A few weeks ago I wrote about the old and often forgotten doctrine of cy pres which allows court to alter the material purposes for which a trust is created under certain conditions. There, I suggested that courts were ever more willing to apply that doctrine to modify trusts. This increased willingness appears to be largely derived from how the doctrine has been interpreted more flexibly in recent years. In particular, the Uniform Trust Code has relaxed some of the requirements for the application of cy pres.[1]
Along with the softening these requirements, however, has come confusion among courts as to when and how to apply cy pres. Professor Christopher Ryan at the University of Louis D. Brandeis School of Law suggests that only about half of the cy pres cases heard by courts in the 2010s were decided correctly, and that trends suggest that this number has been steadily decreasing over the past several decades.[2] In his article titled Confusing Cy Pres, Ryan suggests that the indefinite nature of the revisions to the definition of cy pres in the Uniform Trust Code has led to “unpredictable results, unreliable case law, and has undermined donors’ incentives to engage in charitable trust making.”[3]
Equitable Deviation vs. Cy Pres
In particular, courts frequently trip over the distinction between the distinction between the doctrine of equitable deviation and cy pres. Equitable deviation allows courts to alter the administrative provisions of a trust instrument rather than reforming the material purposes of a trust which cy pres allows courts to do.[4] Examples of administrative provisions include, among other things, the “transfer of trust property to a new trustee”, the “modification of investment restrictions”, and “modification of governing instruments to include provisions required by federal tax law.”[5] Equitable deviation, unlike cy pres, can also be used with private trusts.[6] Ryan suggests that courts may be confusing equitable deviation and cy pres in part because of comments found in the UTC which do not properly delineate administrative from material purposes.[7]
More importantly, though, inconsistent application of cy pres ultimately may create feelings of distrust between settlors and the courts as settlors lose certainty that the purposes they have created a trust for will ultimately be respected.[8] This might in turn drive down the rate at which charitable trusts are created.[9]
Cy pres stands at a critical juncture in trust law representing the tension between “dead-hand” control of trust funds and the desire to ensure that funds are being efficiently applied to serve the public good. If a charitable trust is created with a specific purpose in mind, and does not have “general charitable intent,” it is arguably unjust for the court to thwart the material purposes of a settlor through application of cy pres.
Lapinske v. City of Grand Haven
One case that illustrates these dynamics is the unreported Sixth Circuit opinion of Lapinske v. City of Grandhaven.[10] In that case, the continued validity of a trust created for the purpose of maintaining a public park was called into question.[11] The heirs of the trust settlor contended that a condition had been triggered which would have necessitated the dissolution of the trust and distribution of the trust property back to the settlor’s heirs.[12] Specifically, the city had passed an ordinance which would have amended the parameters of the trustees management of the trust property.[13] So at issue was a material purpose of the trust (the revertor provision) as well as administrative concerns (the dimensions of the trustees’ control over the trust property). While the Sixth Circuit ultimately held that these trust provisions were not triggered, it also engaged in a discussion in the alternative as to whether cy pres could be applied and affirmed the Michigan court’s ruling that the doctrine was appropriate in this context.[14]
Revertor or “gift-over provisions” normally defeat the application of cy pres, due to the fact that these provisions would undermine a showing of “general charitable intent.”[15] However, both the Michigan courts and the Sixth Circuit reasoned that cy pres was appropriate because of statutory language which nullified this general rule.[16] Under Michigan statute, a revertor provision would only defeat application of cy pres within fifty years but after that time cy pres would be permissable.[17] The court reasoned that even if the revertor provision was effective, cy pres would save the trust because fifty years had passed since the trust was created.
While states are certainly entitled to legislate the dimensions of cy pres, the outcome in Lapinske might be unsettling to some. Here, through the application of cy pres, the courts completely rejected the express material purposes outlined by a settlor in their trust instrument that trust property would revert to their heirs under certain conditions.[18] Under traditional cy pres rules, this revertor provision would have defeated application of the doctrine but in this context the court allowed for its application due to state law’s modification of the traditional rule.
As should be clear by now, cy pres can be a doctrine that is difficult to pin down. If you are a beneficiary or trustee that is concerned that the purposes of your trust are not being carried out effectively, the experienced attorneys at Dalton & Tomich would be happy to help you navigate through the hidden complexities of trust law.
[1] U.T.C § 413; Alberto B. Lopez, A Revaluation of Cy Press Redux, 78 U. Cin. L. Rev. 1307, 1326–1329 (2009) (explaining, inter alia, that the UTC has created a “presumption” of charitable intent in its definition of cy pres, as opposed to requiring affirmative proof thereof).
[2] Christopher J. Ryan, Jr., Confusing Cy Près, 58 Georgia L.R. 17, 57–58 (2023).
[3] Id. at 82.
[4] Id. at 32
[5] Id. at 33-34
[6] Id. at 32.
[7] Id. at 40-43
[8] Id. at 91
[9] Id.
[10] No. 21-1309, 2022 WL 767707 (6th Cir. Mar. 14, 2022).
[11] Id. at *1.
[12] Id.
[13] Id. at *3.
[14] Id. at *8–*9
[15] Ryan, supra note 2, at 35 (“the existence of a gift over should prevent application of the cy pres doctrine in order to save that gift, because is possible failure is already taken into account.”).
[16] Lapinske, No. 21-1309, 2022 WL 767707 at *9–*10.
[17] Id. at *10.
[18] See id.
