Coe College may no longer count the value of a donated 1932 Grant Wood mural toward its endowment, the Iowa Supreme Court ruled Friday, shrinking the institution’s nest egg by $5.4 million at a time those funds are becoming increasingly crucial to private colleges.
The ruling came after the Cedar Rapids school appealed a lower court’s decision that a 1976 donation of “The Fruits of Iowa” mural should never have been counted as an “unrestricted gift” that conceivably could be sold, and thus added to its endowment.
Although Coe had been doing so for 40 years, its auditors in 2016 flagged that as a mistake and reclassified the paintings as “restricted” assets — dinging Coe’s endowment and inciting the court challenge.
“Although Coe has demonstrated that its endowment has dropped by $5.4 million due to the reclassification of the paintings as a restricted gift, it has not offered proof of actual financial difficulties resulting from them,” according to the high court’s ruling.
Coe administrators previously boasted of a robust endowment, and in June 2016 reported it at $86.1 million, according to data provided by the Chronicle of Higher Education.
Coe officials on Friday did not provide an updated endowment value or a comment on the decision.
But the college argued, according to court documents, that a letter with the gift characterizing Coe as a “permanent home” for the mural was meant only to contrast its prior situation — which had been temporary — and was not meant as a “bar to the college (from) selling or otherwise disposing of the paintings.”
The state Attorney General, Office, resisting Coe’s petition “in each respect,” disagreed — noting a critical part of the donation, according to the letter, was to recognize Eugene C. Eppley with a bust and plaque.
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Hotel magnate Eppley in 1932 commissioned renowned artist Wood to paint the mural in the Cedar Rapids Hotel Montrose. When the hotel sold in 1957 — 15 years after Wood’s death — Eppley took down the mural, separated it into seven panels and loaned the oil paintings to Coe.
The loan was indefinite with the understanding the mural could be taken back at any time after a year, according to records. It remained on display at Coe, however, for nearly 20 years.
The paintings’ ownership eventually was transferred from Eppley to his charitable foundation, which in 1976 terminated its previous loan agreement and donated the mural to Coe with a gift letter. That letter, according to court documents, said Coe would serve as the “permanent home” for the Wood paintings, “hanging on the walls of Stewart Memorial Library.”
The letter also called for a bust of Eppley with a plaque reading — in part — “The Grant Wood paintings the Fruits of Iowa were given to Coe College by the Eugene C. Eppley Foundation, Inc.,” according to the court documents.
Although they’ve been loaned out on occasion, the paintings remain on display in the Perrine Gallery at Stewart Memorial Library — where they’ve continued to grow in value, adding to Coe’s endowment until the audit changed that three years ago.
Coe, in its argument, noted the Eppley Foundation’s mission was to support charities through grants, “not to disseminate art.”
But the district court in January found the foundation’s intent was to make Coe the mural’s permanent home — and, additionally, that it had no reason to remove the restriction. The Supreme Court agreed, pointing to how much the letter stressed the importance of honoring Eppley.
“Four paragraphs in the Eppley Foundation’s 1976 gift letter were devoted to the Eppley memorial, only one to the paintings,” according to the court order. “We think it is fair to infer that the donor intended a symbiotic relationship between the two — the paintings and the commemoration of Eppley.
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“Such a relationship depends on the paintings remaining at Coe College,” it continued. “The effort to honor Eppley would cease to have the same significance without the presence of the Grant Wood artwork.”
The court agreed to look at whether it should lift the restriction by considering whether the gift intention had become “impractical, illegal, or impossible” for Coe,
“We are not convinced that implementing the Eppley Foundation’s specific charitable purpose of honoring Eppley and dignifying and beautifying the Coe campus through the display of the Wood paintings in the Stewart Memorial Library has become impossible or impracticable,” according to the ruling.
The problem, the court ruled, is not that Coe no longer wants the gift or would prefer cash.
“Instead, due to an unanticipated increase in the value of Grant Wood’s art, the paintings now are worth millions of dollars and would make up 7 percent of the college’s endowment, rather than the original 1 percent,” according to the order. “While we sympathize with difficulties faced by small private colleges in a trying financial environment, it is difficult to see this fortuitous increase in the value of an asset as rendering the original restrictions impracticable or impossible to meet.”
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