Gerber, Matter of

• Decision Date: 26 August 1982
• Docket Number: No. 17831,17831
• Citation: 652 P.2d 937
• Parties: In the Matter of the Trust of Nita GERBER and Donna Gerber, Trustors.
• Court: Utah Supreme Court

Page 937

652 P.2d 937

In the Matter of the Trust of Nita GERBER and Donna Gerber Trustors.

No. 17831.

Supreme Court of Utah.

Aug. 26, 1982.

Nolan J. Olsen, Midvale, for appellant.

David E. Salisbury, Richard H. Johnson, II and Samuel O. Gaufin, of Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, for Intermountain Medical Center, etc.

Frank Armstrong, Salt Lake City, for Zions Bank.

HALL, Chief Justice:

Appellants, heirs of Nita and Donna Gerber, contest an order of the trial court which distributes a trust created by the Gerbers in 1960. The trial court's order awarded specific gifts to each of appellants from the trust fund and divided the residue equally between Shriners' Hospital for Crippled Children and Intermountain Health Care, Inc. (IHC). Appellants object to the portion of the order which allocates trust money to IHC.

The residuary clause of the Gerber trust instrument reads:

The entire trust estate remaining, principal and income, [shall be paid] in equal shares to the Shriner's Hospital for Crippled Children, a corporation of Colorado, for the exclusive use and benefit of its Intermountain Unit located at Salt Lake City, Utah and to the Corporation of the President of the Church of Jesus Christ of Latter-Day Saints, a corporation sole, for the use and benefit of the Children's Latter-Day Saints Hospital.

At the time of the creation of the trust in question, no "Children's Latter-Day Saints Hospital" existed, but the Corporation of the President of the Church of Jesus Christ of Latter-Day Saints (LDS Church) owned and operated a single children's hospital known as Primary Children's Hospital. This hospital and the Shriners' Hospital for Crippled Children named in the residuary clause of the trust were then and are now the only children's hospitals in the Salt Lake City area, where the trust instrument was signed.

In 1975, the LDS Church relinquished control of Primary Children's Hospital to IHC, a nonprofit corporation formed for the purpose of administering a number of hospitals formerly owned by that church. At that time, Primary Children's Hospital was renamed "Primary Children's Medical Center." Primary Children's Medical Center continued to occupy the same premises and to provide the same services to children as it had before the change.

Appellants argue that because the LDS Church no longer operates a children's hospital, it is impossible to carry out the intent of the trustors to make a gift "to the Corporation of the President of the Church of Jesus Christ of Latter-Day Saints ... for the use and benefit of the Children's Latter-Day Saints Hospital." They reason that because the trustors expressed a specific intention to benefit the children's hospital through their gift and because the designated administrator of the gift is now incapable of using the gift for that purpose, the attempted gift must lapse for failure of purpose. The trial court did not adopt this view, but rather awarded one-half of the trust residue to IHC to be used for the benefit of Primary Children's Medical Center.

The primary object of a court, in construing the provisions of a trust, is to carry out the intent of the trustor or trustors. This Court has stated:

The general rules of construction of written instruments apply to the construction of trust instruments, and those rules require a determination of the intention of the settlor where the creation of the trust is a unilateral matter. ¹ [Footnote omitted.]

A second generally recognized principle of construction is the presumption in favor of charitable dispositions of property, expressed by one court as follows:

Charitable trusts are favorites of the law; they must be upheld whenever possible and, once it has been determined that the provisions of a will create a charitable trust, those provisions and others to be found in the instrument must be liberally construed for the purpose of carrying out the intention of the donor. Technical rules of construction, which have often prevented conveyances or bequests from taking effect, are disregarded. ²

The Utah Legislature, in enacting the Charitable Trusts Act of 1971, expressed its approval of the latter principle of construction, declaring:

This act shall be interpreted to effectuate the intent of the state of Utah to preserve, foster, and encourage gifts to or for the benefit of charitable organizations. ³

The time-honored doctrine of cy pres ⁴ embodies both of the above rules of construction by providing a means for implementation of a trustor's charitable purposes in cases where a court cannot precisely follow the trustor's instructions regarding the means of accomplishing such purposes. In 1889, the United States Supreme Court expressed the cy pres doctrine as follows:

[W]here property has been devoted to a public or charitable use which cannot be carried out on account of some illegality in, or failure of the object, it does not, according to the general law of charities, revert to the donor or his heirs, or other representatives, but is applied under the direction of the courts, or of the supreme power in the State, to other charitable objects lawful in their character, but corresponding, as near as may be to the original intention of the donor. ⁵

A Kansas appellate court recently explained the concept which underlies the doctrine:

The fundamental concept of the doctrine is that a donor may have a general charitable intent, and that the particular charitable institution he has designated as recipient of the gift is only an agent for effectuating that gift. Therefore, when it becomes impossible for the gift to take effect exactly as the donor specified, the court must look for another agent, as nearly like the designated one as possible, that will receive the gift and effectuate the general charitable intent expressed in the will or gift instrument. ⁶

Most American courts recognize and adhere to the cy pres principle. ⁷

The Utah Supreme Court, in 1892, recognized the cy pres doctrine as a means of accomplishing the intent of a donor of property, declaring:

The doctrine of cy pres is only a liberal rule of construction to ascertain the intention of the donor, and all the rules relating thereto are intended to aid in ascertaining and carrying out, as nearly as may be, the true intention of the donor. His intention should be the aim of the court. ⁸

In that case, the Court quoted the following characterization of the doctrine from a Pennsylvania case:

In all gifts for charitable uses the law makes a very clear distinction between those parts of the writing conveying them, which declares the gift and its purposes, and those which direct the mode of its administration....

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And this is the doctrine of cy pres, so far as it has been expressly adopted by us[,] ... a reasonable doctrine by which a well-defined charity, or one where the means of definition are given, may be enforced in favor of the general intent, even where the mode or means provided for by the donor fail by reason of their inadequacy or unlawfulness. ⁹

Although this Court has not had occasion to apply the cy pres doctrine since that time, the Court referred to the continued existence of the doctrine in a recent case, explaining:

[Cy pres] is a doctrine that is sometimes invoked where there has been a gift or bequest for a charitable purpose, which for some reason cannot be literally carried out, and something closely analogous is done which comports with and fulfills what appears to be the donor's intention and purpose. ¹⁰ [Footnote omitted.]

In the instant case, application of the cy pres doctrine clearly requires that the trust money in question be used to benefit Primary Children's Medical Center. The language of the trust residuary clause, quoted above, unambiguously expresses the intention of the trustors that one-half of the residue be used for this purpose. ¹¹ Although the parties agree that this objective can no longer be accomplished by channeling the funds through the LDS Church, the doctrine of cy pres permitted the trial court to achieve the same purpose by substituting the present owner of the hospital as administrator of the gift. Under the language of the trial court's order, IHC is required to expend the trust money exclusively "for the use and benefit of Primary Children's Medical Center," which continues to engage in the same activities and to perform the same services as it did at the time of the creation of the trust.

The trust instrument contains no language suggesting that the trustors wished to make their gift to Primary Children's Hospital contingent upon continued management of the hospital by the LDS Church; on the contrary, it allocates the remaining half of the trust residue to Shriners' Hospital, a nonchurch-related hospital, showing the unlikelihood of such an intention on the part of...