Tuesday, August 13, 2013

New Jersey Court: Donor Intent Rules the Day

In a decision handed down last week, the New Jersey Superior Court, Appellate Division, ruled that charities that do not follow donor intent must return the gifts.  In Adler v. Save, ___A.3d___, 2013 WL 4017286, a three-judge panel ruled that a Mercer County animal shelter must return a $50,000 gift originally slated for specialized construction.

In delivering the court's opinion, Judge Jose Fuentes wrote:

We hold that a charity that accepts a gift from a donor, knowing that the donor’s expressed purpose for making the gift was to fund a particular aspect of the charity’s eleemosynary mission, is bound to return the gift when the charity unilaterally decides not to honor the donor’s originally expressed purpose.

The case turned on a gift given by a Princeton couple, Bernard and Jeanne Adler, to animal shelter SAVE (now SAVE, A Friend to Homeless Animals). The gift was to finance the building of an area for larger dogs and older cats, whose adoption prospects are limited, as part of a new facility in Princeton.

Before SAVE began construction, it merged with another animal welfare nonprofit, Friends of Homeless Animals. The new organization developed a new plan to build a shelter in nearby Montgomery Township instead.  The new shelter will be about half the size of what the new Princeton facility would have been.  Although SAVE trustee John Sayer testified that the new shelter would “absolutely” have rooms for large dogs and older cats, the court said that evidence suggested otherwise.  Judge Fuentes wrote:

Based on Mr. Sayer’s testimony and the letter announcing the merger between SAVE and Friends of Homeless Animals, we are satisfied that the 15,000 square foot shelter to be constructed in Montgomery Township does not include two rooms specifically designated for the long-term care of large dogs and older cats.

The Adlers filed suit in Mercer County in 2007, seeking the return of their $50,000 donation to SAVE.  By order dated August 26, 2010, the court held in the Adlers' favor, finding that they were entitled to the full return of their charitable gift.  SAVE appealed, arguing that the judge erred in determining that the Adlers’ gift was restricted.  SAVE also argued that even if the gift was restricted, its purpose would have been fulfilled and, barring that, the lower court should have reformed the gift under the cy pres doctrine so that SAVE could spend it on a project as near as possible to the original intent.

The appellate court disagreed, saying SAVE had courted the Adlers, who had been long-time supporters of animal welfare but who had never made a significant gift prior to the $50,000 donation, with a campaign that specifically included the two rooms and a naming opportunity. “To be clear, the record shows that SAVE: (1) decided to construct a substantially smaller facility; (2) outside the Princeton area; (3) without any specifically designated rooms for large dogs and older cats; and (4) without any mention of plaintiffs’ names,” Judge Fuentes wrote.  He continued: "By opting to disregard plaintiffs’ conditions, SAVE breached its fiduciary duty to plaintiff.  Under these circumstances, requiring SAVE to return the gift appears not only eminently suitable, but a mild sanction.”

VEJ

http://lawprofessors.typepad.com/nonprofit/2013/08/new-jersey-court-donor-intent-rules-the-day.html

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