a trust purpose does). The terms also fail to prohibit modification of the trust when a particular purpose becomes impracticable, unlawful, or impossible. See id. § 633A.5102(2) (stating the trust may be modified when a trust purpose fails). Thus, the terms of the trust do not state section 633A.5102 should not apply in this case. Of course, it is also true the terms of the trust do not specifically endorse the directions provided in section 633A.5102. Section 633A.5102, however, effectively establishes a presumption that cy pres should apply if the trust does not state to the contrary. Id. § 633A.5102; see Begleiter, Code We Trust, 49 Drake L.Rev. at 290-91 & n. 844 ([T]he section appears to create a presumption that cy-pres should be applied in the absence of a provision in the trust stating otherwise.). This should not be a surprise, however, as the common law has never required a charitable trust to specifically indicate cy pres should apply. In fact, the common law has always required a similar inquiry. Under the common law we must ask whether the settlor anticipated the possible failure of the trust and [if he or she] has made alternative disposition of his [or her] property to meet that contingency. Simmons, 256 N.W.2d at 227. If so, cy pres could not be applied because in the words of our statute, the trust stated to the contrary. Iowa Code § 633A.5102. In this case, the settlors did not anticipate the failure of the trust. The initial 1968 agreement stated the garden was to continue during the period of the trust as created in [Henry's] Will. Henry did not establish a testamentary trust, however, and the inter-vivos trust he created does not mention any period of duration or otherwise indicate the settlors anticipated its failure. [8] In addition, there is nothing to indicate the settlors had an alternative plan if there was a failure. See, e.g., Rothrock, 452 N.W.2d at 406 (noting the absence of a forfeiture or reversion clause). As a result, we do not think our statute or the common law initially precludes the application of the cy pres doctrine.
Section 633A.5102 only applies to charitable trusts. See Iowa Code § 633A.5102 (listing the section under the subchapter Charitable Trusts); Restatement (Second) of Trusts § 399 cmt. a (The doctrine is not applicable to private trusts. . . .). A trust established to support a city flower garden demonstrates a charitable purpose. See Iowa Code § 633A.5101(1) (noting a charitable trust may be created for any purpose beneficial to the community); Restatement (First) of Trusts § 368(e), (f) (1935) (defining governmental or municipal purposes and those that benefit the community as charitable purposes). A flower garden enhances the beauty of its surroundings for the benefit of others who take the time to enjoy it. Thus, the property was held by the trustee for a charitable purpose and is a charitable trust. Rothrock, 452 N.W.2d at 405 (citing Restatement (Second) of Torts § 348).
We must also determine whether a particular purpose for which the trust was created [has] become [] impracticable, unlawful, or impossible to fulfill. Iowa Code § 633A.5102(1); see Begleiter, Code We Trust, 49 Drake L.Rev. at 290 (noting one must [d]etermine whether the original trust purpose was impossible to fulfill, illegal or impracticable  in the sense that to devote funds would not fulfill the settlor's intention). There is no claim of unlawfulness; the parties and district court have focused solely on whether the purpose of funding the improvement and maintenance of the garden at the surveyed location has become impracticable or impossible. [9] A review of the case law on impossibility and impracticability has led many to believe no precise definition of the standard exists, and whether something has become impossible or impracticable is up to the particular facts of each case. Nancy A. McLaughlin, Rethinking the Perpetual Nature of Conservation Easements, 29 Harv. Envtl. L.Rev. 421, 465 (2005). We agree. We also believe the particular facts of this case reveal it was impracticable to fund the garden at its original location. The record reveals Project Awaysis is a multi-million dollar endeavor, funded in part by Vision Iowa. The evidence clearly indicates the City devoted considerable thought and planning to the project. Moreover, and although contested, there is evidence the City would have preferred to keep the garden and fountain at their original locations. The project manager plainly testified of the need for the garden and fountain to be moved. Otherwise, the lodge and aquatic facilities could not be built adjacent to each other, which the planners believed was essential to the project's success. Such a massive project should be planned in a way that maximizes its potential, and when the location of the garden and fountain jeopardize that potential it becomes impractical not to relocate them. As a result, we think it would be impracticable to fund the garden at its original location. See Rothrock, 452 N.W.2d at 406 (applying cy pres because it was impractical to carry out the particular trust purpose). In addition, it is now certainly impossible to fulfill this particular purpose of the trust. The City voluntarily destroyed the garden and fountain to begin the construction of Project Awaysis. It has no intention of rebuilding them at their original locations. Consequently, it is literally impossible for the trust to fund the garden at its original location. Of course, it was not impossible for the trust to fund the garden until the City voluntarily destroyed the garden and fountain. Thus, the City caused the impossibility. Furthermore, the City caused the impracticability by planning and moving forward with Project Awaysis. Some courts have recognized that a trustee or donee cannot invoke the doctrine of cy pres when he or she causes the impossibility, impracticability, or illegality. See, e.g., Conn. College v. United States, 276 F.2d 491, 497-98 (D.C.Cir.1960) (Nor may a trustee by his own act produce changed conditions which frustrate the donor's intention and still claim the gift through the application of the cy pres doctrine.). We have at least hinted at such a rule in one of our cases. See Curtis & Barker v. Cent. Univ. of Iowa, 188 Iowa 300, 322, 176 N.W. 330, 338 (1920) (It occurs to us that [donee], having voluntarily put it beyond its power to carry out the purposes of the donors as to the denominational control of the college, is not in a position to ask that this fund be disposed of cy pres.). We do not believe, however, that a per se rule against the cy pres doctrine exists when the trustee or donee causes the impracticability, impossibility, or illegality. The rule against cy pres in such a case has been justified because permitting modification would allow the trustee or donee to disregard the express terms of the grant or devise. President & Fellows of Harvard College v. Jewett, 11 F.2d 119, 122 (6th Cir.1925). But there are circumstances when a natural and unavoidable change in conditions or circumstances causes the trustee or donee to act. Id. In such cases, we think a proper disregard for the grant or devise may be maintained by the donee or trustee that does not preclude the application of cy pres. See id. ; see also Howard Sav. Inst. of Newark v. Peep, 34 N.J. 494, 170 A.2d 39, 47-48 (1961) (noting the changed circumstances were not merely to serve trustee convenience). After all, the trustee or donee is the cause of the impossibility or impracticability in most cases. See, e.g., Rothrock, 452 N.W.2d at 404 (noting donee wanted to use trust funds for more than what trust specified). Moreover, our hint in Curtis was dicta and we commented on the question [of cy pres] but briefly because the appellant/donee had not briefed or argued it. 188 Iowa at 321-22, 176 N.W. at 335-37 (resolving the case under the more important questions of contract law). Thus, we refuse to adopt a per se rule that a trustee or donee may not invoke the doctrine of cy pres when he or she causes the impossibility, impracticability, or illegality. We also believe the City's actions in this case, while causing the impracticability and impossibility, are the result of natural and unavoidable changes. It is only natural for a city to respond to the inevitable changes in its economic and societal needs. Project Awaysis provided that response. Moreover, it was unavoidable in the sense that a city has the responsibility to make improvements, whether it is to roads, public buildings, or city parks. It was also unavoidable in the sense we have already indicated: the plans for Project Awaysis required the removal of the garden and fountain. While the settlors specifically wanted the trust to fund the garden at a particular location within the park, the City is not improperly disregarding the express terms of the trust by planning an economic revitalization project that requires the garden to be moved.
We must next consider whether the settlor, or settlors in this case, had general charitable purposes, or what is recognized at common law as general charitable intent. See Iowa Code § 633A.5102(2) (recognizing the settlor must have general charitable purposes); Begleiter, Code We Trust, 49 Drake L.Rev. at 290 (noting the court must next [d]etermine whether settlor had a general charitable intent  his purpose was not to benefit or accomplish one specific object). Similar to our evaluation of impracticability and impossibility, there are no hard and fast rules to determine whether the settlors had general charitable intent. Miller v. Mercantile-Safe Deposit & Trust Co., 224 Md. 380, 168 A.2d 184, 189 (1961). Instead, we must evaluate all the relevant facts and circumstances, which may include extrinsic evidence not included in the trust document, Nat'l Soc'y of Daughters of Am. Revolution v. Goodman, 128 Md.App. 232, 736 A.2d 1205, 1210 (Md.1999), and we will make an effort to find a general charitable intent when possible, Bd. of Trustees of Univ. of N. Carolina v. Unknown & Unascertained Heirs, 311 N.C. 644, 319 S.E.2d 239, 242 (1984). It is hard to define general charitable intent. Perhaps the best explanation embraces the concept that it would not reject the continuation of the trust when a particular purpose of the trust fails. This concept draws on several cases where we have recognized the lack of a forfeiture or reversion clause supports a finding of general charitable intent. See, e.g., Mary Franklin Home for Aged Women v. Edson, 193 Iowa 567, 571, 187 N.W. 546, 549 (1922). As we noted earlier, there is no such clause in this case. But there is a clause, in fact several clauses, in the trust that specifically indicate the trust is to fund the garden's improvement and maintenance at the original surveyed location. Both warranty deeds stated the trust fund shall be used in connection with improvements [for the garden] upon the tract of real estate hereinafter described, as follows: [legal description of garden location]. They also referred to the funds being used for the maintenance of the park area herein described. Such specificity is normally a strong argument that the settlors had specific, rather than general, charitable intent. Nevertheless, our previous cases have indicated that unless the specific purpose is the primary, dominate or essential purpose, cy pres may still be applied. For example, we have stated that, if the mode of application is such an essential part of the gift that you cannot distinguish any general purpose of charity, but are obliged to say that the mode of doing a charitable act was the only one the testator intended or at all contemplated, and that he had no general intention of giving his money to charity, then the court cannot, if the particular mode of doing it fails, apply the money cy pres. Hodge v. Wellman, 191 Iowa 877, 883-84, 179 N.W. 534, 537 (1920) (citation omitted). In other words, if the specific purpose of the trust is so essential that it becomes the dominate purpose of the trust, then there is no other general purpose of charity that can be fulfilled cy pres. See id. (What, then, was the dominate purpose of the testator?); Mary Franklin Home, 193 Iowa at 574, 187 N.W. at 549 (looking into the general or dominate purpose of the donor). The location of the garden and fountain was certainly important to the settlors. They felt it provided the ideal setting. But the record discloses no other reason, personal or unique to the settlors, that existed for their choice. Importantly, the garden was not established by the Kolbs to memorialize an event that occurred at the designated location. Moreover, the appellee's testimony that the settlors would not have wanted the trust funds to be spent on the garden at any other location is contradicted by his actions as trustee. He permitted trust funds to buy property for the school district, and he initially supported a petition to relocate the garden. While we must remain focused on the settlors' intentions, these actions discredit the trustee's testimony regarding their intentions. Furthermore, the settlors named the trust the James Kolb Memorial Trust Fund, and indicated in all the documents an intent to benefit the City of Storm Lake, or that the trust was for the use and benefit of the City of Storm Lake, Iowa. Under such circumstances, we do not believe funding the garden at the surveyed location was essential, or that it was the dominate or primary purpose. Instead, the settlors' primary or dominate purpose was to perpetually honor their grandson and benefit the City. This is evidence of `a more general intention to devote the property to charitable purposes,' and demonstrates the designated site was not part of the broader trust purposes. Simmons, 256 N.W.2d at 227 (quoting the Restatement (Second) of Trusts, § 399). Finally, we our guided by our answer to the ultimate question: whether, under the circumstances, would the Kolbs, the settlors, have wanted the trust to continue in light of the changes brought on by Project Alwaysis? See Nat'l Soc'y of Daughters of Am. Revolution, 736 A.2d at 1210 (describing this as the pertinent inquiry when determining whether the [settlor] possessed a general charitable intent). The record clearly indicates the settlors wanted the garden and fountain to be permanent additions in the City's park. They were, in the words of appellee, created by the blood and guts of the settlors, constructed to withstand the tests of time, and funded by what seems to be an everlasting trust. No doubt they would have been disappointed about the plans that required the relocation of the garden and fountain, and their ultimate destruction. But we think they would have been even more disappointed in the complete failure of the trust and their eleemosynary ends. After all, the settlors specifically indicated in their original agreement with the City that the trust was to be a permanent fund. As a result, we believe the settlors would have preferred the trust to continue under cy pres if they were alive today, so that the City can continue to display the flowers in the lake side park in honor of the memory of their deceased grandson.