Conditional Gift Giving to Institutions

n 1953, Valparaiso University, a small, private Lutheran institution of higher education in Indiana, received a charitable gift from the estate and trust of Percy Sloan.¹ The donation included a sum of cash and a collection of paintings, many of which were created by Sloan’s father. The remainder came from other painters from the mid-19th Century art movement known as the “Hudson River School,” described on the Met’s website as a collection of landscape painters that created “America’s first true artistic fraternity.”² The collection now stands at 476 works of art, kept by the university’s Brauer Museum of Art, which has, in total, approximately 5,200 pieces of art, but the capacity to display only 150 pieces at a time.³

The charitable gift established a gift committee and came with the condition that when using the gift funds to add to the art collection, the university must “purchase paintings of the type generally known as conservative.”⁴ In 1961, committee member and Valparaiso University professor Richard Brauer encouraged the acquisition of two paintings: Georgia O’Keefe’s Rust Red Hills, and Frederick Childe Hassam’s The Silver Veil and Golden Gate.⁵ These two paintings have appreciated enormously in value – recent appraisals of Rust Red Hills, purchased for $5,700, valued the painting between $10.5 – $15 million.⁶

The university, struggling immensely from declining student enrollment, finds itself strapped for cash and hopes to sell the paintings to fund renovations of freshman dormitories and the creation of the “Sloan Gallery of American Paintings.”

When it becomes impossible, impracticable, or illegal to carry out the designated purpose of a gift, or if it becomes wasteful to apply all the property to the designated purpose, a court may reasonably approximate the designated purpose for the gift.⁷ This is known as the doctrine of cy pres. Over time, the doctrines of cy pres and equitable deviation have developed to allow for substantive modification to the purposes and methods of carrying out the gift.⁸ Cy pres allows for, when the exact intention of the gift giver “is not to be carried out, the intention will be given effect ‘as nearly’ as may be.”⁹ So, in its petition to allow for the sale of the three paintings and funding of freshman dormitories,  Valparaiso set out to prove not only  that keeping the paintings was wasteful and impracticable, but also that the intended uses would further Sloan’s initial intent. The petition demonstrated not only how the renovation would display more art, but also argued that the sale itself would further the purpose – by ridding the collection of art that is not “conservative.”¹⁰ Declaring that the two acquired paintings are not conservative, because they are modernist and impressionist in style, Valparaiso leveraged the vagueness of the term as applied to art, arguing that the pieces’ acquisition deviated from the goals of the donation more than the sale of them would.¹¹

In its petition, Valparaiso lists four reasons why financing the renovations and capital improvements funded through the sale of the three paintings would effectuate Sloan’s intent and is in the public interest. The university mentions the infeasibility of properly and securely displaying the paintings; that the proceeds would be able to create a gallery to display the collection; that the university would be able to generate funds to increase the number of students exposed to an art education; and that selling the paintings “is consistent with Sloan’s intent to promote conservative art.”¹²

In an unrelated case fifteen years ago, Fisk University wished to sell two O’Keefe paintings donated as part of a conditional charitable gift by O’Keefe herself, that prohibited the art from being sold or exchanged.¹³ While the lower court found the university was not entitled to relief under cy pres, the appellate court reversed and remanded, finding that O’Keefe had demonstrated a general, rather than specific, charitable intent, as evidenced by simultaneous gifts to other institutions.¹⁴ The appellate court found that under the applicable New York Law, cy pres is an available remedy if: (i) a gift is charitable in nature; (ii) the gift demonstrated a general, rather than specific, charitable intent; and (iii) circumstances have changed to render literal compliance with a restriction impossible or impracticable.¹⁵ Only after satisfying those three prongs can a court grant cy pres relief.¹⁶ On remand, the Chancery Court found Fisk had suffered continuing financial difficulties that satisfied the change of circumstances for cy pres, and that to honor the donor intent, the collection must remain available for study in Nashville and the south.¹⁷

When providing conditional gifts to an institution, the institution’s circumstances may change over time such that the conditions of the gift no longer serve the institution well – occasionally to the point of wastefulness or impracticability. Under those circumstances, the donee may seek relief through cy pres to alter the use of the gift. When a term is ambiguous, like “conservative” in the realm of landscape paintings, the courts may look to other sources to determine the closest possible application of the funds – like an artist’s other donations, or reasonable expectations of the donor.

Practical Forethoughts:

Before getting to the stage of having a court determine whether relief is possible under the cy pres doctrine for a gift that has outgrown its original purpose, donors can consider various factors for outlining the specific intent or circumstances surrounding a potential gift of art to an institution. Some of these factors may include:

1. Reflecting on what specific intent a donor wants to grant with regard to an intended gift based on an assessment of the donee’s present and future possible circumstances.
2. Consultation with an attorney well-versed in drafting instruments involving charitable gifts and who also has an awareness of the art market and institutional forces.
3. Avoid vague words that can be interpreted with different meanings particularly when envisioning how the word may be interpreted in the future. Generational and cultural differences in word interpretation can affect how words may be perceived. For instance, in the case above, the word “conservative” has transformed meaning over time and does not have the same present connotation as it did when the donor was providing the gift.

By Charity Gates and Amelia Lembeck

¹Verified Petition to Modify Conditions of Charitable Trust With Respect to Three Paintings at 2, In the Matter of Three Paintings of the Percy H. Sloan Charitable Trust, 64D01-22405-TR-005503, (May 28, 2024), https://bloximages.chicago2.vip.townnews.com/nwitimes.com/content/tncms/assets/v3/editorial/c/e0/ce06a41a-1e0d-11ef-a669-3b33b5503bdd/6657b1813ae23.pdf.pdf (“Petition”).

² Id., see also Kevin J. Avery, The Hudson River School, Heilbrunn Timeline of Art History, The Metropolitan Museum of Art (Oct. 2004), https://www.metmuseum.org/toah/hd/hurs/hd_hurs.htm.

³ Petition at 7-9.

⁴ Id. at 5-7.

⁵ Id. at 8.

⁶ Id. at 9-10.

⁷ Restatement (Third) of Trusts § 67 (Am. L. Inst. 2003).

⁸ See Hanna K. Feldman, Preserving the Artistic Afterlife: The Challenges in Fulfilling Testator Wishes in Art-Rich, Cash-Poor Estates, 30 Fordham Intell. Prop. Media & Ent. L.J. 223, 250 (2019).

⁹ Restatement (Third) of Trusts § 67 cmt. a (Am. L. Inst. 2003).

¹⁰ Petition at 8.

¹¹ Id. at 13.

¹² Id. at 14.

¹³ Georgia O’Keefe Foundation (Museum) v. Fisk University, 312 S.W.3d 1, 4-5 (Tenn. Ct. App. 2009).

¹⁴ Id. at 18-19.

¹⁵ Id. at 16.

¹⁶ Id.

¹⁷ Alan L. Feld, Who Are the Beneficiaries of Fisk University’s Stieglitz Collection?, 91 B.U. L. Rev. 873, 887 (2011).