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I have scheduled a for those
who have read the paper,Saturday,
p.m., 130 McGregor.
–A 1 Denman
A LAYMAN’S GUIDE TO LEGAL MEANS FOR SEPARATING ANTIOCH COLLEGE FROM ANTIOCH UNIVERSITY
A.l Denman, Professor of Philosophy of Law and Religion, Antioch College
October 1, 1979
PART ONE: Introduction. 1
I. Personal notes • 1
A. A lay guide.
B. An uncont1dential document •
C. Three levels ot involvemen.: tor readers.
D. Bias. • • • • •
E. Beyond bias.
. .
1
1
2
2
5
II. Tips to readers • 5
A. About l:::.ws, j’l.o..:..,;es and lavyers
1. In general • •
2. Lava and Judges.
3. Lavyers •••.••• . . . . . . . .
5
5
5
6
B. About cross references, footnotes and authorities •• 6
PARr 1″1’10: Overview, an interpretation ot the law. 8
I. .In general • . . . a
II. Strengths and weaknesses of 10 a.pproaches • 9
A. Most p:-omising: a.ccounting s…,d declaratory judgment • 9
B. Promisir.;G: injunction and nuisance. 9
C. Promising unde:.* s-pecial circumstances: mandamus and partition • 10
D. Long-shot possibilities: quia. t1:met and rescission. • 10
E. Unpromising: bankruptcy and receivership. • • • • 11
Summary ot the law and some opinions. • 13
13
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·18
• 20
• 22
·26
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·29
• 30
31
•32
34
• 37
• 38
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• •
• •
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• •
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• ••
Accounting •
Eo..’lkr-l1JtcY’•
D-aclaratory. judgment .
Equity.
jurisdiction •
bjunction.
Mandamus •
XII.
PART ‘:’EREE:
X.
XI.
r.
II.
III.
rI.
v.
VI.
VII.
VIII. Nuisance.
Partition •
Quia. timet •
Receivers
Rescission •
Separate incorporation.
Standing •
Trust •
IX.
XII!.
m.rv.
not produced nor reproduced at College expense
,C,.,¥ PM iii • .4 • 4,4
A GUIDE TO LEGAL FOR SEPARATING ANTIOCH COLLEGE FROM ANTIOCH UNIVERSITY
Al Denman, Antioch College, October 1, 1979
PART ONE: INTRODUCTION
I . PERSONAL NOTES
A. A la.y guide
This “Guide” is by a layman for la.ypersons. Although I am a lawyer and
teach courses in law, it has been 25 years since I practiced law (in Idaho) and
I have not been admitted to the bar in Ohio, the locus of most of the discussion
that follows, because University incorporated in Ohio. My research
and opinions are not to be thought of as equivalent to those of a practicing
attorney.
B. An unconfidential document.
My original intention wa.s to write a confidential memo for a few Antioch
College faculty and administrators who have pivotal positions for developing
strategies of separating the College from the University.
During the summer, as I Was doing the research, colleagues, students and
townspeople asked me from time to time how I was spending my summer. I explained
in general terms, stressing the confidentiality of the results, if they chanced
to express an interest in them. Invariably, people accepted without question
the notion that I should keep the results of my investigation secret.
That acquiescence began to bother me. A high value in the ethics of
education and scholarship is freedom of information. Why should “truth” be an
early casualty in a conflict within an academic community? To be sure,
University trustees and officers have closed strategy meetings and they do not
make their minutes public. But we despise that sort of secret designing of our
future by others. Now, the tables are turning. We are planning futures which
will radically affect others. Why should we use the secret means we despise
when others use them? Isn’t there a good chance we’d all make sounder decisions
if we knew what others were thinking?
And how about students? Could I as a teacher, especially an AntiOCh College
teacher, write something which I considered important and keep it from students?
The College exists for students’ education. What could be more important than
informing students about basic options for the College? What could be more
educational than inclUding students in a fully informed dialogue about our
future?
In addition, there is the outside world. Antioch College has prided itself in
being an open community. We’ve been willing to pay the costs of full disclosure,
because we believe critical examination from the outside is healthy for us, and
‘lie hope the outside vorld is edified when our debate about veighty educational
and social issues is carried into public forums. Am I willing to give up all
this to the supposed strategic advantages of secrecy?
Those vere some of my thoughts as I reflected upon the question of secrecy.
In the end, I decided the arguments were overwhelmingly on the side of free
disclosure. Whoever is interested is welcome to the results of my research.
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C. Three levels of involvement for readers.
In vriting this “Guide,” I have had in mind three levels of involvement
readers might have.
Some will proba.bly be content with my conclusions. “Part II: Overview,”
will suffice for them.
Others might have time and interest to work through a taxing, detailed
summary of the law to their own conclusions. “Part III: Summaries of the Law
and Some Opinions” tries to meet that need.
At least a few, I hope, will not be content until they have gone to primary
sources. They will rightly suppose what·I know, that my research is both biased
and far from exhaustive. If they are in Yellow Springs, I invite them to examine
my files at my office, and I beckon them to use three, fine, open law libraries
in the vicinity of Yellow Springs, the Greene County Law Library in Xenia, the
University of Dayton Law School Library in Dayton, and The Ohio State University
Law School Library in Columbus.
Moreover, I hope all who examine the legal issues of separating Antioch
College from Antioch University, especially persons in other parts of the
University, will share their results widely. Sharing the results of our
investigations might do much to transform fight into intelligent, communal
problem-solving.
D. Bias.
The major issue before Antioch is whether the College should be sepa:ated
from the University.
I presuppose that it should.
One who begins with such a position must answer three questions: (1) how
much separation, (2) when, and (3) how?
I answer: (1) The greater the separation, the better. Complete separation
is best. (2) The sooner the better. (3) The separation should be through
amicable, negotiated means, if possible; if not, we should invoke the aid of the
courts to help us resolve the issue.
This “Guide” is an attempt to help all parties to the dispute (College and
University administrators, alumni, faculty, staff, students, trustees, and
Yellow Springs townspeople) think through how the courts could help us resolve
our problem, if we can’t do it ourselves.
I come as a late convert to the position that Antioch College and University
should separate. For 14 years I supposed a national university in dispersion
was a good idea Which could and should be made to work.
I bear some blame/praise for developing the national university in dispersion
idea. In 1968, I went to Columbia., Maryland, as a part of the student-faculty
team that began negotiations with James Rouse to plant Antioch in that new city.
In 1971, I invited Edgar and Jean Cabn to Yellow Springs to meet students and
..
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and faculty to talk about their dream of creating an Antioch School of Law.
In 1976, I told William Birenbaum at the Adcil meeting at which he announced
the reorganization of the university (“College,” still, in name) that I was
enormously saddened by the loss of control over our own affairs his reorganization
implied, but that I would vote for it because he needed that central control to
make the university work. In 1977, I was a member of the President’s Task Force
to promote intra-institutional connections. Among the faculty, I supported the
vision of President Dixon and the legitimacy of his attempts to make it a reality
long after most of my colleagues had become his adversaries–in fact, until he
fired Frank Shea. And I have defended to this day President Birenbaum ,as a
dedicated, energetic and able university administrator.
But I have concluded the idea of an Antioch national university in dispersion
cannot work, no matter whether it was a good idea. I can summarize my reasons
under three headings:
1. Antioch College has irreconcilable, fundamental differences with
other parts of the University and with the University administration.
a. They believe the intangible capital assets (endowment and alumni)
belong to the University and should be used for the welfare of the whole
University, including the University administration. We believe the assets
belong to the College, should be used for the College’s welfare alone, and that
the assets have been stolen from us.
b. They believe that other parts of the University “subsidize”
the College, that any portion forwarded to us is an unearned “deficit” in our
bUdget. We believe we are in no way “subsidized,” that alumni contributions
belong to us and we will never accept the language of “deficit” nor the
implication that we have not earned that income. ·We have earned it through
130 years of educational excellence.
c. They believe the University must survive as an organism, because
in that direction lies the future of higher education as well as the ability of
the University to survive, and they would be willing to close “the Yellow Springs
operation,” if that became necessary and it could be done without losing
accreditation for the whole University. We believe the University might indeed
try to close the College to save the rest of the University. We believe the
College must survive, because the future of higher education and our future
more likely lie in the direction of small, autonomous units than in the direction
of conglomerates.
d. They believe the College is a wasteful economic burden on the
rest of the University and that the College budget must be superintended by the
University administration. We believe the University is a wasteful economic
burden on the College and that the University administration is incapable of
superintending itself, let alone the rest of the units.
e. The University administration believes the management crisis of
the University can be solved by adding to its personnel and budget. We believe
that will worsen the crisis.
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2. Sixteen years of conflict over the national university in dispersion
idea have been educationally ruinous. Those years of conflict have:
a. deprived us of a President representing our interests full time
and have frequently turned the President into our adversary;
b. been the grounds for firing, against our will, two of our chosen
and esteemed administrative leaders, Greenlee and Shea, and left us leaderless
for long periods of time;
c. diverted administrative time and energy from their proper ends
of cultivating support for and managing the operations of the College to
exhausting and unproductive meetings in New York and Washington on University
problems;
d. eviscerated faculty of their creative ed.u.cational energies by
thrusting them into an afflictive series of crises and conflicts;
e. so filled students, especially, with seething rage about loss
of independence and absentee ownership and control that the President will no
longer meet with the assembled community to talk about our problems;
f. disaffected hundreds of former College supporters in Yellow
Springs, Dayton and the rest of the country;
g. given Antioch College a hurtt’ul and unwarranted image as an
institution more given to conflict than education.
3. Two Presidents and two interim administrators, all of them ingenious
and energetic men, have been unsuccessful in managing the University. After
seven years of administrative reorganization (I date the beginning, Spring, 1972,
when President Dixon withdrew from the College to manage the University and left
the College in the hands of a temporary, appointed, not-chosen, Dean), three ot
them under the current President, the University has:
a. moved from about $2 to $10 million indebtedness;
b. liquidated most of the $4 million endowment, spent over $8
million in gifts and sold scores of houses and other pieces of real property
and spent that uncalculated capital, too;
c. lost key, top leaders in the financial and development offices
in the midst of a make-it-or-break-it fundraising campa.ign.
The idea has been tried. It has failed. The burden of prcof
has surely shifted to those who the university idea can work. To my’ mind,
the only sensible starting point is to suppose that the Antioch University idea
is a mistaken idea whose time will not come and that we had better disengage
the College trom the University–tast!
/
r’
E. Beyond bias
I have tried to be clear about fact-value confusion. I am aware that it is
impossible to separate perfectly my own values, which I have already spelled out,
about College independence from the University, from the way I find and report
the law as fact. I know that even what I chose to read, let alone what I made
of it, was tinctured with my values.
Nevertheless, I have tried for my own benefit well as for the reader’s to
separate my report into three categories along the fact-value continuum:
1. Fact and value mixed. You will find this in “Part II: Overview:
An Interpretation of the Law.”
2. Fact, as pure as I could render it. You will find this in the first
part of each section of “Part III: Summaries of the Law and Some Opinions.”
3. Valuation of the law. You will find this in the second part of each
section of “Part III: Summaries of the Law and Some Opinions.”
I have tried to use language appropriate to the quality of the report. Where
I am conscious of fact-value mixture, I use words and phrases such as these
freely: “I think,” “it appears to me.” Where I am trying to be factual, I avoid
the first person singular.
II • TIPS TO READERS.
A. About laws, .1udges and lawyers.
1. In general.
a. Laws and courts exist, in part, to resolve disputes persons can’t
resolve by themselves.
b. Negotiated settlements of long-standing problems are often greatly
assisted by the initiation of a legal suit. This happens in two ways: judges
push toward settlement in pre-trial, informal negotiation sessions, and the
parties and their attorneys negotiate with increased earnestness as trial approaches.
c. The normal waiting time, from initiation of a suit until the time
it comes to trial, in Greene County in cases of this type is 6 to l2 monthB.
d. The main task of legal research is to increase the accuracJ” with
which you can predict how a judge would decide your case, if it comes to trial.
2• Laws and judges.
a. Cases and statutes are more authoritative to a judge than
scholarly opinions, but when a judge is in doubt s/he may look to scholarly
opinions for guidance.
b. Judges are bound by statutes, but statutes are necessarily
written in broad terms which only more or less fit a particular case. Hence,
judges have the final say about what statutes means.
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c. Judges recognize that no cases are identical, yet they will try
to be guided by court decisions in the most similar cases they can find. This
is what we mean by saying courts follow precedent.
d. To a judge in search of precedent:
–the higher the court, the more authoritative its decision in
a case offered as precedent.
–the closer the court, the more persuasive its in a
case offered as precedent.
–the more similar the facts of a preceding case to the one slhe
must decide, the more binding will be the rule of. that case on the one to be
decided.
–the older the preceding case, the better, if it gets continued
reuse and reinterpretation.
–the newer the preceding case, the better, if it represents a
trend.
–therefore, the best possible precedent is a case slhe tried
recently with fact similarities that are astonishingly similar to your own
case, that the Ohio Supreme Court affirmed yesterday, reinterpreting and
bringing up to date a trend·started many years ago in a landmark decision.
3. Lawyers.
a. A practicing lawyer can tell you from his practice a wealth
of predictive information a scholar can’t find in books.
b. Lawyers and trials are expensive and to be avoided if possible.
c. In planning for attorney and court costs, prepare for the worst:
long delays, multiple pre-trial maneuvers, unpredictable courts, change of
venue, shift from local to federal courts, multiple appeals, and even if
ultimately successful, no award of attorney’s fees.
d. Few lawyers charge less than $50 per hour; many come in around
$100; some are double or triple that.
e. All things being equal, local lawyers have an edge in workingwith local judges. .
B. About cross references, footnotes and authorities.
1. I use CAPS for cross-reference.
I
2. “Footnotes” are placed in the body of the work. The standard legal
form for citation of cases and articles places items in this sequence: volume,
title, page, date. Thus, 10 Ohio St. 20 (1910) or 10 Harvard L. Rev. 20 (1910).
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3. Where possible, I’ve cited Ohio statutes and cases as the best
authorities. Where not possible, I’ve used next-best authorities as available:
federal cases, cases from nearby jurisdictions, scholarly treatises and law
reviews, and legal encyclopedias, in that preferential order.
Among Ohio cases, “Ohio St.” is best, because from the Ohio Supreme
Court. “Cir.
1I
or “App.” are circuit and appellate court cases. They are
better than “N.P.,” or “C.P.,” “Nisi Prius” and “Common Pleas,” Ohio’s trial
court cases.
.,
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PART II: OVERVIEW, AN INTERPRErATION OF THE LAW
I. IN GENERAL.
The basic legal point ot departure is that by Ohio statute and Antioch
Articles ot Incorporation the trustees ot Antioch University are given all
its power. The trustees ot University are the University: they hold
title to all property, make all its decisions either directly or through
delegation to their officers, and bear ultimate responsibility tor all-the
University does.
Trustees are charged by statute, caSe law and provisions in any TRUST
agreements with certain special responsibilities·toward the beneticiaries
of the TRUST, primarily students. The University (trustees) must behave
according to other legal standards, in common with’other corporations and
natural persons. It must live up to its contracts and not harm others by
violating their personal or property rights. It it does misbeha.ve, if’ it
breaches contra.cts and violates other rights, it may be sued, according to the
statutes of’ Ohio and the Articles ot Incorporation.
I believe the University has misbeha.ved, has violated its trust responsi-
bilities and violated contract rights of persons at the College.
I think the University idea” is a failure, that it cannot be made to
work, and that the longer Antioch College is a part of it, the more persons
will be hurt by the tailures of the University.
The rational thing to do: separate.
I prefer a voluntary, amica.ble, negotiated SEPARATE INCORPORATIOiI, in
which Antioch College will be absolutely separate. . I doubt we can get an
acceptable SEPARATE INCORPORATION it we don’t at least initiate a suit.
My research tells me there are 10 possible legal approaches to
separating Antioch College trom Antioch University.
Some are more promising than others. Each gives a different set of
interested persons to sue. Each calls for a different theory and
appeals to a different portion of the “facts” of our 16 year history of
development of the University.
Even though I describe the dispute as one between Antioch College and
Antioch University, probably “Antioch College” cannot ha.ve STANDING to sue
because it is not a separate legal entity, that is, it is not incorporated
separately from the University and is not a. “person” in the eyes of the law.
other persons, who have an interest in the College and who can represent
a whole class of similarly situated persons, will have to bring suit, if one
is to be brought. The 9 types of persons I have had in mind while making
this analysis are: Antioch College administrators, alumni, contributors,
faculty, the Glen Helen Association, staff (Le. all who work for the College
other than faculty and administrators), students, townspeople and trustees.
” .. , .
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II. AND WEAKNESSES OF 10 APPROACHES.
For summary purposes, I divide the 10 approaches into 5 grades along a
continuum from most to least promising and list some of their strengths and
weaknesses. A more complete analysis of each follows in Part III.
A. Most promising: ACCOUNTING and DECLARATORY JUDGMENT.
1. Strengths.
–Many, perhaps all of the potential 9 plaintiff types could get
STANDING to sue.
–These are the least adversaria.l, meaning a pla.intiff need not accuse
or blame, but only a.ssert the need tOl” financial information and
So claritication of disputes about rights ,and duties owed each other.
Because they are so little adversarial, we might even get a trustee
to join as plaintift, petitioning tor a clarification, and it might
increase the possibility of amicable, negotiated SEPARATE
INCORPORATION agreement.
–These vill yield reliable financial information and definitive
statements of rights and duties, eS1?ecially about the TRUST relation-
ship between trustees and the College.
–In accounting, the court would sit in EQUITY. That allows much creative
judicial discretion. Once the judge takes the case in EQUITY, s/he
might follow through to a complete settlement ot all the issues,
including issuing an INJUNCTION .to separate.
-other actions may be taken subsequently, based upon the accounting
and declaratory Judgment t actions such as. INJUNCTION or
MANDAMUS. .
2. Weaknesses.
–These approaches m:s.y be fatally eliptical and time-consuming when
time is of the essence ot the College’s survival.
–As is true ot all approaches t the court might tell us there are no
grounds for What we seek.
B. Promising: INJUNCTION and NUISANCE.
1. Strengths
–Many of the 9 potential plaintiffs might have STANDING.
–There is a possibility of quick action through a preliminary INJUNCTION.
-rr’hat might accelerate negotia.tion of SEPARATE INCORPORATION.
–These approaches clarity’ issues immediately; they go directly to the
heart of the problem.
–There is a fairly good doctrinal base in each for arguing our case.
–These open up the basie problems to creative Judicial discretion.
since they are both remedies in EQUITY.
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–We have a somewhat helpful precedent in the 1973 INJUNCTION
against the Administration. ‘
–The directness and possible speed of action would appeal to
many and offer hope that the basic issue of relationship would be
settled by next academic year.
2. Weaknesses.
–These are very adversarial approaches. Some College persona ,might
See them as precipitous and disruptive. University officials and
trustees might be less Yilling to negotiate amicably’ toward SEPARATE
INCORPORATION.
–These are drastic remedies, so it takes a strong case to convince a
judge to act. ”
-If’ we lose, we probably would not have a clarification of the financial
picture and legal rights and duties obtainable from ACCOUNTING
and DECLARATORY JUDGl4ENT.
-If we Yin, the University will probably appeal.
C. Promising under special circumstances: MANDAMUS and PARTITION
1. Strengths.
-Mandamus is an order to perfol'”:1 a clear duty. It is direct and
fast. It .takes precedence over other cases on judicial calendars.
–Partition is a separation among co-owners of their property. The
right of a co-owner to partition is unambiguous. The courts don’t
try to balance conveniences–the right is sure.
2. Weaknesses.
is probably available only after another action, such as
DECLARATORY JUDGMENT, has already clearly established the duties of
the University (trustees).
–Partition is available only to co-owners, that is, only persons who
have certain rights in property have STANDIliG. The Glen Helen
Association might have STANDING with respect to the Glen. As fer
the rest of the property of Antioch College, both realty and pel’sonalty,
it ‘is uncertain who might have STANDING. Acoherent theory neec.s to
be developed and useful precedents need to be discovered.
D. Long-shot possibilities: QUIA TIME’!’ AND RESCISSION.
1. Strengths.
-The basic concept of quia timet, that jUdicial relief should be
fashioned to suit legitimate fears of harm to rights, accurately
captures how the College regards the Un!versity • We fear the
University will do us more harm.
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–The basic concept of rescission, that contracts based on a big,
mutual mistake about the ability of the parties to do vhat they
intend to do, or that truly inequitable contracts should be
cancelled and the parties should be returned to their pre-contract
positions, accurately describes how the College views its contractual
relationships with the University and the remedy we seek.
2. Weaknesses.
–Quia timet has shrunken through disuse in’this country and recent,.
supportive precedents have yet to be found.
–For a rescission, there must be a contract. For a contract, there
must be at least 2 parties. Who are the parties to the long,
evolving contract to develop the idea of a national university in
dispersion? The trustees, a continuing body, is one. We are hard
put to locate the other. We are in need of as-yet-undiscovered
precedents on this and other doctrinal problems in rescission.
E. Unpromising: BANKRUPrCY AND RECEIVERSHIP.
1 ••Strengths.
-Through Federal bankruptcY, a troubled corporation can take either
liquidation or reorganization. Both allow the corporation to pay
off its creditors and start anew. Liquidation allows a new
corporation, free of debts, to start the enterprise over. Reorgani-
zation allows the old corporation to continue the operation, under
a neW’, court-approved and creditor-approved organizational plan.
–Through Ohio receivership, a failing corporation can be placed in the
hands of a neutral party who will manage the property for the benefit
of all who may have an interest.
2. Weaknesses.
–Creditors and other interested persons cannot initiate either
liquidation or reorganization bankruptcy proceedings against an
educational corporation, according to the neW’ bankruptcY’ law. The
onlY roles creditors have are to advise on the development of the
plan and vote on the plan. It is doubttul that Antioch College
persons could have much influence.
–The odds are very high against being able to start Antioch College
anew after liquidation of the University.
-A receiver can be appointed only when some cause is pending or a
creditor has already been awarded a judgment.
-A receiver would exacerbate the problems of managing the Univers:Lty.
-Receivership would probably not help settle the basic problem of the
relationship ot the College with the University.
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I recommend interested persons study this and other analyses, consult
attorneys of their choice, and initiate suit, if they are convinced, as I am,
that Antioch College must be entirely separated from Antioch University, and
that a suit Yould aid in achieving that end. I do not recommend one’ legal
approach over another. That is the responsibility of a practicing attorney.
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PART THREE: SUMMARIES 0:” THE LAW AND SOME OPINIONS
I. ACCOUNTING
A. Law
1. Where two or more parties have complex accounts with each other
and one or more parties wants to ascertain the balances, and has no other
ade
S_ta_f_f :l__Y_l;..; __ .. :_::. _. ?
i’ (-
‘J ( ., . • i …;
College
Related
Persons
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x:v. TRUST.
A. Law.
1. A “trust” is a. legal rela.tion created when one person (“trustor,”
“donor,” or ltsettlor”) transfers property to another (lttrustee lt ) for the benefit
of a third (ltbeneficiary”).
2. Trustees have a legal estate or title, which permits them to exercise
management and administrative control over the property. Beneficiaries, have an
equitable estate or title, which gives them the right to have the trust performed
for their benefit according to the trustor’s terms.
3. A “private” trust is devoted. to specific, designated persons. A
“charitable” trust is devoted to an indefinite class of persons, some portion of
the pUblic. Restatement of Trusts, 2nd (1959), § 348.
4. A university is a charitable corporation. The community which it
serves, especially the stUdents, are the beneficiaries, and the trustees a:e
trustees of both the general university properties and of particular
and other funds held in trust. Ohio Rev. Code, s 1702.01{D} Koblitz v.
University, 21 Ohio C.C.R. 144, 11 Ohio C.Dec. 515 (1901). (LaW’
denied readmission in 2nd year on grounds ot bad conduct and scholarship. He
asked for an injunction and argued W.R.U. was a public corporation. Held it is
a charitable corporation, meaning the corporation is private but the benefi.ciaries
are a portion pUblic.) State ex rel. Rohr V. Schauss, 3 Ohio Cir. Ct. R.
(n.s.) 388,13 Ohio Cir. Dec. 283 (1901). (A father brought action to foroe Toledo
U. to accept his freshman high school son into a manual training class operated
by the University in a building adjoining the high school. Held a university
supported by private funds is private and may make its own rules and serve its
students however it wishes so long as it doesn’t viola.te trust fund
5. To determine the administrative powers and duties of trustees, one
must look to (a) the rules of EQUITY governing trusts and t::.:-ustees, (b) the
statutes of the state in which the trust is located, (c) the articles of
incorporation for their statements at the powers of the corporation, and (d) the
terms of any trusts.
a. Tile rules of EQUITY governing trusts and trustees.
places a number of duties upon trustees. Among the more
important tor tne Antioch problem, summarized by the Restatement of Trusts 2d
(1959), are the following:
The trustee is under a duty to the beneticiarJ:
. ,,(I) “to administer the trust solely in the interest of the
• 170. That is, a high standard of conduct is required whenever
a trustee s personal interest might come into conflict vith the duty to
The Ohio Revised Code prohibits self-dealing. Ii 2109.43-.44.
Scott, The Law of Trusts (5th ed.; Boston: Little Brown 1967)
170 hereinafter, Scott on Trusts). ‘ , ,
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(II) “to keep and render clear and accurate accounts vith
respect to the administration of the trust. It § 172 In re Pittsburg Rye. Co.,
117 F.2d 1007 (C.A.3rd, 1941). (Trustees of a railway undergoing bankruptcy
reorganization held bound to render regular accounts.) Scott on Trusts, 172.
(III) “to give him upon his request at reasonable times complete
and accurate information as to the nature and amount of the trust property, and
to permit him or a person duly by him to inspect the subject matter
of the trust and the accounts and vouchers and othe:r documents relating to the
trust.” § 173. State of Washington v. Taylor, 58 Wash.2d 252, 362 P.2d 247,
86 1365 (1961). (Trustees of a technical institute held bound to .
supply attorney general, as representative of public interest in charitable
trust, accountings, upon request.) Scott on Trusts, § 173.
(IT) “to take reasonable steps to ..:take and keep control of the
trust property.” Scott on ‘. Trusts. B 175.
(V) “to use reasonable care and skill to preserve the tru3t
property.” § 176, Re Howison, 49 Ohio App. 421, 3 Ohio Cps 301, 197 N.E.2i 333
(1934). (An executor of an estate held liable for losses sustained when h:
invested in a bank that was in precarious condition and he knew it.)
on Trusts, § 176.
(VI) “to defend actions which may result in a loss to the trust
estate, unless under all reasonable circumstances it is reasonable not to make
such a defense.” § 178. Re Flavin, 59 0 App 443, 18 N.E.2d 514 (1938).
(Guardian of a minor, a former banker, held liable for losses to the trust when
he invested the trust in a bank he knew had inadequate reserves.) Scott on
Trusts, § 178.
(VII) “to keep the trust property separate from his individual
property, and, so far as it is reasonable that he should do so, to keep it
separate from other property not subject the trust, and to see that the
property is designated as property of the trust.” S 179. In re Stone, 138
Ohio St. 293, 34 N.E.2d 755, 134 A.L.R. 1306 (1941). (A trust company, acting
as trustee of an estate, acquired its own stock and kept as a part of the trust.
Held to be a violation of trustee t s duties to keep trust property separate from
its own and other property not subject to the trust.) Scott on Trusts, § 179.
(VIII) there are two or more beneficiaries of a trust,
the trustee is under a. duty to deal impartially with them.” § 183. Homer v.
Wullenweber, 89 Ohio App. 255, 101 N.E.2d 229 (1951). (Plaintiff has a right
to accounting and other equitable relief where land vas willed in trust to a
son for himself and siblings and he profitted from the land, then sold it and
tried to distribute the sale proceeds.) Scott on Trusts, § 183.
b. Statutes of the sta.te in which the trust is located.
Ohio statutory provisions about trustee povers are sweeping and not
very specific. Duties and restrictions are few and mainlY inferential.
(I) Powers.
corporation to the trustees.
do.
The Ohio R;;vised Code gives all authority of the
Anything the corpora.tion can do, the trustees can
·.,
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(A) “Except where the law, the articles, or the regulations
that action be otherwise authorized or taken, all of the authority of
a corporation shall be exercised by its trustees.” § 1702.30(A).
(B) The corporation itself “may be formed for a.ny purpose
or purposes for which natural persons lawfUllY may associate themselves ••••”
§ 1702.03.
(c) More specifically, nonprofit corporations, including
universities, may •••encumber, sell and dispose” of property,
“acquire control of other corporations,” “mortgage •••any ot its property”
and “do all things permitted by law and exercise all authority within the
purposes stated in its articles or incident thereto.” § l702.12(F).
(D) In addition, trustees of nonprofit corporations are
given power to mortgage: “The trustees may authorize any mortga.ge •••of all
or any of the property of the corporation • • • for the purpose of securing the
payment or performance of any obligation or contract.” s 1702.36.
(E) Another specific power granted an “educational
corporation” is that “A university, •••may hold in trust any property devised,
bequeathed, or donated to such institution, upon any specific trust consistent
with the objects of such institution.” § 1713.07.
(II) Duties and restrictions. No explicit statement of duties
is given in the Ohio Revised Code. There are places where duties may be interred.
By inference, in a section that allows the corporation to
indemnify trustees from suit, a trustee has a duty not to be “negligent or
guilty of misconduct in the performance of his duty to the corporation,” to
“act in good faith in what he reasona.bly believed to be the best interest of
the corporation,” to act in ways he reasonablY to be lawful, and to
rely only “in good faith” upon financial statements prepared by corporation
officers. §§ l702.l2(E)(1), l702.55(B)(3).
c. Statements of’ corporation power in articles of incorporation.
Antioch t s A..-ticlc:.;… ” , •• t,;JO r:lcjor revisions, in 1859, after
early bankruptcy, and in 1965. E::cc:)’!;; to:.’ &. cha.’1ge of name from “College” to
“University” in 1977 ,the 1965 Articles remain unchanged. A set of by-laws
was draim up in 1972 and has been amended since, bU’c the by-la.ws in no way
aftect the powers and duties of the corpora.tion or trustees and are not relevant
to the issue of separation.
(I) The Articles renect the statutes in giving the University
and its trustees broad11 stated powers.
(II) Certain organiza.tional duties, such as to hold meetings
and elect officers, are imposed upon the trustees, and a trustee who “shall
become unfitted to discharge or shall persistently neglect the duties of that
office” “may be removed.” Otherwise, the Articles make no statement about the
duties of trustees to beneficiaries or limitations upon their power.
‘.
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(III) The relevant portiona of the Articles are:
ARTICLE I: NAME. The corport:c.ion hereby formed shall be known and designated
by the name and title of “Antioch University” and by that name shall have
perpetual succession, sue and be sued, and plead and be impleaded; and shall
ha.ve power to acquire, hold and convey real and personal property; •••and
to have and exercise such other lawfUl pouers as shall be necessary to
promote the objects for which it is formed.
The principaJ. office of the corporation shall be at YelloW Springs” Gree.ne
County, Ohio.
ARTICLE II: PURPOSE. The objects of the said corporation are to possess
and carry on at Yellow Springs, in Greene County, Ohio, end at such other
as the Board may determine, a University or educational establishment
where instruction in every branch ot usefUl learning may be given. • • •
ARTICLE III: TRUSTEES. A. Pover e.nd number. All of the rights and powers
of the corporation and the entire control and management of its University ,
property and affairs shall be vested in and exercised by a Board of Trustees.
. . .
(IV) From 1859 to 1965 severe restrictions were imposed upon
the authority of trustees to sell or encumber real property and of the
College, ‘but those restrictions vere completelY removed in the 1965 revision.
Art. XII.
. (V)
pre-192l property.
The 1921 version of Article XII was vehement about preserving
It closed vith this statement:
• but under no circumstances shall the property , either
real or personal, owned by Antioch College, before April 1st, 1921, be
liable or made liable in any way tor such debts, an inventory of such
property as of April 1st, 1921, being recorded in the Corporation Records
of ‘Greene County, Ohio.
The inventory was tm.de and recorded. It consisted of 20 acres
of campus, 7 lots in Yellow Springs, 1 in Illinois, a house and lot
in Cincinnati, Main Building, North and South Halls, the President t sHouse,
contents of Main Building and North and South Halls and $98,000 general and
“Joy” endowment investments. Greene County, Articles of Incorpora.tion, Dec. 8,
1921, pp. 205-206.
d. Terms of the trust.
(I) A donor can stipulate how the property is to be used to
benefit the beneficiaries. If accepted by the trustees, and not contrary to
law, the stipulation is binding upon the trustees. Koblitz v. Western Reserve
University, 21 Ohio C.C.R. 144,11 Ohio C.Dec. 515 (1901). (See A,4, above.)
(II) The Birch trusts.
(A) On 12, 1929, Hugh Taylor Birch granted “Antioch
College of Yellow Springs, Greene County, Ohio, •••and its successors”
“forever. in tee simple,” about 530 acrea. The property was to be a memorial
•.••.,,_. t”:
….. .
-L.2-
for his daughter Helen. The property was to be used for a variety of purposes:
“preservation,” “as a laborator’J,” “as an e:>”l’eriment station,” “as a park,”
“and as a campus for the undertaking ot such other things and activities as may
be acceptable and appropriate to the use and purposes of Antioch College and
its successors; to the end that the students and faculty of Antioch College and
its successors 1IlSY’ forever have available, adequate facilities” for “study”, II
“exploration,” and “the conduct of recreational or any other activities ••••”
(B) By resolution, the trustees authorized the officers
of the College “to accept the conveyance in accordance with the purposes and
wishes of the donor••••”
(C) The same resolution took precautions to protect the girt:
(1) It provided’ that “in the event Antioch College or
its successor institutions should cease to exist, and no provision be made for
the continuing fulfillment of the purposes of the memorial,” the property “shall
pass to the State of Ohio to be preserved and kept by it for the purposes set
forth in this resolution.”
(2) It also provided that as “a condition of acceptance
of the gift, that the College will not impose or allov • • • upon the property
any charge or lien, nor shall the be subject to • • • any indebtedness
•••against the College”; and the College “agrees to protect the property
against any such charge, lein, indebtedness • • • by appropriate legal procedure.
”
(n) In 1932, Mr. Birch willed “Antioch College, a corporation
organized under “the laws of the State of Ohio, and located in the Township of
Miami, County of Greene and said State of Ohio, •••$500,000 ••••to be held
as a permanent tund and the income therefrom used for the beautification and
maintenance of •••Glen Helen••••”
He also willed the College $1,000,000 and the remainder of
his estate “for an Endowment Fund, the income from ‘Which shall be devoted to
the uses and purposes of said College.”
6. Restrictions upon diverging from terms of a. trust.
Over the years, circumstance3 change, and performance of a trust in
the way the trustor descrioed it might become difficult, imprudent or impossible.
What discretion do trustees have?
a. Generally, trustees ha.ve only the powers given them by the
terms of the trust. They can also do vhat is necessary and appropriate to carry
out the purposes of the if it doesn’t violate the terms of the trust.
Restatement of Trusts 2nd (1958), a 380.
But wha.t it the trustee must ignore the terms to be true to the
purpose, or must violate the purpose to observe the terms? Or what if trustees
simply believe the best interests of the university would be served by using
the trust funds in ways not foreseen or described by the donor?
…
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b. Courts have developed t’Wo doctrines for alloving a d.ivergence
trom the particulars of a trust, “deviation” and “cy pres.” The doctrines are
very similar and orten confused but are distinguishable.
(I) If compliance with the terms of a charitable trust is
impossible or illegal or if the purpose of the trust ‘Would be defeated or
substantially impaired by some circumstance the donor didn’t know or couldl’t
anticipate, courts will direct or allow the trustees to “deviate” from the
exact terms of the trust. Restatement of Trusts (1958), § 381.
Cleveland Museum of Art v. O’Neill, 57 Ohio Ops. 250, 129 N.E.2d 669 (1955).
(In a declaratory’ judgment, the Cuyahoga County Common Pleas court allowed·.
a deviation from a trust fund to buy art objects to construction of a new
museum to house them.) Fenn College v. Nance· 40 D. Misc. 183, 330.Ops.2d
292 (1965). (In a declaratory judgment,. the Cuyahoga. County Common Pleas court
allowed a deviation from a trust which created Fenn College, a work-study
engineering institute, to be absorbed by Cleveland State University, vith ;;Jome
of its assets going to a Fenn College Foundation which would support cooperative
education in the Fenn division of C.S.U.)
(II) If compliance with the particular purpose of a chari·’;able
trust is impossible, illegal or impracticable, and if the trustor expressed or
implied a more general charitable purpose, courts will direct the trust property
to be applied to some object within the more general purpose rather than let the
trust fail. This is the doctrine of “cy pres” (from the French, “so near, as
near”). Restatement of Trusts, 2nd (1958), 399. Cincinnati v. McMicken,
6 Ohio Cir. ct. Rep. 188, 3 Ohio Cir. Dec. 409 (1892). (University of Cincinnati
allOYed to move from land willed in trust when the area. became industrialized
and unfit for a. university.)
c. Recent scholarly comments on trustee duties, as set out in the
Restatement of Trusts (above,5,a.) and on the application of deviation and cy pres
have been critical ot the restrictiveness of the doetrines and have noted with
approval trends tovard applying more lenient standards of duty, found in decisions
that draw upon standards relating to directors of business corporations, as
opposed to the stricter standards derived from chaJ.aitable trust law. It is not
at all clear how far these trends toward leniency have advanced in Ohio.
Committee on Charitable Trusts, “Duties of Charitable Trust Trustees and Charitable
Corporate Directors, 2 Real Prop., Prob, &: Tr. J. 545 (1967) and “Cy Pres and
Deviation: Current Trends in Application, It 8 Real Prop., Frob. & Tr. J. 391
(1973) • William C. Porth, “Personal Liability of Trustees of Educa.tional
Institutions,” 1 J. of College and U. L. 84 (1973) and 2 J. of College and U. L.
143 (1975). John W. Wheeler, Responsibilities of Trustees in
Relation to the Financing of Private Institutions of Higher Education,” 2 J. of
College and U. I.. 210 (1975). Note, “The Fiduciary Duties ot Loyalty and Care
Associated with the Directors and Trustees of Charitable ·Organizations,” 64
Virginia I.. R. 449 (1978).
d. The most fairly analogous case in a nearby jurisdiction
a strict application ot cy pres. On May 26, 1979, the Court of Common
Pleas, Franklin County, Pennsylvania, ordered the trustees of Wilson College to
reverse its action and keep the college open and operating. The trustees had
not obtained a court order, as required by a sta.tute which “delineated” the
cy pres doctrine. Zehner v. Alexander, unreported case.
‘- …”
-44-
7. Enforcement. The Attorney General has power, of STANDING, to
enforce educational and other charitcble trusts. The Attorney General is
also a necessary party to any court action affecting charitable trusts. Ohio
Rev. Code, 109.26.
Other persons who have a “special interest” have STANDING to bring an
action to enforce a charitable trust. “Special interest” is defined by Scott:
“He must show that he is entitled to receive a benefit under the trust which is
not merely the benefit to which members of the public in general are entitled.”
Scott on Trusts, 5th ed. (1974), p. 3007.
That has been interpreted to mean that “‘Where a charitable trust is’
created for the benefit of a small class of persons, any member of the class
can maintain a suit on behalf of himself and the other members of the class
for the enforcement of the trust.” Ibid., p. 3008.
Who
of “special
directions.
allowed it.
in a university community might have STANDING under that interpretation
interest If? Recent analogous, non-Chio cases go in somewhat different
On the one hand, students are denied while others are
On the other hand, students are allowed STANDING along with others. ..
In Miller v. Alderhold, 228 Ga. 65, 184 S.E.2d 172 (1971), the Supreme
Court of Georgia denied a student STAliDING in a class suit against the trustees
of Georgia Baptist College where he claimed the trustees had breached their
trust in their administration of the general funds of the college. And in
Zehner v. Alexander, t-fay 26, 1979, unreported case in the Court of Common Pleas
of County, Pennsylvania, held that students at Wilson College lack
STANDING in a suit against trustees for violating a code provision that embodied
the cy pres doctrine (see above). However, that court awarded STANDING to an
alumna, a contributor, a member of the faculty, a trustee and a former trustee.
On the other hand, the Supre::le Court of Alabama held, in Jones v.
Grant, _Ala._, 344 So.2d 1210 (1977), that faculty, staff and students
have STANDING in a class action against the president and trustees of Daniel
Payne College for misuse of federal funds and other contributions.
B. Opinion.
1-7. Antioch University trustees hold all property in charitable trust
for all present and potential students, except for properties designated
tor certain persons, in which case they are trustees of private trusts.
The difference is crucial for STANDING to sue tor enforcement of trust
duties. Beneficiaries of a charitable trust probablY have to persuade the
Attorney General to enforce the trust, unless they can ma.ke a case tor a
“special interest,” such as the Glen Helen probably has. Beneficiaries
of private trusts, such as departments that have received special gifts, and
maybe C.W.S.P. stUdents, might enforce the trust on their own initiative in a
court.
5,a,(II-III). I think it’s fair to say the College has not had “clear
and accurate accounts” of the trusts nor ha.ve requests for information and
inspection of records been honored.
.IN ” .’
.. -45-
5. These duties are stated in general and vague terms. We should be
careful not to leap to the conclusion that they clearly cover what aggrieves
us. That leap is almost permissible if we have a really close Ohio precedent.
I’ve noted the best Ohio precedents I could find, if I could find any at all.
As you can see, they’re seldom on target, never precisely in the bullseye.
5,a,(II-III). I think it’s fair to say that none of us at the College
has had “clear and accurate accounts” of the trusts nor have requests for informa-
tion and inspection of records been honored. An almost clear breach of duty.
5,a.(IV-VI). I suppose it’s debatable whether the trustees lived up
to these “reasonable” duties with respect to the loss of most of the endc;nnent
last spring. Certainly we could make a fairer judgment if the trustees would
tell us the truth about trust funds they hold for our benefit. (See above, 1-8.)
5,a,(VIII). Again, that elastic qualifier, “reasona.ble.” On the surface,
there seems to be a good case that the University trustees breached this last
spring. Some funds vere commingled and spent. Regardless of how the funds were
designated in accounting systems, lllOneY’ vas .unavailable, for some trust funds.
5,a,(IX). Did the University officers allow some units or some employees,
including themselves, to be paid last spring, even though the May 17 announcement
vas “to defer all pay”? If so, a clear breach of duty here, I think.
5,b. The trusteeS can mortgage and sell all property, except property
restricted by trust at;reement. (See 6, belov.), such as the Birch grant of
real property and will of endowment funds. “The income therefrom” of the Birch
endowments is at trustee disposal. The principal is not. If the principal has
been lost. the trust has been breached, unless it was beyond their ability to
save. In that case, they had a dutY’ to applY’ to a Court of Common Pleas for
permission to depart from the provisions of the trust. (See 6, above.)
5,b,(II),(A). These s-candtrds are even more vague and general than “the
Restatement of Trusts standards, a”cove, 5 ,a. They are not very helpful.
5,c. The trustees have “all power”; therefore, they have all responsibility.
5,c,(III). The references to Yellow Springs are important for determining
JURISDICTION.
5,c,(IV). So, trustees have power to sellar encumber all property,
unless restricted bY’ trust agreement.
5,c,(V). The 1921 recorded inventory is a fascinating document. It is
more of an a.ppraisal than an inventory. !rotal appraised value of the endowments:
$98,200. Grand total at all assets: $208,OOO.(!)
Why did they record this inventory? To add ‘Weight to the e:..-pressed
intention in XII not to allov this pre-1921 property to be sold or
encumbered. What was the legal effect of recording? None, I think. Making it
a public record put the public on notice ot the intention to preserve the
property, but I think it in no ‘Way impaired the title, making the properties less
salable or mortgageable. This is a good lesson in the irony of trustee pover.
Trustees have power to do almost anything with the property of·a college; because
of that power, they have great difficulty binding a future board of trustees in
the use of their pover.
.,
.’. -46-
5,d,(II). It is my judgment that until the trustees obtain permission
tram the of Common Pleas (see 6, below) to depart trom the provisiona of
the Birch will:
(A-B). The Glen is inseparably linked to the College.
(C) The Glen:
(1) cannot lD.lrtully be sold but must escheat to the State
(reversion of property to the state as the ultimate”proprietor of realty, by
reason of failure to tuJ.fill condition to preserve), and
(2) cannot lawf’uJ.J.y be mortgaged or in any way subj ected to
indebtedness;
(D) The principal of the Birch endowments for the Glen and the
College can be encumbered but cannot lawfUlly be sold nor can the income from
the principal be directed to uses other than support of the Glen and College.
It the trustees do or have done any ot the a.bove (C and D), the Attorney
General of Ohio may action against the trustees to enforce the trust for
the beneficiaries and others might have STAl1DING to bring action in their own
names. (See 8, above.)
6-7. At the May 5, 1974 meeting ot the Executive Committee of the Board
of Trustees at the Dayton Airport Inn, the trustees present heard trom their
legal counsel, Oscar Martin:
Mr. Martin noted that restricted gifts have to be protected trom
liquidation. • • •
Mr. Martin noted that there is no really clear definition ot
“endOl1llent”; funds that are giver.:. to c College: as endowment can be used in
an ultimate necessity because the would receive them in any case.
However, if there are restrictions or limitations, the College normally must
not’subject them’to invasion. P. 98.
What did the trustees t legal counsel mean When he said “normally”?
(If he said it. The minutes summarize by paru.phrase; they are not 11teral
transcriptions.)
He might have had in. mind the “d,c’J’:’c.tion,t or “cy pres” doctrines.
There is no hint in the rest of tho
“, .. ,…
_”””, …… IwI.
times in Ohio to
provisions of a.. “.’ …..
. .rv “,,’… ;.,.J.,””….. v
iJ J::”-‘
“Deviation” and “Cy
university trustees. Trus”GC2;8 ‘i’•.
trust must get permission from a. -.:.
Trustees are wowed to
funds, such as the Birch funds.
restricted endowment
Did the trustees sell some …. ·…c this Spring? The
minutes are not available, but TJIY’ U y ‘0;:’:’;..;0. on inadequate shreds
of oral information, is as follows: ., LOlf..,:” mortgaged prior to
1976 when President Birenbaum becarr. ‘. 