2010 Wisc. App. Lexis 921 (November 16, 2010)

During his lifetime, James Lowenstine established the Conserve School Trust and directed the trustees to establish and operate a school named the Conserve School on a large parcel of property owned by Lowenstine. The trustees had discretion to build facilities and develop the curriculum. The trustees had the power to open the school for regular enrollment of students beginning in the seventh grade and extending, in the discretion of the trustees, through high school. If feasible, the trustees could allow students enrolled at other private or public schools to enroll in the Conserve School for tutorial instruction after school hours and on holidays. If the IRS denied the trust charitable status, or if it became legally impossible or otherwise impracticable to operate the Conserve School, the trust terms provided for the payment of a specified sum to Rush Medical College and the remainder of the trust assets to Culver, an organization that funds college preparatory boarding schools in Indiana.  

After Lowenstein’s death, the trustees spent $60 million to build the school and commenced formal instruction in September 2002 as a four-year college preparatory boarding school for students in grades nine through twelve. In 2009, due to the global economic downturn, the trustees reconsidered the school’s model and decided to transition the school to a semester school model operating as a semester away program, primarily for high school juniors from other institutions.

A group of Conserve School parents filed suit to stop the transition to the new model, and the circuit court held that they lacked standing to bring the suit. The court allowed Culver to intervene as a contingent trust beneficiary. Culver filed an amended complaint alleging that the semester away program violated the trust instrument and triggered the alternative distribution plan. The parties filed cross motions for summary judgment and agreed that the central issue was Lowenstein’s intent as reflected in the language of the trust instrument.

The circuit court found that the semester model was an appropriate exercise of the trustees discretion and consistent with the “regular enrollment” requirement in the trust instrument. The court concluded that the language allowing students enrolled somewhere else to come to the Conserve School was precatory and not mandatory language, that the exclusive means by which students could attend Conserve School was not for tutorial services, and that the trust instrument did not prohibit “dual enrollment.” Accordingly, the circuit court granted Conserve School summary judgment. Culver appealed.  

On appeal, the Wisconsin Court of Appeals affirmed the circuit court on the following grounds: (1) the trust instrument adopted the regular enrollment requirement as set forth in the Internal Revenue Code by reference, and the trial court’s decision that “regular” did not mean “primary” was consistent with the language of the Internal Revenue Code; (2) a semester away program satisfied the full grade requirement by providing a full academic year of instruction, even if broken into two semesters and certain students only enrolled for one semester; (3) allowing students from other institutions to attend in a manner not explicitly designated under the Trust agreement did not violate the trust because the trust did not expressly prohibit it; (4) the adoption of the semester away program did not reflect a finding of legal impossibility or impracticability for the continued operation of the Conserve School triggering the alternative distribution plan; and (5) rather, the new program reflected the trustees’ desire to operate the school in a manner best suited for current economic realities.