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A state appeals panel ruled today that charities in New Jersey must return donations given for a specific purpose if the money will not be used as the donor intended. The case was brought by a Princeton couple seeking reimbursement of a $50,000 gift to a no-kill animal shelter.

(Ed Murray/The Star-Ledger)

TRENTON — People who cut checks to charities in New Jersey to help pay for everything from a new university building to an expansion of a local dog shelter are entitled to a refund if the organization does not use the money as intended, a state appeals court ruled today.

In a precedent-setting decision that affects hundreds of organizations across the state, a three-judge panel said nonprofit groups cannot ask for money for a specific purpose and then pull a bait-and-switch, spending it on something completely different.

"We believe that responsible charities will welcome this decision because it will assure prospective donors that the expressed conditions of their gift will be legally enforceable," said Judge Jose Fuentes, writing for the panel.

Nonprofit fundraising experts and charity watchdog groups supported the decision and said it would probably not have a negative impact on charities because ethical groups already abide by the intent of a donor.

"Nobody’s forcing the nonprofit to take that money," said Daniel Borochoff, president and founder of the Chicago-based CharityWatch, a watchdog group. "They only should take it if they are willing to accept the terms under which it is given."

But experts added that donors who give small amounts of money for specific purposes would probably see a limited benefit because they often have no way of accounting for how their money is eventually spent.

In 2007, Bernard and Jeanne Adler of Princeton sued SAVE, A Friend to Homeless Animals, a nonprofit, no-kill animal shelter founded in 1941 to serve the greater Princeton area, claiming it violated the terms of a $50,000 gift.

For at least 30 years, the Adlers had cared for homeless dogs and cats, often taking several animals at one time into their home until they were adopted. The couple also rescued two large dogs — a Bernese Mountain Dog and Newfoundland, court papers show.

Around 2002, the shelter held an event and solicited its top donors, including the Adlers, to support a plan to expand the shelter, including creating new rooms for large dogs and older cats who often face bleak prospects of being adopted.

According to court documents, the Adlers strongly supported the new rooms and agreed to give $50,000 to specifically put toward them in return for the right to name them. The couple made four separate donations from 2002 to 2004.

But in February 2006, the shelter told its donors it was merging with another charitable foundation and no longer planned to build the expansion. Instead, the shelter said, it would build a new, smaller facility in Montgomery Township.

The Adlers requested that their money be returned because it was no longer being used as intended. They sued after several failed attempts to persuade the shelter to voluntarily refund the money.

The trial court found the purpose of the donation was clearly understood, and a different, smaller facility in another location would not satisfy the conditions of the gift. The appellate panel agreed, noting such disputes often arise after a donor has died. In this case, the donor is alive and was able to testify to the purpose of the gift.

"In the end, the appellate decision relied on the very, very most basic principle of charitable giving: What was the donor’s intent?" Stuart Polkowitz, an attorney for the Adlers, said. "This is a rare case in terms of published opinions where we actually had a live donor, so the court could go right to the facts."

An attorney for the shelter said the decision was still under review.

Michael Baker, the president of the New Jersey chapter of the Association for Fundraising Professionals, said donors should discuss the purpose of their gift before making a donation and be clear about how they want the money to be used.

While many smaller donations are unrestricted, Baker said charities that accept donations with restrictions are ethically — and now legally — obligated to follow the intent of the donor. "Nonprofits are held to a higher standard," Baker said.

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