Section 2 of the bill would, among other things, repeal the “historic dollar value” limitation on endowment invasion in NPCL §513(c). While anomalously leaving the definition thereof in §102(a)(16), the bill would thus reward the profligate institution with authority to wipe out entirely an endowment, even below its basis in the donor’s hands. For those institutions whose endowments are under water but need cash, the solution is, with the consent of available donors and on notice to the state attorney general, to ask a court for permission to borrow from the endowment on reasonable terms for a reasonable time.

Proposed §553 authorizes an institution to “appropriate for expenditure . . . so much of its endowment fund,” subject “to the intent of the donor expressed in the gift instrument.” But this only pays lip service to donor intent, because §553(c)(2) says, “Terms in a gift instrument designating a gift as an endowment . . . do not otherwise limit the authority to appropriate for expenditures under paragraph (a) of this section,” a trap for the unwary or ill-advised donor.

Moreover, under proposed §§555(b), (c) and (d), donors are excluded from notice of an institution’s application to a court for modification of restrictions.

Indeed, unlike the Uniform Management of Institutional Funds Act (UMIFA),5 UPMIFA does not clearly preserve resort to cy pres or deviation proceedings. Existing NPCL §522(d) which provides, “This section does not limit the application of the doctrine of cy pres” should be added to proposed §555 as a new subsection (f).

Such proceedings should require notice to donors or their representatives.6 The UPMIFA drafters’ comment says disingenuously:

Notice to Donors. The Drafting Committee decided not to require notification of donors under subsections (b), (c), and (d). The trust law rules of equitable deviation and cy pres do not require donor notification and instead depend on the court and the attorney general to protect donor intent and the public’s interest in charitable assets. (Emphasis added).

The learned drafters must be held to the knowledge that only 10 or 11 of the states do any significant charity enforcement, and within each of those that do there is great variance from time to time.7

Appellate Division, First Department Justice Betty Weinberg Ellerin was well aware of this when she wrote in Smithers:

Absent Mrs. Smithers’ vigilance, the Attorney General would have resolved the matter between himself and the Hospital in that manner and without seeking permission of any court.

The donor of a charitable gift is in a better position than the Attorney General to be vigilant and, if he or she is so inclined, to enforce his or her own intent . . . .

Moreover, the circumstances of this case demonstrate the need for co-existent standing for the Attorney General and the donor . . . . We conclude that the distinct but related interests of the donor and the Attorney General are best served by continuing to accord standing to donors to enforce the terms of their own gifts concurrent with the Attorney General’s standing to enforce such gifts on behalf of the beneficiaries thereof. 8 (Emphasis added).