Davis Adv. Sh. No. 1
S.E. 2d

THE STATE OF SOUTH CAROLINA

In The Supreme Court

The Evangelical

Lutheran Charities

Society of Charleston,

South Carolina (Franke

Home) and Newberry

College, Respondents-Appellants,

v.

The South Carolina

National Bank (n/k/a

Wachovia Bank of

South Carolina, N.A.),

as Trustee of the

Charitable

Testamentary Trust

Created Under the Last

Will and Testament of

John D. Muller, Jr.,

Deceased, Appellant-Respondent.

Appeal From Charleston County

William L. Howard, Sr., Judge

Opinion No. 24729

Heard June 17, 1997 - Filed December 29, 1997

REVERSED IN PART; AFFIRMED IN PART

Donald B. Meyer, Scott W. Pitts, both of Moore and Van Allen,

and William C. Cleveland, of Haynsworth, Marion, McKay &

Guerard, of Charleston, for the Appellant-Respondent, The

South Carolina National Bank (n/k/a Wachovia Bank of South

p. 30

Carolina).

Jacquelyn L. Bartley, David W. Robinson, II, both of Robinson,

McFadden & Moore, P.C., of Columbia, for Respondent-

Appellant Franke Home.

Robert M. Hollings, F. Truett Nettles, II, both of Hollings &

Nettles, P.A., of Charleston, for Respondent-Appellant

Newberry College.

FINNEY, C.J.: This is an action construing a testamentary

trust. The circuit court first held that historic preservation of the

exteriors of certain properties in the City of Charleston did not confer a

sufficient public benefit so as to render a trust established for this purpose

a charitable trust. In a second order, the court construed the trust and

held that the Trustee had properly managed its assets. We reverse the

first order, and affirm the second.

Respondents-Appellants (Beneficiaries) are the charitable

beneficiaries of a testamentary trust created under John Muller's will.

Appellant-respondent (Trustee) is the Trustee. Beneficiaries brought this

action challenging certain provisions of the will, alleging they do not create

a charitable trust, and claiming Trustee breached its fiduciary duty in

administering the trust. Trustee appeals an order finding no charitable

trust; Beneficiaries appeal an order finding no breach of fiduciary duty.

The appeals have been consolidated.

Mr. Muller, a lifelong Charleston resident, was well known for

his efforts to preserve historic homes in the city. Mr. Muller acquired

nine continuous properties, most on Archdale Street (the Archdale

Properties) in the 1950's and 1960's, and began restoring them. Under

Muller's will, the Archdale Properties and Laurel Hill Plantation¹ were the

corpus of the charitable trust, and Trustee was directed to "hold such

properties ... to comprise the corpus of the ... Muller Trust in

perpetuity. . . ." [Will, art. IV(b)]. The will directed the net income from

the corpus "[F]irst be applied by my Trustee to the care, upkeep and

maintenance of my said real properties ...... [(Will, art (b)(1)]. It then

provided:

After establishing a reserve or a "cushion" from net income

p. 31

from this Trust... the amount of which is to be determined

solely by my Trustee, of monies from which repairs, insurance,

taxes and other, contingencies can be paid, all of the

remainder of the net income which .remains from time to time

... if any, shall be distributed by my Trustee to the

[Beneficiaries)

[(Will, Article (b)(2))].

At the time of Muller's death in 1984, the Properties were still

in a state of disrepair. Since that time, the Trustee has fully restored the

exterior of the Properties, created 27 separate apartments, and rented

them. The expenses incurred in renovating the Properties have

consistently exceeded the Trust's net income, and the Beneficiaries have

received only one distribution, that from interest generated by insurance

proceeds paid after Hurricane Hugo severely damaged the Properties.

The trial court found the exterior of the Archdale Properties

had been "preserved and returned to their original splendor with

substantial education benefit to those who may view them. It also

found the fact the Properties share a common owner is important in

preserving and maintaining them, and "(t)hey have historical significance

as a unit which transcends their individual parts." He held the Properties

had significant public value because they constitute the northern boundary

of historic preservation in this part of Charleston, and as such "(t)heir

continued preservation is important as a bastion against insipid

deterioration. " Finally, the trial judge found the restored and preserved

Properties "are a monument to [Muller's] ideas, and a model to be

followed."

The trial judge held, none-the-less, that the purpose of

the Muller Trust as it relates to the Archdale Properties did not provide a

sufficient public benefit so as to render it a proper charitable trust.

Trustee appeals this order.

A court of equity takes a sympathetic view of attempts to

create a charitable trust, and will go to great lengths to try to sustain

such an attempt. Medical Society of South Carolina v. SC Nat'l Bank of

Charleston, 197 S.C. 96, 14 S.E.2d 577 (1941); Porcher v. Cappelmann, 187

S.C. 491, 198 S.E. 8 (1938)(charitable trusts "are entitled to peculiar

favor"). No general rule can be laid down as to what benefits constitute a

public charity, and each case must be judged on its own facts. Medical

p. 32

Society, supra. "Courts, on the whole, are kindly disposed towards

preservation of the settings and trappings of historical events and of

remnants of a departed culture, and trusts to that end are generally

upheld." Annot., Validity, as for a charitable purpose, of trust for

dissemination or preservation of material of historical or other educational

interest or value, 12 ALR 2d 849, 893 (1950).

The trial judge's conclusions appear to rest on two grounds:

(1) the Properties' interiors are not open to the public on a regular basis;

and (2) the Properties are rented to private individuals who receive a

greater benefit (albeit at a greater cost) than the public at large. In our

opinion, the fact the Trustee utilized the properties themselves to generate

the income necessary to achieve the trust's purpose does not convert the

benefit conferred from public to private. See The Preservation Society-of

NemMort County v. Assessor of Taxes of the City of Newport, 247 A.2d 430

(R.I. 1968). Further, the fact that the renters are more able to enjoy the

Properties than the public at large does not alter the trust's charitable

character. It is true in almost all public trusts that some individuals

receive more direct benefit than others, but the purpose is charitable so

long as societal interests are furthered. §54 Bogert on Trusts (6th Ed.

1987).

The trial judge also relied on Smith v. Heyward, 115 S.C. 145,

104 S.E. 473 (1920). In Smith, the testatrix established a fund to

maintain her family home and its extensive grounds, none of which were

open to the public. The Court held there was no charity involved, but

that the bequest was "purely private and personal." Unlike Smith, the

trust here is not "purely private and personal", but, as even the trial judge

held, "clearly bestow[s] a public benefit

.... Smith is clearly distinguishable.

The Beneficiaries rely not only on Smith, supra, to support

their position but also on the Medical Society decision. In Medical Society,

the testatrix left her home and its contents to be used as a museum. The

evidence showed the contents had little or no value as museum pieces, and

that the exhibition of these items would constitute a public detriment, not

a public benefit. Id. Medical Society supports the position of the Trustee

here since the Muller Trust confers a public benefit.

We reverse the first order and find for the historic

preservation of the Archdale Properties because this confers a sufficient

p. 33

public benefit to render it a charitable trust.

In a subsequent order, the trial court construed the will and

granted Trustee summary judgment on the Beneficiaries' claims that

Trustee had breached its fiduciary duties in managing the Muller Trust.

Beneficiaries have appealed this order, essentially contending the trial

court erred in determining Muller's intent, and that Trustee's management

was deficient. We affirm this order. Germann v. New York Life Ins. Co.,

286 S.C. 24, 331 S.E.2d 385 (Ct. App. 1985).

Accordingly, these appeals are

REVERSED IN PART: AFFIRMED IN PART.

MOORE, WALLER, JJ., and Acting Associate Justices Thomas

J. Ervin and Casey L. Manning concur.

p. 34