The Greater Milwaukee Foundation v. American Company of Irish Dance ( 2019 )

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
August 20, 2019
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.
Appeal No. 2018AP1294 Cir. Ct. No. 2016PR1600
STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT I
IN THE MATTER OF THE BILL BORCHERT LARSON REVOCABLE TRUST:
THE GREATER MILWAUKEE FOUNDATION,
PETITIONER-RESPONDENT,
V.
AMERICAN COMPANY OF IRISH DANCE,
INTERESTED PARTY-APPELLANT,
TRINITY IRISH DANCE COMPANY,
CROSS-PETITIONER-RESPONDENT,
UNIVERSITY OF CHICAGO,
INTERESTED PARTY.
No. 2018AP1294
APPEAL from an order of the circuit court for Milwaukee County:
MARSHALL B. MURRAY, Judge. Reversed and cause remanded with
directions.
Before Brash, P.J., Dugan and Gundrum, JJ.
¶1 BRASH, P.J. American Company of Irish Dance (American)
appeals an order in which the trial court declared a successor organization to the
Trinity Irish Dance Company (Trinity I). Trinity I was the beneficiary of a fund
established by the Bill Borchert Larson Revocable Living Trust (Trust) and
administered by the Greater Milwaukee Foundation (Foundation). The Trust
stated that the Foundation was to make distributions to Trinity I from the fund as
long as Trinity I was in compliance with certain requirements set forth in the
Trust. The Trust further provided that a successor organization to Trinity I would
be eligible to receive distributions from the fund as well, as long as that successor
organization also complied with the requirements of the Trust.
¶2 In 2014, after a legal dispute between the Board of Directors and one
of the founders, Trinity I changed its name to American. American continued to
make claims for distributions from the fund under its new name. However,
another dance company—also named Trinity Irish Dance Company, and started by
the founder of Trinity I involved in the legal dispute (Trinity II)—began making
claims to the fund as well. The Foundation filed a petition with the trial court
seeking construction of the Trust and a declaratory judgment as to whether
American or Trinity II was the “successor organization” to Trinity I under the
Trust.
¶3 The trial court held that Trinity II was the successor organization to
Trinity I. The court considered extrinsic evidence—in particular, testimony
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received at a court trial—to determine the intent of Bill Borchert Larson, the
testator, with regard to the meaning of “successor organization” in the Trust. The
court found that Trinity II met that intent.
¶4 We disagree with the trial court’s analysis. The law of corporate
succession clearly states that American changing its name from Trinity I did not
change its corporate identity. Therefore, it was not necessary to determine a
successor organization, since American is the same entity as Trinity I, the
beneficiary named in the Trust. Furthermore, the terms of the Trust were clear and
unambiguous in stating that Trinity I—now American—is the intended beneficiary
of the fund as long as it remains in compliance with the requirements of the Trust.
¶5 We therefore reverse the order of the trial court declaring Trinity II
the successor organization to Trinity I, and remand this matter for the entry of an
order declaring that American is the beneficiary of the fund, subject to the
requirements of the Trust, with the Foundation to determine compliance with those
requirements as directed in the Trust.
BACKGROUND
¶6 Trinity I was founded by Mark Howard in the 1990s. It was
incorporated in Illinois in 1997 under the name Trinity Irish Dance Company; that
corporation was registered in Wisconsin as well, under the same name.
¶7 Howard met Bill Borchert Larson, a philanthropist in Milwaukee, in
the spring of 2001, and Larson began providing financial support to Trinity I.
When Larson died in 2006, his Trust distributed one million dollars to the
Foundation to establish a fund for the benefit of Trinity I or its successor
organization. All distributions from the fund had to be authorized by the
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Foundation to ensure that certain requirements of the Trust were being met.
Specifically, those requirements compelled the discontinuation of distributions if
Trinity I or its successor organization (1) ceased to operate as a non-profit
organization; or (2) ceased to operate “as a dance company primarily for girls.” In
either event, the Trust mandated that any remaining funds were to be used to
provide scholarships to “worthy and deserving” undergraduate students at the
University of Chicago who were financing their education primarily on their own.
¶8 In the years that followed, the Board of Directors for Trinity I
developed concerns over Howard’s management of the finances, particularly with
regard to maintaining its non-profit status. After numerous legal battles, Howard
split from Trinity I in 2014; however, as the result of a trademark dispute, Howard
was awarded the rights to the name Trinity Irish Dance Company. Trinity I then
legally changed its name to American, keeping the same corporate officers and the
same federal tax identification number it had operated under as Trinity I.
¶9 While those legal disputes between Howard and Trinity I were
taking place, the Foundation alerted Trinity I that beginning in 2012 it was
withholding distributions because the “inactive status” of Trinity I did not meet the
requirements of the Trust. Subsequently, in January 2015, the Foundation notified
American that the Foundation was changing the beneficiary to the secondary
purpose stated in the Trust—establishing scholarships at the University of
Chicago. However, in May 2015, after a meeting between the Foundation and
American, the Foundation informed American that it would delay making that
change to the secondary beneficiary if American could demonstrate, by the end of
the year, that it was meeting the requirements of the Trust. In that case, the
Foundation would reinstate the distributions to American.
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¶10 Meanwhile, Howard formed Trinity II and began making claims to
the Foundation that it was the proper recipient of the funds from the Trust as the
successor organization to Trinity I. Howard based his claim on his belief that it
was the “donor’s intent” to have the funds go to “the founder of the
organization”—himself. Thus, he asserted that his new dance company, Trinity II,
was the successor organization to Trinity I, not American.
¶11 Due to this conflict, the Foundation filed a petition for declaratory
judgment with the trial court in November 2016 seeking construction of the Trust
regarding the meaning of “successor organization.” The Foundation explained
that it had operated under the presumption that American was still the intended
recipient of the funds since it had simply changed the name of the company and
was still using the same tax identification number as Trinity I. However, after
Trinity II began making claims to the funds, the Foundation believed that the
threshold question had become which entity—American or Trinity II—is the
successor organization. The trial court agreed with that posture. The court further
noted that after making its decision, it would be up to the Foundation to determine
whether that successor organization met the requirements of the Trust necessary to
obtain the funds.
¶12 A court trial was held in February 2018. Testimony was received
from several witnesses, including: a member of the Board of Directors for
American; an accounting consultant who had helped to “clean up” the financial
records of American; a professor at New York University who is an expert on Irish
dance; a former associate artistic director of Trinity I; and several dancers from
Trinity II who also teach and serve as artistic directors for Trinity II.
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¶13 The trial court issued its decision in May 2018. Based on the
testimony received, the court determined that Trinity I “does not exist in the way
that it was set up at the time that the [T]rust was set up.” The court further found
that although American retained the tax identification number of Trinity I, it was
“no longer furthering the original mission” of Trinity I in that it was not currently
operating as a dance company primarily for girls and was “not actively conducting
the live progressive Irish dance performances which clearly captivated Mr.
Larson.” Rather, the court found that Trinity II was “doing the work that [the
court] believe[s] Mr. Larson wanted to fund[.]” Therefore, the court held that
Trinity II was the proper successor organization to receive the funds from the
Trust.
¶14 This appeal follows.
DISCUSSION
¶15 “A decision to grant or deny declaratory relief falls within the
discretion of the [trial] court.” Milwaukee Dist. Council 48 v. Milwaukee Cty.,
2001 WI 65, ¶36, 244 Wis. 2d 333, 627 N.W.2d 866. We will uphold a
discretionary decision of the trial court if it “‘has examined the relevant facts,
applied a proper standard of law, and, using a demonstrated rational process,
reached a conclusion that a reasonable judge could reach.’” Hefty v. Strickhouser,
2008 WI 96, ¶28, 312 Wis. 2d 530, 752 N.W.2d 820 (citation omitted).
¶16 American begins by arguing that this matter was not ripe for
adjudication, one of the factors required in a declaratory judgment action. See
Putnam v. Time Warner Cable of Se. Wis., Ltd. P’ship, 2002 WI 108, ¶41, 255
Wis. 2d 447, 649 N.W.2d 626. American contends that the question presented by
the Foundation—which organization was the successor organization pursuant to
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No. 2018AP1294
the terms of the Trust—lacked ripeness because the Foundation had not
determined that the corporate entity of Trinity I no longer existed.
¶17 We first note that Wisconsin law permits court intervention in trust
matters. Specifically, WIS. STAT. § 701.0201(1) (2017-18)1 allows for a court to
“intervene in the administration of a trust to the extent its jurisdiction is invoked
by an interested person[.]” Indeed, the order executed by the trial court indicates
that it was entered pursuant to §§ 701.0201(3)(g), (3)(i), and (3)(k), which permit
a judicial proceeding involving a trust to “[d]etermin[e] the existence or
nonexistence of any immunity, power, privilege, duty, or right”; to “[o]btain[] a
declaratory judgment”; or to “[r]esolv[e] a question arising in the administration of
a trust, including a question of construction of a trust instrument.” Id.
¶18 Here, the Foundation—as an interested party in the administration of
the Trust—invoked the trial court’s intervention by filing its petition to determine
whether American or Trinity II was entitled to the funds pursuant to the Trust.
Both American and Trinity II had made claims to the funds, and the Foundation
sought a declaratory judgment to resolve the question and ensure the proper
distribution of the funds. Therefore, the court had jurisdiction to decide this
matter.
¶19 American’s ripeness argument, however, is actually grounded in
corporate succession law as opposed to being a jurisdictional question. American
frames the threshold issue as being whether Trinity I actually ceased to exist—
which would trigger the need to determine the successor organization—since
1
All references to the Wisconsin Statutes are to the 2017-18 version unless otherwise
noted.
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No. 2018AP1294
Trinity I had only changed its corporate name, not its corporate identity.
American contends that because the change was solely to its corporate name, there
was no need to determine a successor organization, and thus the trial court’s
determination that Trinity II is the successor organization of Trinity I was
erroneous. We agree.
¶20 Basic law relating to corporate succession indicates that there is no
successor organization in this case, because Trinity I’s name change to American
did not render it a “new” corporation:
A change in the name of a corporation does not constitute a
reorganization of the corporation....
A mere change in the name of a corporation
generally does not destroy the identity of the corporation,
nor in any way affect its rights and liabilities. A change of
name by a corporation has no more effect upon the identity
of the corporation than a change of name by a natural
person has upon the identity of such person. It is the same
corporation with a different name.
McNally CPA’s & Consultants, S.C. v. DJ Hosts, Inc., 2004 WI App 221, ¶17,
277 Wis. 2d 801, 692 N.W.2d 247 (citation omitted). Put another way, “a
corporation ‘ordinarily continues existing unless there is a fixed period of
existence which has lapsed, the corporation has been voluntarily dissolved, or the
state has in some proper way taken away the corporate life.’” Id. (citation
omitted). None of those dissolution options apply here.
¶21 Moreover, it is undisputed that American operates under the same
tax identification number originally assigned by the Internal Revenue Service to
Trinity I; Trinity II uses a different tax identification number. Regardless of the
fact that Howard is not involved with American, that corporate entity remains the
same as Trinity I.
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¶22 Trinity II asks that we ignore corporate succession law and focus
instead on Larson’s intent in establishing the funds through the Trust.
Specifically, Trinity II argues that Trinity I no longer exists because American is
not operating in the same manner that Trinity I did with regard to dance
performances, classes, and the like. Therefore, Trinity II asserts that American
does not fulfill the charitable purpose stated in the Trust and, as a result, a latent
ambiguity exists.
¶23 Furthermore, Trinity II contends that since it is a dance company
also founded by Howard and is operating in the manner contemplated by Larson
when the Trust was established, the cy pres doctrine can be invoked to ensure that
Larson’s wishes are fulfilled by naming Trinity II as the recipient of the fund.
Trinity II relies on Bletsch v. Barth, in which our supreme court explained the
cy pres doctrine: “‘when a charitable purpose cannot be fulfilled according to its
terms, equity will attempt to do the next best similar charitable thing.’” Id., 25
Wis. 2d 40, 45, 130 N.W.2d 275 (1964) (citation omitted).
¶24 In our review of trust provisions, the language of the trust “should be
construed so as to give effect to the subjective intent of the settlor.” See State v.
Barr, 78 Wis. 2d 254, 258, 253 N.W.2d 901 (1977). “Where there is no ambiguity
inherent in the trust document, that intention may be ascertained from the
language of the trust document itself, considered in light of the circumstances
surrounding its drafting.” Id. The interpretation of trust provisions is a question
of law that we review de novo. See Furmanski v. Furmanski, 196 Wis. 2d 210,
214, 538 N.W.2d 566 (Ct. App. 1995).
¶25 We disagree with Trinity II’s assessment that an ambiguity exists in
the Trust. The plain language of the Trust states that the intended recipient of the
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funds is Trinity I or a successor organization. Although Trinity I changed its name
to American, it is still the same corporate entity—the law pertaining to corporate
succession is very clear as to that point. See McNally CPA’s & Consultants, 277
Wis. 2d 801, ¶17. Therefore, the “successor organization” provision of the trust is
not applicable here.
¶26 The Trust further states that if Trinity I—now American—does not
meet the requirements for distribution of the funds, the contingent beneficiary is
the University of Chicago. There is no provision in the Trust that allows for
another dance company—even a company with the same founder as Trinity I—to
make a claim to the fund in the event that Trinity I is not compliant with the
Trust’s requirements. Trinity II’s argument infers that Howard was the true
intended recipient of the fund because he created Trinity I, and thus the fund
should follow him to his new company, Trinity II. However, the Trust provided
for distribution to Trinity I, the corporate entity—not Howard. These terms, as set
forth in the Trust, are not ambiguous.
¶27 If there is no ambiguity in the text of a trust, “extrinsic evidence is
inadmissible for the purpose of determining intent.” Krause v. Krause, 14 Wis. 2d
490, 496, 111 N.W.2d 413 (1961). Therefore, the trial court erred in basing its
decision on extrinsic evidence received at trial regarding the employment structure
and production status of each company, rather than on the unambiguous language
of the Trust. See Barr, 78 Wis. 2d at 258. That language states that Trinity I—
now American—is the recipient of the fund established in the Trust, as long as
American complies with the requirements relating to distribution.
¶28 The question of compliance with those requirements remains with
the Foundation, as clearly stated in the Trust. This responsibility of the
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No. 2018AP1294
Foundation was recognized and acknowledged by the trial court; as such, it made
no findings with regard to compliance—by either American or Trinity II—with
the requirements of the Trust.
¶29 In sum, the trial court did not apply the proper standard of law to the
relevant facts in making its declaratory judgment. See Hefty, 312 Wis. 2d 530,
¶28. We therefore reverse the order naming Trinity II as the successor
organization to Trinity I, and remand this matter with directions to enter an order
declaring that American is the beneficiary of the fund, subject to the requirements
of the Trust, with the Foundation to determine compliance with those requirements
as directed in the Trust.
By the Court.—Order reversed and caused remanded with directions.
Not recommended for publication in the official reports.
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