Our previous article “Who owns the America’s Cup” focussed on the likelihood that the first Deed of Gift was defective. That Schuyler was aware of this is shown by the final paragraph of his letter of 9 July 1857, which accompanied the unsigned Deed sent to the New York Yacht Club:
“I merely changed the date of the communication to this time [sic] as it does not seem necessary to go back in any official of the matter beyond this letter of explanation which should be entered on the minutes.”
We must remember that in this context, the mid 19th century meaning of “official” was “one having conductive authority”.
Changing the Deed

Having got the New York Yacht Club to accept the Cup on the basis of an unsigned Deed, George Schuyler had no compunction about modifying it on the two occasions the New York Yacht Club wanted this, despite the clear wording of that unsigned Deed:

"the condition of keeping it open to be sailed for by Yacht Clubs of all foreign countries, upon the terms above laid down, shall forever attach to it"

Regardless of the glaring legal flaws in its acceptance of the Cup based on an unsigned Deed, that phrase means that the New York Yacht Club had no right to have the Deed amended, only the right to hand it over to a winning challenger. Nevertheless, it was on the basis of the third Deed of Gift that the New York Yacht Club applied to set up the George Schuyler Trust, in 1956.

An Uncharitable Trust?

There are a number of reasons that could lead an intelligent observer to wonder whether the George Schuyler Trust would pass the test of scrutiny by a court. The first, as we mentioned in the previous article, is that it was supposedly set up inter vivos at a time when that was legally impossible in New York.

Secondly, contrary to popular myth,which says that all the world's yacht clubs are beneficiaries, there are no beneficiaries.

It is hard to understand how a Charitable Remainder Trust - and that is how the George Schuyler Trust is designated - can exist without beneficiaries and, indeed, how such a trust can exist in perpetuity, which was the very reason for its creation.

The other big question concerning the George Schuyler Trust is whether it is, in fact, a true charitable trust. In a footnote to the Mercury Bay v San Diego case, the New York Court of Appeals said (citing Nottage 1895) "While there is authority for the proposition that trusts created for the purpose of promoting sporting events are not true charitable trusts no one has disputed the characterization of this trust as a charitable trust." [In Nottage - a case concerning the gift of a cup to the Yacht Racing Association of Great Britain - the ruling was that benefit to the community was not the natural, direct, necessary result of the gift, which meant that it was not beneficial in such a manner as to constitute a charity.] The Courts involved in Mercury Bay did not rule on the charitable nature of the George Schuyler Trust, since they were not asked to do so; both litigants had a vested interest in not asking for a ruling, since a ruling that the Trust was not charitable could have voided it, since non-charitable trusts cannot exist in perpetuity.

New York Law

Whether the George Schuyler Trust is charitable has a clear bearing on whether the New York Supreme Court has jurisdiction over it, but a charitable nature does not preclude the fact that the NYSC may not have the jurisdiction it is generally believed to have. Clearly, Schuyler and the other owners of the America's Cup foresaw that the Cup might leave New York, yet there was no attempt to impose New York jurisdiction on foreign challengers. The only document that purports to confer New York jurisdiction on foreign yacht clubs in disputes concerning the Cup is a "choice of law" provision in an Assignment and Acceptance Agreement that was first made between the Royal Perth and San Diego Yacht Clubs, in February 1987, and has been accepted by all subsequent trustees. Whether that clause is enforceable, when neither the defender, the challenger, nor the Cup itself is in the state of New York is debatable.

Marian Martin - May 2009
To be continued ....
In addition to stories in this 33rd America's Cup section, you can read stories from the 32nd America's Cup . You will also find some older stories and interviews, from the last event, HERE.
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