Opinion
No. 72-876
Decided July 18, 1973.
Charitable trust — Action by Attorney General to enforce — Greenhills property — Charitable trust purpose expressed in purchase agreement — Duty of holder to devote property to charitable purposes.
1. The charitable purposes expressed in a trust become vested in use or enjoyment within the meaning of R.C. 109.23 when the right of present or future use or enjoyment for such charitable purposes becomes fixed and irrevocable.
2. Where there is a present fixed and irrevocable duty on the holder of trust property to devote it to charitable purposes, such purposes expressed in the trust are vested in use and enjoyment even though the actual enjoyment of the benefits of the trust by the beneficiaries thereof may occur only in the future.
APPEAL from the Court of Appeals for Hamilton County.
The Attorney General of Ohio, appellant herein, brought this action in the Court of Common Pleas of Hamilton County on January 5, 1971. The Attorney General filed an amended complaint on July 16, 1971, seeking to enforce an alleged public charitable trust and requesting relief by way of an injunction and an accounting. The amended complaint stated that the action was brought by the Attorney General pursuant to statutory and common law powers.
The defendants filed an answer to the amended complaint, setting forth twelve defenses. Subsequently, defendants filed a motion for judgment on the pleadings upon the ground that they were "entitled to judgment as a matter of law because plaintiff does not have standing to bring this action."
In the mid-1930's, the United States government built Greenhills, Ohio (a city located in the northwestern part of Hamilton County), to demonstrate modern town planning and principles of design, to give productive employment to the seriously depressed building industry, to provide needed housing for moderate income families and to encourage the resettlement of urban dwellers to the suburbs. As part of this plan, a "greenbelt" area of land was created, completely surrounding Greenhills, to guard the community against dangers of intrusion and conflicting land uses. The total property owned by the federal government included approximately 6,000 acres, with 676 living units.
In 1947, the federal government determined to offer this property for sale acting through the Public Housing Administration (PHA). In December 1949, PHA contracted to sell the Greenhills property to Greenhills Homeowners Corporation (now known as Fienco, Inc., a defendant herein) which was organized in March 1948 for the purpose of purchasing the Greenhills property, reselling the dwelling units, and developing the remainder of the tract. The sale was consummated on January 13, 1950.
The amended complaint alleges that, prior to the sale, on May 6, 1949, the shareholders of defendant Fienco amended the articles of incorporation "by changing the nature of the corporation and by creating: `a public charitable trust for the benefit of the political subdivisions related to Greenhills and of its citizens and its civic development.'" The amended complaint alleges next that "the charitable trust was established by the amendment as the recipient of any surplus or profits earned by the corporation, after the payment of limited 6% dividends to its shareholders."
The amended complaint alleges further that the shareholders intended Fienco to be a liquidating corporation and that upon liquidation the shareholders "would not receive in excess of the par value of their shares" and "a non-profit charitable corporation would be created for the civic development of Greenhills."
The amended complaint also alleges that "Fienco in December 1949, held itself out to the world as a limited dividend corporation, whose profits and surplus were to be devoted to a charitable trust for the benefit of Greenhills and whose objective was to develop said commercial and undeveloped property and then liquidate and transfer its assets to a charitable corporation for the benefit of Greenhills."
The articles of incorporation of Fienco were amended twice in July 1950. The amended complaint alleges that, by the first amendment, "the shareholders repeated and restated their intent that any surplus or profits of the corporation be devoted to a charitable trust and modified the provisions of the trust."
The amended complaint alleges further that the articles of incorporation of Fienco were again amended in 1953 to eliminate the provision for the alleged charitable trust, and that since that time profits and surplus have been devoted to the benefit of shareholders rather than to the charitable trust.
The Common Pleas Court sustained defendants' motion for judgment on the pleadings. The Court of Appeals affirmed the judgment of the Court of Common Pleas. The cause is now before this court pursuant to allowance of a motion to certify the record.
Messrs. Beckman, Lavercombe, Fox Weil, Mr. Bernard C. Fox, Mr. Paul H. Tobias, and Mr. Peter W. Swenty, for appellant.
Messrs. Frost Jacobs, Mr. James G. Headley, and Mr. F. Bruce Abel, for appellees.
This case involves interpretation of the definition of charitable trust contained in R.C. 109.23, which provides: "As used in Sections 109.23 to 109.33, inclusive, of the Revised Code, `charitable trust' means any fiduciary relationship with respect to property arising as a result of a manifestation of intention to create it, and subjecting the partnership, corporation, person, or association of persons by whom the property is held to equitable duties to deal with the property for any charitable, religious or educational purpose. There are excluded from this definition and from the operation of such sections, trusts until such time as the charitable, religious or educational purpose expressed in such trust becomes vested in use or enjoyment. * * *"
The cause was determined by the Court of Common Pleas upon a motion for judgment on the pleadings, so that all facts pleaded in the amended complaint must be accepted as being true. The amended complaint contains allegations indicating a manifestation of intention by Fienco to create a fiduciary relationship with respect to the Greenhills property and subjecting Fienco "to equitable duties to deal with the property" for charitable purposes.
Paragraph numbered 20 of the amended complaint alleges that "the land and properties received from the U.S. government by Fienco in 1950 and the monies received from the individual home buyers by Fienco in the fall of 1949 became part of the irrevocable charitable trust previously established May 10, 1949, and were impressed with the trust. The corporation and its directors and officers received and held said properties as trustees, for the purpose of ensuring that all surplus and profits earned during the life of Fienco would be devoted to charitable purposes and for the purpose of ensuring that all assets, surplus and profits in excess of the fixed obligations as aforesaid would, upon liquidation, be turned over to a charitable trust."
Thus, the issue before this court is the application of the provision of R.C. 109.23 excluding from the definition of charitable trust, "trusts until such time as the charitable * * * purpose expressed in such trust becomes vested in use or enjoyment." The Court of Appeals found that the Attorney General failed to allege a charitable trust because of this exclusion, stating that "the present obligation to establish a charitable trust at some uncertain future time cannot be held to be a trust in which the charitable purpose has vested in use and enjoyment."
Although this statement of the Court of Appeals may be correct, the Attorney General contends that a charitable trust becomes vested in use or enjoyment when the right to future use or enjoyment becomes fixed and irrevocable. Although the amended complaint does not allege that there has been any past or present use or enjoyment of the trust, it does contain allegations to the effect that the right thereto in the future became fixed and irrevocable.
On the other hand, defendants contend that there must be present, actual use or enjoyment of the trust before it becomes vested in use or enjoyment within the meaning of R.C. 109.23. Such contention interprets the provision as excluding trusts from the definition until such time as the charitable purpose of the trust becomes vested by use or enjoyment.
The word "vested" has a double meaning. The word "vest" is defined in Bouvier's Law Dictionary (3 Rev.) as "to give an immediate fixed right of present or future enjoyment. An estate is vested in possession when there exists a right of present enjoyment; and an estate is vested in interest when there is a present fixed right of future enjoyment."
The word "vested," standing alone, includes both present and future enjoyment so long as the right to such present or future enjoyment is presently fixed. Although the phrase "vested in use or enjoyment," as used in R.C. 109.23, is somewhat ambiguous, we conclude that it means the time that the right of use or enjoyment, present or future, has become fixed and irrevocable.
We do not believe that the General Assembly intended the words "vested in use or enjoyment" to exclude from the definition of charitable trust, a trust, otherwise meeting the definition, but which provides for a temporary accumulation of assets prior to the actual devotion of the trust res or income for the benefit of the beneficiaries of the trust. The purpose expressed in such a trust becomes vested in use or enjoyment when the duty to accumulate commences.
The charitable purpose of a charitable trust becomes vested in use or enjoyment at the time of the creation of the equitable duty of the person, by whom the property is held, to deal with such property for such charitable purpose, whether actual enjoyment by the beneficiaries of the charitable trust is present or future.
Having determined that the amended complaint alleges the existence of a charitable trust, as defined by R.C. 109.23, it is unnecessary to determine the extent of the common law powers of the Attorney General in dealing with charitable trusts.
The judgment of the Court of Appeals is reversed, and the cause is remanded to the Court of Common Pleas for further proceedings.
Judgment reversed.
HERBERT, Acting C.J., CORRIGAN, STERN, CELEBREZZE, W. BROWN and STEPHENSON, JJ., concur.
WHITESIDE, J., of the Tenth Appellate District, sitting for O'NEILL, C.J.
STEPHENSON, J., of the Fourth Appellate District, sitting for P. BROWN, J.