Story Case

The law of the state of Ohio provided that religious, charitable, or educational corporations might hold real or personal property, not exceeding $1,000,000. The Fremont College was a corporation organized under the laws of the state of Ohio, for religious education. It held, as an endowment, the sum of $500,000, given by Mr. Fremont, for whom the institution was named. Mr. H. T. Beard who had been interested in the college, at his death, bequeathed all his real and personal property, amounting to $1,000,000 or more, to the institution. George Carrick, a nephew of Mr. Beard and next-of-kin, contested the right of the college to receive this whole sum. He claimed that the school was limited to $1,000,000 endowment; since it had already $500,000, it was entitled to take only enough to make its total endowment $1,000,000. How should the Court decide?

Ruling Court Case. Hubbard Vs. Worcester Art Museum, Volume 194 Massachusetts, Page 280

The Worcester Art Museum is a corporation established under the laws of the state of Massachusetts for the purpose of founding an institution for the promotion of art and art education in Worcester. By the laws of Massachusetts, such a corporation is authorized to hold real and personal estate to an amount, not exceeding $1,500,000. One Mr. Salisbury, by will, devised to this corporation real and personal property which amounted to $3,000,000. By a statute, which was enacted after the probate of the will in question, such a corporation was authorized to hold real and personal property to an amount not exceeding $5,000,-000. This was a petition, brought by the heirs of Mr. Salisbury deceased, to recover this money, and to to determine whether the corporation was entitled to this property devised by Mr. Salisbury.

It was contended on behalf of the heirs of Mr. Salisbury that the corporation could not take more than $1,500,000, and that title to more than that had never passed to the museum; and that the remaining amount then went to the heirs at law of Mr. Salisbury.

Decision

Where the state forbids a corporation to receive more than a certain amount of property, it does not render the corporation incapable of holding any more than that amount, but merely gives to the state the power to take the excess from the institution if it wishes. In this case, therefore, the state received title to the whole amount, subject to the power of the state to contest its right to the excess. Not only has it failed to exercise its right, but, also, by a subsequent law, it has expressly waived its right to challenge this excess. Therefore, the heirs of Mr. Salisbury cannot complain. They are not entitled to recover any part of the money or property.

Mr. Chief Justice Knowlton, rendered the opinion: "In the construction of our statutes, when the question arises whether a different rule shall be established in regard to the taking and holding by a corporation under a will from that which is universally laid down in regard to a holding under a deed, we are much influenced by the policy of our law as to devises and bequests for charitable purposes. We are of opinion that, under our statutes, a gift to a corporation under a will, to an amount in excess of the sum specially authorized, should be held no less valid than a similiar acquisition of title under a deed. It is good as against every one but the commonwealth. It follows that the subsequent statute operated as a waiver of the commonwealth's right to terminate the holding, and a legislative declaration of the entire validity of the provision in the will."

Judgment was, accordingly, given for the Worcester Art Museum.

Ruling Law. Story Case Answer

Frequently, the state legislature limits the amount of real or personal property which may be held by charitable or educational corporations. If, however, there is bequeathed to an institution, real or personal property which exceeds the amount which a corporation is permitted to hold, the Courts are of the opinion that the organization may retain it against all but the state. That is, only the state may contest its right to hold a greater amount than that allowed by law.