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In re Trust of Eddy

Supreme Court of New Hampshire

June 14, 2019


          Argued: February 14, 2019

          7th Circuit Court-Dover Probate Division

          Pierce Atwood LLP, of Portsmouth (Michele E. Kenney on the brief), DLA Piper LLP, of Wilmington, Delaware (Stuart Brown on the brief and orally), and Foehl & Eyre, PC, of Glenside, Pennsylvania (Robert B. Eyre on the brief), for the Second Church of Christ, Scientist, Melbourne (Australia).

          Upton & Hatfield, LLP, of Concord (Russell F. Hilliard, James F. Raymond, and Michael P. Courtney on the brief, and Mr. Hilliard orally), for the Trustees of the Clause VI Trust and Clause VIII Trust.

          Gordon J. MacDonald, attorney general (Thomas J. Donovan, director of charitable trusts, and Charles D. Shockley, assistant director of charitable trusts, on the brief, and Mr. Donovan orally), for the Attorney General, Director of Charitable Trusts.

          DONOVAN, J.

         The Second Church of Christ, Scientist, Melbourne (Australia) appeals an order of the Circuit Court (King, J.), denying it standing to request affirmative relief and enforce certain charitable trusts created by the will of Mary Baker Eddy. We affirm.

         I. Factual and Procedural Background

         The relevant facts follow. Mary Baker Eddy founded The First Church of Christ, Scientist, and, upon her death in 1910, her will established two testamentary trusts, known as the Clause VI Trust and Clause VIII Trust. The Clause VI Trust bequeathed to the "Christian Science Board of Directors of The Mother Church" $100, 000 in trust "for the purpose of providing free instruction for indigent, well educated, worthy Christian Scientists." Clause VIII of Mrs. Eddy's will devised "all the rest, residue and remainder of [her] estate . . . to The Mother Church ― The First Church of Christ, Scientist, in Boston, Massachusetts, in trust," for certain "general purposes." She directed, inter alia, that "such portion of the income of [her] residuary estate as may be necessary shall be used for the purpose of keeping in repair the church building" and her former home in Boston and that "the balance of said income, and such portion of the principal as may be deemed wise," shall be used "for the purpose of more effectually promoting and extending the religion of Christian Science as taught by [Mrs. Eddy]."

         In previous litigation concerning these trusts, we upheld the validity of the trusts and established that the bequest in Clause VIII was to be held in trust for two purposes, church building repair and "promoting and extending the religion of Christian Science as taught by [Mrs. Eddy]." Glover v. Baker, 76 N.H. 393, 400-01 (1912); see also Fernald v. Church, 77 N.H. 108, 109 (1913). The Massachusetts Supreme Judicial Court reached a similar conclusion in Chase v. Dickey, 99 N.E. 410 (Mass. 1912), wherein the court held that the construction of the Clause VIII Trust manifests a purpose to make the promotion and extension of the religion of Christian Science the "dominating and real residuary purpose" of Mrs. Eddy. Chase, 99 N.E. at 415. As a result of this litigation, court oversight of the trusts commenced, and annual accounts for both trusts, and requests for appointments of trustees, have been filed in the Concord Probate Court (now, Circuit Court) for over one hundred years.

         The trustees of the Clause VIII Trust were comprised of the Board of Directors of the Mother Church and Josiah Fernald, the administrator of Mrs. Eddy's estate, until Mr. Fernald's death in 1949. At that time, Judge Lord of the probate court, in a letter to the trustees, concluded that it was "not necessary to fill the vacancy [of Mr. Fernald]" and that the "five members of the Christian Science Board of Directors who are the surviving trustees . . . shall constitute the sole trustees" of the Clause VIII Trust. Since the 1949 letter, the trustees of the Clause VIII Trust have all been members of the Mother Church Board of Directors.

         In 1993, following an investigation by the New Hampshire Director of Charitable Trusts (DCT) into a five million dollar loan from the Clause VIII Trust to the Mother Church to be used to fund a failed television venture, the Probate Court (Cushing, J.) approved a stipulation between the DCT and the trustees of the Clause VIII Trust. The stipulation provided, inter alia, that: (1) the Mother Church agreed to repay the loan to the Clause VIII Trust; (2) the Clause VIII Trust income was to be used to repair the church, with any available, remaining income to be applied to the promotion and extension of Christian Science, at the discretion of the trustees; (3) further loans from the trust were prohibited; and (4) the principal of the Clause VIII Trust could only be invaded with court approval.

         The current litigation commenced in 2015, when Second Church, an alleged qualified beneficiary of the Clause VIII Trust, sought to review, and potentially object to, the annual accounting filed by the trustees. Although the DCT assented to Second Church's motion, the trustees objected on the basis that Second Church, as a "branch church," lacked standing to sue. Second Church responded by arguing that it had standing under the special interest doctrine. The court scheduled a hearing to address the issue of standing. However, the court did not rule on Second Church's motion or the standing issue because the parties agreed at the hearing that Second Church would withdraw its motion and the DCT, Second Church, and the trustees would cooperate to resolve concerns raised by Second Church and the DCT.

         Notably, prior to the court's scheduling order, the DCT had not responded to the concerns voiced by Second Church. Thereafter, the DCT filed a memorandum in April 2016 asserting that Second Church did not have special interest standing, especially in light of the DCT's "plan to review the Clause VIII Trust's decision making concerning its distributions." In his memorandum, the DCT recognized that prior litigation had arisen from the "tension" between the two beneficial purposes of the Clause VIII Trust, namely: (1) repair of the Mother Church building(s); and (2) "promoting and extending the religion of Christian Science." The DCT also acknowledged the tension between the 1912 decision in Chase, 99 N.E. at 415, that devoted the Clause VIII Trust distributions primarily to promoting and extending the religion of Christian Science, and the court's approval of the 1993 stipulation prioritizing distributions for church repairs. The DCT further opined that "[b]ecause the trustees of the Clause VIII Trust are also the Board of Directors of the Mother Church, they have embedded conflicting fiduciary obligations." In light of these concerns, the DCT outlined a review plan that he intended to undertake with the trustees, which included a "review [of] the distributions made from the Clause VIII [Trust]." The DCT concluded that because his office had, and continued to take, an active role in monitoring the Clause VIII Trust, "special interest standing is not warranted."

         Thereafter, following the DCT's objection to the trustees' accounts filed in 2016, the DCT and trustees reached an agreement and the trustees filed a motion, assented-to by the DCT, to, among other things, approve an amended account. Second Church moved for authorization to file an amicus curiae brief voicing its continuing concerns. The trial court issued an order requiring the trustees to file accounts audited by an independent auditor. The court also denied Second Church's motion, but indicated that Second Church should share information with the DCT who, by statute, represents their interests in this matter. See RSA 564-B:4-405(c) (2007).

         Subsequently, the trustees submitted an assented-to motion to, inter alia, amend the 1993 order. Second Church, again, sought to submit a brief as amicus curiae. The trustees objected. Second Church filed a responsive pleading as well as a status report and a request for time to conduct discovery, despite the fact that its standing to participate in this matter had not yet been determined. The court scheduled a hearing for November 2017. Prior to the hearing, the trustees filed a memorandum concerning the issue of standing. Second Church responded by moving for the appointment of an independent trustee and filing a memorandum on standing.

         In March 2018, the trial court issued an order finding that Second Church failed to satisfy its burden to demonstrate that it had standing. We note that in making this determination, the trial court did not identify the standard by which it decided the standing issue ― i.e., whether the trial court considered the challenge to Second Church's standing as a motion to dismiss.

         In its order, the trial court acknowledged the general rule that when a trust is determined to be charitable, it becomes the duty of the attorney general to ensure that the rights of the public in the trust are protected and that the trust is properly executed. See Petition of Burnham, 74 N.H. 492, 494 (1908). The court further noted that New Hampshire law is unclear as to whether a possible beneficiary of a charitable trust, like Second Church here, has standing. Looking to other jurisdictions for guidance, the trial court determined that most jurisdictions have ruled that a possible beneficiary is generally not entitled to sue for enforcement of the trust. See Alco Gravure, Inc., v. Knapp Foundation, 479 N.E.2d 752, 755 (N.Y. 1985); see also State ex rel. Nixon v. Hutcherson, 96 S.W.3d 81, 83-84 (Mo. 2003). However, the trial court also found that courts have recognized an exception to this rule "where an individual seeking enforcement of the trust has a 'special interest' in continued performance of the trust distinguishable from that of the public at large." Hooker v. Edes Home, 579 A.2d 608, 612 (D.C. 1990).

         After considering how other courts have applied the doctrine of special interest standing, the trial court applied a five-factor test, often referred to as the Blasko test. See Mary Grace Blasko, Curt S. Crossley, David Lloyd, Standing to Sue in the Charitable Sector, 28 U.S.F. L. Rev. 37, 61 (1993) (hereinafter, "Blasko"). The test is based upon a comprehensive survey of case law and it sets forth five factors to determine whether a plaintiff's interest is distinct enough from the public at large to justify conferring standing upon the plaintiff in order to enforce a charitable trust. See generally id. The factors are: (1) the extraordinary nature of the acts complained of and the remedies sought; (2) the presence of bad faith; (3) the attorney general's availability and effectiveness; (4) the nature of the benefitted class and its relationship to the charity; and (5) the social desirability of conferring standing. Id. at 61.

         Applying the Blasko test, the trial court found that none of the factors weighed in favor of granting Second Church standing. Second Church filed a motion for reconsideration, which the trial court denied. This appeal followed.

         II. Analysis of Second Church's Claims

         On appeal, Second Church argues that, even though the trial court properly adopted the Blasko test, it misapplied the factors. Second Church asserts that, under the Blasko test, as one of a limited number of potential beneficiaries under the trusts, it has a "special interest" in the Clause VIII Trust sufficient to justify standing. Moreover, Second Church contends that the trial court improperly reached its decision without the development of a factual record, while also faulting Second Church for not developing sufficient facts to demonstrate standing. Although the DCT agrees with Second Church that we should "recognize the standing of certain persons or entities that have a special interest in a particular charitable trust to enforce that ...

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