Certain Scholarship Funds, In re

• Decision Date: 24 May 1990
• Docket Number: No. 89-127,89-127
• Citation: 575 A.2d 1325,133 N.H. 227
• Parties: , 90 A.L.R.4th 811, 61 Ed. Law Rep. 149 In re CERTAIN SCHOLARSHIP FUNDS.
• Court: New Hampshire Supreme Court

Page 1325

575 A.2d 1325

133 N.H. 227, 90 A.L.R.4th 811, 61 Ed. Law Rep. 149

In re CERTAIN SCHOLARSHIP FUNDS.

No. 89-127.

Supreme Court of New Hampshire.

May 24, 1990.

Rehearing Denied July 6, 1990.

Goodnow, Arwe, Ayer, Prigge & Wrigley P.C., Keene (John D. Wrigley, on the brief and orally), for School Bd. of Union School Dist. of Keene.

John P. Arnold, Atty. Gen. (William B. Cullimore, Director of Charitable Trusts, on the brief and orally), for State.

BATCHELDER, Justice.

Frank A. Wright, a resident of Keene, died on October 29, 1929, and within his will, probated November 4, 1929, was language establishing a charitable scholarship trust requiring that eighty percent of the annual income on the principal:

"shall be used to provide a college education for some Poor and worthy Keene boy who is a scholar in the Keene High School. Said boy is to be recommended by the Principal of the Keene High School and ... approved by the Board of Education of the Union School District, or its successors...."

Given the generosity of the Wright Scholarship Trust and the resources available to it, the scholarship has generally been awarded every four years. In the last decade, the Wright Scholarship was awarded in 1982, 1986, and 1988.

Maurice A. Alger, also a resident of Keene, died on February 28, 1970, and within Mr. Alger's will, probated March 6, 1970, was similar language establishing a charitable scholarship trust requiring that thirty percent of the annual income on the principal:

"shall be used to provide tuition for one year for some worthy protestant boy who is a scholar at the Keene High School, to attend some college in good standing. Said boy is to be recommended by the principal of the Keene High School and ... approved by the Board of Education of the Union School District or its successors...."

The Alger Scholarship has been awarded in the amount of $3,400 annually for five out of the last six years.

From the record and the agreed statement of facts, there is no indication that a female student has ever applied for a scholarship under either of the trusts. Likewise, because there is no independent information available to the high school principal to verify the religious affiliation of the applicants, it is unclear whether any non-Protestant students have applied for, or have been awarded, a scholarship under the Alger trust. The principal of the Keene High School assumes that the applicants have read the requirements of the scholarship and have applied according to its terms. Once the students have applied, the school board selects who shall receive the scholarships based upon the recommendation of the principal of Keene High School. The awards are announced during an assembly, and the funds are provided from the trust funds which are held by the City of Keene Trustees of Trust Funds. Thus, the facts of this case reveal that there are three different instances in which public officials are involved in the administration of these discriminatory trusts. We note in passing that there currently are, and most likely will continue to be, students at the Keene High School who meet both the Wright and Alger Scholarship requirements.

On October 8, 1987, the School Board of the Union School District of Keene (School Board), fearing that its actions in the administration of these religion and gender-based discriminatory trusts may be violative of constitutional guarantees of equal protection, filed a petition in equity seeking the removal of the discriminatory provisions. At trial, the Superior Court (Hollman, J.) reformed the language of the trusts, utilizing its cy pres powers to replace the terms "boy" and "protestant boy" with the term "student." RSA 498:4-a. In particular, the court held that it was unconstitutional "State action" for the School Board, as an arm of the State, to participate in the administration of religion and gender-based discriminatory trusts. Furthermore, the court found that it would be exercising constitutionally impermissible "State action" were it to employ its equitable powers of deviation, as urged by the Director of Charitable Trusts, to reform the trusts by striking the language requiring the participation of public officials and appointing private persons to act in their absence. In arriving at a remedy, the court reasoned that it was appropriate to use its cy pres powers to preserve the primary intent of the testators, which was to aid deserving students at Keene High School in their pursuit of a college education. For the following reasons, we affirm.

On appeal the defendant, the Attorney General, Director of Charitable Trusts, presents the following two questions: (1) whether the actions of Union School District of Keene, in participating in the administration of religion and gender-based discriminatory trusts, may be viewed as "State action" within the ambit of part I, article 2 of the New Hampshire Constitution and the equal protection clause of the fourteenth amendment to the United States Constitution and, if so, (2) whether the court may employ its equitable powers of deviation to reform the trust by striking the language requiring the participation of public officials and appointing private persons to act in their absence, thereby terminating any State participation. In affirming the decision of the trial court we must answer the first question in the affirmative and the second in the negative.

Since we have been presented with both State and federal constitutional claims, we will address the State constitutional claim first. State v. Ball, 124 N.H. 226, 231, 471 A.2d 347, 350 (1983). To the extent that we look to the United States Supreme Court for guidance in approaching these difficult issues, we borrow only the analytical framework of the Court's decisions in our interpretation of part I, article 2 of the New Hampshire Constitution, and as such, we are not "tied to present or future federal pronouncements on the issue." State v. Bradberry, 129 N.H. 68, 73, 522 A.2d 1380, 1382 (1986). Part I, article 2 of the New Hampshire Constitution as amended provides as follows:

"[Art.] 2d. [Natural Rights.] All men have certain natural, essential, and inherent rights--among which are, the enjoying and defending life and liberty; acquiring, possessing, and protecting, property; and, in a word, of seeking and obtaining happiness. Equality of rights under the law shall not be denied or abridged by this state on account of race, creed, color, sex or national origin."

The first step in our inquiry requires us to determine whether there is the necessary "State action" present to implicate the provisions of our constitution. As the United States Supreme Court in Shelley v. Kraemer, 334 U.S. 1, 13, 68 S.Ct. 836, 842, 92 L.Ed. 1161 (1948), stated:

"Since the decision of this Court in the Civil Rights Cases ... the principle has become firmly embedded in our constitutional law that the action inhibited by the first section of the Fourteenth Amendment is only such action as may fairly be said to be that of the States. That Amendment erects no shield against merely private conduct, however discriminatory or wrongful."

As previously suggested, there are three levels of potential "State action" implicated by this appeal: (1) screening of applicants by the principal of the Keene High School, (2) the participation of the School Board in the selection of students to receive the scholarships, and (3) the role of the City of Keene Trustees of Trust Funds in the administration of the trust funds.

The determination of what acts may properly be considered "State action" within the meaning of part I, article 2 of the New Hampshire Constitution must be established on a case-by-case basis. See Burton v. Wilmington Pkg. Auth., 365 U.S. 715, 722, 81 S.Ct. 856, 860, 6 L.Ed.2d 45 (1961). The development of a formula to determine whether or not "State action" is present has been labeled an "impossible task." Id. "Only by sifting facts and weighing circumstances can the nonobvious involvement of the State in private conduct be attributed its true significance." Id.

In Pennsylvania v. Board of Trusts, 353 U.S. 230, 77 S.Ct. 806, 1 L.Ed.2d 792 (1957), the United States Supreme Court held that the administration of a discriminatory trust by an agency of the Commonwealth of Pennsylvania, benefitting poor male white orphans, was constitutionally impermissible. Similarly, of those cases in other jurisdictions that have addressed this issue, the majority have held that the administration of discriminatory trusts by agencies of the State is "State action" subject to the constitutional mandates of equal protection. See In re Crichfield Trust, 177 N.J.Super. 258, 261, 426 A.2d 88, 89 (1980); Trammell v. Elliott, 230 Ga. 841, 845, 199 S.E.2d 194, 197 (1973); Bank of Delaware v. Buckson, 255 A.2d 710, 713-14 (Del.Ch.1969). Accordingly, we hold that the participation by the principal, School Board, and the City of Keene Trustees of Trust Funds, as agents of the State, in the administration of these discriminatory trusts amounts to "State action" within the ambit of part I, article 2 of the New Hampshire Constitution. Since the State's participation in the administration of either the Alger or Wright Scholarship trust cannot even withstand the lowest level of judicial scrutiny, we need not determine what level of review should be employed in cases of gender and religious discrimination that are expressly forbidden by the most recent amendment to part I, article 2 of the New Hampshire Constitution. Cf. Belkner v. Preston, 115 N.H. 15, 18, 332 A.2d 168, 170-71 (1975) (part I, article 2 was amended in 1974 providing that equality of rights under the law shall not be denied or abridged on the basis of, inter alia, creed or gender). Having concluded that the State's participation in the beneficiary selection process, management, and miscellaneous administration of these trusts is constitutionally...