The opinion of the court was delivered by: PARKER
In this proceeding brought by the United States
the Court is called upon to construe the terms and conditions of two separate charitable gifts made to the Smithsonian Institution in 1969 and to instruct the Smithsonian as to its duties and obligations as trustee. The gifts were substantial and were among the largest ever made to the Institution. Their present combined value is in the neighborhood of $ 15 million.
While the donors were different, Mr. J. Seward Johnson of the Johnson & Johnson pharmaceutical family was a moving force in each. The gifts were related to oceanography, an area in which Mr. Johnson had long maintained an interest.
The first, known as the Johnson gift, was made in October, 1969, by Seward Johnson. It consisted of Johnson & Johnson stock whose value at the time was approximately $ 2 million.
The second, known as the Hunterdon gift, was made two months later by the trustees of the Hunterdon Medical Center School of Health in Flemington, New Jersey. The School was established in 1965 by Mr. Johnson to provide education in preventive medicine, early diagnosis and nutrition. His contributions provided its entire support. The School did not develop as planned, however, and in the fall of 1969, the trustees decided to dissolve it. They in turn made a gift to the Smithsonian of one-half of the School's assets valued at about.$ 3.6 million.
The petition of the United States names as interested persons the Attorney General of the United States as "parens patriae of the public beneficiaries of this charitable trust," J. Seward Johnson in his individual capacity and as president of the Harbor Branch Foundation, Inc., and Mr. Edwin A. Link. Harbor Branch Foundation, Inc.,
a private operating foundation under the tax laws, is an organization through which Mr. Johnson has expressed his continuing interest in oceanography. Early in this proceeding, the Court approved the intervention of Harbor Branch and the participation of Seward Johnson as amicus curiae.
The central issue presented is what restrictions are imposed on the use of the income from these gifts. The Smithsonian contends that at this time it is free to use the proceeds from both gifts for generalized oceanographic or underwater oceanographic undertakings. Harbor Branch and Mr. Johnson contend that the terms of the two gifts require that the proceeds be used for a specific oceanographic undertaking rather than oceanographic research generally. That specific undertaking is the so-called "Johnson-Sea-Link" submersible program currently being carried on by the Harbor Branch Foundation at Fort Pierce, Florida.
Alternatively, the Smithsonian argues that if the obligation imposed by the October letter was both to develop and to operate the submersible, it was relieved of that obligation by its determination in 1973 that such a course had become impossible or impractical, a contingency expressly provided for in the October 17 letter. It contends that in 1973 further development and operation of the submersible became impractical because of circumstances arising from a serious accident involving the submersible and resulting in two fatalities. One such circumstance following the accident was the transfer of legal title to the Johnson-Sea-Link from the Smithsonian to Harbor Branch. In turn, Harbor Branch agreed for a time to fund operation of the submersible in return for Smithsonian's assumption of funding of certain other oceanographic endeavors of interest to the Foundation.
As to the Hunterdon gift, the Smithsonian argues that all relevant restrictions are set forth in the trustees' resolution of December 18, 1969, distributing one-half the School's assets.
That resolution specified that the gift was to be used for the support of Smithsonian's programs of oceanography, with special emphasis on underwater oceanography.
Harbor Branch responds that the Smithsonian's present obligation is to use the income from both gifts to develop and operate a system of submersibles and support vessels, which it describes as the Johnson-Sea-Link submersible project; that the Johnson and Hunterdon gifts were in effect and should be construed as one; and that the Hunterdon transfer was subject to the same restrictions as the earlier Johnson gift, namely, the funds were to be used for the Johnson-Sea-Link project.
The Foundation finds no integrated trust instrument as to either gift. Accordingly, it maintains that one must look beyond the October 17 letter and the December 18 resolution for other indicators of the restrictions on the two gifts. Harbor Branch would have the Court consider evidence of various circumstances surrounding the gifts, including: statements by the principals, related documentary evidence, the conduct and statements of the Smithsonian officials administering the gifts, subsequent statements of J. Seward Johnson, and present testimony of both Mr. Johnson and the former Hunterdon trustees as to their intentions in 1969. It further argues that whether or not the development and operation of the submersible project became impossible or impractical following the 1973 accident which it disputes the submersible program is eminently possible and practical today as demonstrated by its present successful operation at Fort Pierce.
Based upon these considerations, Harbor Branch asks this Court to direct the Smithsonian to use the income from both gifts to support the Johnson-Sea-Link program at Fort Pierce and to reimburse it for certain outlays previously made for this purpose.*
The Court's subject matter jurisdiction over this matter is found in 28 U.S.C. §§ 1331 and 1345. Venue is proper under 28 U.S.C. § 1391(b).
The factual findings and legal analysis of the Court are set forth in the discussion which follows:
The Smithsonian Institution has long been involved in oceanographic undertakings but it was only in the early 1960's that an Oceanographic Sorting Center was established to identify, catalogue, and make available oceanographic specimens from throughout the world. In aid of these underwater endeavors, the Smithsonian has made use of scuba divers and submersibles. Beginning in the mid and late 1960's its oceanographic endeavors were coordinated by Dr. I. Eugene Wallen, as Director of Oceanography and Limnology, and later as Director of the Department of Science. As Assistant Director of Oceanography for the Museum of Natural History, he established the Smithsonian's Sorting Center and in his various capacities, he assumed responsibility for seeking and negotiating contracts, gifts, and grants for oceanography.
In 1963, Dr. Wallen met Edwin A. Link, the noted engineer and inventor, who at the time was designing submersibles and other devices for underwater research. Mr. Link was the inventor of the Link Trainer, a device used to train airplane pilots during World War II. Because of their shared interests, the two collaborated on several Smithsonian projects making use of the submersibles and underwater devices designed by Mr. Link.
J. Seward Johnson and Link were friends and it was through this association that Mr. Johnson became interested in the work of the Smithsonian and later was introduced to Dr. Wallen. Shortly thereafter, in the period 1968-1969, he participated financially and otherwise in several of the Smithsonian's oceanographic projects. In these projects, use was made of a submersible and other equipment designed and developed by Mr. Link.
Subsequently Dr. Wallen and Mr. Link discussed the possibility that Link might develop a submersible for use of the Smithsonian which lacked one of its own. The submersible would be revolutionary in design, having an acrylic sphere to provide unobstructed vision for the pilot and observer and a "lock-out" chamber permitting divers to leave the vehicle while it was submerged. Such direct access to the underwater environment would permit divers to gather specimens which could not be collected by traditional means such as by use of drag nets.
Mr. Johnson, after learning of such plans, became interested in and expressed a desire to participate in development of the submersible. Mr. Link then suggested to his friend that he make a gift to the Smithsonian with instructions that it be used to develop the submersible.
In June, 1969, Mr. Johnson transferred to the Smithsonian a block of Johnson & Johnson stock worth approximately $ 200,000, to be used for underwater research projects. He suggested to Dr. Wallen that the gift be used in part to construct the submersible in which he and Mr. Link were interested.
In September, 1969, partly at the urging of Dr. Wallen, he decided to make a substantially larger gift. In planning the gift, he was of course mindful of its tax consequences. To preserve his unlimited charitable deduction Mr. Johnson was required to donate a sizeable percentage of his net income to charity each year. Tax considerations also required that his gifts be completed quickly, before the end of that year, and he therefore had to act within a matter of months.
No agenda was prepared for the meeting. The general outlines of the proposed gift of Johnson & Johnson stock were developed, but the amount of the donation and any specific restrictions were not established. Following the meeting, Mr. Myers served as a liaison between the Smithsonian and Mr. Johnson in working out the details, specific language and terms of the proposed gift.
Immediately thereafter, on September 30, Mr. Johnson informed Morgan Guaranty Trust Company that he would shortly advise them to transfer a specified number of shares of Johnson & Johnson stock to the Smithsonian. He instructed Morgan Guaranty in making the transfer to advise the Smithsonian that the transfer was "for the purposes and uses agreed to by the Smithsonian Institution and (Mr. Johnson) at a conference . . . on . . . September 26, 1969, and that the details of the grant are in the hands of respective counsel."
Morgan Guaranty forwarded a certificate for 14,500 shares of Johnson & Johnson stock to the Smithsonian's Treasurer, T. Ames Wheeler, on October 3, and referred to the "purposes and uses" agreed to at the September 26 meeting and the fact that the details were in the hands of respective counsel as directed by Mr. Johnson.
Mr. Wheeler's October 8 letter of acknowledgment recognized that the restrictions on the gift had not yet been established, noting that the stock represented "a gift by Mr. J. Seward Johnson to the Smithsonian Institution for purposes being designated by Mr. Johnson."
It was clearly understood at that time by the Smithsonian, that the purposes of and restrictions on the gift of stock, then valued at approximately $ 2 million, had not yet been formally designated by Mr. Johnson but would be forthcoming.
During this period, Mr. Myers and Dr. Wallen had a number of discussions regarding the gift. The Smithsonian's General Counsel did not participate in these discussions. While Dr. Wallen made suggestions and had an input in the language used in the gift instrument, he did not make any demands or insist that any particular terminology or form be used. He and the Smithsonian were clearly anxious to secure the gift of stock and were willing to accept the terms imposed by Mr. Johnson.
On October 17, 1969, Seward Johnson sent a letter, drafted with his attorney's assistance, to Mr. Ripley, setting forth his intentions in making the gift. The letter, noting that the gift was an outgrowth of the September 26 meeting, directed:
(1) that the principal of the gift "shall generally be kept intact;"
(2) that the income "be used in the first instance in assuring the successful completion and operation of the research submersible vehicle being given separately by Edwin A. Link and myself;"
(3) that "in the unexpected event that the income and other funds are insufficient to properly equip and operate the submarine, limited emergency use of the principal for this purpose would be appropriate;"
(4) that the fund be designated the " "Seward Johnson Trust Fund for Oceanography' . . . to assure that the income should be available for broader use in underwater oceanography beyond the life of the specific submersible mentioned here;" and
The letter was an instrument of gift and set forth in full its purposes and restrictions. Mr. Johnson did not reserve in the instrument the right to terminate, alter, modify, or amend the terms of the gift nor did he provide for reversion under any circumstances. It was otherwise a clear expression of intent. The stock was given in trust and the Smithsonian was to serve as trustee. As evidenced by the letter, "the principal (was to) generally be kept intact" and the fund designated as the "Seward Johnson Trust Fund for Oceanography." The primary objective of the trust was to assure the successful development and operation of the submersible then being constructed by Edwin Link, subsequently named the Johnson-Sea-Link.
Mr. Johnson intended his gift to be used to operate as well as develop the submersible. His letter specifically states that the income was to be used "in assuring the successful completion and operation" of the submersible. All efforts, including even the extreme step of invasion of principal, were to be made "to properly equip and operate" it. Finally, the gift was placed in trust to provide for broader use in oceanography "beyond the life of the specific submersible mentioned here."
On October 17, the submersible was not a finished vessel but under construction and development on Mr. Link's drawing board. Mr. Johnson was thus not in a position to specify how it should best be equipped or operated or what was necessary to assure its successful completion and operation. He intended, however, that all necessary steps be taken to achieve that result.
It is generally recognized that the development of an invention such as the Johnson-Sea-Link involves by definition a continuing series of progressive changes. According to Mr. Link, a model prototype is never completed. Dr. Wallen similarly acknowledged that there was a constant, evolutionary process for an invention and that the Johnson-Sea-Link was not yet complete.
The October 17 letter does not specify the steps the Smithsonian should pursue to properly equip and operate the submersible and to assure its successful development. However, the trial testimony, not disputed in any manner, established that several measures are necessary: namely, a tender vessel and a second submersible to the extent that it is needed for safety reasons.
A tender vessel, sometimes referred to as the mother ship, performs various necessary functions. It transports the submersible and its prospective occupants to the area of operations, launches and recovers the vehicle, and keeps watch on and communicates with the submersible while on its mission. Finally, most of the maintenance to the submersible is undertaken from the deck of the tender vessel.
Roger Cook, Harbor Branch's director of submersible operations, explained the various functions of the tender vessel. An important consideration, he claimed, was that with a support vessel for transportation, submersible operations could be conducted ten to twenty miles from the shore and a number of dives completed over a period of several days. Without a mother ship only one dive could be undertaken. By way of illustration he testified that the Johnson-Sea-Link was engaged in such an extended mission in searching and exploring the U.S.S. Monitor, a Civil War vessel submerged off the North Carolina coast.
Mr. Cook had more than ten years' experience piloting and operating submersibles including four years in the Navy before coming to Harbor Branch. In his approximately 600 submersible dives, only three or four had been without a tender vessel and these had been in the confines of a canal, not in the "hostile environment of the ocean."
The Johnson-Sea-Link has been approved to conduct dives to a depth of 1000 feet. A separate decompression chamber, like that aboard the Johnson-Sea-Link's tender vessel, the R/V Johnson, is required by the Occupational Safety and Health Administration for submersible dives below 200 feet. While the Occupational Safety and Health Act
was not passed until 1970, its regulations are nonetheless applicable and binding as related to the proper equipment and operation of the Johnson-Sea-Link.
Moreover, the Smithsonian has recognized that the R/V Johnson, its handling crane, and the Johnson-Sea-Link are part of an integrated system. In its annual report for fiscal 1973, Smithsonian Year 1973,
the Institution observed that a crane to launch and recover the Johnson-Sea-Link from ...