Boyles v. Commissioner , 4 T.C. 1092 ( 1945 )

Estate of Lucy Latham Boyles, Deceased, Houston Land & Trust Company, et al., Executors, Petitioners, v. Commissioner of Internal Revenue, Respondent

Boyles v. Commissioner

Docket No. 4750

United States Tax Court

4 T.C. 1092; 1945 U.S. Tax Ct. LEXIS 192;

April 3, 1945, Promulgated

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Decision will be entered under Rule 50.

The decedent bequeathed $ 50,000 to trustees, directing that the fund be used for civic purposes in the city of Houston. Pursuant to this provision of the will, the trustees paid the $ 50,000 to the Christ Episcopal Church of Houston for the construction of a parish house and administration building as an adjunct to the church. Held, that the amount of the bequest is a legal deduction from the gross estate under section 812 (d) of the Internal Revenue Code.

John H. Crooker, Esq., for the petitioners.

D. Louis Bergeron, Esq., and L. R. Van Burgh, Esq., for the respondent.

Harron, Judge.

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HARRON

The respondent determined a deficiency in estate tax in the amount of $ 3,104.24. Not all of the adjustments are in dispute. The only issue is whether a bequest of $ 50,000 made by decedent to trustees, to be used for civic purposes in the city of Houston, is deductible from the gross estate under section 812 (d) of the Internal Revenue Code.

Some of the facts have been stipulated.

FINDINGS OF FACT.

Lucy Latham Boyles, hereinafter referred to as the decedent, was a citizen of the United States, residing in Houston, Texas. She died on June 30, 1941, leaving a last will and testament which was admitted to probate by the County Court of Harris County, Texas. The Houston Land & Trust Co., A. S. Cleveland, and W. D. Cleveland, Jr., are the duly qualified and acting independent executors and trustees under decedent's will.

At the time of her death, and for many years prior thereto, decedent owned an undivided one-half interest in lot No. 11, block 80, on the south side of Buffalo Bayou, in the business section of the city of Houston. The other undivided one-half interest was owned by decedent's sister, Lennie Groesbeck Latham.

On June 9, 1931, decedent and her sister made separate contemporaneous wills which were substantially similar to each other. In her will the decedent devised her one-half interest in lot No. 11 to Houston Land & Trust Co., A. S. Cleveland, and W. D. Cleveland, Jr., as trustees, for the following purposes:

Within a reasonable time after my death the above described property is to be sold by my Trustees for such price and upon such terms and conditions as they may see fit and out of the net consideration received for my interest in said property, there shall be set aside the sum of Fifty Thousand and No/100 ($ 50,000.00) Dollars, and the balance of said consideration shall be paid to my sister, Lennie G. Latham to be hers absolutely. Should my interest in said property sell for less than Fifty Thousand Dollars ($ 50,000.00) then the net amount realized for my interest shall be set aside by my Trustees. The Fifty Thousand Dollars so realized from the sale of said property shall constitute a trust fund and shall be designated as the "Captain Lodowick Justin Latham Memorial," in memory of my father, who was born April 16, 1814 at Mystic, Connecticut, and died in Houston, Texas, March 20th, 1886. The said fund or the income therefrom or both shall be used by my Trustees for civic purposes in the City of Houston, the exact use to be made of said fund to be made known by me to my Trustees during my life time, but should I fail to determine the exact purposes for which said fund is to be used and not make it known to my Trustees, then the said shall be used by my Trustees for such civic purposes as they may determine. The only restriction I place upon them is that whatever use may be made of the fund, the fund or the things purchased or set up with the fund or the act done with the fund shall be designated and known as the "Captain Lodowick Justin Latham Memorial".

Decedent's sister, Lennie Groesbeck Latham, died on September 14, 1942, and her will, which was admitted to probate, also provided that $ 50,000 from the sale of her undivided one-half interest in lot No. 11 should be used for civic purposes in the city of Houston as a memorial to her father.

The decedent during her lifetime did not make known to the trustees the exact use or civic purpose for which she desired the trust fund to be used.

After decedent's death, the trustees, pursuant to the terms of the will, considered various civic purposes for which the fund might be used and, in the exercise of the discretion given to them under the will, determined that the $ 50,000 devised under decedent's will, together with the similar sum of $ 50,000 devised under the will of Lennie Groesbeck Latham, should be used for the construction of a parish house and administration building as an adjunct to Christ Episcopal Church, which was located in the city of Houston.

Thereafter, the executors under the wills filed suit in the District Court of Harris County, Texas, against the Attorney General of Texas, the District Attorney of Harris County, the city of Houston, and various residuary legatees in order to have the wills construed, to determine, among other things, whether the two bequests of $ 50,000 each constituted a valid public charitable bequest and whether the proposed use and dedication of such trust funds were within the civic purposes directed and authorized by such wills. The district court in which the suit was filed and subsequently tried had jurisdiction over the subject matter of the suit and the parties thereto. Answers were filed by various defendants, at least one of whom was a minor. The answer filed in behalf of the minor alleged that the trust "for civic purposes in the city of Houston" was too vague and uncertain to be valid and enforceable and that the proposed construction of the parish house and administration building for Christ Episcopal Church was not such a charitable or civic purpose as to be valid and enforceable as a charitable trust.

Thereafter, a hearing was had which lasted two days, at which the public interests were represented by the District Attorney of Harris County, Texas, and the city attorney of Houston, and the minor was represented by a guardian ad litem who was an attorney.

On August 20, 1943, a decree was entered by the district court which, in so far as it affects this proceeding, provided as follows:

First: That said $ 100,000.00 public charitable trust fund created and provided for by said wills as referred to in findings set forth above in paragraphs 4, 5, and 6 of this decree ($ 50,000.00 thereof being under said will of Lucy Latham Boyles, deceased, and the other $ 50,000.00 thereof being under said will of Lennie Groesbeck Latham, deceased) arises solely from said two bequests of such $ 100,000.00 trust fund, each and both of which bequests constitutes a valid, enforceable and irrevocable charitable trust for the use and benefit of said City of Houston (which city is a political subdivision of the United States) for exclusively public purposes and the same also constitutes a valid, enforceable and irrevocable charitable trust to said trustees (in their fiduciary capacity as such trustees) to be used by them exclusively for the public and charitable use so determined by them; that said use so determined by such trustees is exclusively for public, civic, educational and charitable purposes, for the use of said City of Houston (which city is a political subdivision of the United States); and that no part of the activities of said trust or the trustees thereof or of said use or purpose is or can be the carrying on of propaganda or otherwise attempting to influence legislation, and no part of said trust fund or the earnings thereof inures or can inure or is payable to or for the benefit of any private stockholder or individual or any party hereto, individually or personally, in any way or to any extent whatsoever -- all as more fully embodied in said findings set forth hereinabove in paragraphs 4, 5 and 6 of this decree.

Since no appeal was taken by any of the parties, the decree of the district court became final 30 days after its entry. Thereafter, the executors sold the lot and set up the $ 100,000 trust, $ 50,000 of it from the estate of decedent. The $ 100,000 fund was conveyed to Christ Episcopal Church of Houston, Texas, for the purpose of constructing the adjunct to the church and deposited in escrow pending the release of war restrictions upon construction.

The value of decedent's undivided one-half interest in lot No. 11, block 80, south side of Buffalo Bayou in the city of Houston, was $ 75,000 on June 30, 1941, the date of decedent's death.

OPINION.

Section 812 (d) of the Internal Revenue Code provides that the value of the net estate in the case of a citizen or resident of the United States shall be determined by deducting from the value of the gross estate "the amount of all bequests * * * to or for the use of * * * any State, Territory, and political subdivision thereof, * * * for exclusively public purposes, or * * * to a trustee or trustees * * * but only if such contributions or gifts are to be used by such trustee or trustees * * * exclusively for religious, charitable, scientific, literary, or educational purposes, * * * and no substantial part of the activities of such trustee or trustees * * * is carrying on propaganda, or otherwise attempting to influence legislation."

The respondent has disallowed the deduction of the $ 50,000 bequest paid to the Christ Episcopal Church of Houston, Texas, pursuant to article XIV of decedent's will on the ground that it did not come within the provisions of section 812 (d) of the code. His contention is that there was no charitable intent on the part of the decedent, since her only purpose in making the bequest was to create a memorial for her father. He also argues that, even if there were a charitable intent, the term "civic purposes" is so broad in its meaning that it could encompass propaganda and legislative purposes.

In determining whether this bequest is within the provisions of section 812 (d), it is essential that the decedent's intention be ascertained. Since the law favors charitable bequests, if a general charitable purpose is manifest within the limits of the language used by the testatrix, a broad and liberal construction should be applied to that language and the gift upheld. John Markle, 28 B. T. A. 201. As pointed out in St. Louis Union Trust Co. v. Burnet, 59 Fed. (2d) 922, 926, if the words of a charitable bequest are ambiguous or contradictory, they are to be construed to support the charity if possible. See also Estate of J. B. Whitehead, 3 T. C. 40, 48. This principle has been uniformly applied by the courts. Thus, in St. Louis Union Trust Co. v. Burnet, supra, it was held that a fund bequeathed to trustees to be devoted "to such benevolent purposes as, in their opinion, will constitute a fitting testimonial or memorial for me and, in some degree, extend my usefulness and helpfulness to others" was deductible. Similarly, in Brown v. Commissioner, 50 Fed. (2d) 842, the court held that amounts paid by trustees out of a trust fund created by decedent during his lifetime, under a power conferred upon them by the trust instrument to distribute the residue of the trust property at decedent's death in such a way and at such times as they, in their uncontrolled judgment, might deem best, "bearing in mind the ideals of said settlor," were deductible from the gross estate. See, also, Estate of Agnes C. Robinson, 1 T.C. 19">1 T. C. 19; Koehler v. Lewellyn, 44 Fed. (2d) 654;Bok v. McCaughn, 42 Fed. (2d) 616.

In this proceeding, the decedent provided that the "fund or the income therefrom or both shall be used by my trustees for civic purposes in the City of Houston, the exact use to be made of said fund to be made known by me to my trustees during my lifetime, but should I fail to determine the exact purposes for which said fund is to be used and not make it known to my trustees, then the said fund shall be used by my trustees for such civic purposes as they may determine." We think the plain meaning of this provision is a mandate upon the trustees to use the fund only for civic purposes in the city of Houston. The decedent's reference to the designation of the fund as the "Captain Lodowick Justin Latham Memorial" meant only that, regardless of the particular civic purpose in the city of Houston chosen by the trustees, the use was to be designated as a memorial to Captain Latham. The issue thus turns upon whether the term "civic purposes in the City of Houston" is susceptible of a public or charitable use.

The word "civic" is defined in Webster's New International Dictionary as relating, pertaining, or appropriate to a citizen; of or pertaining to a city or other municipality or citizenship; relating to man as a member of society, or to civil affairs. See also Black's Law Dictionary, 3d Ed. The principle is well established that a gift for the benefit of an indefinite number of persons is a public or charitable gift and it is immaterial whether the purpose is called charitable in the gift itself. St. Louis Union Trust Co. v. Burnet, supra.In Restatement of the Law of Trusts, sec. 373 (c), it is stated that a bequest for the benefit of a town or city, without specifying the method of applying the property, is charitable. Here, the bequest was for the benefit of the city of Houston or its inhabitants. A mandatory duty was imposed on the trustees under the terms of the will to apply the fund for that purpose, which was clearly charitable in nature. We think the term "civic purposes," in its generally accepted meaning, excludes the concept of propaganda or legislative activities. It is therefore held that the $ 50,000 bequest in issue is a legal deduction from the gross estate under section 812 (d) of the Internal Revenue Code. Accordingly, it is unnecessary to determine petitioners' alternative contention that the state court's decision holding that the bequest was a valid charitable trust is determinative of the issue here.

Decision will be entered under Rule 50.