State v. Coerver , 100 Ariz. 135 ( 1966 )

LOCKWOOD, Justice:

Application for original jurisdiction in this Court was made by applicant, .State of Arizona, ex rel. Samuel P. Goddard, as Governor of the State of Arizona, pursuant to the Arizona Constitution, Art. VI, § 5(1), A.R.S. We accepted the dispute, by order on July 6, 1965, stating the state’s application for Writ of Prohibition would be treated as an application for Writ of Injunction against the named respondents.

The issues in this'case concern the nature of the interest of the respective parties in certain lands conveyed in 1885 by deed from the Board of Supervisors of Maricopa County to the Directors of the Insane Asylum of Arizona, and the present power and authority of the successors of that grantee board to reconvey an unused portion of the lands to the original grantor.

On March 9, 1885, the Governor of the Territory of Arizona approved dual enactments of legislation entitled “An Act authorizing and instructing the Board of Supervisors of Maricopa County to issue bonds for a certain purpose,” and “An Act to establish, maintain and provide for the government of an Insane Asylum.” Ariz. Laws 1885, Nos. 53, 58. On September 8, 1885, acting pursuant to this legislative authority, the Board of Supervisors of Maricopa County purchased 160 acres of land from M. W. Kales and Charles H. Veil for the sum of $3500. On October 8, 1885, this same 160 acres was conveyed by the Board of Supervisors to the Board of Directors of the Insane Asylum of Arizona.

The deed upon which the applicant relies to prove its title is lengthy as it sets out a resolution adopted by the Territorial County. The deed, with omissions which are not material, reads as follows:

“This indenture made * * * by and between the County of Maricopa * *, and the Board of Supervisors thereof * ' * * parties of the first part and the Directors of the Insane Asyíum * * * parties of the second part * * •*, Resolved, That a conveyance be made, executed and delivered to the Board of Directors of the Insane Asylum of Arizona with full covenants of warranty and further assurance by * * * the County * * * conveying unto the * * * Directors * * * for the use and benefit of the Territory of Arizona and for said Asylum * * *.

“Now therefore the said parties of the first part for and in consideration of the premises and of the acceptance of said land * * * and in order the more effectually to carry out and fulfill the requirements and provisions of the said Acts of the Legislative Assembly aforesaid have granted, bargained, sold, conveyed and confirmed and by these presents do .grant, bargain, sell, convey and confirm unto the said parties of the second part and their successors and assigns all and singular that certain piece parcel and tract of land * * *. Together with all and singular the tenements hereditaments and appurtenances thereunto belonging or in anywise appertaining and the rents issues and profits thereof; and, also, all the estate-right title interest, property possession as well in law as in equity and in-possession as well as in expectancy of the said party of the first part of in or tO' said premises and every part thereof with the appurtenances.

“To have and to hold all and singular the above mentioned * * * premises together with the appurtenances unto ‘The Directors of the Insane Asylum of Arizona’ * * * for the use and benefit of the Territory * * *, and for said asylum in accordance with the provisions of the said acts of said Legislature; and the said parties of the first part and their successors and assigns the j^said premises in the quiet and peaceable possession of the said parties of the second part * * *, will forever warrant and defend; and said parties of the first part hereby covenant to make and execute all such further conveyances and to do and perform such further acts as may hereafter be deemed necessary in order to vest the title to the above mentioned * * * premises in fee simple absolute in the said parties of the second part their successors and assigns.” (Emphasis supplied)

The respondents, W. A. Coerver, Ruth C. Irving, William C. Smitherman, William B. McGrath, and Joseph E. McGarry, are the duly appointed, qualified, and acting members of the Arizona State Hospital Board, and, as such, are the successors in office and in interest to the original Directors of the Insane Asylum of Arizona.

The land involved in this case constitutes slightly more than sixty-two acres of the land conveyed to the asylum board in 1885. The remaining portion of the original 160 acres is presently occupied and used by the Arizona State Hospital as the site of its physical plant and operation. During much of the time from its acquisition in 1885 until 1964, the land in question was used for agricultural purposes, in connection with the operation of the hospital.

On June 24, 1965, at a regular monthly meeting, the respondent Board unanimously adopted a resolution expressing its intention to convey to Maricopa County so much of the sixty-two plus acres as is needed for a new Maricopa County General Hospital. The present action was brought to test the power and authority of the State Hospital Board to convey the land and the power and authority of Maricopa County to accept the grant.

Both respondents contend the deed from the Board of Supervisors of Maricopa County to the Directors of the Insane Asylum created a charitable trust. The respondent Maricopa County contends the trust has failed, in part, and, therefore, the respondent Arizona State Hospital Board now holds the land as a resulting trustee for the benefit of Maricopa County. The respondent State Hospital Board claims it may substitute the res of the charitable trust. Applicant urges that the county holds no interest in the property, but that the state owns the land in fee simple absolute. Thus, the nature of the right, title or interest conveyed by the deed of the land in question by the Board of Supervisors of Maricopa County on October 8, 1885, is the first question to be answered in resolving this case.

From the admittedly ambiguous instrument two major possibilities emerge: (1) a conveyance in fee simple absolute to the Directors of the Insane Asylum; (2) a conveyance of legal title in fee simple absolute to the Directors of the Insane Asylum and its successors to be held in trust for the use and benefit of the Territory of Arizona, and the people confined in the asylum.

A general principle of law applied to either a private or charitable trust, is that when a trust is created by a Written instrument, the intention of the settlor is ascertained from the express language •of the instrument, and court will not go ■outside the instrument in an attempt to give effect to what it conceives to have been the actual intent or motive of the •settlor. If, however, the intention is not plainly expressed, or if the language used is ambiguous, there are well-established rules which courts will invoke to aid them in the construction of the instrument. See, Olivas v. Board of Nat. Missions of Presbyterian Church, 1 Ariz.App. 543, 405 P.2d 481 (1965).

One such rule is that the determination of the intention of the settlor, where construction is necessary, will be made in light of surrounding circumstances at the time of execution of the deed. The court places itself in the position of the settlor at the time of creation of the trust and interprets what he has said or done in light of his environment at that time. In the instant case the language used does not plainly express the intention of the grantor, and, therefore, it is necessary for us to look at circumstances surrounding the execution of the deed to determine if a trust was intended, and if so, the nature of any trust so created, its terms and its beneficiaries.

A charitable trust is defined as :

“ * * * a fiduciary relationship with respect to property arising as a result of a manifestation of an intention to create it, and subjecting the person by whom the property is held to equitable duties to deal with property for a charitable purpose.” Restatement, Trusts 2d § 348.

The settlor must manifest an intention to create a charitable trust. It is not necessary that any particular words or conduct be manifest to create a trust, and it is possible to create a trust without using the words “trust” or “trustee”. Scott on Trusts §§ 24-25 (2d ed. 1956); Restatement, Trusts 2d § 24. Conversely, the mere fact these words are used, or other similar words, does not necessarily indicate an intention to create a trust.

There is a difference of opinion in the reported cases as to whether language similar to that used in the deed in question passes legal and equitable title to the grantee in fee simple absolute or the legal title in fee simple absolute upon a trust with equitable title in the beneficiaries. We have found no Arizona cases which have interpreted language similar to that used in the deed in question. The language in the deed to the Board of Directors of the Insane Asylum of Arizona is clearly not precatory as it was not stated in terms' of a “wish” or “desire”.

Several courts have been presented with similar language in a deed or will and have found the existence of a fee simple in trust. See e. g., Harris v. Emmerling, 224 Ark. 40, 271 S.W.2d 618 (1954) City of Providence v. Payne, 47 R.I. 444, 134 A. 276 (1926); Kibbe v. City of Rochester, 57 F.2d 542 (W.D.N.Y.1932); Packard v. Old Colony R. R. Co., 168 Mass. 92, 46 N.E. 433 (1897); Hamlin v. “Perticuler Baptist Meeting House”, 103 Me. 343, 69 A. 315 (1907); Schaeffer v. Newberry, 235 Minn. 282, 50 N.W.2d 477 (1951) ; Ramsey v. City of Brookfield, 361 Mo. 857, 237 S.W.2d 143 (1951) ; Greenleaf v. Land & Lumber Co., 146 N.C. 505, 60 S.E. 424 (1908); Abel v. Girard Trust Co., 365 Pa. 34, 73 A.2d 682 (1950). Other courts have found similar language did not create a fee simple in trust. See, e. g., Armijo v. Town of Atrisco, 56 N.M. 2, 239 P.2d 535 (1951); DeKay v. Board of Education of Central School Dist., 20 Misc.2d 881, 189 N.Y.S.2d 105 (1959).

Thus, it becomes a question of interpretation of the language used in the light of all the circumstances.

The phrase “for the use and benefit of the Territory of Arizona and for said asylum” was twice used in the deed. Moreover, in Act 58 (Laws of 1885) which established the Insane Asylum, the Legislature provided, inter alia, that if not less than eighty acres of land were conveyed to the Board of Directors, “for the use and benefit of the Territory of Arizona and for said asylum * * * ” then the Directors and their successors may receive and hold such property “for the benefit of the Territory of Arizona and the use of said Asylum.” Certainly these phrases suggest an intention to create a charitable trust with the Board of Directors of the Insane Asylum as trustees, and the beneficiaries being the mentally ill of the state.

There is also language in the deed which might indicate that the intent of the County was to-convey the land to the Board of Directors in fee simple absolute.

In the construction of an ambiguous deed, we look to the intention of the parties to a deed, if ascertainable from the entire instrument and resort to consideration of attending circumstances to determine the estate conveyed. Pass v. Stephens, 22 Ariz. 461, 198 P. 712 (1921); Wise v. Watts, 239 F. 207, (9th Cir.) cert denied, 244 U.S. 661, 37 S.Ct. 745, 61 L.Ed. 1376 (1917); see generally Annot. 58 A.L.R.2d 1374 (1958). Moreover, since a deed must he construed as of the time it is given and not as of a later date, Palermo v. Allen, 91 Ariz. 57, 68, 369 P.2d 906, 914 (1962), we must delve into the applicable rules of construction of the period of 1885. The law then, as now, has treated the charitable trust with considerable favor, by. applying liberal rules of construction in an effort to support such a trust. See Bogert, Trusts and Trustees § 368.

Though we have determined that the County had intended that the conveyance to the Board of Directors to be in the form of a charitable trust, we are still confronted with the task of determining whether the Board may dispose of land as per its resolution of June 24, 1965:

“NOW, THEREFORE, BE IT RESOLVED by the board of the Arizona State Hospital that a grant and conveyance be made to Maricopa County of so much of the 62.698 acres * * * as is needed for a new Maricopa County General Hospital on the express condition that the land transferred be used by Maricopa County for a County Hospital site, otherwise, to revert to the grantors, * * * ”

The Restatement of Trusts 2d §§ 380(b) and 190(b) declare the applicable principle: “The trustee can properly sell .trust property if * * * such sale is necessary or appropriate to enable the trustee to carry out the purposes of the trust * See also Bogert, Trusts & Trustees § 392 (1964).

Furthermore, the court will permit a trustee to deviate from the express terms of the trust if, owing to circumstances not known to the settlor or not anticipated by him, compliance would defeat or substantially impair the accomplishment of the purposes of the trust. Restatement Trusts 2d § 167. City of Wapakoneta Board of Education v. Unknown Heirs of Aughinbaugh, 99 Ohio App. 463, 134 N.E.2d 872 (1955).

It has long been stated that Courts of Equity will exercise their jurisdiction to sell property held for charitable purposes, where on account of changed conditions, the charity would fail, or its usefulness would be materially impaired without a sale. See, Grace Church v. Ange, 161 N.C. 314, 77 S.E. 239 (1913) ; Heustess v. Huntingdon College, 242 Ala. 272, 5 So.2d 777 (1942); Brown v. Meeting Street Baptist Society, 9 R.I. 177 (1869). This power to sell property held in charitable trust rests upon the equity court’s power to effectuate the intention of the settlor. See Trustees of New Castle Common v. Gordy, 33 Del.Ch. 334, 93 A.2d 509, 40 A.L.R.2d 544 (1952); Cf. Lowell v. Lowell, 29 Ariz. 138, 155-156, 240 P. 280, 286 (1925). It does not rest on the cy pres doctrine but rather on the inherent jurisdiction of the Equity Court. Scott on Trusts § 381; Restatement, Trusts 2d § 399 comment p; Henshaw v. Flenniken, 183 Tenn. 232, 191 S.W.2d 541, 168 A.L.R. 1010 (1946); Lovelace v. Marion Institute, 215 Ala. 271, 110 So. 381 (1926); Patton v. First Presby. Church, 129 S.C. 15, 123 S.E. 493 (1924); Holton v. Elliott, 193 N.C. 708, 138 S.E. 3 (1927). The South Carolina Supreme Court in Furman University v. McLeod, 238 S.C. 475, 491—492, 120 S.E.2d 865, 873 (1961) applied the appropriate rule:

“The equities of the situation demand that this deviation from the technical terms of the trust, if it be a deviation, should be authorized by the Court.

“The defendant has raised the point that no deviation is possible since the cy pres doctrine is not recognized in South Carolina. It is the opinion of this Court, however, that the cy pres doctrine has no application in the instant case in any event as there is here no diversion of the trust and no transfer of assets to a different charity or to a different purpose.

“If anything, there is only a deviation from the strict or technical terms of the trust to enable the same charitable institution to better fulfill the purposes for which it was organized and to carry out to the fullest extent possible, the intent and purposes of the grantors of the property in question.” (Emphasis in original)

We do not find it necessary, at this time, to determine whether Arizona will apply the cy pres doctrine in an appropriate case.

Certainly the County and the Legislature had intended that agriculture be an essential element of the trust as they provided that sufficient irrigation be provided for the tract conveyed to the Board of Directors. Moreover, agriculture for a long period of time had supplied needed' funds for the maintenance of the mental hospital, plus providing a method of treatment for the patients. However, in recent years the remaining land has been found to be useless for the farming purposes for which it was originally intended. Rehabilitative theories no longer support such activities as the most effective means of treatment of the mentally ill. 1959-1960’ and 1963-1964 Annual Report of Arizona State Hospital. Also see Guttmacher, 37 F. R.D. 129 (1964) ; Rapaport, 37 F.R.D. 135-(1964). Moreover the economics of the situation do not support the future use of the land for agricultural purposes. See Annual Reports, supra.

Thus a conveyance to the County for the construction of a General Hospital would. greatly enhance the benefits to the beneficiaries of the charitable trust because the establishment of a modern well-equipped medical complex in the immediate vicinity of the Arizona State Hospital would beneficially consolidate community resources for diagnosis, care, and treatment of the mentally ill.

Therefore if the sale by the State Hospital Board is conditioned upon the use of the land for County Hospital purposes, it is obviously appropriate for supplementing the carrying out of the purposes of the original trust. If the sale were not so conditioned, so that the use of the land might be diverted to a purpose unconnected with hospital or medical care and treatment, it would be inconsistent at this time with the trust purposes, and therefore beyond the approved authority of the State Hospital Board.

It should be made clear that this Court does not have before it the question of the disposition of the lands, upon which the facilities or buildings are now being administered by the hospital board. Thus this decision does not purport to be future authority for the sale, transfer, or disposition in any manner of such hospital properties, as that question is not presently before the Court.

The state makes an extensive argument that the lands so conveyed to the Board of Directors of the Hospital vested in the State, and therefore only the State Land Department would be authorized to convey such lands. See A.R.S. § 37-102. The State cites A.R.S. § 37-101, subsec. 13 which declares that state lands “means any land owned or held in trust, or otherwise, by the state * * Superficially this would appear to be a prohibition of sale by the trustee of a charitable trust when the trustee happened to be a governmental Board. If we were to assume that the State has legal title to such land, then such statute might be applicable. However, the legal title of the land conveyed by the County vested in the Board of Directors. The Act of 1885 stated that the land shall “be obtained by the Directors” and “remain under the control of said Directors.” The legislative provision also provided that the land be conveyed to the said Board of Directors and their successors in office for the use and benefit of the Territory of Arizona for said Asylum. Thus it appears evident that the Legislature intended that the Board act as trustee of the property so conveyed.

It is generally held that a State Board may act in two entirely distinct and separate capacities and thus may hold title as trustee of a charitable trust. General Bd. of State Hospitals for the Insane v. Robertson, 115 Va. 527, 79 S.E. 1064 (1913) ; Hauns v. Central Kentucky Lunatic Asylum, 103 Ky. 562, 45 S.W. 890 (1898); State v. Evans, 33 S.C. 184, 11 S.E. 697 (1890). But see, State ex rel. Olsen v. Montana Armory Board, 128 Mont. 344, 275 P.2d 652 (1954) (-3-2 decision).

The question as to the power of the State Hospital Board to act as trustee of a charitable trust, was additionally recognized by the Legislature in 1964 when it gave to the Board the specific authority to accept and expend gifts and grants in trust. Laws 1964, Ch. 81. (A.R.S. § 36-204, subsec. B). Furthermore, a trustee which may have been incapable of administering a trust may do so upon subsequently receiving legislative authority. See, City of Providence v. Payne, 47 R.I. 444, 134 A. 276 (1926).

The fact that A.R.S. § 41-571.15 grants the State Planning & Building Commission the power to direct a sale of property belonging to the State or one of its institutions if such property is no longer useful, has no application here. Though the legal title had vested in the Board of Directors, the equitable title remained with those of the public to be benefited by the Mental Hospital.

Finally the fact that the Legislature has seen fit to sell a portion of State Hospital land on two occasions has no effect on the result reached herein. The sales to the City of Phoenix for a fire station (Laws 1953, Ch. 35) and roadway (Laws 1960, Ch. 46) were of benefit to the charitable trust. Such power or authority of the Legislature is in no way inconsistent with the conclusions expressed in this case. Such legislative power or authority is not exclusive of a broader power and authority of the court to administer the trust and to direct the conveyance. Bogert, Trusts & Trustees § 395; Scott on Trusts §§ 381, 399.5; Also see Trustees of New Castle Common v. Gordy, 33 Del.Ch. 334, 93 A.2d 509 (1952); Annot. 40 A.L.R.2d 544. But see, Bridgeport Public Library & Reading Room v. Burroughs Home, 85 Conn. 309, 82 A. 582 (1912).

Although the applicants for relief in this original proceeding designated it as an application for a writ of prohibition, this Court determined that it should properly be treated as an application for injunction, and accepted jurisdiction.

For the foregoing reasons, the writ of injunction is denied.

STRUCKMEYER, C. J., BERNSTEIN, V. C. J., and McFARLAND, J., concur.