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Howard Savings Institution of Newark v. Peep

Decided: April 10, 1961.


For affirmance -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor and Hall. For reversal -- Justice Haneman. The opinion of the court was delivered by Proctor, J. Haneman, J. (dissenting).


This appeal and cross appeal from a judgment of the Chancery Division primarily involve the question of whether that court properly applied the doctrine of cy pres to the terms of a trust established by the will of C. Edward McKinney, Jr. Mr. McKinney, a resident of the City of East Orange, died on October 21, 1957. His will, admitted to probate by the Surrogate of Essex County on November 6, 1957, designates the plaintiff, the Howard Savings Institution, as executor and provides in part as follows:

"Thirtieth: I give and bequeath the sum of Fifty Thousand Dollars ($50,000) to Amherst College, an institution of learning, situate at Amherst, Massachusetts, to be held in trust to be used as a scholarship loan fund for deserving American born, Protestant, Gentile boys of good moral repute, not given to gambling, smoking, drinking or similar acts. (It being my thought that if a young man has enough funds to allow the waste of smoking, he certainly does not need help.) The money loaned from said fund is to be repaid to the fund at the earliest moment so that others may benefit from its use.

Thirty-third: All the rest, residue and remainder of my estate, real, personal and mixed, of whatsoever kind and wheresoever

situate, of which I shall die seized or possessed, I give, devise and bequeath unto Amherst College aforesaid to be held on the same trusts as mentioned in paragraph Thirtieth aforesaid."

The charter of Amherst College provides that "no student shall be refused admission to, or denied any of the privileges, honors, or degrees of said College, on account of the religious opinions he may entertain." On June 7, 1958 the Board of Trustees of Amherst College adopted a resolution stating that it believed acceptance of a trust discriminating among students on religious grounds would contravene the letter and spirit of the charter and the policy of the college. Accordingly, the Board declined to accept the trust funds unless the Protestant-Gentile restriction was eliminated from the terms of the trust. Plaintiff-executor thereupon instituted this action to obtain judicial construction of paragraphs Thirty and Thirty-three of Mr. McKinney's will and conformable instructions. It joined as defendants the Board of Trustees of Amherst, the Attorney General of New Jersey, and the next-of-kin of the testator.

The Chancery Division, applying the doctrine of cy pres, entered a judgment excluding the words "Protestant" and "Gentile" from paragraph Thirty of the will and ordering the executor to turn the trust funds over to Amherst to be administered in accordance with the remaining terms and conditions of the will. 61 N.J. Super. 119 (1960). We certified the appeal of the executor and the cross appeal of the next-of-kin before argument in the Appellate Division.

At the outset, the Board of Trustees of Amherst disputes the executor's standing to appeal. In a sense the Board's argument is moot, since all parties concede that the next-of-kin have standing to cross-appeal, and to resolve the issues raised by the next-of-kin we must consider whether, as the executor argues, the Chancery Division should have appointed a substituted trustee. Nevertheless, the argument raises a point of law which should be resolved for the future guidance of the bench and bar.

Only a party aggrieved by a judgment may appeal therefrom. Green v. Blackwell, 32 N.J. Eq. 768 (E. & A. 1880); In re Atlantic City, 3 N.J. Super. 62 (App. Div. 1949). It is the general rule that to be aggrieved a party must have a personal or pecuniary interest or property right adversely affected by the judgment in question. In re Lent, 142 N.J. Eq. 21 (E. & A. 1948); Eugster v. Eugster, 89 N.J. Eq. 531 (E. & A. 1918); Swackhamer v. Kline's Administrator, 25 N.J. Eq. 503, 505 (Prerog. 1874). The Board argues that the executor has no interest in its own right which is adversely affected because it will be fully protected in making distribution as directed by the judgment of the Chancery Division, and that it has no representational interest because all other affected persons are adequately represented in the action -- the next-of-kin by their counsel and the only other possible interests by the Attorney General.

An executor has the duty to see that the estate is distributed in accordance with what he believes are the wishes of the testator. Pursuant to that duty, he may in appropriate circumstances ask a court to construe the will. But there is no reason why the executor should be bound by the decision of a lower court if it believes that that court's decision will not accurately effectuate the testator's intent. As expressed by the New York Appellate Division: "the fact they [the executors] asked for a construction does not bind them to accept any construction they get, right or wrong." In re Smith's Will, 9 A.D. 2 d 583, 584, 189 N.Y.S. 2 d 331, 332 (App. Div. 1959). We think that under the circumstances the executor is entitled to a definitive judgment by an appellate court, and we therefore hold that it has standing to prosecute this appeal as the representative of the testator. See Drewen v. Bank of Manhattan Co. of City of N.Y., 31 N.J. 110 (1959); 7 New Jersey Practice, Clapp, Wills & Administration § 981, p. 585 (1950).

The executor has standing to prosecute this appeal for an additional reason. The interests of Protestant-Gentile boys who might qualify for a scholarship loan under the terms of the trust have been diluted or adversely affected by the judgment below. Neither the next-of-kin nor the board represent those interests; for both have taken a position contrary thereto. The board argues that all unknown persons who might benefit under the trust are represented by the Attorney General. This is an unrealistic assertion. The Attorney General represents the public interest in a charitable trust rather than a particular class of potential beneficiaries. Indeed, in the present case, the Attorney General did not adopt any position as to how the doctrine of cy pres should be applied, and declined to appeal from the judgment below on the ground that the general charitable interest and the divergent views with regard to that interest are adequately represented by the other counsel. Since Protestant-Gentile boys who might qualify for loan aid have been adversely affected by the judgment below and would otherwise be unheard, the executor may appeal on their behalf. See Green v. Blackwell, supra.

This brings us to the merits of the case. No one urges on this appeal that the Protestant-Gentile restriction or its enforcement by the court offends public policy or the Fourteenth Amendment to the Federal Constitution. Hence, we have no occasion to express a view as to those issues. See Clark, "Charitable Trusts, the Fourteenth Amendment and the Will of Stephen Girard," 66 Yale L.J. 979 (1957); Miller, "Racial Discrimination and Private Schools," 41 Minn. L. Rev. 145 (1957).

We first consider whether the Chancery Division should have applied the doctrine of cy pres to the terms of the trust. The doctrine of cy pres is a judicial mechanism for the preservation of a charitable trust when accomplishment of the particular purpose of the trust becomes impossible, impracticable or illegal. In such a situation if the settlor manifested an intent to devote the trust to a [34 NJ Page 501] charitable purpose more general than the frustrated purpose, a court, instead of allowing the trust to fail, will apply the trust funds to a charitable purpose as nearly as possible to the particular purpose of the settlor. Wilber v. Owens, 2 N.J. 167, 177 (1949); Restatement, Trusts § 399 (1935). Three observations about the doctrine may aid analysis of its applicability to the facts of the present case. First, the term "general charitable intent" ordinarily used by courts articulating the doctrine does not require an intention to benefit charity generally. It requires only a charitable purpose which is broader than the particular purpose the effectuation of which is impossible, impracticable or illegal. Sheridan & Delaney, The Cy-Pres Doctrine (1959); Restatement, Trusts § 399, comment c, p. 1211 (1935). Second, the inquiry "did the settlor manifest a general charitable intent" is just another way of asking "would he have wanted the trust funds devoted to a like charitable purpose, or would he have wanted them withdrawn from charitable channels." 4 Scott, Trusts § 399, p. 2824 (1956). So stated, it can be seen that cy pres is an intent-enforcing doctrine. But it is well to keep in mind that it is a surmised rather than an actual intent which the courts enforce through application of the doctrine. Rarely does a settlor contemplate the possible non-fulfillment of his precise purpose. Therefore, the court must make an educated guess based on the trust instrument and relevant extrinsic evidence as to what he would have intended had he been aware of the contingency which has frustrated the exact effectuation of his expressed intent. 2A Bogert, Trusts & Trustees § 436, p. 344 (1953). And third, recognizing the social benefit deriving from the devotion of property to charitable purposes, courts ascertaining a settlor's surmised intent are guided by the policy of preserving charitable trusts whenever possible and by the established presumption against partial intestacy. Mirinda v. King, 11 N.J. Super. 165, 173 (App. Div. 1951) and cases cited therein. See Comment, "Revaluation of Cy Pres," 49 Yale L.J. 303 (1939).

Similar to, but distinct from, cy pres is the doctrine of deviation from the terms of a trust. Applicable to private as well as charitable trusts, the doctrine of deviation comes into play when compliance with an administrative provision of the trust is impossible, illegal or in conflict with the essential purpose of the trust. Bogert, op. cit. supra, § 561 (2 d ed. 1960); 2 Scott, op. cit. supra, § 167; Restatement, Trusts § 167 (1935). In such a situation, a court, pursuant to its general equity power, may allow modification of the provision. The doctrine is commonly applied, for example, to appoint a substituted trustee when the trustee designated by the settlor cannot or will not serve. E.g., Martin v. Haycock, 140 N.J. Eq. 450 (Ch. 1947). Essential to application of the doctrine of deviation is a finding that the term of the trust to be deviated from is an administrative one -- that is, that it is not essential to fulfillment of the settlor's scheme. See Martin v. Haycock, supra. This finding, in turn, depends on an interpretation of the settlor's intent. Ultimately, therefore, applicability of the doctrine of deviation, like the doctrine of cy pres, depends on what the court concludes the settlor would have wanted to happen if he were aware of the contingency which has made the exact effectuation of his expressed intent impossible.

With the above principles in mind, we return to the question of whether the Chancery Division should have disposed of the trust funds in the present case as it did.

We first consider the next-of-kin's contention that the doctrines of cy pres and deviation are inapplicable to the trust established by Mr. McKinney's will and that therefore the Chancery Division should have declared an intestacy. The next-of-kin's initial argument is that the bequest provided for in paragraphs Thirty and Thirty-three is not a charitable trust. They do not quarrel with the well-settled proposition that a trust for the advancement of learning is charitable. Wilber v. Owens, supra, 2 N.J., at p. 174; MacKenzie v. Trustees of Presbytery of Jersey City, 67 N.J. Eq. 652, 665 (E. & A. 1905). Instead, they rely on

the rule that to be characterized as charitable, a trust, regardless of its purpose, must encompass a sufficient number of beneficiaries to warrant a community interest. 4 Scott, op. cit. supra, § 375. In order to qualify for scholarship loan aid under Mr. McKinney's will, an Amherst student must be an American born Protestant-Gentile, not given to gambling, smoking, drinking or similar conduct. The next-of-kin assert, and ask us to take judicial notice of, the fact that in light of contemporary social conditions and mores, few if any Amherst students could comply with all of the trust requirements. Paragraph Thirty is not so worded that an isolated indulgence in the proscribed activities would result in disqualification. The testator said that the beneficiaries are to be boys "not given to" smoking, drinking, etc. "Given to" is ordinarily defined as meaning "disposed; inclined; addicted; * * * as, given to drink." Webster's New International Dictionary (2 d ed. 1959). It implies at least some degree of regular indulgence. This construction is confirmed by the testator's parenthetical observation: "It being my thought that if a young man has enough funds to allow the waste of smoking, he certainly does not need help." It is obvious that the testator had in mind a person who is so committed to the act of smoking that it becomes a financial drain. Presumably, there are and will be at Amherst enough American born Protestant-Gentiles who do not regularly smoke, drink, gamble or engage in similar conduct, and who thus fall within the class of potential beneficiaries to justify categorizing the trust as charitable. We think that there is a sufficiently broad classification combined with Mr. McKinney's worthy purpose to warrant that appellation. See Clark, op. cit. supra, at p. 998. In any event, we have no information which would merit our taking judicial notice to the contrary. Accordingly, we hold that paragraphs Thirty and Thirty-three of Mr. McKinney's will establish a charitable trust.

The next-of-kin also argue that the Chancery Division erred in applying the doctrine of cy pres because the testator

had no general charitable intention. He had, they say, a particular, unitary and inseparable purpose of benefiting Protestant students at Amherst; he was equally interested in Protestantism and the college. Therefore, they contend, since the testator's intent cannot be ...

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