In re Certain Scholarship Funds

Batchelder, J.

Frank A. Wright, a resident of Keene, died on October 29, 1929, and within his will, probated November 4, 1929, *228was language establishing a charitable scholarship trust requiring that eighty percent of the annual income on the principal:

“shall be used to provide a college education for some poor and worthy Keene boy who is a scholar in the Keene High School. Said boy is to be recommended by the Principal of the Keene High School and . . . approved by the Board of Education of the Union School District; or its successors

Given the generosity of the Wright Scholarship Trust and the resources available to it, the scholarship has generally been awarded every four years. In the last decade, the Wright Scholarship was awarded in 1982, 1986, and 1988.

Maurice A. Alger, also a resident of Keene, died on February 28, 1970, and within Mr. Alger’s will, probated March 6,1970, was similar language establishing a charitable scholarship trust requiring that thirty percent of the annual income on the principal:

“shall be used to provide tuition for one year for some worthy protestant boy who is a scholar at the Keene High School, to attend some college in good standing. Said boy is to be recommended by the principal of the Keene High School and . . . approved by the Board of Education of the Union School District or its successors . . . .”

The Alger Scholarship has been awarded in the amount of $3,400 annually for five out of the last six years.

From the record and the agreed statement of facts, there is no indication that a female student has ever applied for a scholarship under either of the trusts. Likewise, because there is no independent information available to the high school principal to verify the religious affiliation of the applicants, it is unclear whether any non-Protestant students have applied for, or have been awarded, a scholarship under the Alger trust. The principal of the Keene High School assumes that the applicants have read the requirements of the scholarship and have applied according to its terms. Once the students have applied, the school board selects who shall receive the scholarships based upon the recommendation of the principal of Keene High School. The awards are announced during an assembly, and the funds are provided from the trust funds which are held by the City of Keene Trustees of Trust Funds. Thus, the facts of this case reveal that there are three different instances in which public officials are involved in the administration of these discriminatory trusts. We *229note in passing that there currently are, and most likely will continue to be, students at the Keene High School who meet both the Wright and Alger Scholarship requirements.

On October 8,1987, the School Board of the Union School District of Keene (School Board), fearing that its actions in the administration of these religion and gender-based discriminatory trusts may be violative of constitutional guarantees of equal protection, filed a petition in equity seeking the removal of the discriminatory provisions. At trial, the Superior Court (Hollman, J.) reformed the language of the trusts, utilizing its cy pres powers to replace the terms “boy” and “protestant boy” with the term “student.” RSA 498:4-a. In particular, the court held that it was unconstitutional “State action” for the School Board, as an arm of the State, to participate in the administration of religion and gender-based discriminatory trusts. Furthermore, the court found that it would be exercising constitutionally impermissible “State action” were it to employ its equitable powers of deviation, as urged by the Director of Charitable Trusts, to reform the trusts by striking the language requiring the participation of public officials and appointing private persons to act in their absence. In arriving at a remedy, the court reasoned that it was appropriate to use its ey pres powers to preserve the primary intent of the testators, which was to aid deserving students at Keene High School in their pursuit of a college education. For the following reasons, we affirm.

On appeal the defendant, the Attorney General, Director of Charitable Trusts, presents the following two questions: (1) whether the actions of the Union School District of Keene, in participating in the administration of religion and gender-based discriminatory trusts, may be viewed as “State action” within the ambit of part I, article 2 of the New Hampshire Constitution and the equal protection clause of the fourteenth amendment to the United States Constitution and, if so, (2) whether the court may employ its equitable powers of deviation to reform the trust by striking the language requiring the participation of public officials and appointing private persons to act in their absence, thereby terminating any State participation. In affirming the decision of the trial court, we must answer the first question in the affirmative and the second in the negative.

Since we have been presented with both State and federal constitutional claims, we will address the State constitutional claim first. State v. Ball, 124 N.H. 226, 231, 471 A.2d 347, 350 (1983). To the extent that we look to the United States Supreme Court for guidance *230in approaching these difficult issues, we borrow only the analytical framework of the Court’s decisions in our interpretation of part I, article 2 of the New Hampshire Constitution, and as such, we are not “tied to present or future federal pronouncements on the issue.” State v. Bradberry, 129 N.H. 68, 73, 522 A.2d 1380, 1382 (1986). Part I, article 2 of the New Hampshire Constitution as amended provides as follows:

“[Art.] 2d. [Natural Rights.] All men have certain natural, essential, and inherent rights — among which are, the enjoying and defending life and liberty; acquiring, possessing, and protecting, property; and, in a word, of seeking and obtaining happiness. Equality of rights under the law shall not be denied or abridged by this state on account of race, creed, color, sex or national origin.”

The first step in our inquiry requires us to determine whether there is the necessary “State action” present to implicate the provisions of our constitution. As the United States Supreme Court in Shelley v. Kraemer, 334 U.S. 1, 13 (1948), stated:

“Since the decision of this Court in the Civil Rights Cases ... the principle has become firmly embedded in our constitutional law that the action inhibited by the first section of the Fourteenth Amendment is only such action as may fairly be said to be that of the States. That Amendment erects no shield against merely private conduct, however discriminatory or wrongful.”

As previously suggested, there are three levels of potential “State action” implicated by this appeal: (1) screening of applicants by the principal of the Keene High School, (2) the participation of the School Board in the selection of students to receive the scholarships, and (3) the role of the City of Keene Trustees of Trust Funds in the administration of the trust funds.

The determination of what acts may properly be considered “State action” within the meaning of part I, article 2 of the New Hampshire Constitution must be established on a case-by-case basis. See Burton v. Wilmington Pkg. Auth., 365 U.S. 715, 722 (1961). The development of a formula to determine whether or not “State action” is present has been labeled an “impossible task.” Id. “Only by sifting facts and weighing circumstances can the nonobvious involvement of the State in private conduct be attributed its true significance.” Id.

*231In Pennsylvania v. Board of Trusts, 353 U.S. 230 (1957), the United States Supreme Court held that the administration of a discriminatory trust by an agency of the Commonwealth of Pennsylvania, benefitting poor male white orphans, was constitutionally impermissible. Similarly, of those cases in other jurisdictions that have addressed this issue, the majority have held that the administration of discriminatory trusts by agencies of the State is “State action” subject to the constitutional mandates of equal protection. See In re Crichfield Trust, 177 N.J. Super. 258, 261, 426 A.2d 88, 89 (1980); Trammell v. Elliott, 230 Ga. 841, 845, 199 S.E.2d 194, 197 (1973); Bank of Delaware v. Buckson, 255 A.2d 710, 713-14 (Del. Ch. 1969). Accordingly, we hold that the participation by the principal, School Board, and the City of Keene Trustees of Trust Funds, as agents of the State, in the administration of these discriminatory trusts amounts to “State action” within the ambit of part I, article 2 of the New Hampshire Constitution. Since the State’s participation in the administration of either the Alger or Wright Scholarship trust cannot even withstand the lowest level of judicial scrutiny, we need not determine what level of review should be employed in cases of gender and religious discrimination that are expressly forbidden by the most recent amendment to part I, article 2 of the New Hampshire Constitution. Cf. Belkner v. Preston, 115 N.H. 15, 18, 332 A.2d 168, 170-71 (1975) (part I, article 2 was amended in 1974 providing that equality of rights under the law shall not be denied or abridged on the basis of, inter alia, creed or gender). Having concluded that the State’s participation in the beneficiary selection process, management, and miscellaneous administration of these trusts is constitutionally impermissible, we now turn to the issue of whether the trial court erred in employing the cy pres doctrine to reform these trusts, replacing the terms “boy” and “protestant boy” with the term “student.”

The trial court found, based upon the facts before it, that there was no indication that Mr. Wright or Mr. Alger would not have responded to the changes in attitudes experienced by society since the creation of these trusts. Furthermore, the court could not find, from language of the wills, any particular discriminatory intent. Thus, the trial court concluded that the primary intent of both testators was not to discriminate against women and non-Protestants, but to assist the students at Keene High School in their pursuit of higher education. After finding a general intention to devote the property to a charitable purpose, and in the absence of a gift-over provision, the *232trial court invoked the doctrine of cy pres to reform the terms of the trusts. See IVA Scott, The Law of Trusts § 395, at 384 (4th ed. 1989). As we have stated on numerous occasions, we will not disturb the trial court’s findings of fact or rulings of law unless they are unsupported by the evidence or erroneous as a matter of law. See Desmarais v. Joy Mfg. Co., 130 N.H. 299, 303, 538 A.2d 1218, 1220 (1988).

In New Hampshire, the application of the cy pres doctrine is controlled by RSA 498:4-a, which provides in pertinent part:

“498:4-a. Cy Pres Doctrine. If property is or has been given in trust to be applied to a charitable purpose, and said purpose or its application is or becomes impossible or impracticable or illegal or obsolete or ineffective or prejudicial to the public interest to carry out, the trust will not fail. Upon petition by the trustee or trustees or the attorney general, the superior court may direct the application of the property to some charitable purpose which is useful to the community, and which charitable purpose fulfills as nearly as possible the general charitable intent of the settlor or testator. . . .”

(Emphasis added.) This statute is of great significance because it contains language allowing the court to apply the doctrine of cy pres where the purpose or application of a charitable trust becomes “illegal or obsolete or ineffective or prejudicial to the public interest to carry out.” RSA 498:4-a. Concern for the public’s interest may be found throughout the historical development of the cy pres doctrine, see DiClerico, Cy Pres; A Proposal For Change, 47 B.U.L. Rev. 153, 154 (1967), and the presence of this language distinguishes the application of cy pres in this case from other cases where the courts have been reluctant to do so. See Matter of Estate of Wilson, 465 N.Y.S.2d 900, 905, 452 N.E.2d 1228, 1233 (1983) (charitable intent must be rendered impossible or impracticable, and so long as there were available beneficiaries that qualified under the testator’s specific intent there was no impossibility).

Part I, article 2 of the New Hampshire Constitution forbids the State to discriminate on the basis of creed and gender. The New Hampshire voters, in ratifying this amendment, have firmly established public policy that demands equal protection for all, regardless of creed or gender. Although the views of society are ever changing, they can hardly be discounted or overlooked when they become the object of a constitutional amendment. The statutory provision requires that, upon finding a trust either illegal or prejudicial to the *233public interest, the “charitable purpose” of the trust may be reformed or redirected so as to fulfill the testator’s intent as nearly as possible. In accordance with this directive, we hold that the trial court properly invoked the doctrine of cy pres to strike the terms “boy” and “protestant boy” and to replace them with the term “student.”

Notwithstanding, the defendant argues that the court should employ its equitable powers of deviation to reform the trust, striking the language requiring the involvement of public officials, and replacing it with language designating private persons to carry out the administration of the trusts. We disagree. Our cy pres statute, quoted above, directs our courts to reform the illegal purpose, not to preserve it as far as possible by modifying those provisions requiring public administration of the trust. But even if our statute were uncertain on this issue, our review of the two leading cases on this subject would persuade as that the trial court followed the proper course.

The two leading cases that have dealt with this issue are Commonwealth of Pennsylvania v. Brown, 392 F.2d 120 (3d Cir.), cert. denied, 391 U.S. 921 (1968), and Matter of Estate of Wilson supra. In Commonwealth of Pennsylvania v. Brown, the United States Court of Appeals for the Third Circuit ruled on the constitutionality of the actions taken by the Orphan’s Court in substituting a private trustee for a public trustee to administer a discriminatory trust established by Stephen Girard. The court held that the substitution and selection of trustees by the Commonwealth, in an effort to uphold the discriminatory purposes of the trust, did “significantly encourage and involve the Commonwealth in private discriminations” and was therefore unconstitutional “State action.” Brown, 392 F.2d at 125 (quoting Reitman v. Mulkey, 387 U.S. 369, 381 (1967)). The Brown court explained that its holding was not based solely on any momentum created by the State’s involvement throughout the institutional life of the trust, see Evans v. Newton, 382 U.S. 296 (1966), but was also based upon the obvious consequences of the State’s participation in the modification of the trusteeship structure from public to private trustees; i.e., the perpetuation and continuation of discrimination at the Girard College. Commonwealth of Pennsylvania v. Brown, 392 F.2d at 125.

In contrast, the New York Court of Appeals in Matter of Estate of Wilson, 465 N.Y.S.2d 900, 452 N.E.2d 1228, held that the use of the court’s equitable powers to facilitate the continued administration of *234discriminatory trusts, replacing the school district as trustee with a private trustee, was not “State action” within the ambit of the fourteenth amendment. Id. at 909, 452 N.E.2d at 1237. The Wilson court stated:

“It is only when the State itself discriminates, compels another to discriminate, or allows another to assume one of its functions and discriminate that such discrimination will implicate the amendment.”

Id.

In choosing between these two opposing views, we are necessarily required to choose between the competing values that they represent. Starting from the assumption that a public trust administered through “State action” violates our constitution when it discriminates on grounds of sex or religion, the court must ask whether its first priority is to end the discrimination or to preserve it by substituting a private administrative mechanism that would, if chosen by the testator, have carried no unconstitutional implication. As we said above, we believe that the appropriate source of values for our judgment is the constitution, which forbids the agencies of the State to act in a manner that would preserve the constitutionally impermissible desires of the testator. We therefore reach the same result ordered in Commonwealth of Pennsylvania v. Brown supra. Furthermore, we hold that the use of the court’s powers to appoint or reappoint a trustee in those cases where the trust involved is, and has been from its inception, a privately administered lawful discriminatory trust, does not rise to the same level of State involvement so as to be considered significant. See Moose Lodge No. 107 v. Irvis, 407 U.S. at 163.

Our society permits discrimination in the private sector in recognizing that the nature of human beings is to associate with, and confer benefits upon, other human beings and institutions of their own choosing. Such private decision-making is a part of daily life in any society. However, when the decision-making mechanism, as here, is so entwined with public institutions and government, discrimination becomes the policy statement and product of society itself and cannot stand against the strong and enlightened language of our constitution.

Affirmed.

Brock, C.J., dissented; the others concurred.