Chambers v. Baptist Education Society

40 Ky. 215

• Court: Court of Appeals of Kentucky
• Decided: April 27, 1841
• Status: Published

Opinion

Judge Ewing

delivered the Opinion of the Court.

Issachar. Pawling, being desirous to set apart a fund for the education of Baptist ministers, and candidates for the Baptist ministry, application was made'to the Legislature of Kentucky for an act of incorporation, with a view to its reception and permanent and secure investment, for the object intended. At the sessjpn of 1828-9, an act was passed, constituting twenty-four persons therein named, trustees, with corporate powers, by the name and style of “the Trustees of the Kentucky Baptist Education Society,” and giving to them and their successors, the authority to exercise all the powers, rights, and privileges, which are exercised by the trustees of any academy-of learning in the state, and especially “with the power and authority, in their corporate capacity, to purchase or receive, by donation, demise or bequest, any lands, tenements, or hereditaments, monies, rents) goods, and chattels, and to hold the same, by the name aforesaid, to them and their successors forever, for the use and benefit of the said institution, and according to the intention of the donor or donors, and no otherwise.”

In the following month, Pawling made his will, by which he devised and bequeathed to the trustees, in ther corporate capacity, all his estate, (except some small specific bequests,) amounting to about $20,000, with express instructions, and upon the express terms and conditions, ‘ ‘that the whole of the principal should be a perpetual fund, no part of which was to be used, and the interest to he applied exclusively to the education of such Baptist preachers, or candidates for the Baptist ministry, as adhered to the articles of general union of Baptists in Ken-tacky, no part of it to be applied to either teachers or scholars of any other description whatever,” and constituted the trustees his executors, and died some short time thereafter.

Demurrer to bill aadsus taiued. Chancery has no jurisdiction to declare the forfeiture of a charter of a corporation — or inquire into its misfeasances or nonfeasances for that purpose.

The trustees, after holding out similar inducements to the citizens of the adjoining counties, at length proposed, that if the citizens of Georgetown and of the county of Scott, would subscribe to the institution $20,000, payable in five years, with interest from the date, and convey to them the College ground and buildings at said town, that they would locate the College at Georgetown. The ¡amount was subscribed, and terms proposed complied with, and the College was located as promised.

U. B, Chambers was one of the subscribers, in a .small amount, and a small sum of the Pawling fund was loaned to him by the trustees. For both of these sums, judgments at few were recovered against him; and h.e filed his bill in chancery, against the trustees and others, injoining their collection, in which he charges various acts ■of misfeasance and abuse of their corporate powers, but mainly in the misapplication of the Pawling fund, to ■other objects and purposes than those designated by Paw-ling, the founder and donor.

The trustees demurred to the bill4 which was joined, and the demurrer sustained by the Circuit Court, and the bill dismissed, from which decree an appeal has been taken to this Court.

As to the charges, which involve a forfeiture of the charter, a Court of Chancery has no jurisdiction over such matters. It cannot inquire into a usurpation or misuser of powers, by the corporation or any of the trustees, nor into acts of misfeasance or nonfeasance, with a view to the.amotion of any of its members, or the dissolution of the corporation. These are subjects exclusively of common law jurisdiction, and appertain exclusively to the common law tribunals: 2 John. Chy. Rep. 376-78-88; Attorney General vs The Utica Insurance Company, 5 Term Rep. 85; The King vs Whitwell, 3 John. Rep. 134; 5 John. Chy. Rep. 380; Slee vs Bloom, &c. 17 Vesey, 491; Attorney General vs Earl of Clarendon, 1 Equity Cases Ab. 131; Attorney General vs Reynolds, 1 Vesey, 468; 2 Atkins, 406-7.

Courts of Ghaneerymay enforce the performance of trusts confided to corporations. Subscriptions received in aid. of a trust fund, (the purposes & object of which is designated by the founder,) are to be held and used as the trust fund andsubjected to the same control and no other. Trustees, invested with the management of a fund for a specified object, may exercise a sound discretion as to the means hesi calculated to effect that object

But though a Court of Equity cannot lake cognizance of acts of forfeiture, nor amove members, nor pronounce a dissolution of the corporation, for a breach of the franchises conferred by the charter, yet where a corporation is made the depository of trusts, and property has been invested in its hands as a trustee, a Court of Chancery can exercise jurisdiction over such corporate trusts, in the same manner, and with like powers, that it may exercise jurisdiction over other trust estates. And it may be compelled, in good faith, by the order and decree of the Court, to perform its trusts: 1 Vesey, 462-68-70, &c.; 2 John. Chy. Rep. supra; Kent’s Commentaries, 2, 226, and the authorities referred to; 2 Maddock’s Chy. 75, and the authorities referred to; Moon’s heirs vs Moon’s devisees and executors, 4 Dana, 355.

The charter, in the case under consideration, authorises the trustees to receive donations, &c. for the use of the institution, but requires them to apply them according to the intention of the donor or donors, and not otherwise. But if there were no such requisition in the charter, by the acceptance of a donation there is an acknowledgement-and acquiescence in the terms prescribed, and an implied obligation to carry out the terms in good faith. As Pawling has prescribed and designated the uses, in unequivocal language, to which the fund donated by him shall he applied, those terms should be carried out, and faithfully executed by the trustees. It is a trust fund, placed in their hands as such, to be vested in good stocks, yielding an interest, or loaned out into good hands, on good security, and the interest applied to the precise objects designated by the donor and founder, and not to any other.

It would seem, therefore, to be their duty, as faithful trustees, invested with the funds of the founder, and the discipline and internal government of the College, to provide a suitable teacher or teachers, as far as the funds will justify, with the requisite qualifications to instruct the beneficiaries, in that manner which will best qualify them to perform the high functions of "preachers of the gospel, in that sect or denomination of Baptists, designated by the donor; likewise to use all reasonable exertions to select and call to the institution, beneficiaries of the class and denomination prescribed, and to fit and qualify them for the high functions contemplated by the founder; literary as well as theological instruction should be afforded them, if the funds will admit, and to accomplish the latter object, it would certainly comport more with the fair intention of the donor, and will contribute more surely to the accomplishment of the object contemplated by him, to employ teachers, if attainable, belonging to the same sect of Christians, with the class of beneficiaries on whom ho conferred his bounty, especially in the theological department. But some discretion is to be allowed to the trustees, in the faithful execution of their trust, as well in the selection of teachers and beneficiaries., (provided the latter be of that class designated,) as in the nature and extent of the instruction to be afforded, having an eye to the amount of the fund bestowed. For though Pawling is the perficient founder, and he and his heirs, as such, were entitled to the visitorial power, in the exercise of which, the institution might have been regulated and controlled at discretion, without responsibility or appeal to any other tribunal; yet he, by the terms of donation, has yielded up the power, and the same is invested, by the charter, in the trustees of the College, rvho, as assignees, and standing in the place of the founder, ‘ ‘may exercise all visitorial power, in their sound discretion, without being liable to any supervision or control, so far as respects the government and discipline of the institution, exercising their powers in good faith, and within the prescribed limits of their charter: 4 Wheaton, 674-5; 1 Black. Com. 482; case of Sutton Hospital, 10 Coke, 33 a. b.; Green vs Rutherford, 1 Vesey, 462; Attorney General vs Middleton, 2 Vesey, 327; Kent’s Com. 2, 242-3.

Qu — May not the Attorney General in Ky. proceed by information in Chancery vs corporations eleemosynary in their character?

But admitting the power of a Court of Chancery, in the control and application of the Pawling fund, to the uses designed by the donor, it is contended that the proceeding, in the forpi of an information, can alone be instituted by or in the name of the Attorney General, who' as a public officer of discretion and trust, .will not unnecessarily harrass or embarrass the institution, from motives of malice or ill will.

in England it wasthe Iemedy’

It is a question of some difficulty to determine, how far, or in what cases, an information by or in the name of the Attorney General, may be instituted in Chancery, in this State, against charitable or eleemosynary corporations, or whether such a proceeding can be instituted at all. There is no statute of the state prescribing or regulating such mode of proceeding, if it can be instituted, it must rest for its authority on the common law, and so much of the statute of 43 Elizabeth c. 4, as was declared by this Court to be in force in this state, in the case of 4 Dana, supra, 354, &c.

In England, the King is the foundatio incipiens, or incipient founder of all eleemosynary corporations, such as Hospitals or Colleges, &c. as be alone can grant a charter of incorporation, while he who is the first giver of the revenues is the foundatio perficiens or perficient founder: 1 Black. Com. 10 Rep. 33; so here, the Commonwealth is the in'eipient founder, as the Commonwealth, by her Legislature, can alone grant a charter or pass an act of incorporation. And as the King, as parens patriae, had the general superintendence of all charities which he exercised by the keeper of his conscience, the Chancellor: 3 Black. Com. 427; so here, the Commonwealth being substituted for the King, as parens patriae, should exercise the like superintendence and control. And as the powers exercised by the Chancellor there, in the establishment and enforcement of charities, were, for the most part, judicial and not personal to the King, and from whose decree an appeal lay to the house of Lords. 3 Black. Com. 428; and as all the powers, purely judicial, which were exercised by the Chancellor, in England, may be exercised by the Chancellor here, and as we have a ministerial officer of the same title, and exercising, in many respects, the same powers, and performing similar duties with the Attorney General of England, with the exception that he was the ministerial officer of the crown, the Attorney General here, the ministerial officer of the Commonwealth, we can perceive no good reason why the same proceedings may not be instituted here, that were sustain, able there, for the enforcement of trusts, or the judicial contract of such corporations, in their management of trust funds. Public charities are public blessings, and the Commonwealth is interested in giving force and effect to them. They redound to the interest of the Commonwealth, and good policy requires that the beneficent objects of the founder should be carried out and enforced.

Purposes of a quo warranto. Judgment thereon. Information in. Chancery may be prosecuted -by Attorney Gen. in Ify. against eleemosynary corporations to enforce a trust, —or the founder or his heirs, (if he be dead,) or any beneficiary, (having an interest, ) or any other (having a vested interest in the fund) may file their hill to enforce a faithful execution of the trust conferred.

A public proceeding may be instituted at law, by quo warranto, or information in the nature thereof, or scire facias, for the asceitainment and enforcement of a forfeiture of the charter, for default or abuse of power; and these proceedings against corporations are carried on at the instance and on behalf of the Commonwealth, and she must be a party, “for the judgment is, that the parties be ousted, and the franchises seized into the hands of the government:” Kent’s Com. 2, 252; Rese vs Stephenson, Yelv. 190; Commonwealth vs Union Insurance Company, 5 Mass. Rep. 230. But a dissolution of the corporation may not be most desirable, nor redound most to the interest of the public.

It may be much more consonant to good policy and the advancement of the interests of the Commonwealth, to continue the corporation and enforce the application of the trusts contemplated and provided for by the founder. If an information cannot be prosecuted in Chancery, we know of no other public proceedingwhich can be instituted, on behalf of the Commonwealth, by which that end and object may be attained. And if the founder be dead, without heirs or representatives, and no beneficiary, for the time being, have a vested interest in the use, there would be no person who could institute any 'proceedings against them, to enforce the use, however regardless of their duty, and faithless to their trust they might be.

We think, therefore, that a proceeding, in the form of an information, may be prosecuted in Chancery, by or in the name of the Attorney General, against an eleemosynary corporation, to enforce the trust. But while we concede this, we are satisfied that a bill may be filed by the founder, if living, or his heirs, if he be dead, or by any beneficiary, having an interest in the use, or by any other, having a vested interest in the fund, against the corporation, for a true and faithful execution of the trusts confided to it.

No individual can proceed against an eleemosynary corporation, unless he be party to the donation, or a representative of one who is, or interested in the same, or in the use to which the fund is donated,

Pawling is the founder, and is a, party to the contract of donation,, and stipulated its terms, and has unquestionably the right to have those terms enforced, and if living, might file his bill for that purpose; being dead, his heirs and representatives, who stand in his place, have also a right to ask of the Chancellor the same measure of justice, and would he indulged in the institution of the like proceedings.

-But to entitle a private individual to prosecute a bill, he must be a party to the contract of donation, or the representative of such party, or interested in the same, or in the uses to which the fund was directed to be applied. And we cannot perceive that the complainant has any such interest in the Pawling fund, as to entitle him to maintain a bill, upon charges or allegations, with respect to its misapplication. He is not a,party to the donation of the Pawling fund, nor is he the heir of Paw-ling, nor is he a cestui que use, or belong to that class of charitable objects provided for by Pawling. The charge that he is a Baptist, belonging to the general union of Baptists in Kentucky, resident in Georgetown, and owning property there, will not suffice. The interest, thus derived, is too general, undefined, and remote, to justify his interference. It equally applies to a large class of individuals, any one of whom might, with equal propriety, file his separate bill, and greatly embarrass the trustees in the management of a fund donated by another, and for the specified benefit of a defined class of objects, whose character is not pretended to be filled by the complainant. As an injury in reference to the class of individuals, of whom the complainant discribes himself as one, it partakes more of the nature of a public than a private injury, and to be redressed by a public prosecution rather than a civil suit.

As to the amount of the Pawling fund, borrowed by the complainant, as he has no right to inquire ipto the misapplication of that fund, he has no more right to withhold its repayment than any other individual to whom any,part of that fund had been loaned. To establish a rule that would allow every individual, to whom any portion of that fund had been loaned, to withhold it until the trustees submitted to an inquiry, and could show that they were applying the funds to the purposes designated by the donor, would be establishing a rule that would subject the trustees to endless litigation, that might result in the entire loss of the interest, in the costs of litigation. He, however, has no right to inquire into these matters or object to repayment on such grounds.

Contractsbysubscription, in aid of a charitable fund, may be avoided as other ■contracts, for false suggestions or suppressions of truth. But expressions of opinions as to the effect on the value of property ata particular point where it is proposed to locate a college, (which is the objectinraising the fund,) is not such representationas will vitiate the subscription, or subject those who express it to the imputation of fraud.

But the complainant has an interest in the Scott fund, as it is called, at least to the extent of the sum subscribed by him. He is a party to the contract of subscription, and if he has been seduced into it, by false representations or a suppression of the truth, in matters material to its correct understanding, or if the consideration has failed, he has a right in this, as well as in all other contracts, to ask its dissolution, and a perpetuation of his injunction against the payment of the money subscribed.

The charge in the bill, that highly colored and false representations were made as to the effect which the location of the College at Georgetown would have, in increasing the value of property in the town and its vicinity, which had not been realized, is not a representation about a matter, though false, which in law, can be taken advantage of, or subject the party making it to the legal reputation of fraud. A false estimate or representation of value, either present or prospective, will not vitiate a contract. And as the location of the College at Georgetown was the consideration which superinduced the subscription, and as that has been performed by the trustees, there can be no pretext for dissolving the contract on the ground of a failure of consideration.

And it is not pretended, that by the terms of subscription, that the fund subscribed was to be applied to any designated class of beneficiaries, or to teachers of any defined denomination of Christians, or any designation made of the uses to which the fund should be applied. The object of all the subscribers, and the main consideiation moving all, were the location of the College at Georgetown. It is true that the subscription is made to the trustees of a College, and it may perhaps be implied, as within the contemplation of the subscriptions, that it was to be a Baptist College, though it is alleged in this bill, that the trustees gave out as an inducement to subscriptions, that the institution should not be sectarian, and there can be no doubt,, and the contrary is not charged, that many individuals of other denominations, as well as of non-professors, subscribed. To allow each individual to file his separate bill, and to institute an inquiry into his secret motives for subscribing, and to ask the Chancellor to direct the application of his subscription to the objects which was within his secret contemplation, when he made it, would be to subject the institution to endless litigation and embarrassments, and defeat the manifest and specific object of all, namely, the location and rearing up of a College at Georgetown, for literary purposes. Besides, the fact that all of the professors w'ho have been employed in the institution are not of the Baptist denomination, belonging to the general union, or that a portion of the trustees have seceded from that order, cannot deprive it of the appellation or character of a Baptist College.

Upon the whole, we think, as to the Scott fund, in the absence of all specification as to the uses or objects to which it is to be applied, that each subscriber must be regarded as having subscibed upon the faith of the charter, and the confidence which they had that the trustees, under the responsibilities of their station, would apply the fund in such manner as to promote the best interests of the institution.

And from their failure to designate the uses, in the terms of subscription, which, under the charter, they had a right to do, it may be implied that they intended that the trustees should have the entire control and direction of the fund, provided it was used and applied to the purposes of the College, as they have, by the terms of the charter, the entire superintendence, management, control, and internal government of the College, taking care to use the funds given for a prescribed object to the objects specified by the terms of the gift.

Decree affirmed. Robinson <† Johnson for defendants.

We^donot, therefore, feel it the duty of the Chancellor to raise, by implication, trusts not expressed, and then to exercise his powers in carrying out those implied trusts.

Nor is the allegation, with respect to the ,insecurity of the fund, sufficiently specific and certain, to demand the interference of the court, if even the complainant had the relation to the treasurer’s failure to give the security requred, may be true, and still the fund be sufficiently safe in his hands. And we are not disposed to indulge in presumptions beyond the specific allegations of the bill, which tend to impute negligence or infidelity to gentlemen, the most of whom have been selected and entrusted by the Legislature with the high and responsible functions committed to the trustees by the charter before us. right to inquire into that matter. All the allegations, in

ft j,s> therefore, the opinion of the Court, that the decree of the Circuit Court be affirmed with costs and damages upon the damages below.