UPDATES & ANALYSIS

11.12

Grant Wood paintings must remain at Coe College, Iowa Supreme Court rules

by Rox Laird | November 12, 2019

What is a non-profit institution to do when a gift becomes a burden?

That is more or less the predicament Coe College found itself in when it learned that a collection of Grant Wood paintings given to the Cedar Rapids school decades earlier, and which had grown significantly in value, could not be sold without violating the donor’s intent.

Coe College turned to the courts for relief, but the Iowa Supreme Court in a unanimous decision handed down Nov. 8 said the paintings’ donor intended they remain a permanent part of the college’s art collection.

The terms of the donor’s gift in effect established a charitable trust “to display paintings of a world-renowned local artist in the library of a nonprofit educational institution where other artworks by the same artist are displayed,” Justice Edward Mansfield wrote for the Court. “Art brings beauty to our world, and Grant Wood’s style situated in Midwest regionalism and illustrative of rural American themes is perhaps of more importance and allure when displayed in the city where he spent much of his youth.”

The Grant Wood paintings were originally part of a mural in a Cedar Rapids hotel coffee shop. They were initially loaned to Coe College in 1957 by the hotel’s owner, Eugene C. Eppley through Eppley’s charitable foundation. Two decades later, when the foundation was being dissolved, the paintings were made a permanent gift to the college.

At that time, the paintings were classified as unrestricted assets in Coe’s endowment fund, meaning the college had the option of selling or transferring the works. In 2016, however, Coe’s outside auditors changed their opinion and said the paintings should be classified as permanently restricted assets.

Therein lies the dilemma: With the paintings reclassified as assets that could not be sold, the total value of the endowment fund’s unrestricted assets was reduced by $5.4 million.

Coe argued that the Eppley gift letter should be read to mean the foundation intended the paintings as outright gifts to the college because it did not place any restrictions on the gift. If the Court disagreed, Coe urged the Court to lift the restrictions under a state statute, Iowa Code section 540A.106, or the Uniform Prudent Management of Institutional Funds Act, which permits charitable institutions to remove obsolete or impracticable restriction on a charitable gift. Or, in the alternative, Coe argued that the Court should apply the common law doctrine of cy pres to relieve Coe of restrictions on the paintings.

The Court bought neither argument.

The Court concluded that the Eppley Foundation intended that the paintings permanently hang in the Coe College library. Evidence of that intent was the foundation’s stipulation that there be a marble or bronze plaque displayed with the paintings, along with a bust of Eugene Eppley, memorializing the donor.

“We think it is fair to infer that the donor intended a symbiotic relationship between the two — the paintings and the commemoration of Eppley,” Mansfield wrote. “Such a relationship depends on the paintings remaining at Coe College. The effort to honor Eppley would cease to have the same significance without the presence of the Grant Wood artwork.”

Nor is this is a case where continuing to display the paintings is impractical or impossible, the Court said, or that the college necessarily wants to convert an asset into cash.

“Instead, due to an unanticipated increase in the value of Grant Wood’s art, the paintings now are worth millions of dollars and would make up seven percent of the college’s endowment, rather than the original one percent,” Mansfield wrote.

“While we sympathize with difficulties faced by small private colleges in a trying financial environment, it is difficult to see this fortuitous increase in the value of an asset as rendering the original restrictions impracticable or impossible to meet on the present record,” he added. “On a different and more robust record, lifting the restrictions on alienability of some or all the paintings might be an appropriate exercise of cy pres.”

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