IN THE MATTER OF THE APPLICATION OF COE COLLEGE FOR INTERPRETATION OF PURPORTED GIFT RESTRICTION, COE COLLEGE, Appellant.
from the Iowa District Court for Linn County, Fae
college appeals a district court judgment denying its request
for declaratory relief as to the terms of a 1976 charitable
J. Streit, Megan R. Merritt, and Teresa K. Baumann of
Shuttleworth & Ingersoll, P.L.C., Cedar Rapids, for
J. Miller, Attorney General, and Chantelle Smith, Assistant
Attorney General, for appellee.
permanent is a "permanent home"? This case concerns
seven works painted by one of Iowa's best-known
artists-Grant Wood. In 1976, a foundation donated the
paintings to Coe College in Cedar Rapids. The gift letter
stated that the paintings would be given to the college
"and that this would be their permanent home, hanging on
the walls of Stewart Memorial Library."
years, the college treated the paintings on its books as an
unrestricted gift that could be sold or otherwise alienated.
But in 2016, an auditor determined the paintings should be
treated as a restricted gift. This had an adverse impact on
the college's endowment fund and led the college to file
a petition seeking a judicial interpretation of the
gift's terms. Following a hearing on a stipulated record,
the district court ruled that there indeed exists a
restriction on the alienability of the paintings. The court
also ruled that neither Iowa Code section 540A.106, part of
the Uniform Prudent Management of Institutional Funds Act
(UPMIFA), nor the common law doctrine of cy pres,
codified at Iowa Code section 633A.5102, applied;
accordingly, the court declined to modify the restriction.
college appeals. It argues that the 1976 gift was
unrestricted, but if this court finds it to be restricted, we
should modify or discard the restrictions. We conclude that
the language in the gift letter did restrict the gift. We
conclude that the UPMIFA does not apply because these are not
"funds" but are instead "program-related
assets." Lastly, we find it is premature to consider the
application of cy pres because there is no showing
the gift restrictions cannot be carried out at present.
Facts and Procedural History.
1932, hotel magnate Eugene C. Eppley commissioned renowned
artist Grant Wood to paint a mural in the Hotel Montrose in
Cedar Rapids. The mural became known as "The Fruits of
Iowa." When the Hotel Montrose was sold in 1957, some
fifteen years after Wood's death, Eppley had the mural
taken down and separated into seven separate panels. He
loaned the paintings to Coe College, a private liberal arts
college in Cedar Rapids. The loan was to last indefinitely,
with the understanding that the paintings could be taken back
at any time after one year passed. The paintings remained on
display at Coe College for nearly twenty years.
point in time, the ownership of the paintings moved from
Eppley personally to the Eppley Foundation, a charitable
institution whose purposes included to
promote the well-being of mankind and to assist the needy and
unfortunate, by religious, charitable, scientific, literary
or educational activities; and for such purposes to make
grants, donations, and contributions to corporations . . .
organized and operated exclusively for religious, charitable,
scientific, literary or educational purposes.
1976, while winding up its affairs, the Eppley Foundation
terminated the previous loan arrangement and donated the
paintings to Coe College. The Eppley Foundation's gift
The Eppley Foundation Board of Directors [has] approved that
the Grant Wood paintings be given to the Coe College and that
this would be their permanent home, hanging on the walls of
Stewart Memorial Library.
A Plaque to be installed, per attached proposal, was
discussed with you when you were here, with a piece of marble
and attaching the bust and the letters to the marble,
including the two bronze plaques which were outlined on the
We are again enclosing a picture of how this plaque will look
like when it is completed but it will be done in bronze
instead of aluminum.
Mr. Christian gave you the name of the Company in Omaha that
made this plaque, The J. P. Cooke Co., 1311 Howard Street,
Omaha, Nebraska, 68102.
Before this plaque is installed, we want to approve the
full[-]scale drawing. Please return the picture of the plaque
and also the sketch which is attached when you are through
plaque states in relevant part, "In [Eppley's]
memory, the Grant Wood Paintings the Fruits of Iowa were
given to Coe College by the Eugene C. Eppley Foundation
Inc." It includes a bust of Eppley and an inscription
with the years he lived. It further states that Eppley's
"great wealth" was "to be distributed for the
benefit of youth and for the lasting good of mankind."
paintings have remained under the ownership of Coe College
since then and are among several Grant Wood pieces on display
in the Perrine Gallery at Stewart Memorial Library. Coe
College occasionally lends them to other institutions for
temporary exhibition purposes and to raise funds for the
maintenance of the paintings.
1977, the Eppley Foundation was dissolved by the Nebraska
Secretary of State for nonpayment of biennial fees, and
nothing has been filed since then to revive the Eppley
1976 until 2016, Coe College accounted for the paintings as
unrestricted assets. In 2016, however, as part of a routine
annual audit, the college's auditors determined this
previous classification had been a mistake and reclassified
the paintings as permanently restricted net assets. This
matters to Coe College because the classification of the
paintings affects the value of Coe College's endowment
fund. Coe College turned to the courts for assistance.
February 5, 2018, Coe College filed a petition seeking an
interpretation of the Eppley Foundation's gift as
unrestricted. If necessary, the petition also sought a
lifting of any restrictions accompanying the gift. Coe
College argued that the reference to a "permanent
home" in the 1976 gift letter was meant to contrast with
the prior situation where the paintings had been on loan and
thus only on temporary display-and not to serve as a bar to
the college selling or otherwise disposing of the paintings.
Alternatively, Coe College asked the court to remove the
the Eppley Foundation was no longer in existence, Coe College
arranged for the attorney general to be served with the
petition. Pursuant to Iowa Code sections 540A.106 and
633A.5108, he participated in the district court proceedings,
resisting Coe College's petition in each respect.
briefing and a hearing on a stipulated record, the district
court issued its ruling on January 2, 2019. It held that
"the Eppley Foundation's intent expressed in the
February 16, 1976 Gift Letter transferring the Paintings to
Coe College was to place a permanent restriction on
alienation of the Paintings." The court further found
that "the permanent restriction on alienation [did] not
merit application of Iowa Code section 540A.106 or the
doctrine of cy pres, under Iowa Code section 633A.5102,
releasing Coe from said restriction."
College appealed, and we retained the appeal.
Standard of Review.
parties disagree whether this declaratory action is equitable
or legal in nature. "Our review of an appeal from a
declaratory judgment action is determined by how the case was
tried in district court." Clarke Cty. Reservoir
Comm'n v. Robins Revocable Tr., 862 N.W.2d 166, 171
(Iowa 2015). Although the attorney general points out that
the college filed this case as a law action, an action tried
wholly in equity will be subject to a de novo standard of
review even if it was filed at law. See Passehl
Estate v. Passehl, 712 N.W.2d 408, 413-14 (Iowa
2006). Here, the court did not rule on evidentiary
objections; indeed, the court did not need to because the
case was tried on a stipulated record. By contrast, in
Salsbury v. Northwestern Bell Telephone Co., we
reviewed at law a determination that a charitable
subscription was binding, where the matter was tried at law-
i.e., objections were made and ruled on. 221 N.W.2d 609,
609-11 (Iowa 1974) (en banc).
addition, the relief sought by the parties here was
equitable- neither party sought damages or a declaration that
damages were not due. Cy pres is an equitable
doctrine, so in deciding whether it applies, our review is de
novo. Kolb v. City of Storm Lake, 736 N.W.2d 546,
552-53 (Iowa 2007). Lastly, the record consists of stipulated
facts in any event. For all these reasons, we apply a de novo
standard of review here.
Is There a Restriction on Alienation of the
Paintings? In Iowa,
[a] donor of property for a charitable use may impose such
conditions as he may choose, including a restraint on
alienation. This right is an exception to the ...