We occasionally see in the media and in our own posts, claims that a donation made to a charitable organization was not used in the way in which the donor intended.  In Choi v. Immanuel Korean United Methodist Church, we get some clues from the Georgia Court of Appeals on ways to structure those donations to achieve the donor’s intent and ways in which claims regarding those donations may fail or succeed.

The Chois made a $1,500,000 donation to a church in 2005 for the construction of a new building.  Although land for a new building was purchased in 2006, years later, the church still had not begun construction of a building.

In 2010, the Chois sued the church for breach of fiduciary duty under the Georgia Trust Act and sought imposition of a trust on the funds.  The trial court granted the church’s motion for summary judgment because there was no time limit set for the use of the money.  The trial court’s order was upheld on appeal.  So comes our first practice pointer: if you make a donation for a specific use, you may want to consider putting a time limit on it.  Of course, you’ll want to talk with your lawyer about the implications of a time limit.

Approximately a year and a half after the entry of summary judgment in the breach of fiduciary duty suit, the Chois again sued the church.  This time, rather than bringing a claim under the Georgia Trust Code, the Chois asked for a declaratory judgment that an implied charitable trust was created when the donation was given to the church; that the church could not fulfill the designated special purpose in a timely manner; and that the money be transferred to a different church that would fulfill the intended purpose of the gift.

The church sought to dismiss the Chois’ new complaint, arguing that the resolution of the 2010 breach of fiduciary duty lawsuit barred the new suit by res judicata and collateral estoppel.

The Georgia appellate court determined that the Chois’ second lawsuit was sufficiently distinct from the first to survive the church’s motion to dismiss. First, the Chois’ new suit was based upon a Georgia statute that provides that “[i]f a gift is made for a specific purpose which is either expressed or is secretly understood and the purpose is illegal or from some other cause fails or cannot be accomplished, the donee shall hold the object of the gift as trustee for the donor or his next of kin.”  Second, the Chois alleged that, since the end of the breach of fiduciary duty case, new evidence has come to light that the specific purpose of the gift cannot be accomplished, namely, that the church’s financial situation has materially deteriorated and the church’s membership and income have dropped making it not reasonably possible to build a new facility.

Because the impossibility of ever fulfilling the purpose of the donation was not considered in the first lawsuit in the context of the Georgia statute regarding fulfillment of specific purpose, the case could continue for now.