Interesting Cy Pres Case Seeking University Scholarship Modification

The Superior Court of New Jersey, Chancery Division, recently issued an unpublished opinion (In the Matter of the Eleanor M. Weisbrod Endowed Scholarship) remanding a cy pres case for further consideration by the New Jersey Chancery Court. The grounds for the remand are relatively pedestrian - the initial judge considered and relied information outside the record. But the case is unusual in that the judge rejected two of the three requested modifications even though the state Attorney General did not object to Georgian Court University (GCU)'s request, and it is not clear that on remand (to a different judge) that the modifications will be permitted.

At issue is a scholarship that as of June 2020 had an endowment of $4.1 million and over the previous ten years had been unable to award $1.3 million in available funds because of the restrictions from the original Gift Agreement and a related Final Trust Agreement. The restrictions GCU sought to remove were that the recipients be limited to Catholic, full-time resident students majoring in mathematics. GCU asked instead that the scholarship be available to students of all religious faiths, commuting students as well as resident students, and students pursuing any math-based or science-based majors. (GCU did not seek to remove or modify restrictions limiting recipients to women with financial need and at least a 3.0 GPA.) The inability to award all of the available funds arose from the fact that the changing demographics and major choices of GCU's student body meant relatively few students satisfied the original criteria. GCU also agreed to a condition imposed by the Attorney General on not objecting to the modifications, which is that the modified criteria only be used in any year where applying the original criteria would result in all of the available funds not being awarded.

The relevant New Jersey statutes (N.J.S.A. 3B:31-29(a) and N.J.S.A. 15:18-30(c)) provide in relevant part that a modification of such restrictions is permissible only if the restriction "becomes unlawful, impracticable, impossible to achieve, or wasteful." If that is the case, then the first statue (applicable to charitable trusts) provides that "the court may 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 purpose." Similarly, the second statue (applicable to gift instruments) provides that the court "may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purpose of the institution or charitable intent of the donor."

It will be interesting to see what happens on remand, including given that the information from outside of the record improperly relied on by the first judge to consider this matter apparently related to the settler/donor's intent.

Lloyd Mayer