Protecting "donor intent" in charitable foundations: wayward trusteeship and the Barnes Foundation.

Author:Abbinante, Chris
 
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"Well, if George could not get the fish, the fish would not get the cake.

George would eat it. He liked cake too. He would find another way to

get a fish."(1)

INTRODUCTION

Philanthropy--"The effort or inclination to increase the well-being of humankind, as by charitable aid or donations."(2) This Comment addresses one of the many forms of philanthropy--the charitable foundation--also known as the charitable trust. Although different types of charitable foundations exist, this Comment uses the term generally to designate institutions established through private wealth, devoted to public purposes and intended to be perpetual in nature.(3)

The twentieth century has seen the rise of the foundation as a crucial and widely used vehicle for philanthropic activity.(4) The growth of charitable trusts coincided with the Industrial Revolution. Industrialization allowed entrepreneurs and opportunists to develop massive personal fortunes. Capitalists such as Henry Ford, John D. Rockefeller and Andrew Carnegie amassed incredible wealth in the late nineteenth and early twentieth centuries.(5) These men and others of similar means recognized the value of charitable trusts as instruments that allowed them to donate funds for the public welfare while maintaining control over the use of those funds.(6) Indeed, these multimillionaires and billionaires envisioned the charitable trust as a vehicle through which they could implement their personal charitable philosophies and affect society in the ways they deemed most beneficial.(7) Beyond the commonly known Ford Foundation and Carnegie Corporation, there are thousands of smaller foundations that either donate funds to worthy causes or operate benevolent institutions themselves.(8) One foundation that uses its endowment to support its own benevolent program is the Barnes Foundation. The Barnes Foundation is a charitable trust that was created by Dr. Albert Barnes, a chemist who made a fortune in pharmaceuticals in the late nineteenth and early twentieth centuries.(9) Dr. Barnes established the Foundation for "the advancement of education and the appreciation of the fine arts."(10) He donated his priceless collection of Impressionist art to the Foundation and built a facility in suburban Philadelphia to house the collection.(11) Barnes also gave millions of dollars for the maintenance of the collection and the creation of an educational program centered around the art.(12)

Unfortunately, the trustees who control the Barnes Foundation, as well as the trustees of many other major charitable foundations, are presently involved in a struggle between their duty to fulfill the intentions of their donors and their desire to dedicate their foundations, assets to other pursuits.(13) Donors' wishes cannot always be accommodated due to economic changes, modifications of the tax code(14) or other statutory guidelines affecting foundations, evolving societal needs, or a host of other unforeseeable circumstances.(15) Under certain circumstances the law allows the trustees of charitable foundations to deviate from the express instructions of donors.(16) While there are instances in which trustees cannot follow donors' intentions if their foundations are to survive or remain viable,(17) there are also many cases where donors' wishes are disregarded without proper cause.(18) The struggle today is to identify those cases where society and the legal system should not permit deviations from donors' wishes. The importance of this struggle is simple--society should ensure that donors' intentions are followed in order to encourage continued philanthropic activity by the wealthy. Charitable foundations have proven to be a valuable source of funding for research and education in the sciences, especially in the fields of medicine and health care.(19) These institutions also provide support for the impoverished, the arts, religious institutions and community welfare.(20) If potential donors decide not to fund foundations because the law fails to protect their intentions, valuable resources will be lost.(21) Given donors' desire for control over their charitable contributions,(22) it is possible that donors who lose faith in the foundation as a medium for giving might forego a large part of their publicly targeted philanthropic activities.(23)

This Comment examines the problem of donative intent using the Barnes case as a touchstone. Part I discusses the history of the Barnes Foundation, from the purposes behind the Foundation's establishment and the wishes of its creator, to the dilemma that the Foundation now faces. This Part argues that the trustees of the Foundation violated their duties by neglecting the wishes of the late Dr. Barnes. In Part II, this Comment outlines the legal doctrines and precedents that control the administration of charitable trusts and deviations from donor intent. Part III details some other present-day situations where donor intent is regularly and wrongfully disregarded by the trustees of charitable foundations. These examples are included for comparison with the Barnes case, noting the legal and circumstantial differences, but focusing on the underlying similarities-specifically, the disregard for the wishes of the donor. In Part IV, this Comment examines the reasons why society should value donor intent and argues that the trustees of charitable foundations should be held to a higher level of accountability in upholding the intentions of donors. Finally, Part V contains recommendations on how philanthropists and the law can better preserve and protect donor intent.

  1. THE BARNES FOUNDATION: PAST AND PRESENT CONTROVERSIES

    1. Albert Barnes and the Establishment of His Foundation

      Dr. Albert Barnes (1872-1951) was a Philadelphian and a graduate of the University of Pennsylvania Medical School. Barnes and German scientist, Hermann Hille, developed the pharmaceutical product Argyrol.(24) Through the sale of Argyrol, Barnes quickly became a wealthy man.(25) With his financial status secure, Barnes devoted most of his time to his passion--art.(26) Because Barnes believed that he was not much of an artist, he collected the works of others. Barnes amassed a collection of Impressionist art that is enormous in volume and impressive in quality.(27) Although his collection is now considered priceless, Barnes bought most of his paintings before they were valued by the art world.(28)

      As his collection grew, so did Barnes's contempt for his peers in the art world and the upper class.(29) Barnes felt slighted by the gentry of Philadelphia, and in response he disassociated himself from his contemporaries.(30) He expressed his bitterness by writing insulting letters and engaging in personal feuds with those he deemed detractors or enemies.(31) Barnes's ultimate act of disassociation was his response to those who sought to view his collection.(32)

      1. The Foundation's Origin

        In 1922, Barnes created his Foundation.(33) The Foundation was established to house Barnes's collection,(34) but contrary to what would seem obvious, the Foundation's primary purpose was not to serve as a public museum.(35) In fact, Barnes intentionally placed strict limitations on public access to the collection.(36) Barnes envisioned the Foundation as an educational institution, established for instruction in his own philosophy of art.(37) Barnes's theories about art education reflected the views of philosopher John Dewey, Barnes's friend and mentor.(38) Dewey implemented these ideas as the Foundation's first director of art education.(39)

        The Indenture(40) that Barnes created to govern the Foundation detailed the proper function of the Foundation and contained many restrictions upon the use and administration of the collection.(41) In addition to the aforementioned guidelines which restricted public access to the collection,(42) the Indenture outlined a severely limited investment policy for the Foundation's endowment.(43) The Indenture strictly forbade charging entrance fees to the collection,(44) the construction of new buildings on the Foundation's premises, and the loan or sale of any of the paintings under any circumstances short of physical deterioration.(45) In an amendment to the Indenture, Barnes mandated that Articles I, II, IV, V and IX were "unamendable and shall never be amended in any manner whatsoever."(46) These restrictions highlight the rigid and peculiar nature of Dr. Barnes's persona and his philanthropic ideology. The question of whether the trustees have the duty to adhere to these extreme guidelines is the cause of the controversies that have long cast a shadow over the Foundation's existence.

      2. The Foundation's History

        After Barnes's death in 1951, he left control of the Foundation to his wife, Laura.(47) Following her death in 1966, control of the Foundation passed, in accordance with Barnes's wishes, to trustees appointed by Lincoln University, a small, African-American institution in Lincoln University, Pennsylvania.(48) In 1961, the Foundation agreed to open its doors to the public twice a week due to a court order and the threat of revocation of its tax-exempt status,(49) and three times a week following Laura Barnes's death.(50)

        Aside from the change in public access and a few minor alterations, the Foundation was administered according to Barnes's wishes throughout the 1960s and 1970s. Adherence to Barnes's intentions was due in large part to the tight-fisted control held by the last trustees Barnes had personally appointed, particularly Violette deMazia.(51) Upon Mrs. deMazia's death in 1988, Lincoln University gained the sole right to appoint the Foundation's trustees.(52) By the appointment of Lincoln's trustees, Richard Glanton, the University's general counsel and a lawyer from Philadelphia, became the Foundation's president, a title he continues to hold.(53)

    2. The Foundation in the 1990s: A Time of Conflict

      By the late 1980s the collection had little professional or private...

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