First, below is a brief statement of relevant matters in the case, with the most important – for church organization purposes – point(s), then, a more extensive summary below that.
KOPSOMBUT-MYINT BUDDHIST CENTER, v. STATE BOARD OF EQUALIZATION, 728 S.W. 2d 327 (1986) Court of Appeals of Tennessee, Middle Section, at Nashville. Permission to Appeal Denied, April 6, 1987.
Point of importance. Property held in trust qualifies for a property tax exemption, if the property is used for religious purposes and the owner, any stockholder, officer, member or employee of such institution is not lawfully entitled to receive and pecuniary profit from the operations of that property in competition with like property owned by others which is not exempt. Property held in trust and which otherwise qualifies for the exemption is to be exempted from property tax.
Two members of a Buddhist organization formed a joint venture and bought property for a Buddhist organization. They requested a property tax exemption. The agency held that no property tax exemption applied. However, the appeals court, among other things, implied that an oral “trust” was created since joint venturers could not profit from the venture. The court stated: “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. 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.” The court further held, contrary to the holding below, that the Buddhist Temple can be deemed to be the “owner” of the property for the purpose of obtaining a tax exemption.
KOPSOMBUT-MYINT BUDDHIST CENTER, v. STATE BOARD OF EQUALIZATION, 728 S.W. 2d 327 (1986) Court of Appeals of Tennessee, Middle Section, at Nashville. Permission to Appeal Denied, April 6, 1987 (Click this link to go to the entire case online)
(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.)
IV. The Temple’s Entitlement to an Exemption
… “There has been a great deal of litigation construing Tenn. Code. Ann. 67-5-212(a)(1)’s requirement that property must be owned and used for religious purposes in order to be exempt. However, there has been little litigation concerning the nature of the entity that will qualify as a religious institution entitled to claim a tax exemption. Thus, our analysis is government by general property tax principles” The court then stated that the property had been used for religi ous purposes [in 1982].
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 may have 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.
The case was remanded to the trial court to determine, in accordance with the opinion of the court of appeals, whether this property was entitled to an exemption in 1982 [and a total exemption in 1983 (this depended upon the use of the property in 1983].