In the United States, with a few exceptions, museums are organized as private charitable trusts or charitable corporations. They derive their purpose from their founders’ charitable purposes. When a museum falters (normally when endowment and other income is insufficient to fund the museum’s operations), options may be limited. In the case of the Fresno Metropolitan Museum of Art, the result was closure and sale of the museum’s assets.
However, as The Barnes Foundation and, more recently, the Corcoran Gallery of Art, have shown, when foundations or other charitable institutions are available as partners, complete dissolution of the museum may be avoided. The question remains: How to accomplish the needed change.
The case of the Corcoran Gallery of Art/Corcoran College of Art + Design provides an example. Founded in 1869, the Corcoran was the oldest art museum in the District of Columbia, and one of the oldest art museums in the United States. Financier and industrialist William Corcoran formed the Corcoran as a charitable trust, and donated to that trust the Corcoran’s first building (the Renwick building, which was later sold to the Smithsonian Institution), his personal art collection, and an endowment.1 A few years after the gallery was established, the trustees created the Corcoran College of Art (later renamed the Corcoran College of Art + Design), which was formed as an integrated component of the Corcoran, and as an expansion of the trust’s mission. Although the Corcoran’s deed of trust did not mention an art school, Mr. Corcoran approved of the change, and provided additional funding in support of the art school’s creation.2
By the early twentieth century, the Corcoran had outgrown its existing space, and the trustees engaged architect Ernest Flagg to design what would become the Flagg Building, a renowned beaux arts building widely considered to be one of the Corcoran’s most prized assets.3 The Corcoran’s collection expanded in 1925 with a bequest from former Senator William Andrews Clark of his collection of European art, with the Clark family funding construction of a new wing to the Flagg Building, which was completed in 1928.
The Corcoran’s problems were a long time coming. In 1941, the cultural life of the District of Columbia (and the nation) changed with the opening of the National Gallery of Art, which was established around the kernel of Paul Mellon’s collection. Some observers of the Corcoran and its place in American cultural life have suggested that the Corcoran’s trustees’ failure to adequately address this changed status resulted in a financially fragile institution, which suffered from an identity crisis.
The Corcoran’s endowment and fundraising had never been robust. Observers have noted that the Corcoran’s “chief attraction was a collection of 19th-century American paintings—a subject that excites art historians much more than it does tourists. And for each visitor, the Corcoran had to compete not only with the National Gallery and the Hirshhorn but with the Lincoln Memorial and the National Air and Space Museum—taxpayer-funded attractions that, unlike the Corcoran, didn’t charge admission.”
As its financial condition worsened, the Corcoran trustees discussed a possible move of the institution to Alexandria, Virginia, which only added to community concerns. In 2013, the trustees “announced a plan to explore a partnership with University of Maryland.” The University of Maryland proposal failed when it became clear that the university was not interested in assuming the Corcoran’s debts, but preferred to establish a partnership with the Corcoran and would make a loan available to it (which, of course, would need to be repaid).4
In February of this year, the Corcoran announced its proposal to partition the art gallery from the art school. The proposal, which became the basis of the Cy Près Petition, would contribute the greater part of the art gallery collection to the National Gallery of Art (the National Gallery), and contribute the art school (along with the Flagg Building and certain of the artworks) to the George Washington University (GW).5
On June 17th, the Corcoran trustees filed the Cy Près Petition in the Superior Court of the District of Columbia,6 seeking authorization to enter into the above-described agreements with the National Gallery and GW. On July 2nd, certain faculty, current and former students, and donors of the Corcoran College of Art + Design, together with and through Save the Corcoran, a non-profit, filed a Complaint and Petition to Intervene in Cy Près Proceedings, seeking to intervene in the Trustees’ cy près proceeding.7 The intervenors objected to the proposed agreements with the National Gallery and GW, and instead proposed two alternatives, which the intervenors argued were each closer to Mr. Corcoran’s charitable intent than the National Gallery/GW agreements. The intervenors urged the court to approve either (i) the proposal with the University of Maryland, or (ii) a proposal put forward by Wayne Reynolds, the former director of Ford’s Theater (which provided for an aggressive fundraising campaign similar to what the director had accomplished for the theater). STC argued that either of these alternatives would be closer to the Corcoran’s charitable purpose, since each proposed to preserve the Corcoran as an independent institution.
When seeking to modify the terms of the charitable trust, trustees generally avail themselves of one of two equitable doctrines – either (i) the doctrine of cy près, or (ii) the doctrine of equitable deviation. “Cy Près” is shorthand for the Norman French phrase cy près comme possible (as near as possible), and alters the substantive purposes of a charitable trust.8 “Equitable deviation,” by contrast, only allows a court to modify the administrative provisions of a trust under changed circumstances.9
As traditionally conceived, the critical requirements for cy près relief are (i) the terms of the charitable trust having become unlawful, impossible, or impracticable to carry out, (ii) the settlor evinced a general (rather than a specific) charitable purpose, and (iii) any modification of the terms of the trust must be “as near as possible” to the settlor’s original charitable purpose.
Since the request was for a determination under the doctrine of cy près, the Corcoran court began with a brief discussion of the doctrine, as embodied in District of Columbia statutory law. In the District of Columbia, petitions to modify or terminate a charitable trust pursuant to the doctrine of cy près are governed by DC ST § 19-1304.13, which enacts Section 413(a) of the Uniform Trust Code. Section 19-1304.13 provides:
Except as otherwise provided in the terms of the trust, if a particular charitable purpose is or becomes unlawful, impracticable, impossible to achieve, or wasteful:
(1) The trust does not fail, in whole or in part;
(2) The trust property does not revert to the settlor or the settlor’s successors in interest; and
(3) The court may apply cy près to modify or terminate the trust by directing that the trust property be applied or distributed, in whole or in part, in a manner consistent with the settlor’s charitable purposes.10
In its Memorandum Opinion, the court cautiously interpreted that provision as incorporating the traditional requirements of the cy près doctrine. The Corcoran court stated as black letter law that “[a] party seeking cy près relief must establish that (1) a charitable purpose of the trust is or has become impracticable or impossible to achieve; and (2) the proposed modification of the trust is as near as possible to the settlor’s original charitable purpose.”11 In its Memorandum Opinion, the court laid out its rationale, stating: “Section 19-1304.13 provides that “[t]he court may apply cy près to modify . . . the trust by directing that the trust be applied or distributed . . . in a manner consistent with the settlor’s charitable purposes.” Therefore, the statute only requires that the Court modify the trust in a way that is ‘consistent with’ the charitable purpose. But because this Section explicitly incorporates the cy près doctrine, it is clear that Section 19-1304.13 authorizes modification under this provision only if the modification is both consistent with, and as near as possible to, the settlor’s original charitable purpose.”12
The court required a showing of two elements – (i) that the trust’s charitable purpose has become impracticable or impossible to achieve, and (ii) that the proposed modification is “as near as possible to the settlor’s original charitable purpose.”13 The court noted that ‘impracticable’ is not defined, but stated that, under existing case law, “a party seeking cy près relief can establish impracticability only if it demonstrates that it would be unreasonably difficult, and that is not viable or feasible, to carry out the current terms and conditions of the trust.”14
The court concluded that the trustees had met their burden of showing that “it would be unreasonably difficult, and that it is not feasible or viable” for the Corcoran to continue operating under the trust’s present terms, because the Corcoran (i) had been operating at a deficit for a majority of the prior 13 years, (ii) has incurred such deficits even while deferring spending on maintenance of the Flagg Building (which now requires an immediate investment of $12 million in maintenance and considerably more in future years), (iii) cannot alleviate its financial state by deaccessioning artworks from the collection, since to do so would place the Corcoran at risk of sanctions from the AAMD and loss of its accreditation from the AAM, and (iv) cannot within a reasonable time period succeed with the board-building and fundraising proposed by a former director of Ford’s Theater.
“If the party seeking cy près relief establishes impossibility or impracticability,” the court notes, “then the Court must evaluate whether the cy près proposal is as near as possible to the settlor’s charitable intent. . . . In making this fact-specific determination, the Court must discern the intent of the settlor when creating the trust and should consider any relevant surrounding circumstances evidencing the settlor’s intent.”15
The court concluded that the Corcoran’s deed of trust “demonstrates, first and foremost, that Mr. Corcoran intended to establish an institution ‘in Washington City’ to be ‘dedicated to Art’ and to be used ‘solely for the purpose of encouraging American genius, in the production and preservation of works pertaining to the “Fine Arts,” and kindred objects.’”16
By reading the traditional cy près requirement that a modification be “as near as possible” to the settlor’s original purpose, the court afforded itself a useful guide to evaluating competing proposals. In evaluating the three proposals, the court stated that it would compare them “to determine whether the Trustees’ current proposal is as near as possible to Mr. Corcoran’s original intent.”17 Turning first to the proposal of Wayne Reynolds (former director of Ford’s Theater), the court rejected that proposal as lacking feasibility and necessary specificity – a hope, not a concrete proposal.18 The court gave greater credence to the University of Maryland proposal, but rejected it as well, noting that it would move the Corcoran, in whole or in part, outside of “Washington City” and, moreover, the university’s contribution to the Corcoran “was structured as a loan that the Corcoran would have to repay if the Corcoran were to opt out of the joint venture.”19
The court concluded that the GW/National Gallery proposal was “consistent with Mr. Corcoran’s intent and effectuates that intent as nearly as possible in light of the Corcoran’s current financial condition.”20 “Under the GW/NGA proposal, the Flagg Building will be renovated, the school will continue and be strengthened by its partnership with a financially sound university, both the school and a significant portion of the collection will remain in the Flagg Building, and a gallery, although smaller, will remain open to the public in the Flagg Building, all results that are consistent with Mr. Corcoran’s intent.”21
Noting that the dissolution of the Corcoran as an independent institution is far from Mr. Corcoran’s original charitable purpose, the court emphasized that nevertheless the result was nearer to that purpose than what other available options would have afforded.
In evaluating proposed modifications to the terms of the charitable trusts, courts turn first to the question of settlor’s charitable purpose. But as with many efforts at interpretation, such settlor intent often proves to be difficult to determine, and malleable in practice. How the question of that settlor intent is framed – by the trustees, by other interested parties, and by the court – often dictates what showing each party will be required to make. The framing of settlor intent, then, is a threshold to all further “threshold” issues in cy près and equitable deviation actions.
1 Petition for Cy Près Determination (the Cy Près Petition), filed by The Trustees of the Corcoran Gallery of Art, Superior Court of the District of Columbia, No. 14-0003745, June 17, 2014, at 2. up
2 Cy Près Petition at 3-4. up
3 Id. at 4. up
4 Id. up
5 Id. up
6Petition for Cy Près Determination, Civil Action No. 14-0003745 (D.C. Sup. Ct.). up
7 Sebastien Arbona, Robin David Bell, et al., Complaint and Petition to Intervene in Cy Près Proceedings, Civil Action No. 2014 CA 003745 B (D.C. Sup Ct.), filed July 2, 2014. up
8 Alberto B. Lopez, “A Revaluation of Cy Près Redux,” 78 U. CIN. L. REV. 1307, 1308 (2010). up
9Id. up
10DC ST § 19-1304.13 up
11 Memorandum Opinion, Case No. 2014 CA 003745 B, Superior Court of the District of Columbia, entered August 18, 2014 (the “Memorandum Opinion”), at 21. up
12 Id. at 21 n 13. up
13Id. at 21. up
14 Id. at 23. up
15 Id. up
16 Id. at 38-39. up
17 Id. at 39. up
18 Id. at 44. up
19 Id. at 42. up
20 Id. at 47. up
21 Id. at 41. up