Court Opinion

ID: 8035830
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:20:42.713157+00
Date Added: 2024-06-11T16:37:07.599737
License: Public Domain

Paine, J.,
dissenting.
Several statements made in the main opinion at once challenge the attention. First, it is stated therein that this action is brought by persons constituting the board of trustees of Grand Island College; but the petition names as plaintiffs some 20 individuals constituting the trustees of the endowment funds of said college,—a vital difference, as the facts disclose.
It is also stated that the endowment funds were kept separate from the general funds of the college. This over*446looks the fact that the testimony of the endowment treasurer during the last seven years, D. E. Magnusson, as found on page 311, is: “There has been nothing paid in the first instance to the endowment treasurer so far since I have been in office; I have received $5,000 from the Philip Kinney memorial and received in the form of a check of the treasurer of Grand Island College general funds in the Commercial Bank and turned over to me as endowment treasurer.” On page 308 of the record the following testimony of Dr. George Sutherland appears; “By the Court: You are not sensing my question. I asked you to tell us whether or not that money that was received from donations and drives and the pledges, was received, was turned over to the endowment treasurer without any record being kept of the transactions and being copied in the books of the college. A. You will —yes, you will find the records in the minutes of the executive committee wherever their reports are made by those soliciting pledges and collecting money. By the Court: You are still not answering my question. Don’t you know? A. I think that is all the books we had; there are no books.”
It is stated in the main opinion that the decision of the district court for Hall county, rendered by Judges Clements and Horth, is generally against the plaintiffs. I find no such statement in the decree rendered by these two district judges, who have for many years been in touch locally with all the facts.in the case. The important part of the prayer of the petition was for the judgment, advice, and direction of the court as to the administration of these funds. It would be strange indeed if the decree found generally against the plaintiffs, as stated in this main opinion, that the records of this court should show that the plaintiffs are the appellees in the case, and not appellants. The contest in this court is being waged, not by the plaintiffs, but by the three appellants, to wit, the board of education of the Northern Baptist Convention, a corporation organized under the laws of New York, and also the Sioux Falls University and Sioux Falls College, *447which are seeking to absorb the remaining endowment funds of the Grand Island College. The longest argument in this court was made by C. C. Caldwell, an attorney of Sioux Falls, representing these appellants. The city of Grand Island, also an appellee, is a cross-appellant, objecting to the fee of $500 allowed to plaintiffs’ attorney, and the Schreiners, annuitants, appellees, filed a motion for new trial on certain phases of the order relating to them. The trial court having found that the provision in the Schreiner annuity providing for the maintenance of a chair of English Bible in the Grand Island College, it was, therefore, only a direction or admonition to such college for the establishment of such chair. The decree further found that funds held under annuity contracts with Patterson, Pierce, Tavender, Turnbull, Yelton, and Coon were trusts, and the receivers in charge of the property were directed to strictly comply with the provisions ,in said annuity contracts until a settlement of the rights of the beneficiaries thereunder might be had. Hence, it is clear from the record that the plaintiffs are not the appellants, waging a contest in this court.
The evidence discloses that the first of the three nonresident corporations, to wit, the New York corporation, is naturally anxious to assist in founding a new Baptist institution, to be known as the Sioux Falls College, and readily consents, on behalf of its predecessor, the American Baptist Education Society, that all of the funds should be transferred to the new school in South Dakota, and the appellants have secured consents from several of the other larger givers that said funds can be moved intact to the new college to be established.
The main opinion is an interesting and scholarly discussion of the subject of charitable trusts by an experienced and able district judge of Omaha. It reviews, at considerable length, decisions from many states, including a number from Iowa. Little objection can be made to the opinion, except that many facts would be needed to sustain the findings if applied to this case, which facts I *448confess I have been entirely unable to discover after a patient search of the records covering several days.
Would it not be well to review some of these basic facts? The articles of incorporation of the Grand Island College, adopted June 13, 1892, were signed by Honorable W. H. Thompson, and several others, and the minutes of the early meetings show that he was active during those years, but his name does not appear as a trustee in the later years.
The evidence discloses that the college ran from 1892 until September 1, 1931, on a campus consisting of about 30 acres; that it owns thereon an administration building, Hibbs Hall, a dormitory for girls, and a boys’ dormitory, and an auditorium or gymnasium; that the campus has been carried upon the books of the college at a value of $30,000, and the buildings at a valuation of $249,500, but that the property is unmarketable; that the college was closed September 1, 1931, because it was unable to meet its current and necessary expenses, having become largely indebted to numerous creditors, and that it is unable to pay its indebtedness.
I cannot find that there was ever any authorization for any board of trustees of the endowment fund. On page 40, Judge Clements asked: “Was there any organization or corporation of the endowment fund?” Answer: “No further organization that I can find.” Page 56: “By Mr. Mayer: The creditors do not join in the stipulation that the trustees of the Grand Island College were appointed trustees of the endowment fund belonging to the said Grand Island College. Our next objection is in regard to the creation of an endowment fund, that any such fund was ever created, and what went into it, and the creditors do not join in the stipulation that an endowment fund was created, and kept separate and distinct from the other funds of Grand Island College.”
During the 38 years of its existence, there was at all times an endowment treasurer. There was also, during a part of the time, a committee, consisting of five mem*449bers of the board of trustees of 21 of the Grand Island College, which assisted the treasurer in handling and investing annuity and other special funds.
Many drives and campaigns were put on during the years of the college’s existence for the purpose and with the sincere hope that a large endowment fund could be created, but these hopes were never realized, for during the entire 38 years the total sum of about $85,000 was actually collected for said purpose. These funds were usually paid to the- secretary or treasurer, or often to the president, and paid over by such officers to the so-called endowment treasurer, but such funds were always under the sole and exclusive control of the board of trustees of the college, and orders that they made in their meetings were always the orders that determined what should be done with the funds. In the building of Hibbs Hall, the girls’ dormitory, funds of approximately $26,000 were ordered by the board of trustees to be taken out of the endowment funds and used for the purpose of erecting this building. Toward the end of the existence of the college, it is testified that some $4,000 of such funds were used in the payment of the long past due salaries of the faithful teachers, and recently another sum of $5,388.56 was directed to be paid to the Grand Island Plumbing Company on its contract for rebuilding the heating plant. Not only were these sums taken out of the various endowment funds and used for running expenses and payment of other items, but in times of stress, when it was impossible to raise money at the moment, it is shown by the minutes in the record that endowment funds were frequently, during the years, put up as collateral at banks for the purpose of borrowing money to meet the salaries of teachers and other running expenses. A. B. Newell, the endowment treasurer for two years, testified, in answer to interrogatory 751: “I resigned for the reason that President Wells wanted to take some funds to put up as collateral at the bank and I wouldn’t stand for it.” Such use of these funds was so usual and customary that *450■a treasurer who would not consent thereto had the only alternative of resigning. It is also shown clearly by the evidence that practically all of such funds were payable to the Grand Island College, the only corporate entity by which such funds could legally be held. When a real estate mortgage held on such funds became delinquent, action of the board of trustees of the college directed a foreclosure suit, and when the property was bid in the title was taken in the name of the Grand Island College, not in the name of an endowment fund. It is also worthy .of note that there was never at any time any definite name given to such funds.
If there was a legal entity known as an “Endowment Fund,” it would so appear in the record. But a casual search of the bill of exceptions and exhibits discloses the following terms by which endowment funds of the Grand Island College were known and styled: Unclassified General Endowment, Webster General Endowment, Permanent Endowment Fund, Strong Missionary Scholarship, Library Fund, Philip Kinney Memorial, Permanent Fund Assets, General Endowment Fund, Special Endowment Funds, Patterson Prize Fund, Victor Person Memorial, Warren Scholarship Fund, Ministerial Scholarship Fund, Y. M. C. A. Endowment Gift, Productive Endowment, and the Coon and several other annuities.
Do these appellations not appear to one as simply different ledger accounts in the ledger fund? of the Grand Island College? Each was kept separate in a manner which would allow a report to be made to the donor, but such funds were always legally the property of the Grand Island College, and of no other corporation.
It was finally stipulated between the parties that there was no organization or incorporation of the endowment fund in accordance with section 24-712, Comp. St. 1929, which was the law of our state during all of the time of the existence of the college.
Article 10 of the charter provides that the board of trustees shall have full power and authority to carry into *451effect the purposes of this incorporation; shall have the general care and disposal of the funds and property of the corporation for the benefit of the college, and may use and invest said property and funds in such a way and manner as may to them seem most effective, subject, however, to the laws of this state and the conditions and purposes of special endowments, bequests and donations. In the articles of incorporation I fail to see any mention made of an endowment fund, or endowment treasurer, or endowment committee, but article 8 says the board of trustees shall have power to elect a president, professors, tutors, and teachers, and such other agents and officers as may be deemed advisable, and to fix the compensation of each, and to remove the same at pleasure.
The records are filled with the aims, hopes, and plans for absorbing the funds of this bankrupt institution into the new college to be organized in South Dakota; may we not, in fairness to the appellees, examine their claims for a moment?
Exhibit 48 is the audit from May 1, 1931, to October 31, 1931, of the college, at which time the accounts payable had reached the sum of $24,126.16. Among the larger items making up this total, as shown by schedule 4 of the said exhibit, were the following accounts of coal, repairs, and supplies to keep said college in operation: American Beet Sugar Co., $1,047.94; Augustine Company, $966.39; City Electric Dep’t, $861.23; Chicago Lumber Co., $4,354.70; Goehring-Sothman Co., $1,305.37; Grand Island Plumbing Co., $5,277.11; Independent Publishing Co., $1,639.83; Lowe & Campbell, $762.51; miscellaneous, ,$7,911.08; total, $24,126.16.
Schedule 3 of the same exhibit gives the list of notes payable, among which we find: Commercial Bank, $10,-885; Grand Island Nat. Bank, $3,000; Chapman State Bank, $2,000; The Augustine Co., $2,942.69; Nebraska Loan & Trust Co., $5,000; Fidelity Nat. Bank & Trust Co., $1,881.25; George Sutherland, $531.20; miscellaneous, $1,125.57; total, $27,365.71. Then comes in schedule *4523 the notes which have been given by the Grand Island College for salaries to teachers and other employees, among which are listed: Sabra Abbott, $392.65; Harriet Anderson, $1,196.66; Ella Blunk, $60; G. Robert Coatney, $136.50; Carolyn B. Cowell, $672; Mary B. Fox, $300; C. S. Griffin, $1,132; Margaret Gelatt, $136.50; Bennett Hites, $754.84; J. D. Jackson, $1,317; W. A. Karraker, $797.40; W. A. Knox, $1,399.57; Alice Lindbnrg, $730; W. T. McDonald, $1,490.80; Harriet Norris, $57; J. H. Pollard, $1,480; A. C. Rice, $2,202.50; Lawrence Ritchie, $678.89; Mrs. F. A. Rush, $387.50; Laurene Steven, $828; George Sutherland, $140; F. J. Titt, $1,433.58; miscellaneous, $5,880.40; giving a total of $23,603.79, or a grand total of the notes payable outstanding, $50,969.50, and adding the accounts payable of $24,126.16 gives us $75,095.66. In order to avoid the unnecessary costs of a multiplicity of suits, practically all of these accounts and bills payable were assigned to several attorneys for more expeditious handling.
It is stated in the main opinion that upon May 6, 1931, the Grand Island College entered into a written contract with Sioux Falls University, of Sioux Falls, South Dakota, to consolidate said colleges. I fail to find any evidence supporting this statement. It only appears that two officers of the college, the vice-president and the secretary, entered into such agreement, and I can find no evidence of any action of-the board of trustees of the Grand Island College, taken as required by the articles of incorporation, approving said contract. Article 2 of the charter provides that its principal office and place of business shall be forever kept and maintained at Grand Island, Nebraska. Article 4 provides that the management of this corporation shall be vested in a board of 21 trustees, five of whom shall be resident freeholders of Hall county, Nebraska.
It is clear that the attempted purported contract, entered into by the vice-president and secretary of the board of trustees of the Grand Island College with the Sioux *453Falls University, is void, as it is clearly in violation of the provisions of the articles of incorporation of the Grand Island College. Yet the main opinion finds that, in spite of these undisputed facts, the contract with the South Dakota college merely selects a new trustee to handle these funds, and approves the contract simply signed by two officers, with no required corporate action upon which to base their authority.
Let us examine a few of the authorities. Horton v. Tabitha Home, 102 Neb. 677. The first opinion in this case is found in 95 Neb. 491. It holds that where a charitable institution has received substantial benefits from improvements made on its property, but is not liable for the cost because the main object was not within the powers and purposes of the institution, the court will order any funds so raised to the payment of the costs. To the decision in 95 Neb. 491, Judge Letton dissented. The hospital erected was not successful, and an attempt was made to foreclose a mechanic’s lien, and the majority of the court held that no such lien could be asserted against a charitable institution. Judge Letton dissenting to the decision in 102 Neb. 677, says: “The great weight of authority is to the contrary.” See annotation, Ann. Gas. 1915D, 1145, and 51 L. R. A. n. s. 161. Judge Letton says further: “It has always been my opinion that the materialmen were entitled to the liens they asserted. Most certainly, if not entitled to liens, they should be entitled to a judgment against the corporation for the price of the articles supplied. To hold otherwise is to permit a corporation organized for charitable purposes to use charity as a sword, and not as a shield, and to obtain property of others without paying for it, which is repugnant to every legal and moral principle. Charity is said to cover a multitude of sins. In this case it is used to cover the wrongful deprivation of these merchants of their property without compensation.”
It has been held that, where property is donated to' a charitable corporation, although donor adds that it is to *454be used for certain purposes, when those purposes are among those for which the charity was incorporated, no trust is created, for one cannot be a trustee and a beneficiary at the same time. Woman’s Foreign Missionary Society v. Mitchell, 93 Md. 199.
In Lyons v. Planters Loan & Savings Bank, 86 Ga. 485, 12 L. R. A. 155, it is said: “If any class of debtors ought to pay, as matter of moral as well as legal duty, the good people of a Christian church are that class. No church can have any higher obligation resting upon it than that of being just. * * * The law grants exemptions of property to families, but none to private corporations or collective bodies, lay or ecclesiastical. These must pay their debts if they can. All their property legal and equitable is subject.”
Presbyterian Congregation of Erie v. Colt’s Executors, 2 Grant’s Cases (Pa.) 75: “The power given to religious societies to hold land was not intended to prevent them from selling it nor to enable them to hold it against their creditors, but to hold and sell it as individuals could do, always subject to the claims of creditors. * * * It may well be questioned whether it would be for the public benefit to allow them to disregard their contracts.”
A gift to a corporation conditioned upon a use for which said corporation is incorporated makes such gift absolute, and not a trust. In Greene v. Greene, 125 N. Y. 506, 21 Am. St. Rep. 743, it is held that there are three essential elements of every express trust, viz., a trustee, an estate, and a beneficiary, and that the trustee and beneficiary must be distinct personalities, or otherwise there could be no trust, and the merger of interests in the same person would effect a legal estate in him.
Gases could be cited by the page in support of these contentions, but our supreme court, in the case of Clarke v. Sisters of Society of the Holy Child Jesus, 82 Neb. 85, in the first syllabus, said: “It is a general rule that, where property is conveyed directly to a corporation to hold for use in the purpose for which the corporation *455was created, no trust for the benefit of others arises, even though the conveyance contains a condition directing the use of the property in a certain manner from which third parties may be benefited. One cannot be a trustee of ■property and a beneficiary at the same time.” This holding of our court has never been modified in any way, and the facts in the case at bar clearly bring it within the law announced, and even though the Iowa courts may have held contrary to this holding, we are required to follow our own decisions.
It is further stated in the main opinion that nearly all of the contributors to the endowment special funds and annuities have joined in the prayer of the petition and filed consent. The evidence discloses, on the contrary, that hundreds of charitably inclined citizens of Grand Island, of the state of Nebraska, and a very few. outside, have down through the years contributed in the frequent drives and campaigns for endowment and other funds put on by said college during its 38 years of existence, and that not . to exceed a half dozen out of these many donors have consented to this, as stated in the main decision.
E. W. Augustine, H. G. Wellensiek and Herbert F. Mayer were appointed receivers by the district court at Grand Island to take charge of all the property of the Grand Island College, and were directed by the trial court to sell the property and pay the costs, then pay the claims in judgment of the Grand Island Plumbing Company and the Chicago Lumber Company, and pay the balance remaining pro rata to the creditors of the college in such amounts and at such times as may be ordered by the court. Such an order, after carefully providing funds to carry out all annuity contracts, is just and equitable to these creditors.
Even if we should admit that the main opinion is right, yet justice and equity demand that all income from said funds be paid to these creditors up to the time that the funds should be turned over to the South Dakota college, *456but even tips crumb of comfort is denied them by the main opinion, which says that only accrued income' up to the date September 1, 1931, could be applied on these debts on which date it says the status of the endowment fund as an active instrumentality came to an end. With this statement I entirely disagree. While the college became bankrupt and ceased to run, yet these funds still belong to the Grand Island College, and the public interest requires that they be applied to the payment of the debts incurred by creditors who furnished materials or labor, or worked as members of the teaching staff, during the last few years of the college’s existence. It certainly would not be in the hearts and minds of the charitable Christian people who donated these funds that such creditors, whose labor and materials kept the college alive, as the donors wished, should now get nothing, and the funds be transferred to establish a new college in South Dakota, of which college only a few of the donors have ever heard.
It is evident that all alleged endowment funds were donated to the Grand Island College and are the property of such college; that, aside from the special annuity contracts, the creditors of said college are entitled to reach' said funds for the payment of teachers’ salaries, coal bills, plumbing bills, and other items, without which the college could not have functioned during the past few years. Such claims have all been found to be valid, and several of them have been reduced to judgment. If the main opinion in this case is carried out and the land is sold at present prices, it is doubtful if it will bring enough to pay the judgment creditors, and nothing whatever would be left to pay the claims of teachers and all of the other creditors.
In the main opinion these creditors are denied even the right to have the endowment funds held by the receivers of the court until the income therefrom would pay the debts of the creditors outstanding. There is a maxim that a debtor must be just before he can be generous; that he *457must pay his creditors before he can transfer his property as a donation to a volunteer. This seems to have been ignored in this main opinion, to which I most respectfully dissent.