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Westminster College Faculty May Pursue Claim Based on Charitable Trust

WEINER LAWInsightslitigationWestminster College Faculty May Pursue Claim Based on Charitable Trust

litigation Trusts & Estates Friday, July 7, 2023

The students of Westminster Choir College and its former faculty can proceed with their claims against Rider College as the trustee for a trust holding the PrincetonCharitable trust litigation attorneys property where the school operated until 2017.

Court Holds that Students and Former Faculty May Sue Rider University in Claim Over Sale of Princeton Tract

In reversing the trial court’s dismissal of the action, the Appellate Division holds in Vazquez v. Rider University that the complaint of the students and former faculty was sufficient to make a claim that Rider acted improperly when it tried to sell the conservatory, now operated by Rider, to a Chinese construction company.

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Rider was accused by various parties of having tried to unload the school to a company with no experience in operating a college that was interested only in the real estate where Westminster was once located.

Princeton School Received Land Held in Charitable Trust

The Appellate Division adopted the position of the attorney general that Rider had assumed the duties of a charitable trust created by the 1935 gift of land used for its Princeton campus, which was subject to a restriction limiting its use and providing that if it ceased to be used for music, to pass to the Princeton Theological Seminary.

In 1991, under financial stress, Westminster merged with Rider, and Princeton Theological released its claim against the property.    Rider agreed to continue the school but carved out discretion to discontinue specific programs or to close the Westminster campus “if it determines in good faith,, that such continued action would be substantially impracticable or would substantially adversely affect the … merged institutions.”

Rider then experienced its own final difficulties and in December 2016 announced it was considering selling the Princeton property and either moving Westminster’s programs to Rider’s Lawrenceville campus or closing the school altogether.  In 2018, Rider announced plans to sell Westminster to a commercial for-profit entity entity.

University Steps into the Shoes of Trustee

Litigation ensued and the Attorney General examined the transaction, ultimately concluding that the quitclaim deed by which Princeton Theological purported to release its interest in the property.  As a result of the merger, the Attorney General concluded, Rider stepped into Westminster’s shoes as the trustee of the charitable trust.

Nonetheless, the Attorney General said that Rider could sell the property free of any restrictions created by the 1932 charitable trust, although Westminster’s separate endowment and the proceeds of any sale of the property would still be considered part of the trust corpus.  If the funders were not sued for the purposes permitted by the trust, court approval would be required based on the failure of the trust.

Rider May Sell Property, but the Proceeds are Part of the Corpus of Charitable Trust

Westminster no longer survived as a separated entity, and existed only as a program at Rider.  The trial judge held that none of the plaintiffs, which included alumni, donors, former board members and faculty, had standing to sue.  No longer at issue were the obligations of a charitable trust.

The Appellate Division agreed that the issue must now be decided as a matter of corporate law, However, the merger agreement had been intended to “preserve, promote, and enhance the existing missions, purposes, programs and traditions” of Westminster.  The faculty and student plaintiffs had a sufficient stake in the outcome to give them standing to sue, the appellate court concluded.

Jay R. McDaniel