PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
RESEARCH MEMORANDUM
TO: Douglas Carmichael, Partner
FROM: Simone Laroche, Associate
DATE: April 18, 2022
RE: Cy Pres and Equitable Deviation Under California Law — Applicability to the Whitfield-Garner Family Trust Gift Instrument
CLIENT: Estuary Foundation
MATTER NO.: 1028-00001
CASE: Estuary Foundation v. The Whitfield-Garner Family Trust, Case No. CGC-22-599481, Superior Court of California, County of San Francisco, Dept. 302 (Hon. Patricia R. Wainwright)
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I. EXECUTIVE SUMMARY
This memorandum analyzes whether Estuary Foundation ("EF"), a California nonprofit public benefit corporation, may obtain judicial modification of the donor restriction contained in the Gift Instrument and Grant Agreement dated June 15, 2018 (the "Gift Instrument"), executed by The Whitfield-Garner Family Trust ("WGFT"), so as to redirect approximately $4,700,000 in restricted grant funds from the now-defunct Bay Area Teacher Residency Initiative ("BATRI") to EF's broader educational mission. The analysis focuses on the cy pres doctrine as codified in California Probate Code Section 15409 and the doctrine of equitable deviation as codified in California Probate Code Section 15403.
The total funds at issue comprise $1,700,000 attributable to the WGFT grant, consisting of $700,000 in unexpended disbursed funds and $1,000,000 in the undisbursed fourth tranche that was due in July 2021 but never remitted due to BATRI's suspension. In addition to the WGFT funds, an additional $2,000,000 from the Cascabel Education Fund and $1,000,000 from the Newhall-Sievert Foundation — both of which were restricted to BATRI under separate grant agreements — remain in EF's custody. Both of those donors have consented in writing to the reallocation of their funds to EF's general educational mission. WGFT is the sole objecting donor. EF's Complaint for Declaratory Relief seeks a judicial determination covering all $4,700,000 to establish a comprehensive legal framework, but the contested legal questions center exclusively on WGFT's objection.
Based on the analysis set forth below, EF has strong arguments under both the cy pres doctrine and equitable deviation that the court may modify the restriction in the Gift Instrument given the impracticability of continuing BATRI following the withdrawal of both partner school districts. The combination of the COVID-19 pandemic, the termination of the Oakland Unified School District ("OUSD") partnership in August 2020, and the non-renewal by the San Francisco Unified School District ("SFUSD") in March 2021 rendered the BATRI program inoperable as a practical matter. EF's December 31, 2021 Board resolution to formally wind down the program was a reasonable institutional response to circumstances beyond EF's control, not a unilateral abandonment of the program.
The central legal tension in this matter is between Section 3.1 of the Gift Instrument (the exclusive-use restriction providing that "[t]he Grant Funds shall be used solely and exclusively for the establishment, operation, and support of the Bay Area Teacher Residency Initiative") and Section 7.2 (the reversion clause providing that "[i]n the event the Program is discontinued prior to the expiration of the Grant Period, any unexpended Grant Funds shall, at the election of Grantor, be returned to Grantor within ninety (90) days of written demand"). WGFT contends that Section 7.2 constitutes a condition subsequent that creates an automatic reversion right, superseding any equitable modification the court might otherwise consider. For the reasons detailed in this memorandum, we conclude that Section 7.2 does not preclude judicial modification, and that a court applying California law is likely to exercise its equitable power to modify the restriction rather than enforce a forfeiture.
II. QUESTIONS PRESENTED
1. Whether the cy pres doctrine, as codified in California Probate Code Section 15409, permits a court to modify the restriction in Section 3.1 of the Gift Instrument to allow EF to use the funds for its general educational mission where the specific restricted purpose — the operation of BATRI — has become impracticable.
2. Whether the doctrine of equitable deviation, as reflected in California Probate Code Section 15403, provides an alternative or supplementary basis for modification of the restriction.
3. Whether the reversion clause in Section 7.2 of the Gift Instrument constitutes a condition subsequent that precludes judicial modification under either cy pres or equitable deviation, or whether it is subject to equitable override.
4. Whether the facts surrounding the termination of BATRI — particularly the COVID-19 pandemic, the withdrawal of Oakland Unified School District ("OUSD") in August 2020, and the withdrawal of San Francisco Unified School District ("SFUSD") in March 2021 — satisfy the impracticability standard required for cy pres or equitable deviation.
5. Whether the general charitable intent of the original settlors (the late Herbert R. Whitfield-Garner, deceased 2019, and Dorothy M. Garner, deceased 2016) can be established from the Gift Instrument and surrounding circumstances so as to support a cy pres modification.
III. BRIEF ANSWERS
1. Cy pres is likely available. California Probate Code Section 15409 authorizes courts to modify charitable trust restrictions when the specific purpose becomes impracticable, provided the donor manifested a general charitable intent. Here, the Gift Instrument's preamble and recitals demonstrate a broad commitment to educational advancement in the Bay Area, not solely the narrow operation of BATRI as a freestanding programmatic end in itself. The recitals reference the settlors' desire to "promote equitable access to high-quality education in Northern California communities," which is precisely the type of broad language California courts have found probative of general charitable intent. While the exclusive-use restriction in Section 3.1 channeled the funds to BATRI as the specific vehicle for achieving the settlors' educational objectives, nothing in the Gift Instrument suggests that the settlors intended the gift to fail entirely if BATRI could not be sustained. The impracticability standard is met by the dissolution of BATRI's operational infrastructure, and the general charitable intent standard is supported by the language and context of the Gift Instrument.
2. Equitable deviation provides a strong alternative basis. Under Section 15403, the court may modify administrative terms of a trust (or analogous charitable gift instrument) where compliance with the specific restriction would defeat or substantially impair the accomplishment of the trust's purposes. The complete dissolution of BATRI's operating infrastructure — the loss of both partner school districts upon which the program depended — renders continued compliance with Section 3.1 as written not merely difficult but impossible as a practical matter. Equitable deviation permits the court to modify the restriction without requiring a finding that the charitable purpose has entirely failed, which provides EF with a somewhat broader doctrinal pathway to relief. Even if the court were to conclude that the educational purpose animating the gift has not wholly failed, equitable deviation permits modification of the specific operational restriction to allow the funds to be deployed through alternative educational programming consistent with EF's mission.
3. The reversion clause in Section 7.2 does not automatically preclude judicial modification. While WGFT argues that Section 7.2 creates a condition subsequent that triggers reversion upon program discontinuation, California courts have consistently held that equitable doctrines may override express contractual reversion provisions in the charitable gift context, particularly where enforcing the reversion would frustrate the donor's general charitable intent. The modern trend — supported by the Restatement (Third) of Trusts and by persuasive authority from multiple jurisdictions — is to distinguish between a reversion clause that expressly states the gift shall fail if the specific purpose cannot be fulfilled (evidencing a lack of general charitable intent) and a clause that merely provides for return of funds as a practical remedy upon program discontinuation. Section 7.2 falls into the latter category. Moreover, the "at the election of Grantor" language in Section 7.2 indicates a discretionary remedy, not an automatic condition subsequent that divests EF of title.
4. The impracticability standard is satisfied. The combination of COVID-19 disruptions, OUSD's termination of its partnership in August 2020, and SFUSD's refusal to renew in March 2021 rendered continued operation of BATRI impossible as a practical matter, not merely inconvenient or more expensive. BATRI's operational model, as described in Exhibit A to the Gift Instrument, depended fundamentally on active partnerships with school districts to place teacher residents in classroom settings. With no partner districts willing or able to participate, the program could not function. EF explored alternatives — including outreach to other Bay Area districts — but was unable to secure substitute partnerships within a reasonable timeframe. The impracticability here is structural and ongoing, not temporary or remediable.
5. General charitable intent is demonstrable. The original settlors' pattern of charitable giving through the WGFT trust, the broad educational purpose articulated in the Gift Instrument's recitals (referencing the promotion of "equitable access to high-quality education"), and the absence of any language in the Gift Instrument suggesting that the gift was conditioned on BATRI as the exclusive and non-substitutable vehicle for the donors' charitable goals all support a finding of general charitable intent. The fact that both original settlors are deceased prevents direct testimony on their subjective intent, but the Gift Instrument itself serves as the primary evidence, and California courts generally presume general charitable intent unless the donor has expressly negated it.
IV. FACTUAL BACKGROUND
A. The Parties
Estuary Foundation. Estuary Foundation ("EF") is a California nonprofit public benefit corporation, incorporated on April 11, 2009, and organized under the California Nonprofit Public Benefit Corporation Law (Cal. Corp. Code §§ 5110–6910). EF holds federal tax-exempt status under Section 501(c)(3) of the Internal Revenue Code; its Employer Identification Number is 94-3127856. EF is headquartered at 1440 Embarcadero Way, Suite 300, San Francisco, California 94107.
EF's stated mission is "advancing equitable access to quality education through teacher development, school partnerships, and community-based learning initiatives in Northern California." Since its founding, EF has operated a range of educational programs spanning teacher preparation, professional development, family engagement, and community-based learning. BATRI was one of several signature programs within EF's teacher development portfolio.
For fiscal year 2021, EF's audited financial statements (prepared by Calloway & Auerbach CPAs, LLP) report total annual revenue of $28.3 million and total net assets of $41.6 million, of which $14.2 million is classified as donor-restricted net assets under ASC 958. The $4.7 million in restricted BATRI funds at issue in this litigation constitutes approximately 33% of EF's total donor-restricted net assets, making the resolution of this matter of significant institutional importance.
EF's Executive Director is Margot Ellison-Yee, who has led the organization since 2015. The Board of Directors is chaired by Dr. Kenneth Oguike, a professor of education at Stanford University. EF's General Counsel is Priya Chattopadhyay, who has been involved in all pre-litigation communications with WGFT and its counsel. In this matter, EF is represented by outside counsel at Calderwood & Harkness LLP.
The Whitfield-Garner Family Trust. The Whitfield-Garner Family Trust ("WGFT") is a California irrevocable trust established on March 14, 2003. The original settlors were Herbert R. Whitfield-Garner, who died on September 12, 2019, and Dorothy M. Garner, who died on November 3, 2016. Both settlors were prominent Bay Area philanthropists with a well-documented history of charitable giving focused on education, the arts, and community development.
The current Trustee of WGFT is Roland Whitfield-Garner, the eldest son of the original settlors. The Co-Trustee is Adrienne Garner-Bosch, the settlors' daughter. Nathaniel Whitfield-Garner, the settlors' younger son, serves as a Non-Trustee Advisor. The trust is administered from its address at 2785 Pacific Heights Lane, San Francisco, California 94115.
WGFT's estimated trust corpus is approximately $62 million in diversified assets, including publicly traded equities, real estate holdings, and significant charitable commitments to multiple organizations. The trust instrument authorizes the trustees to make distributions for charitable purposes consistent with the settlors' expressed philanthropic priorities, which historically have emphasized education, the visual arts, and Bay Area community organizations.
WGFT is represented in this matter by Victoria Huang and Derek Solano Jr. of Pratchett, Huang & Solano LLP, located at 555 California Street, 28th Floor, San Francisco, California 94104. Ms. Huang is lead counsel on the matter.
B. The Gift Instrument and Grant Agreement
On June 15, 2018, WGFT and EF executed a document titled "Gift Instrument and Grant Agreement Between the Whitfield-Garner Family Trust and Estuary Foundation for the Bay Area Teacher Residency Initiative" (the "Gift Instrument"). The Gift Instrument was negotiated over a period of approximately four months, with both parties represented by counsel. Herbert R. Whitfield-Garner executed the Gift Instrument on behalf of WGFT in his capacity as Trustee; Margot Ellison-Yee executed on behalf of EF in her capacity as Executive Director.
The Gift Instrument committed WGFT to a total grant of $5,000,000 to EF for the purpose of establishing and operating BATRI over a five-year Grant Period from 2018 through 2023. The funds were to be disbursed in four tranches according to the following schedule:
Total funds disbursed by WGFT to EF over the course of the grant: $4,000,000. The fourth tranche of $1,000,000, which was due in July 2021, was never disbursed due to the suspension of BATRI and the onset of the dispute between the parties.
The Gift Instrument contains several provisions of central importance to this litigation:
Section 3.1 (Exclusive-Use Restriction): "The Grant Funds shall be used solely and exclusively for the establishment, operation, and support of the Bay Area Teacher Residency Initiative as described in Exhibit A, and for no other purpose." Exhibit A to the Gift Instrument contains a detailed programmatic description of BATRI, including its structure as a year-long teaching residency program operated in partnership with Bay Area public school districts, its target of placing 25–30 teacher residents per cohort in partner schools, its curriculum and mentorship framework, and its staffing and administrative requirements.
Section 7.2 (Reversion Clause): "In the event the Program is discontinued prior to the expiration of the Grant Period, any unexpended Grant Funds shall, at the election of Grantor, be returned to Grantor within ninety (90) days of written demand."
Section 2.2 (Grant Period): "The Grant Period shall commence on the date of execution of this Agreement and shall expire on June 30, 2023."
Section 5.1 (Reporting Obligations): EF was required to submit annual progress reports to WGFT detailing BATRI's programmatic outcomes, financial expenditures, and plans for the following year. EF submitted reports for FY 2018, FY 2019, and FY 2020. The FY 2020 report, submitted in October 2020, disclosed the termination of the OUSD partnership and the reduction of the third cohort.
Recitals and Preamble: The Gift Instrument's recitals state, in relevant part: "WHEREAS, the Whitfield-Garner Family Trust, through the vision and philanthropy of its settlors Herbert R. Whitfield-Garner and Dorothy M. Garner, seeks to promote equitable access to high-quality education in Northern California communities; and WHEREAS, Estuary Foundation has demonstrated leadership in teacher development and school partnership programs that advance this shared educational vision; and WHEREAS, the Bay Area Teacher Residency Initiative represents an innovative approach to addressing the chronic shortage of well-prepared teachers in underserved Bay Area schools . . ." These recitals are significant because they articulate the broad educational purpose underlying the gift, characterizing BATRI as one "approach" to the settlors' broader educational objectives rather than as the exclusive end in itself.
C. The BATRI Program and Its Termination
BATRI was conceived as a year-long teaching residency program modeled after medical residencies, in which aspiring teachers would be placed in partner schools under the mentorship of experienced educators, combining classroom instruction with graduate-level coursework leading to a California teaching credential. The program was designed to address the chronic teacher shortage in underserved Bay Area schools by recruiting, training, and placing high-quality teachers in the communities that needed them most.
The following timeline sets forth the key events in BATRI's operation and termination:
September 2018: BATRI launches with its inaugural cohort of 24 teacher residents placed across six partner schools in the San Francisco Unified School District and the Oakland Unified School District. The program is staffed with a Program Director, two coordinators, and a half-time data analyst, all employed by EF.
June 2019: The first cohort completes the residency program. Of the 24 residents who began, 22 are placed in full-time teaching positions in Bay Area schools, a completion and placement rate of approximately 92%. The program is widely regarded as a success. Herbert R. Whitfield-Garner, who attended the completion ceremony in May 2019, expressed personal satisfaction with the program's outcomes in correspondence with EF Executive Director Margot Ellison-Yee.
September 2019: The second cohort of 30 teacher residents begins the program, reflecting an expansion in line with the programmatic projections in Exhibit A to the Gift Instrument. Herbert R. Whitfield-Garner dies on September 12, 2019, three days after the second cohort's orientation. Trusteeship of WGFT passes to Roland Whitfield-Garner and Adrienne Garner-Bosch.
March 2020: The COVID-19 pandemic forces the closure of schools across the Bay Area. In-person classroom placements, the cornerstone of BATRI's residency model, are suspended. EF attempts to adapt the program to a remote or hybrid format, but the experiential, in-classroom component that distinguished BATRI from conventional teacher preparation programs cannot be replicated virtually.
August 2020: OUSD formally terminates its partnership with BATRI, effective immediately, citing severe budget constraints exacerbated by the pandemic and the need to consolidate its own teacher development programming. OUSD's decision eliminates three of the six partner schools from the program. The planned third cohort, originally projected at 25–30 residents, is reduced to 15 residents placed exclusively in SFUSD schools.
March 2021: SFUSD notifies EF that it will not renew its BATRI partnership agreement for the 2021–2022 academic year, citing a district-wide program consolidation initiative. SFUSD's decision eliminates the remaining three partner schools. With no partner school districts, BATRI has no institutional infrastructure through which to place teacher residents.
June 2021: The third cohort, operating entirely within SFUSD, graduates. Twelve of 15 residents complete the program and receive teaching credentials. These are the final BATRI graduates.
July–December 2021: EF's leadership, under Executive Director Ellison-Yee, explores alternatives to sustain BATRI, including outreach to other Bay Area school districts (West Contra Costa Unified, San Mateo-Foster City, and Hayward Unified) and discussions with the Alameda County Office of Education about a potential regional partnership. None of these efforts produces a viable replacement partnership within a reasonable timeframe.
December 31, 2021: The EF Board of Directors, after extensive deliberation, formally votes to wind down BATRI, finding that the program cannot be reconstituted in a form consistent with Exhibit A to the Gift Instrument without active school district partnerships.
Over its three-year operational life, BATRI's total expenditures were $3,300,000, allocated among teacher resident stipends, partner school coordination costs, curriculum development, program staffing, and administrative overhead. These expenditures were funded from the combined WGFT, Cascabel Education Fund, and Newhall-Sievert Foundation grants, as well as a modest allocation from EF's unrestricted operating budget. The unexpended balance of WGFT-disbursed funds is $700,000, calculated as $4,000,000 in total disbursements minus $3,300,000 in total program expenditures. (For purposes of this memorandum, we note that the allocation of specific expenditures to specific donors' funds raises accounting questions that are beyond the scope of this legal analysis. EF's position is that the $700,000 represents the pro rata unexpended balance attributable to the WGFT grant.)
D. Funds in Dispute
The funds at issue in this litigation total $4,700,000, broken down as follows:
WGFT's demand covers $1,700,000: the $700,000 in unexpended disbursed funds, plus the $1,000,000 undisbursed fourth tranche that WGFT contends it is no longer obligated to remit. WGFT takes the position that the fourth tranche was never disbursed and therefore remains trust property; EF may argue that WGFT's obligation to disburse the fourth tranche was not contingent on BATRI's continued operation, but this contractual question is secondary to the equitable modification analysis.
The Cascabel Education Fund restricted its $2,000,000 grant to BATRI under a separate grant agreement executed in 2019. By letter dated February 14, 2022, the Cascabel Education Fund consented to the reallocation of its $2,000,000 to EF's general educational programming. Similarly, the Newhall-Sievert Foundation restricted its $1,000,000 grant to BATRI under a separate grant agreement executed in 2020 and consented to reallocation by letter dated February 22, 2022.
EF seeks declaratory judgment covering all $4,700,000 to establish the legal framework governing the modification of BATRI-restricted funds. While the consenting donors' funds are not contested, EF believes a comprehensive judicial determination will provide legal certainty for the disposition of all restricted BATRI assets and establish binding precedent on the cy pres and equitable deviation questions.
E. Pre-Litigation Correspondence and Procedural Posture
January 28, 2022: WGFT, through its counsel Victoria Huang of Pratchett, Huang & Solano LLP, sends a formal demand letter to EF demanding the return of $1,700,000 within ninety days pursuant to Section 7.2 of the Gift Instrument. The letter asserts that BATRI has been "Discontinued" within the meaning of Section 7.2 and that EF is contractually obligated to return all unexpended grant funds. The letter further states that WGFT considers the fourth tranche obligation extinguished by BATRI's discontinuation.
March 3, 2022: Calderwood & Harkness LLP, on behalf of EF, responds to WGFT's demand letter. The response acknowledges that BATRI has been wound down but asserts that the cy pres and equitable deviation doctrines apply to the restricted funds, that EF intends to seek judicial guidance on the proper disposition of the funds, and that EF declines to return the $700,000 in unexpended funds pending judicial resolution. The letter invites a pre-suit meeting to explore whether a negotiated resolution can be reached.
March 22, 2022: WGFT's counsel responds, reiterating the demand and rejecting EF's characterization of the Gift Instrument as subject to equitable trust doctrines. WGFT takes the position that the Gift Instrument is a bilateral contract and that Section 7.2 provides the exclusive remedy.
April 15, 2022: A final pre-suit meet-and-confer telephone conference takes place between counsel for both parties. No resolution is reached. WGFT reiterates its position that the funds must be returned; EF reiterates its intention to seek judicial modification.
April 25, 2022: EF files its Complaint for Declaratory Relief in the Superior Court of California, County of San Francisco, Case No. CGC-22-599481. The Complaint names WGFT as the sole defendant and seeks a judicial declaration that (a) the cy pres doctrine permits modification of the restriction in the Gift Instrument to allow EF to use the funds for its general educational mission; (b) equitable deviation provides an alternative basis for the same modification; and (c) WGFT's reversion demand under Section 7.2 is not enforceable in light of the equitable modification. The case is assigned to Department 302, the Honorable Patricia R. Wainwright presiding.
April 28, 2022: The ninety-day demand period specified in WGFT's January 28, 2022 demand letter expires. EF has not returned any funds.
June 10, 2022: WGFT files a Cross-Complaint seeking (a) restitution of $1,700,000 ($700,000 in unexpended funds plus $1,000,000 representing the undisbursed fourth tranche), (b) interest at the rate of 7% per annum on the $1,700,000 from April 28, 2022 (the expiration of the ninety-day demand period), which amounts to approximately $119,000 per year, and (c) attorneys' fees and costs. WGFT's Cross-Complaint is grounded in breach of contract and unjust enrichment theories.
V. LEGAL ANALYSIS
A. The Cy Pres Doctrine Under California Probate Code Section 15409
1. Statutory Framework
California Probate Code Section 15409 codifies the common law doctrine of cy pres as it applies to charitable trusts. The statute provides, in relevant part:
(a) Except as provided in subdivision (b), if a particular charitable purpose is or becomes unlawful, impracticable, or impossible to fulfill, and if the settlor manifested a general charitable intent to devote the property to charitable purposes, the court may, on petition, select an alternative charitable purpose or beneficiary. The court shall apply the doctrine of cy pres to select an alternative purpose or beneficiary that is as close to the original charitable purpose as practicable.
(b) If the settlor did not manifest a general charitable intent to devote the property to charitable purposes, the charitable trust fails and the trust property is distributed as provided in the trust instrument, or if no provision is made in the trust instrument for distribution of the trust property, the trust property is distributed to the settlor, if living, otherwise to the settlor's successors in interest.
Section 15409 thus establishes a two-part framework for cy pres modification. First, the petitioner must demonstrate that the particular charitable purpose specified in the gift instrument is or has become "unlawful, impracticable, or impossible to fulfill." Second, the petitioner must demonstrate that the settlor or donor "manifested a general charitable intent to devote the property to charitable purposes" — that is, the donor intended to benefit charity broadly, and not solely through the specific restricted purpose that has failed.
The statute applies directly to charitable trusts. However, California courts and commentators have consistently recognized that cy pres principles extend beyond formal trusts to encompass restricted charitable gifts, including grants made under gift instruments and grant agreements. The California Nonprofit Public Benefit Corporation Law, codified at California Corporations Code Sections 5110 through 6910, governs the operations of entities like EF, but it incorporates trust-law principles for the management of restricted charitable funds. The Uniform Prudent Management of Institutional Funds Act ("UPMIFA"), adopted in California as Probate Code Sections 18501–18510, further confirms that restricted charitable gifts are subject to modification under cy pres and equitable deviation principles, regardless of whether the gift was structured as a trust or as an outright grant. Specifically, Probate Code Section 18509 provides that "[a] person that is an institution as described in this article may release or modify, in whole or in part, a restriction contained in a gift instrument on the management, investment, or purpose of an institutional fund" under specified circumstances, including judicial modification.
The applicability of cy pres to restricted charitable grants — as opposed to formal charitable trusts — is well-established in California. As the Court of Appeal noted in Estate of Mabury (1976) 54 Cal.App.3d 969, a restricted charitable gift creates a relationship analogous to a charitable trust, and the donee holds the restricted funds in a fiduciary capacity subject to the equitable supervision of the courts. Similarly, in Holt v. College of Osteopathic Physicians & Surgeons (1964) 61 Cal.2d 750, the California Supreme Court applied cy pres principles to a charitable gift that was not structured as a formal trust, finding that the nature of the gift — a restricted donation to a charitable institution — triggered the equitable doctrines regardless of the instrument's form. We anticipate that WGFT will argue that the Gift Instrument is a bilateral contract, not a trust instrument, and that cy pres is therefore inapplicable. As discussed in Section V.D.3 below, this argument is contrary to the weight of California authority.
2. Impracticability of BATRI's Specific Purpose
The first element of the cy pres analysis requires a showing that the particular charitable purpose specified in the Gift Instrument has become "unlawful, impracticable, or impossible to fulfill." Cal. Prob. Code § 15409(a). Here, EF relies on impracticability, although the facts arguably support a finding of impossibility as well.
BATRI's operational model, as described in detail in Exhibit A to the Gift Instrument, was a year-long teaching residency program in which aspiring teachers were placed in partner schools under the mentorship of experienced educators. The program's defining feature — and the feature that distinguished it from conventional teacher preparation programs — was the intensive, in-classroom placement component, which required active partnerships with public school districts willing to host teacher residents. Without such partnerships, the program could not function.
Both of BATRI's partner school districts have withdrawn from the program:
• OUSD formally terminated its partnership with BATRI in August 2020, citing severe budget constraints exacerbated by the COVID-19 pandemic. OUSD's termination eliminated three of the six partner schools and approximately half of the program's available placement capacity.
• SFUSD notified EF in March 2021 that it would not renew its BATRI partnership for the 2021–2022 academic year, citing a district-wide program consolidation initiative. SFUSD's decision eliminated the remaining three partner schools and reduced BATRI's placement capacity to zero.
With no partner school districts, the BATRI model as described in Exhibit A simply cannot be implemented. This is not a situation in which the program has become more expensive or more difficult to operate — it is a situation in which the fundamental infrastructure upon which the program depends has ceased to exist. The program cannot place teacher residents in schools if no schools will accept them.
California courts have consistently held that the impracticability standard under Section 15409 does not require absolute impossibility. In In re Estate of Buck (1986) No. 23259 (Marin County Superior Court), the court applied cy pres where the specific charitable purpose — providing services exclusively within Marin County — had become impracticable due to the dramatic increase in Marin County's wealth since the trust's creation, finding that the trust's purpose would be better served by expanding the geographic scope of distributions. The Buck decision, while a trial court ruling, is widely cited for the proposition that impracticability encompasses circumstances in which the specific purpose cannot reasonably be accomplished in the manner contemplated by the donor, even if some attenuated version of the purpose could theoretically be pursued.
Similarly, in Estate of Gilliland (1974) 44 Cal.App.3d 32, the Court of Appeal applied cy pres to modify a charitable bequest where the designated beneficiary institution had ceased to exist, finding that the particular charitable purpose had become impracticable. The court emphasized that impracticability should be evaluated in light of the program's actual operational requirements, not in the abstract.
Applying these principles here, the impracticability of continuing BATRI is clear. The program required active partnerships with school districts; those partnerships no longer exist. EF made reasonable efforts to identify substitute partners, including outreach to three other Bay Area school districts and the Alameda County Office of Education, but none of these efforts bore fruit within a reasonable timeframe. The impracticability is structural and ongoing — it results not from EF's mismanagement or voluntary choice, but from the independent decisions of two large urban school districts to withdraw from the program.
The COVID-19 pandemic, while not the sole cause of BATRI's termination, was a significant contributing factor. The pandemic disrupted in-person schooling across California, forced school districts to redirect resources to emergency operations, and created the budget pressures that led OUSD to terminate its partnership. While the pandemic alone did not terminate BATRI, it set in motion a chain of events that made the program's continuation impracticable. Courts evaluating impracticability under cy pres routinely consider the totality of circumstances, including external events that render the specific purpose unachievable. The pandemic is relevant context, not a separate ground for relief.
EF's Board resolution of December 31, 2021, formally winding down BATRI, was a reasonable institutional response to the loss of both partner districts — not a unilateral abandonment of the program. We anticipate that WGFT will argue that EF "voluntarily" Discontinued BATRI and that the impracticability was therefore self-imposed. This argument conflates the formal act of winding down the program with the underlying cause of its termination. EF did not choose to lose its partner school districts; it chose to recognize the reality that the program could not continue without them. A charity is not required to maintain the fiction of a program's viability indefinitely in order to preserve its claim to cy pres relief.
3. General Charitable Intent of the Settlors
The second element of the cy pres analysis requires a showing that the donor "manifested a general charitable intent to devote the property to charitable purposes." Cal. Prob. Code § 15409(a). This requirement distinguishes cases in which the donor intended to benefit charity broadly — with the specific program serving as the vehicle for that broader intent — from cases in which the donor's charitable motivation was so narrowly tied to the specific program that the gift should fail entirely if the program cannot continue.
California courts generally presume a general charitable intent where the donor has made a gift to a charitable institution for a stated purpose, unless the donor has expressly provided that the gift shall fail if the specific purpose cannot be fulfilled. As the court explained in Estate of Tarrant (1951) 38 Cal.2d 42, 46, "The general rule is that where money is given to a charity for a specific purpose, and that purpose fails, the law presumes a general charitable intent on the part of the donor, and will apply the fund cy pres, unless a contrary intent appears." This presumption reflects the policy judgment that charitable gifts should be sustained where possible, rather than being defeated by the failure of a specific program.
Several features of the Gift Instrument and surrounding circumstances support a finding of general charitable intent here:
The Recitals. The Gift Instrument's recitals express a broad commitment to "promot[ing] equitable access to high-quality education in Northern California communities." This language describes a general educational objective, not a narrow commitment to BATRI as a programmatic end in itself. The recitals further describe BATRI as "an innovative approach to addressing the chronic shortage of well-prepared teachers in underserved Bay Area schools" — characterizing it as one approach among potentially many, rather than as the sole acceptable vehicle for the donors' charitable goals. This distinction is significant. Courts interpreting charitable gift instruments routinely look to the recitals and preamble for evidence of the donor's broader purpose. See, e.g., In re Estate of Ralston (1961) 190 Cal.App.2d 671, 679 (examining the instrument's recitals to determine the scope of the donor's charitable intent).
The Settlors' Broader Philanthropic History. WGFT's trust corpus of approximately $62 million includes multiple charitable commitments across education, the arts, and community development. The settlors' history of diversified charitable giving — extending well beyond BATRI — supports the inference that their philanthropic motivation was general rather than narrow. While evidence of a donor's overall giving pattern is not dispositive, courts have considered it relevant to the general charitable intent inquiry. See Restatement (Third) of Trusts § 67 cmt. b (noting that the donor's overall philanthropic context may illuminate the scope of charitable intent).
Absence of Express "Failure" Language. The Gift Instrument does not contain any provision stating that the gift shall fail, terminate, or revert to the donor if BATRI cannot be sustained. While Section 7.2 provides for a return of funds upon program discontinuation "at the election of Grantor," this is not the same as a provision declaring that the gift is conditioned upon BATRI's continued existence and shall automatically fail without it. Courts distinguishing between general and specific charitable intent have consistently focused on whether the donor included express language negating the possibility of an alternative use. See discussion of reversion clauses in Section V.C.3, infra.
Both Settlors Are Deceased. Herbert R. Whitfield-Garner died on September 12, 2019, and Dorothy M. Garner died on November 3, 2016. Their deaths predated the circumstances that rendered BATRI impracticable. The unavailability of direct testimony from the original settlors means that the court must assess general charitable intent primarily from the Gift Instrument itself and the surrounding circumstances. While this cuts both ways — WGFT may argue that the settlors' subjective intent cannot be presumed — the settled California rule is that the Gift Instrument is the primary evidence of the donor's intent, and the presumption of general charitable intent applies unless the instrument expressly provides otherwise. See Cal. Prob. Code § 21102 (providing that the intention of the transferor as expressed in the instrument controls the legal effect of a transfer).
4. Relevant California Case Law on Cy Pres
California has a robust body of case law addressing the cy pres doctrine in the charitable trust and charitable gift context. The following authorities are particularly instructive:
Holt v. College of Osteopathic Physicians & Surgeons (1964) 61 Cal.2d 750. In Holt, the California Supreme Court applied cy pres to modify a charitable bequest where the designated beneficiary institution had changed its character (converting from an osteopathic college to an allopathic medical school). The court held that the donor's general charitable intent — to support osteopathic medical education — could be fulfilled by redirecting the gift to another institution, notwithstanding the specific designation of the original beneficiary. Holt is significant because it confirms that cy pres is available even where the specific charitable vehicle designated by the donor has undergone a fundamental change, provided the donor's broader charitable purpose can still be served.
Estate of Tarrant (1951) 38 Cal.2d 42. In Tarrant, the Supreme Court articulated the presumption of general charitable intent that governs cy pres analysis in California. The court held that where a donor makes a gift to a charitable institution for a stated purpose and that purpose fails, the law presumes a general charitable intent and will apply the fund cy pres, "unless a contrary intent appears." Id. at 46. Tarrant is the leading California authority on the general charitable intent presumption and will be central to EF's argument.
In re Estate of Buck (1986) No. 23259 (Marin County Superior Court). While a trial court decision without formal precedential authority, the Buck case is the most extensively litigated cy pres proceeding in California history and is widely cited by courts and commentators. The court applied cy pres to modify a trust that restricted distributions to Marin County, finding that the specific geographic limitation had become impracticable due to changed circumstances. The court's analysis of the impracticability standard is particularly instructive, as it confirmed that impracticability does not require absolute impossibility and may be established by showing that the specific restriction prevents the charitable purpose from being effectively accomplished.
Estate of Gilliland (1974) 44 Cal.App.3d 32. In Gilliland, the Court of Appeal applied cy pres to a charitable bequest where the designated beneficiary had ceased to exist, holding that the particular charitable purpose had become impracticable. The court emphasized that the donor's general charitable intent was demonstrated by the broad charitable language in the instrument, notwithstanding the designation of a specific beneficiary.
Estate of Mabury (1976) 54 Cal.App.3d 969. In Mabury, the court held that restricted charitable gifts create a trust-like relationship between the donor and the donee, and that cy pres principles apply to such gifts regardless of whether the instrument is formally denominated as a trust. This authority directly supports EF's position that the Gift Instrument — styled as a "Gift Instrument and Grant Agreement" — is subject to cy pres modification.
The Restatement (Third) of Trusts (2003) provides further support for a flexible approach to cy pres. Section 67 of the Restatement states that "[i]f a particular charitable purpose becomes unlawful, impracticable, or wasteful . . . the court will direct the application of the trust property to a charitable purpose that reasonably approximates the designated purpose." The Restatement expressly adopts the modern trend of applying cy pres liberally to sustain charitable gifts where possible, and it has been cited with approval by California courts. See, e.g., Bridgeford v. Pacific Health Corp. (2012) 202 Cal.App.4th 1034, 1042 (citing Restatement (Third) of Trusts as persuasive authority on charitable trust modification).
B. Equitable Deviation Under California Probate Code Section 15403
1. Statutory Framework
California Probate Code Section 15403 codifies the doctrine of equitable deviation, which permits a court to modify the terms of a trust where compliance with the terms as written would be counterproductive in light of changed circumstances. Section 15403 provides, in relevant part:
(a) The court may modify the administrative or dispositive provisions of the trust or terminate the trust if, owing to circumstances not known to or anticipated by the settlor, the continuation of the trust under its terms would defeat or substantially impair the accomplishment of the purposes of the trust. In modifying the trust, the court shall consider the purposes of the trust.
(b) Upon petition by a trustee or beneficiary, the court may modify the administrative provisions of the trust if continuation of the trust on its existing terms would be impracticable or wasteful or impair the trust's administration.
Equitable deviation differs from cy pres in several important respects. First, equitable deviation applies to the modification of administrative or operational terms of a trust, whereas cy pres applies to the modification of the trust's charitable purpose itself. In practice, this distinction means that equitable deviation may be available even where the charitable purpose has not entirely failed — for example, where the specific restriction impedes the accomplishment of the purpose without rendering it wholly impossible. Second, equitable deviation does not require a showing of "general charitable intent" in the same way that cy pres does. The inquiry under Section 15403 is whether continued compliance with the specific term "would defeat or substantially impair the accomplishment of the purposes of the trust," not whether the donor had a general charitable intent that transcends the specific restriction.
Subdivision (a) requires a showing of "circumstances not known to or anticipated by the settlor." This requirement is easily satisfied here, as the COVID-19 pandemic, the withdrawal of both partner school districts, and the resulting dissolution of BATRI's operational infrastructure were plainly not known to or anticipated by Herbert R. Whitfield-Garner and Dorothy M. Garner when the Gift Instrument was executed in June 2018. Indeed, Dorothy M. Garner died in 2016, two years before the Gift Instrument was executed, although her charitable intent as a co-settlor of WGFT is attributable to the trust's charitable commitments generally.
Subdivision (b) provides a somewhat lower threshold for modification of "administrative provisions" specifically, requiring only a showing that continuation under existing terms would be "impracticable or wasteful or impair the trust's administration." This alternative ground may be available if the court characterizes the exclusive-use restriction in Section 3.1 as an administrative or operational directive rather than a dispositive provision.
2. Application to the Gift Instrument
The restriction in Section 3.1 of the Gift Instrument provides that "[t]he Grant Funds shall be used solely and exclusively for the establishment, operation, and support of the Bay Area Teacher Residency Initiative as described in Exhibit A, and for no other purpose." This restriction can be characterized as an administrative or operational directive specifying the mechanism through which the donor's educational purpose was to be advanced. The donor's underlying purpose — promoting equitable access to high-quality education — is articulated in the recitals. Section 3.1 prescribes the specific vehicle (BATRI) through which that purpose was to be pursued. When the vehicle becomes inoperative, the restriction impedes rather than advances the purpose.
The circumstances not anticipated by the settlors are manifest. The COVID-19 pandemic was an unprecedented global crisis that was not and could not have been foreseen at the time the Gift Instrument was executed in June 2018. The pandemic's cascading effects — school closures, budget crises, programmatic consolidations — led directly to the withdrawal of both OUSD and SFUSD from the BATRI partnership. The dissolution of BATRI's operational infrastructure was a consequence of these unanticipated circumstances, not a foreseeable risk that the settlors assumed when they made the gift.
Continued compliance with Section 3.1 as written would "defeat or substantially impair the accomplishment of the purposes of the trust" because the funds would be effectively frozen. If the restriction cannot be modified, the $700,000 in unexpended funds can neither be used for education (the settlors' stated purpose) nor returned to WGFT (unless the court enforces the reversion clause). The funds would sit idle in EF's accounts, restricted to a program that cannot operate, generating no educational benefit whatsoever. This outcome directly contradicts the settlors' expressed desire to "promote equitable access to high-quality education." The equitable deviation doctrine exists precisely to prevent such outcomes — to ensure that charitable resources are not sterilized by restrictions that have become counterproductive due to changed circumstances.
EF proposes that the court modify the restriction in Section 3.1 to permit the funds to be used for EF's general educational mission. EF's mission — "advancing equitable access to quality education through teacher development, school partnerships, and community-based learning initiatives in Northern California" — is closely aligned with the educational purpose that animated the original gift. Indeed, BATRI was itself a program within EF's broader educational portfolio. Redirecting the funds from a specific, now-defunct EF program to EF's general educational operations is not a departure from the settlors' purpose but rather an adaptation that preserves the essence of that purpose while acknowledging changed circumstances.
3. Equitable Deviation as Complementary to Cy Pres
EF should plead — and has pleaded — both cy pres and equitable deviation in the alternative in its Complaint for Declaratory Relief. The two doctrines are complementary, not mutually exclusive, and pleading both maximizes EF's likelihood of obtaining judicial modification.
If the court finds that the specific charitable purpose (BATRI) has wholly failed, cy pres under Section 15409 is the more direct doctrinal pathway. The court would apply cy pres to select an alternative charitable purpose "as close to the original charitable purpose as practicable" — which, in this case, would be EF's general educational mission.
If, however, the court finds that the educational purpose animating the gift has not entirely failed — for example, because education generally remains viable even though BATRI specifically cannot operate — equitable deviation under Section 15403 provides a separate basis for modifying the specific operational restriction. Under this analysis, the court would find that the restriction in Section 3.1 is an administrative or operational term that impedes the accomplishment of the trust's educational purpose, and would modify it to allow the funds to be used for educational programming through EF's other initiatives.
California courts have applied equitable deviation to modify charitable gift restrictions in analogous circumstances. In City of Palm Springs v. Living Desert Reserve (1999) 70 Cal.App.4th 613, the Court of Appeal addressed the modification of a charitable trust restriction where changed circumstances made compliance with the original restriction counterproductive. Although the court ultimately remanded for further proceedings, its analysis confirmed that equitable deviation is available to modify charitable gift restrictions where the restriction impedes the accomplishment of the donor's broader purpose. Similarly, in Marin Hospital District v. Rothman (1983) 139 Cal.App.3d 495, the court applied equitable deviation principles to modify trust terms where unanticipated circumstances had made compliance impracticable.
The availability of equitable deviation as an alternative to cy pres is particularly important here because it provides EF with a fallback position in the event the court has concerns about the cy pres analysis — for example, if the court is uncertain about the general charitable intent requirement or the complete failure of the specific purpose. Equitable deviation does not require a finding that the purpose has wholly failed; it requires only a finding that the specific restriction impedes the purpose under changed circumstances. This lower threshold may make equitable deviation the more accessible ground for relief.
C. The Effect of the Reversion Clause (Section 7.2)
1. WGFT's Position
WGFT's central argument is that Section 7.2 of the Gift Instrument creates a "condition subsequent" — that is, the gift was conditional on BATRI's continued operation through the Grant Period (2018–2023), and EF's failure to operate BATRI through 2023 triggers a mandatory return of unexpended funds. In WGFT's view, Section 7.2 is a negotiated contractual remedy that supersedes any equitable modification the court might otherwise consider. WGFT characterizes the Gift Instrument as a bilateral contract between sophisticated parties, both of which were represented by counsel, and argues that the court should enforce the bargained-for terms rather than substituting its own judgment through equitable doctrines.
WGFT invoked Section 7.2 by demand letter dated January 28, 2022, sent through its counsel at Pratchett, Huang & Solano LLP, requesting the return of $1,700,000 within ninety days. EF did not comply by the April 28, 2022 deadline. WGFT's Cross-Complaint, filed June 10, 2022, seeks restitution of the $1,700,000 plus interest at 7% per annum from April 28, 2022, amounting to approximately $119,000 per year, plus attorneys' fees and costs.
WGFT's argument has surface appeal. The Gift Instrument does contain an express reversion provision, and the provision was negotiated between the parties. A court inclined to enforce the contractual terms as written might find WGFT's position persuasive, particularly if the court characterizes the Gift Instrument as a commercial contract rather than a charitable trust instrument. However, for the reasons discussed below, WGFT's argument encounters significant obstacles under California law.
2. Analysis: Section 7.2 as Discretionary vs. Mandatory
A close textual reading of Section 7.2 undermines WGFT's characterization of it as a mandatory condition subsequent. The provision states:
"In the event the Program is discontinued prior to the expiration of the Grant Period, any unexpended Grant Funds shall, at the election of Grantor, be returned to Grantor within ninety (90) days of written demand."
The critical phrase is "at the election of Grantor." This language creates a discretionary right in the Grantor, not an automatic reversion that occurs by operation of the instrument's terms upon program discontinuation. A true condition subsequent would divest the donee of title automatically upon the occurrence of the specified event, without requiring any affirmative election by the donor. See Restatement (Third) of Property: Wills and Other Donative Transfers § 25.2 cmt. b (distinguishing conditions subsequent from discretionary remedies). By contrast, Section 7.2 requires the Grantor to affirmatively elect to demand return — it is a remedy that must be invoked, not a self-executing divestiture of title.
This distinction matters because it undermines WGFT's argument that Section 7.2 constitutes a condition subsequent that automatically negates the charitable gift. If the reversion is discretionary — if the Grantor must choose to invoke it — then the gift does not automatically fail upon program discontinuation. The funds remain in EF's possession, subject to the restriction in Section 3.1, unless and until the Grantor elects to demand their return. This structure is consistent with a restricted charitable gift subject to a contractual remedy, not a conditional gift that automatically reverts.
The discretionary character of Section 7.2 also raises an additional issue. The original settlors, Herbert R. Whitfield-Garner and Dorothy M. Garner, are both deceased. The discretion to invoke Section 7.2 now vests in the successor trustees, Roland Whitfield-Garner and Adrienne Garner-Bosch. The question of whether the current trustees' election to invoke the reversion is consistent with the original settlors' charitable intent is a relevant consideration. The current trustees have a fiduciary obligation to administer the trust in accordance with its terms and the settlors' purposes. If the settlors' purpose was to advance education, as the Gift Instrument's recitals suggest, the current trustees' decision to demand return of the funds rather than permit their reallocation to educational purposes may itself be in tension with the settlors' intent. While this argument has limits — the trustees presumably have broad discretion in managing the trust's charitable commitments — it adds a layer of complexity to WGFT's position.
3. Reversion Clauses and Cy Pres: The Legal Tension
The core analytical question presented by Section 7.2 is whether an express reversion clause in a charitable gift instrument negates the general charitable intent required for cy pres modification. This is a question that has been addressed by courts in multiple jurisdictions, and the modern trend strongly disfavors the automatic preclusion of cy pres by reversion clauses.
The majority view and modern trend — reflected in the Restatement (Third) of Trusts, the Uniform Trust Code, and the weight of recent case law — is that a reversion clause in a charitable gift instrument does not automatically defeat cy pres. Courts draw a critical distinction between two types of provisions:
(a) A provision that expressly states the gift shall fail if the specific purpose cannot be fulfilled — for example, "If the Program cannot be operated, this gift shall terminate and the funds shall revert to the Grantor, and no other use of the funds shall be permitted under any circumstances." Such language affirmatively negates general charitable intent and signals that the donor regarded the specific purpose as the exclusive object of the gift.
(b) A provision that merely provides for the return of funds upon program discontinuation as a practical remedy — for example, "In the event the Program is discontinued, unexpended funds shall, at the election of Grantor, be returned." Such language addresses the practical question of what happens to unexpended funds if the program ends, without expressing a categorical intent that the gift must fail if the specific purpose cannot be fulfilled.
Section 7.2 of the Gift Instrument falls squarely into category (b). It is a practical remedy provision — a contractual mechanism for unwinding the grant if the program is discontinued. It does not contain language such as "this gift is conditioned upon," "no other use shall be permitted," "the funds shall not be used for any purpose other than BATRI under any circumstances," or any similar formulation that would negate general charitable intent. The absence of such language is significant. Sophisticated donors and their counsel, when they intend to preclude any alternative use of gifted funds, typically include express provisions to that effect. The absence of such language in the Gift Instrument supports the inference that the settlors contemplated the possibility of alternative uses, or at minimum did not intend to categorically preclude them.
The Restatement (Third) of Trusts Section 67, comment on reversion clauses, provides directly relevant guidance:
A direction that trust property shall "revert" to the settlor or the settlor's estate if the specific charitable purpose fails does not necessarily establish that the settlor lacked a