Court: Supreme Court of Georgia; November 10, 1988; Georgia; State Supreme Court
C. S. Trust Company filed a petition in Cobb Superior Court to be appointed as co-executor and co-trustee of the estate of O. C. Hubert, who passed away on June 2, 1986. The petition sought a declaratory judgment on the legal authority to distribute and administer estate assets according to a modification agreement consented to by the district attorney but rejected by the state revenue commissioner. The estate, valued at approximately $30 million, includes a charitable remainder trust created under the testator's 1982 will, which designates the widow, Ruth S. Hubert, as the life-income beneficiary and outlines specific bequests totaling $633,000 and debts of about $3.1 million. After the widow's death, the Hubert children are to receive designated parcels of property valued at approximately $3.98 million, while the remaining assets, valued at over $22 million, will support charitable purposes such as feeding the hungry and providing Bibles. Distributions to designated Christian organizations are required to occur within 21 years of the widow's death, as directed by the trustees.
On July 18, 1986, Robert H. Owen submitted the 1982 will for probate in Cobb County, seeking letters testamentary. Following this, on August 5, he submitted the will for solemn probate. Deborah H. Jones filed a caveat against the will on August 22, followed by Judith H. Manning and Marilyn H. Kemper on August 29. Settlement negotiations ensued among the family, during which the widow initiated an action in Cobb Superior Court to disqualify Owen as co-trustee and co-executor. A modification agreement was reached, with the district attorney consenting and the revenue commissioner refusing.
Key modifications included the deletion of the Item VIII residuary trust from the estate plan, and the distribution of a residuary estate valued at $26,085,310. The widow would receive $1,080,000 and 50% of the remaining assets. Four parcels designated for the Hubert children would be held in separate trusts, with income distributed to the widow during her lifetime and the properties transferred to the children upon her death. A charitable trust, valued at $12,502,655, was to be immediately created, subject to deductions for extraordinary administrative compensation.
Further amendments included the establishment of an Advisory Committee for charitable distributions, comprising the widow and the Hubert children. Robert H. Owen was removed as successor co-trustee and replaced by Dr. I. B. Hall. A lineal descendant of the testator must succeed Richard N. Hubert as co-trustee, elected by the Advisory Committee. Hubert Realty Company was granted exclusive management and sale rights for Georgia income-producing properties during estate administration and charitable trust existence, along with rights to brokerage commissions. Dehco, Inc. and a Hubert daughter received a right of first refusal for designated property from the charitable trust. Although the charitable trust was set to terminate within 21 years after the widow's death, the Advisory Committee could extend it indefinitely. Georgia Statutes OCGA 53-12-98 stipulate that the state revenue commissioner must be involved in any proceedings to modify or terminate a charitable trust.
The Act establishes a regulatory framework for the government’s oversight of charitable trusts, initially assigning supervisory duties to the attorney general. The General Assembly clarified that this Act does not reduce the attorney general's existing powers regarding charitable trusts. However, in 1975, the Act was amended to transfer these responsibilities to the state revenue commissioner.
The appellees argue that the revenue commissioner’s involvement in the litigation is unnecessary, asserting that the charitable trust referenced in the testator's will is legally non-existent due to the will not being probated. They claim this is not a suit to modify or terminate a charitable trust under OCGA § 53-12-98. Furthermore, they maintain, and the trial court agreed, that if the revenue commissioner’s participation were required, his standing would be limited to matters affecting state revenue.
The legislative intent of the Act appears to include establishing government oversight to ensure that only entities genuinely operating for charitable purposes qualify for tax-exempt status. Courts have historically exercised supervisory jurisdiction over charitable trusts, but they cannot initiate inquiries into such trusts independently. The Act also provides the revenue commissioner with the authority to investigate trustees to ensure proper administration of charitable property.
Moreover, a will cannot be used to transfer any interest unless it is probated; however, this case still involves the modification of a charitable trust despite the will's unprobated status. Thus, the revenue commissioner’s participation in the proceeding is deemed necessary under OCGA § 53-12-98.
The state revenue commissioner requested a continuance when discovery requests were served to gather evidence related to his statutory duties. The trial court denied the continuance, ruling that the commissioner could not represent the interests of charitable beneficiaries. However, it was determined that the Georgia Charitable Trust Act mandates the commissioner to represent these interests, which includes full discovery rights. The court must provide reasonable time for discovery procedures. The ruling was reversed, and the case was remanded due to the error in limiting the commissioner's participation and discovery.
In dissent, Justice Smith argued against the majority's interpretation of OCGA. 53-12-98, suggesting that the statute applies only to existing, funded, and probated charitable trusts. Smith contended that the commissioner’s role is administrative regarding these trusts and that the act does not extend to unprobated or unfunded declarations of trust in a will. The dissent emphasized that a will must be probated to create a trust, and thus the revenue commissioner’s authority is limited to overseeing ongoing charitable trusts, not representing potential beneficiaries of unprobated trusts.
The revenue commissioner's primary responsibility is to administer and enforce revenue laws. This role includes overseeing charitable trusts to ensure their proper use and prevent tax evasion. However, the commissioner should not have the authority to interfere with the rights of parties involved in a will, particularly regarding modifications to settle disputes. The family in this case took a year to negotiate a settlement, which is crucial since the will stipulates that the trust cannot begin until Mrs. Ruth Hubert's death, causing her distress. The settlement would allow the trust to commence once approved, promoting family harmony and reducing litigation, as supported by legal precedent.
The majority ruling grants the revenue commissioner extensive discovery rights over all charitable trusts in Georgia, even those that are unfunded and unprobated, potentially blocking settlements and leading to prolonged estate litigation. This interpretation of OCGA § 53-12-98 would uniquely position Georgia in allowing a state officer to determine the best interests of both the state's finances and charitable trust beneficiaries, creating a conflict of interest. The revenue commissioner's duty to collect revenue contradicts their role in representing beneficiaries. Allowing unlimited discovery could delay estate settlements indefinitely. Furthermore, there is legal precedent supporting an executor's authority to seek court assistance in managing estate distributions according to settlement agreements rather than the original will. The revenue commissioner's oversight of charitable trusts only activates once the trusts are operational, as outlined in relevant statutes, and does not apply to religious organizations holding property for religious purposes.
