Keeping charity in charitable trust law: the Barnes Foundation and the case for consideration of public interest in administration of charitable trusts.

• Author: Eisenstein, Ilana H.

INTRODUCTION

The Barnes Foundation is a world-class art collection, amassed in the first half of the twentieth century by the wealthy, but eccentric, Dr. Albert C. Barnes. In establishing the Foundation, Barnes set forth detailed and comprehensive restrictions on the use of, management of, and access to the trust that funded it. Efforts to modify the trust in the interest of public access have generated millions of dollars in litigation expenses over the last fifty years. This Comment will explore the most recent chapter in the Barnes Foundation saga: an offer by the Pew Charitable Trust and the Lenfest Foundation to contribute $150 million to the Barnes Foundation, contingent on the court's approval of major modifications to the Barnes indenture. (1) This offer reveals the considerable tension between the rubric of respect for donor intent and the importance of the public interest in the administration and modification of charitable trusts.

Charitable trusts receive significant public benefits in the form of tax incentives, exemption from the usual rule against perpetuities, and public enforcement of trust terms. (2) In spite of scholarly arguments for change, charitable trusts are almost always administered and supervised under the principle that donor intent is paramount. Public interest and notions of charitable efficiency are considered only insofar as the donor himself would have considered them.

While the favored status of charitable trusts and deference to donor intent have been longstanding features of charitable trust law, closer scrutiny is justified. Philanthropy of the Barnes variety remains a bastion of the wealthy for the wealthy. Charitable institutions allow wealthy individuals to exert control over their bequests--in life as trustees and in death as donors whose wishes are legally enforceable. (3) Furthermore, the minimal requirements for qualification as a charitable entity have led to a large number of charitable organizations that serve elitist or esoteric purposes. (4) Given the benefits trusts receive, the public welfare deserves greater consideration in charitable trust administration.

Part I of this Comment provides further background on the history of the Barnes Foundation and the contours of the present controversy. I will examine the status quo of charitable trust law and the current dominance of donor intent in Part II. In Part III, I will discuss three benefits that charitable trusts receive from the public, which together support the case for greater consideration of public interests in trust administration. Finally, Part IV explores five options for how the public interest can be considered in trust administration: (1) liberalizing the cy pres doctrine; (2) relaxing the fiduciary duty of obedience and using greater discretion in public enforcement of charitable trusts; (3) raising the bar to the creation of trusts; (4) lowering the obstacles currently preventing trust failure; and (5) providing special consideration for regulation of the care of and access to important works of art and culture. While trust law varies state by state, this Comment will use the recent Barnes litigation and Pennsylvania trust law to demonstrate that the public interest should be considered throughout the life of a charitable trust.

1. BACKGROUND OF THE BARNES FOUNDATION AND RECENT CONTROVERSY

   1. History of the Barnes Foundation

      Albert C. Barnes was born into a family of modest means in the lower-middle-class Kensington area of Philadelphia. (5) From these relatively humble beginnings, Barnes went on to train as a doctor and chemist, leading to his ultimate success in marketing the antiseptic Argyrol. (6) His pharmaceutical business earned Dr. Barnes an increasing fortune. (7) This allowed him to take up residence in Merion, an upper-class suburb of Philadelphia, (8) and eventually enabled him to accumulate his now-famous art collection.

      Although he made every attempt to emulate the accoutrements of his affluent neighbors in Merion, Dr. Barnes was a "self-made businessman," who felt his lack of polished "social graces" kept him on the outskirts of high society. (9) This social isolation, complemented by a sincere fascination with art, motivated Dr. Barnes to collect art both as a means to fit in and as a means to exclude those who spurned him. (10) Between 1910 and 1930, Barnes studied and rapidly collected the art that forms the collection of his now world-famous Barnes Foundation, (11) which was first incorporated in 1922 and opened formally in 1925. (12)

      The Barnes Foundation was established for the purpose of promoting the "advancement of education and the appreciation of the fine arts." (13) Barnes used the Foundation to develop a unique educational and aesthetic program. His collection features great works of the Impressionist, Post-Impressionist, and early Modernist periods, as well as examples of decorative arts and African sculpture. (14) The art is hung in unique arrangements based on Barnes's theory of aesthetics, rather than by the typical categories of artist or period. (15)

      The Foundation was also meant to promote Barnes's belief in democratic values by making special efforts to allow "plain people" to access the collection while excluding activities and--during his lifetime--individuals that Barnes deemed part of the social elite. (16) The Foundation's bylaws formalized both his aesthetic and social values by setting forth detailed restrictions on the composition and placement of the collection, the use of the buildings and grounds, the admission policy, and the Foundation's management. (17)

      In 1951, following Barnes's sudden death in a car accident, (18) the bylaws' restrictive provisions became permanent rules which the trustees--and the public--apparently had to follow. (19) Less than six months after his death, the stream of litigation challenging the Foundation's bylaws began, (20) and it has continued unrelentingly to the present day. (21) Several of these cases have challenged trustee decisions, claiming they were detrimental to the Foundation's purposes as Barnes likely conceived them. (22) Other suits have challenged the restrictions as damaging the public interest, given the Foundation's status as a tax-exempt, charitable trust. (23) As a result of this extensive litigation history and the significant expense of maintaining an increasingly valuable collection, the Barnes Foundation has sunk into financial woes over the last ten years. (24)

   2. The $150 Million Problem

      With this brief historical sketch of the Foundation in mind, I turn now to the most recent chapter in its history: a bold petition to change the location, management, trusteeship, and access policies of the Foundation in return for a multimillion-dollar gift. (25) Faced with a dim financial picture, the Foundation's trustees were frustrated by their inability to fundraise because of the limitations on public access, (26) the small size of the board, (27) the inability to deaccession works from the collection, (28) and the constant costs of litigation. As a result, the trustees began seeking additional sources of funds that could prevent the Foundation from falling into bankruptcy. (29)

      Earlier this year, the Pew Charitable Trust (30) and the Lenfest Foundation (31) committed $80 million--and offered to help raise that figure to $150 million--to save the Barnes Foundation. (32) The Pew/Lenfest offer, however, is conditioned on the Barnes Foundation making significant modifications to the Foundation's restrictive bylaws. First, the main collection must move from its current location in Merion to downtown Philadelphia, (33) near other museums and cultural attractions. Second, the restrictions on public access and social gatherings at the new location must be lifted. (34) Third, the number of board members must be increased from five to fifteen, with Lincoln University still nominating only four trustees. (35) Finally, the bylaws will have to be amendable by the board of trustees rather than through the current court petition process. (36)

      This offer and its conditions have set up a public and legal controversy. The benefits of the offer to the public, the city, and the collection itself are potentially tremendous. The public would benefit from increased access to the collection, which would be open many more hours and in a location easily reached by both residents of Philadelphia and tourists. The collection would no longer be plagued by zoning restrictions that severely limit the number of people who can view the collection each week. The city would benefit by having this world-class collection added to the downtown's already museum-laden Ben Franklin Parkway area. And the artwork would benefit from a higher level of art preservation, climate control, and security services than the Foundation, with its current funding limitations, can presently provide. While some art aficionados worry that moving the collection will diminish its unique character, (37) it seems clear that the public would best be served by the court's approval of the Pew/Lenfest offer. (38)

      The public interest, however, is unlikely to be considered by the Montgomery County Orphans' Court when it applies Pennsylvania law to the trustees' petition. (39) The battle over the modification of the trust bylaws will be based on the intent of Albert C. Barnes as the court finds it. The relevant legal question is not what is best for the public, but what Dr. Barnes would have done if he were alive today. The importance of Barnes's wishes is in no degree lessened because he has been dead for over fifty years. Charitable trusts and all of the idiosyncratic provisions of their founders run in perpetuity. Notwithstanding the potential for a meaningful public benefit, donor intent--not public interest--remains paramount in the administration and modification of charitable trusts.

2. CHARITABLE TRUST PURPOSES AND THE SUPREMACY OF DONOR INTENT

   The...