- KOPSOMBUT-MYINT BUDDHIST CENTER, v. STATE BOARD OF EQUALIZATION, 728 S.W. 2d 327 (1986)(Two members of a Buddhist organization formed a joint venture and bought property for a Buddhist organization. They requested a property tax exemption. The appeals court, among other things, implied that an oral “trust” was created.)
- . Excerpts from PARSHALL CHRISTIAN ORDER v. BOARD OF REVIEW, COUNTY OF MARION, 315 N.W.2d 798 (1982)[Family bought land and asserted claimed property tax exemption as a “religious institution or society.” The court’s definition of “religious society” is very insightful considering that the Bible is not quoted or referred to.]
1. KOPSOMBUT-MYINT BUDDHIST CENTER, v. STATE BOARD OF EQUALIZATION, 728 S.W. 2d 327 (1986)
(Two members of a Buddhist organization formed a joint venture and bought property for a Buddhist organization. They requested a property tax exemption. The appeals court, among other things, implied that a “trust” was created.)
I. The Temple’s Entitlement to an Exemption
A. The Kopsombut-Myint Buddhist Center’s 1982 Exemption
The Assessment Appeals Commission found that the Kopsombut-Myint Buddhist Center had not met the requirements of Tenn. Code Ann. § 67-5-212(a)(1) for two reasons. First, the Commission stated:
The restriction in the statute precludes ownership by an individual or individuals and by implication suggests ownership which has a foundation by law, whether the mode of its operation be by way of legislative enactment, a corporation or a trust, but imposing always an irrevocable use of the property for exempt purposes.
Second, the Commission held:
The property was acquired by Myint and Kopsombut in December 1981; the joint venture was not formalized until almost a year later on November 12, 1982 at which time a written agreement was drawn that went into substantial detail about the duties of Myint and Kopsombut, the events of default, the transfer of the property and profit or loss. It appears that the conditions placed on the two parties by the agreement in November mayhave had the effect of forming a trust whereas Myint and Kopsombut acted as trustees for the Buddhist Center. Until this formulation of the restrictions set out in the agreement, the joint venture was an association of two men who had equal right of control over the property. The fact that the individuals did not exercise this right is of no consequence nor is the altruistic intentions of the joint venturers. Either party or both who wished to transfer his interest in the property could have done so with impunity.
These findings indicate that the Commission denied Kopsombut-Myint Buddhist Center’s 1982 exemption simply because the joint venture agreement had not been reduced to writing prior to the beginning of 1982. We infer that the Commission reasoned that until Myint and Kopsombut executed this agreement there was no binding, irrevocable commitment to hold and use the property for exempt purposes. We disagree. In fact, all the evidence is to the contrary.
A valid trust need not be in writing. It can be created orally unless the language of the written conveyance excludes the existence of a trust. Sanderson v. Milligan, 585 S.W.2d S.W.2d 573, 574 (Tenn. 1979); Linder v. Little, 490 S.W.2d 717, 723 (Tenn. Ct. App. 1972); and Adrian v. Brown, 29 Tenn. App. 236, 243, 196 S.W.2d 118, 121 (1946). However, when a party seeks to establish an oral trust, it must do so by greater than a preponderance of the evidence. Sanderson v. Milligan, 585 S.W.2d 573, 574 (Tenn. 1979); Hunt v. Hunt,169 Tenn. 1, 9, 80 S.W.2d 666, 669 (1935); and Browder v. Hite, 602 S.W.2d 489, 493 (Tenn. Ct. App. 1980).
The existence of a trust requires proof of three elements: (1) a trustee who holds trust property and who is subject to the equitable duties to deal with it for the benefit of another, (2) a beneficiary to whom the trustee owes the equitable duties to deal with the trust property for his benefit, and (3) identifiable trust property. See G.G. Bogert & G.T. Bogert, The Law of Trusts and Trustees § 1, at 6 (rev. 2d ed. 1984) and Restatement (Second) of Trusts § 2 comment h (1957). We find that the Kopsombut-Myint Buddhist Center has proved the existence of each of these elements by clear and convincing evidence.
Both the November, 1982 agreement embodying the parties’ commitments when the property was purchased in December, 1981 and Mr. Myint’s uncontradicted testimony show that Kopsombut and Myint intended to create a joint venture that would acquire the Treutland Street property and hold it in trust for Nashville’s Buddhist Community. They agreed to restrict their interest in the property by agreeing to receive no profits of any sort and to convey the property only to The Buddhist Temple when it was incorporated. These oral agreements are sufficient to establish an enforceable trust in the Treutland Street property in favor of the temple which came into effect when the Kopsombut-Myint Buddhist Center purchased the property from the House of Prayer and Praise, Inc.
The trial court’s reason for denying the 1982 exemption differed from the Assessment Appeals Commission. It relied upon the portion of Tenn. Code Ann. § 67-5-212(a)(4) that states
But the property of such institution shall not be exempt if the owner, or any stockholder, officer, member or employee of such institution shall receive or may be lawfully entitled to receive any pecuniary profit from the operations of that property in competition with like property owned by others which is not exempt.
The trial court concluded that Myint and Kopsombut could have received profits from this transaction merely because they formed a joint venture to acquire the Treutland Street property. We disagree with this conclusion. A joint venture is inherently neither a for-profit entity nor a not-for-profit entity. Its nature depends upon the nature of the persons forming it and the purposes for which it was formed.
We should look to the substance of an arrangement rather than its form when we are construing Tenn. Code Ann. § 67-5-212. See National Music Camp v. Green Lake Township, 76 Mich. App. 608, 257 N.W.2d 188, 191 (1977). We have already determined that the Kopsombut-Myint Buddhist Center was holding the Treutland Street property in trust for The Buddhist Temple pursuant to an oral trust agreement. It is the character of the beneficiary of the trust, not the trustee, that determines the availability of an exemption. National Bank of Burlington v. Huneke, 250 Iowa 1030, 98 N.W.2d 7, 11 (1959).
There is no question that the beneficiary of the trust, The Buddhist Temple, is a religious institution. As the owner of the equitable interest in the property, The Buddhist Temple can be deemed to be the “owner” of the property for the purpose of obtaining a tax exemption. See Hahn v. County of Walworth, 14 Wis.2d 147, 109 N.W.2d 653, 656 (1961). See also 71 Am.Jur.2d State and Local Taxation § 366 (1973); Annot., 94 A.L.R.2d 636 § 3 (1964); and 84 C.J.S. Taxation § 231 (1954). It is also undisputed that Myint and Kopsombut, as trustees, agreed that they would hold the property only for the benefit of the temple. Therefore, the trial court’s conclusion that Kopsombut and Myint could profit from this transaction is not supported by the evidence.
2. PARSHALL CHRISTIAN ORDER v. BOARD OF REVIEW, COUNTY OF MARION, 315 N.W.2d 798 (1982)
[Family bought land and asserted claimed property tax exemption as a “religious institution or society. Notes and some applications: “Online “ministers” who gather a following and call themselves the “church” or a “church” since every believer, according to them, becomes a member of “the church.” they don’t understand God’s Word on the matter and do a great deal of harm to the cause of Christ. Many of these “Lone Rangers” criticize others, stir up trouble, teach falsely, and create confusion and chaos. Here are some excerpts from cases which addressed what a “church,” “a religious society,” etc. is. Of course, the reasoning is man’s but the reasoning, from a human standpoint is good and arrives at good conclusions, while making some good points along the way.”]
The question of what constitutes a religious institution or society under section 427.1(9) is one of first impression for this court. “Institution” is defined as “an established society or corporation: an establishment or foundation esp. of a public character.” Webster’s Third New International Dictionary 1171 (1976) (emphasis added). “Society” is defined as “a voluntary association of individuals for common ends; esp.: an organized group living or working together or periodically meeting or worshipping together because of a community of interests or beliefs or a common profession: a corporate or cooperative body.” Id. at 2162 (emphasis added).
The only Iowa case we have found construing a similar term is First Presbyterian Church v. Dennis, 178 Iowa 1352, 161 N.W. 183 (1917). There the court defined “church society” as:
[A] voluntary organization, whose members are associated together not only for religious exercises but also for the purpose of maintaining and supporting its ministry and providing the conveniences of a church home and promoting the growth and efficiency of the work of the general church of which it forms a co-ordinate part.
Id. at 1362, 161 N.W. at 187.
Courts in other jurisdictions, however, have defined the phrase ” religious society.” The New Jersey equity court stated, “The association of persons for religious as opposed to secular purposes, having no regard to the particular mode or manner of constituting or forming the body, answers the description of a religious society.” St. John the Baptist Greek Catholic Church v. Gengor, 121 N.J.Eq. 349, 356, 189 A. 113, 117 (1937)(emphasis added). A “religious society” has been defined to be “a voluntary association of individuals or families united for the purpose of having a common place of worshipand to provide a proper teacher to instruct them in religious doctrines and duties, and to administer the various ordinances of religion.” In re Religious Society of Families v. Assessor and Board of Assessment Review of Town of Carroll, Chautauqua County, 73 Misc.2d 923, 926, 343 N.Y.S.2d 159, 162 (1973), aff’d, 75 A.D.2d 1004, 429 N.Y.S.2d 321 (1980) (emphasis added). See also Church v. Bullock, 104 Tex. 1, 5, 109 S.W. 115, 117 (1908).
Nothing in these definitions suggests that a religious society can consist solely of the members of a nuclear family. Inherent within those definitions is the notion that the various individuals composing a religious society have become associated only through their mutual desire for worship and religious education. Except for that desire the association of those particular individuals would not have occurred. Such is obviously not the case with PCO. The members of the Parshall family are not associated only because of their desire for mutual worship; they are associated as a family. They will continue as a group regardless of any religious beliefs they may possess. Because the predominant reason for the Parshalls’ association is not religious pursuit, we conclude that PCO is not a religious institution or society as contemplated by section 427.1(9).
Cases from other jurisdictions lend support to our conclusion. In one case a Reverend Ham and his wife established a nonprofit religious corporation. Mordecai F. Ham Evangelistic Ass’n v. Matthews, 300 Ky. 402, 189 S.W.2d 524 (1945). The corporation held title to residentia propertyl which the reverend and his wife occupied as a home. It also paid all living expenses for the couple and for the upkeep of the residential property. The purpose of the corporation was to promote Reverend Ham’s evangelistic work. Reverend Ham accomplished that task by conducting Christian evangelistic services throughout the country and by radio broadcasts, independent of any religiousdenomination.
A controversy arose when the corporation applied for a tax exemption of its residential property. The Kentucky Constitution exempted “all parsonages or residences owned by any religious society and occupied as a home, and for no other purpose, by the minister of any religion.” (Emphasis added.) In discussing the meaning of the term “religious society”, the court stated:
This leads to the consideration of whether he and his wife, employees and unattached and unorganized audiences and contributors collectively are to be regarded as a “religious society” in the contemplation of the Constitution. The words are to be taken in their ordinary acceptation, as understood by the framers of the Constitution and the people who adopted it. Any meaning of a term and all purposes apparently not within its contemplation must be excluded in the interpretation. The term “religious society” is an old one. In the English ecclesiastical law and in our own law, both statutes and judicial opinions, it has had a well-understood meaning, being used interchangeably with “church” or some group organized and maintained for the support of public worship. The framers of the Constitution were familiar with all this. While we do not find the term to have been expressly defined by this court, it was commonly used in the generally accepted sense, and in accordance with designations or definitions given in the dictionaries and elsewhere as being an association or body of communicants or a church usually meeting in some stated place for worship or for instruction, or organized for the accomplishment of religious purposes such as instruction or dissemination of some tenet of particular faith or otherwise furthering its teachings. The Oxford English Dictionary defines “Society” as “Association with one’s fellow man” and “A number of persons associated together by some common interest or purpose, united by a common vow, holding the same belief or opinion, following the same trend or profession, etc.; an association.”
Id. at 408, 189 S.W.2d at 527-28 (citations omitted). Reverend Ham contended that the corporation had a large congregation, composed of all those persons listening to his radio broadcasts and attending his services. The court, however, rejected that argument and concluded that the corporation was not a “religious society” as that term was commonly understood. The court conceded the religious orientation of the corporation, but went on to state:
In this case there is no question but what this appellant corporation and the Reverend Mr. Ham are engaged in religious activities . . . . But we are constrained to hold that the ownership is lacking the element of a “society.” As observed by the chancellor: “We could hardly conceive of a society, as we understand it from the broader term, existing without some time or another there is a getting together. The term society itself implies a getting together of its members, although it is true persons may worship God or even receive religious instructions without getting together.” The many contributors and the audiences may be regarded as a kind of fellowship but not as a “society” within the meaning of the Constitution. There is no communion, no unity, no society. This is a one man organization; at least, as said by the chancellor, “Its whole operation is centered around one personality.” He is not a pastor and the organization is not a church. He does not claim it to be. We are not quite sure that the appellant nor the individuals it represents, is the type of religious organization whose parsonage or residence of the minister is tax free. If the property should be held exempt under these circumstances, the decision would afford a facility or means for any individual engaged in religious service to escape payment of taxes on his residence.
Id. at 409-10, 189 S.W.2d at 528.
A federal district court confronted a situation remarkably similar to the present one. American Guidance Foundation, Inc. v. United States, 490 F.Supp. 304 (D.C.1980). American Guidance Foundation (AGF) was founded by one Seyfried and consisted of five members of his immediate family. He regularly conducted worship services in his apartment living room for the members of AGF congregation. Those services often included the playing of religious tapes. Apart from its private services, AGF also advertised in the yellow pages of the telephone book and provided telephone callers with a recorded religious message. The dispute arose when AGF applied for tax exempt status as a “church” under the Internal Revenue Code. Concluding that AGF was not a “church” within the general or traditional understanding of that term, the court stated:
At a minimum, a church includes a body of believers or communicants that assembles regularly in order to worship. Unless the organization is reasonably available to the public in its conduct of worship, its educational instruction, and its promulgation of doctrine, it cannot fulfill this associational role.
Plaintiff fails to satisfy the standard. Mr. Seyfried and his wife pray together in the physical solitude of their home. They do not constitute a “congregation” within the ordinary meaning of the word. AGF has made no real effort to convert others or to extend its membership beyond the immediate Seyfried family. Its telephonic religious message hardly qualifies as dissemination of a creed or doctrine. Its “religious instruction” consists of a father preaching to his son. Its “organized ministry” is a single self-supported clergyman. Its “conduct of religious worship” does not extend beyond the family dwelling, which is used primarily for non-religious purposes. Rather than ministering to a society of believers, plaintiff is engaged in a quintessentially private religious enterprise.
. . . .
It is not enough that a corporation believes and declares itself to be a church. Nor is it sufficient that the applicant prepares superficially responsive documentation for each of the established IRS criteria. To hold otherwise would encourage sham representations to the IRS and result in adverse tax consequences to the public at large. In this instance, AGF does not employ recognized, accessible channels of instruction and worship. There is little if any evidence that it seeks to reach or serve a congregation. Private religious hurch.
Id. at 306-07.
A recent Minnesota case also is quite similar to the facts presently before us. Ideal Life Church of Lake Elmo v. County of Washington, Minn., 304 N.W.2d 308 (1981). One Rossow founded the Ideal Life Church (ILC) which consisted of himself and ten members of his family. Eventually the membership increased to include a neighbor and his wife and three other persons unrelated to the Rossow family. Shortly after ILC was established, Rossow and his wife conveyed their property and home to it. As in the present case, ILC was controlled solely by the family of which it was composed. ILC, like PCO, also spent significant sums for mortgage payments and maintenance costs of the Rossow home. ILC applied for but was denied a property tax exemption. On appeal the court was required to determine whether ILC was a “church” within the meaning of the Minnesota exemption statute. The court applied a “factual analysis” test and concluded that the ILC failed to qualify. Id. 304 N.W.2d at 317. Although both American Guidance Foundation and Ideal Life Church were concerned with the term “church”, courts have held that term to be interchangeable with ” religious society”. Trustees of Pencader Presbyterian Church v. Gibson, 26 Del.Ch. 375, 385, 22 A.2d 782, 787-88 (1941); Bates v. Schillinger, 128 Me. 14, 17, 145 A. 395, 397 (1929); In re Douglass’ Estate, 94 Neb. 280, 284, 143 N.W. 299, 300 (1913); Riffe v. Proctor, 99 Mo.App. 601, 607, 74 S.W. 409, 410 (1903); Josey v. Union Loan & Trust Co., 106 Ga. 608, 611, 32 S.E. 628, 629 (1849).
We conclude that PCO has failed to sustain its burden of demonstrating that it is a religious institution or society within the meaning of our exemption statute. To hold otherwise would lead to a result which the legislature surely did not intend. The property in question is currently being used as a home and farm for the Parshall family, just as it was before PCO was established. People may not transform their families into religious organizations and thereby obtain exemption for property over which their dominion and use remain unaffected. Granting tax exempt status to PCO would exalt form over substance and violate the rule of construction that exemption statutes are strictly construed.
The assessor correctly denied exemption.