Register v. The Nature Conservancy

US Dist. Court, ED Kentucky, Civil Action No. 5:13-77-DCR, December 9, 2014: Charitable gift restricted by oral contract but claimed restriction violation goes to jury

At issue were whether a contribution to a charity was restricted, what the law required if the gift was restricted, and whether the gift was ultimately used contrary to the restriction.

Register, the donor, contributed appreciated stock to The Nature Conservancy (TNC). The trial record produced evidence about what Register and TNC personnel thought the donation was for at the time of donation and leading up to it.  Register alleged the gift of about $1 million to TNC was intended to be permanently restricted for the purchase and management of a parcel of land known as Griffith Woods. Register alleged he made the gift intending to obligate TNC to use the proceeds from a sale of Griffith Woods for management of that property if Griffith Woods were ever sold. Using the gift and other funds, TNC bought Griffith Woods and then sold it. Part of the land was sold to the University of Kentucky (which Register evidently expected) and TNC sold the rest to the Kentucky Department of Fish and Wildlife Resources (“KDFWR”), without a conservation restriction.

Among the evidence relevant to the court’s decision was that TNC placed Register’s original donation in an account classified by TNC internally as “temporarily restricted” to fund the purchase of Griffith Woods. After Griffith Woods was sold, TNC deposited the funds back into that account and then transferred money out of the account. TNC used some of the proceeds from the sale to pay-off a land debt on another project and the rest were deposited into TNC’s general operating fund. TNC admitted that no portion of Register’s gift is currently being used to benefit Griffith Woods. The court’s opinion recites much additional evidence specific to the knowledge and intent of the parties at various times.

The court first held that as a matter of law Register’s donation was restricted as a “conditional gift” and as such TNC was bound by Register’s intention when it accepted the donation. The court cited an Arizona Supreme Court decision (Dunaway v. First Presbyterian Church of Wickenburg, 442 P.2d 93, 95 (1968)) for the proposition that a charity’s acceptance of a gift creates an implied contract with a promise “agreeing to the purposes for which it is offered.” The court cited a Seventh Circuit decision (Kentucky is in the 6th Circuit) for the proposition that a promise of a gift is a promise subject to contract law.

The court found that although there was no written contract in one integrated document, the evidence supported the conclusion that the parties entered into an oral contract and Register’s donation was “restricted to Griffith Woods” as a matter of law. [Digest readers are urged to read the opinion if they are interested in the specific statements, writings and circumstances that gave rise to the court’s conclusion in this and other aspects of its decision.]

The court then turned to the “parameters and duration” of the conditions, if any, of the contract. One letter from Register to the Director of the Kentucky TNC chapter at the time included, “I’d like to make now a gift …  I would prefer that the … proceeds go toward the establishment and management of a nature preserve in the Bluegrass region, e.g. Griffith Woods. If the Griffith Woods project falls through, I trust that KNC will put to use the funds in a manner that will further help protect areas in Kentucky with unique and diverse plants and animals.” The actual transmittal letters from Register’s investment clearinghouse to TNC memorializing the transfer of stock stated “[t]his represents a gift from [Register] to the Nature Conservancy-Kentucky Chapter, Griffith Woods project” or “[t]his represents a gift from [Register] to the Kentucky Chapter Griffith Woods project.”

TNC’s arguments focused on Register’s letter’s use of “precatory language” (“prefer” and “e.g.”) and the general nature of how he wanted the gift used if the Griffith Woods “project falls through.”   The court, however, concluded that Register’s intent for the funds to be used for Griffith Woods was meant by him as a limiting restriction and created an enforceable obligation because the next sentence points out what is to happen if the Griffith Woods preference is not fulfilled. The court also found the evidence lead to the conclusion that, “At the time the donation was made, no one appeared to believe that the funds were not restricted to Griffith Woods.”

The court also favorably cited a New Jersey intermediate appellate court decision for the proposition that even if the conditions at the time of the gift have subsequently materially changed, making the fulfillment of the donor’s condition either impossible or highly impractical, the donee is not at liberty to ignore or materially modify the expressed purpose underlying the donor’s decision to give.

Neither party contended that the donation was intended to form a trust.

Having reached the foregoing conclusions of law and findings of fact, the court said a trial is still necessary for a jury to determine whether TNC complied with the restrictions on Register’s gift. The court held that the timing, documents and the conduct of the parties prevent the court from finding, as a matter of law, that Register’s donation was restricted after the sale of the property.

Looking ahead to the outcome of a trial, the court said that if TNC breached its contract with Register, the proper remedy is for the gift to revert to Register.

The court rejected various other arguments by the parties for summary judgment.

TNC’s argument that Register should be unable to claim breach of contract because he allegedly agreed to both TNC’s sale to KDFWR and subsequent management of Griffith Woods by KDFWR failed because Register’s claim was about use of the donated funds for a purpose other than Griffith Woods, not the sale of the property to KDFWR.

Register’s argument that TNC’s breach of restrictions gave rise to a claim for unjust enrichment failed because under Kentucky law the doctrine of unjust enrichment isn’t applicable where there is an explicit contract.  Register’s claim that a “constructive trust” should be imposed as a remedy if the Court finds unjust enrichment failed because the court threw out his unjust enrichment claim.

Register’s claim of fraudulent inducement was dismissed because the court said he hadn’t identified any specific misstatement upon which he relied and without that a party can’t prevail on this claim as a matter of law.

The court also dismissed Register’s claim of constructive fraud based on the alleged violation of a fiduciary duty by TNC.  The court said Register couldn’t offer any Kentucky case upholding the proposition a charitable organization has a fiduciary relationship with its donors.

Decision is available from Justicia web site at and

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