By Patricia M. Annino
James Maffei, an Italian immigrant who developed a successful sand and gravel business, purchased several tracts of land in Wellesley in 1925.
Twenty-one years later — 19 years after Maffei's death — his children donated eight acres of the land to the Roman Catholic archbishop of Boston on the condition that the site be used for a church that would be named St. James in honor of their father.
Two of his six children donated their shares in the property outright in order to set up the eternal tribute to their father. The other four children received $3,000 each, much less, all agreed, than the land was worth.
In 1958, St. James the Great Parish was built on the property. Unfortunately, in 2004, as membership declined, the archbishop of Boston decided to close St. James.
The daughter and granddaughter of James Maffei sued for breach of contract, arguing they had been promised that the property would be used as an eternal tribute to James.
In a recently issued decision, the court sided with the archbishop, in part because the Maffei family had not protected itself with a written agreement that stipulated what should happen to the property if the church no longer existed.
It was perfectly understandable that, back in 1946 when the land was turned over to the archdiocese, no one in the Maffei family foresaw a time would come when declining membership would necessitate closing a church at that location — understandable, but devastating in its consequences.
The Maffei case underscores how important it is for donors to contemplate the future. The family and the church could have agreed, back when the donation was made, that if the day came when St. James Church was no longer in existence, the property should be sold and the funds be used within the archdiocese for something else in their father's name.
Donations may last forever, but the conditions under which they are made are usually transitory. Several other recent cases highlight this issue.
Georgia O'Keefe, et al.
Fifty-eight years ago, artist Georgia O'Keefe, donated two paintings to Fisk University, the historically black college in Nashville, Tenn. Fisk accepted the gift on O'Keefe's terms, which were that the university would "not at any time sell or exchange the artworks."
In the decades since, the paintings have multiplied in value, and Fisk's economic viability has plummeted. The paintings now exceed Fisk's endowment, and insuring and caring for them has become an economic hardship.
Fisk decided to sell the paintings. The Georgia O'Keefe Foundation intervened, insisting that doing so would violate the terms of the donation. The two sides negotiated a compromise: If Fisk sold one painting to the O'Keefe Foundation for $7 million (significantly less than its fair market value), the university could sell the other painting to a Tennessee buyer, but only if the buyer agreed to lend it back to Fisk permanently for display. That way at least part of Georgia O'Keefe's intentions — that her work be displayed at Fisk — would be followed.
The Tennessee attorney general, who is authorized by state law to protect the public's interest in the case of a charitable gift, decided it was in the public's interest to keep both paintings in Tennessee.
He thus brokered a deal that the settlement between the foundation and Fisk would be approved only after both paintings were first offered for sale to any buyer who agreed to lend them back to Fisk.
A similar agreement occurred in Pennsylvania when Thomas Jefferson University decided to sell Thomas Eakins' famous painting "The Gross Clinic" to the National Gallery of Art and an Arkansas Museum for $68 million. The state attorney general stepped in to insist that local museums first be given the chance to bid on the painting in order to keep it in Pennsylvania.
In Lawrence, in the mid-19th century, the Rev. Wolcott bequeathed 17 paintings (including works by Boudin, Pissaro and Claude Monet) to the White Fund "to create and gratify a public taste for fine art, particularly among the people in the city of Lawrence."
The reverend wanted his collection eventually housed in Lawrence, but until there was an adequate gallery there, he authorized the White Fund trustees to offer the paintings to the Museum of Fine Arts for exhibition.
The City of Lawrence never got a museum, and in the 88 years the paintings remained at the Museum of Fine Arts, only three were placed on exhibition. The White Fund attempted to sell the paintings, which are now worth more than $8 million. The residents of Lawrence opposed that petition and the court ruled that the paintings could not be sold.
In all three of these cases — and, unfortunately, such cases are not that unusual today — an organization receiving a charitable contribution took steps to move against the original intent of the donor, and against the very terms it had agreed to in order to receive the contribution.
Fisk, Thomas Jefferson and The White Fund could have said "no." In accepting the gift and with it the imposed conditions, each organization assumed responsibility for making sure that the conditions were honored.
Why did they allow so many years to go by without developing strategies that would have enabled them to honor the donor's intent?
Fisk University could have chosen to negotiate different terms, instead of agreeing to Georgia O'Keefe's terms in the first place. The university could have figured out ways to derive revenue from the paintings donated — by exhibiting them broadly, building a resource around them. Why did Fisk wait until its financial problems had reached a crisis point (and the O'Keefe donations had increased so much in value)?
If the trustees of Fisk and Thomas Jefferson University were inept at managing the endowments they received, and over the course of more than 130 years the White Fund was incapable of building an appropriate museum in Lawrence, what makes us think they will be better able to handle the financial rewards that come from selling those endowments?
Means, not the end
A donor who accumulates wealth and wants to use it to benefit society has earned the right to decide precisely how her donation will be put to work.
Most donors who make these gifts do so to serve a greater purpose — to show the world that this art exists or to give hope that there is beauty out there that is available to all.
The charitable organization the donor chooses is the means, not the end. It is a conduit, chosen for its ability to do what is necessary to convey the gift to the broader public.
As stewards of the gift to the people, charitable organizations cannot abdicate their responsibility to the common good by cashing out the gift to a private donor and turning the money over to a failing university.
The question we should be asking today is not whether or not valuable donated property should be sold to save a mismanaged institution. Instead, the seminal questions are:
(1) What mechanisms should the trustees of the charitable organization have in place along the way to insure that their end of the gifted bargain is upheld?
(2) What responsibility should the attorney general, as the public steward, have (prior to a crisis lawsuit) to make sure that the intended purpose of the donation remains intact?
Increasingly, charitable organizations are being scrutinized and held to the same standards as private corporations on financial accounting and audit issues, and that is as it should be.
Why shouldn't charities — as stewards of countless private donations and as the beneficiaries of many tax incentives — be required to issue annual reports to the public that disclose their purpose and how they are utilizing their assets to fulfill that purpose?
When they accept the donation of an asset for which a tax break has been provided, they should also have to explain what they intend to do to make sure the gift they have agreed to steward will be handled properly.
Fisk, Thomas Jefferson, and the White Fund are not alone. There seems to be a growing problem of charities straying from the desires of their donors, and it is a trend that could seriously endanger the country.
What should you do if you are contemplating making a gift to a charitable organization?
Explore the charity and make certain it has the trustees and/or directors in place to sustain the gift.
Check out the organization's financial condition.
Be specific in your choices. If the charity finds itself in a position where it has to sell the artwork and you want yours kept in the public domain, you must decide what your overriding goal is — giving it to the charity or making it available to the public?
In default, where do you want your gift to go? To a museum? Should the charity be permitted to sell it, but only to a museum or public charity? Must it be sold at a fair market value? Who should approve the sale? What should happen to the proceeds?
Should the organization's history — whether it has been managed or mismanaged — be taken into consideration in determining who should receive the benefit of the proceeds from the art?
Set up checkpoints. If a gift is going to be given in perpetuity, and that is, of course, a very long time, you should not have to wait 88 years to see if the paintings are still in the basement of the Museum of Fine Arts.
Understand that the team in charge of the organization at the time of the gift will not be the same team in the future. It is trite but true that life changes and even those circumstances such as the closing of a family church parish, which may seem not remotely possible at the time, must be contemplated and dealt with in the discussion and documentation of the gift.
Patricia M. Annino is chairwoman of the estate planning department at Prince, Lobel, Glovsky & Tye in Boston.
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June 18, 2007
