Court Opinion

ID: 9471289
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:28:36.370055+00
Date Added: 2024-06-11T17:42:20.432636
License: Public Domain

OAKES, Circuit Judge
(dissenting):
While fully concurring in the other portions of Judge Cardamone’s lucid and careful opinion, I am required to dissent to that portion of it relating to the trial judge’s charge on the law of trusts. Majority op. IIIA. Contrary to the Government’s brief and the majority’s view that “Moon did not raise until late in the trial” the claim that he was holding the assets in question in trust, this was his position in the pretrial motion to dismiss as well as during argument on the midtrial motion for a judgment of acquittal. The trial judge quite properly acknowledged his obligation to charge on the law of trusts and did so no fewer than three times in the space of six pages of transcript.1 The Government’s assertion *1242that defendants made “no claim ... that [they] wanted, much less were entitled to, any of the specific instructions on the law of trusts which are claimed to be so crucial on appeal” simply does not hold water. The Reverend Moon submitted detailed instructions with supporting memoranda of law both on the general issue of beneficial ownership (No. 16) and on the specific issue whether an unincorporated religious association can be the beneficiary of a charitable trust (No. 15). Similarly, counsel pressed and elaborated upon his requests at the charging conference and made plain his disagreement with the proposed instruction submitted by the Government. Furthermore, counsel lodged specific objections to the instructions as given and in doing so specifically renewed the request for proposed instructions. The defense position was clear and consistent throughout the proceedings. See United States v. Kelinson, 205 F.2d 600, 601-02 (2d Cir.1953) (Fed.R.Crim.P. 30 “does not require a lawyer to become a chattering magpie”).
Even if objections were not properly preserved, however, the issue of beneficial ownership was one “central to the determination of guilt or innocence” in the case, United States v. Alston, 551 F.2d 315, 321 (D.C.Cir.1976). Thus, any defects in respect to the charge on this central issue would constitute plain error and require reversal. See Connecticut v. Johnson,-U.S.-, -, 103 S.Ct. 969, 976, 74 L.Ed.2d 823 (1983).
Before discussing in detail what I believe were the errors in the trust instructions, I wish to put them in context because it is only then that their importance becomes apparent. In the first place, whether the Chase Manhattan Fund and the Tong II stock held in Moon’s own name were church property or Moon’s personal property was the critical issue in the case. The Government went to great lengths to establish a fact that was really conceded from the beginning, that the assets were held in Moon’s own name. But the law is clear that dominion and control over funds does not by itself establish taxability, at least where funds are beneficially owned by another. See, e.g., Brittingham v. Commissioner, 57 T.C. 91 (1971); Seven-Up Co. v. Commissioner, 14 T.C. 965 (1950). See also Poonian v. United States, 294 F.2d 74 (9th Cir.1961). Thus, it was essential that the court’s instructions precisely state the law on the creation of a trust relationship and the implications of the jury’s finding that such a relationship existed in this case.
In the second place, this case did not involve a claim that an ordinary, lay taxpayer held certain assets in a private trust for the benefit of another. On the contrary, the taxpayer here was the founder and leader of a worldwide movement which, regardless of what the observer may think of its views or even its motives, is nevertheless on its face a religious one, the members of which regard the taxpayer as the embodiment of their faith. Because Moon was the spiritual leader of the church, the issue whether he or the church beneficially owned funds in his name was not as crystal-clear as might seem at first glance to be the case.
It appears that the assets in question came to Moon largely from members of his faith, and there was some evidence that the donors intended their contributions to be used by him for religious purposes. The religious context involved gives the case a special color. As noted in cases such as Winn v. Commissioner, 595 F.2d 1060, 1065 (5th Cir.1979), funds donated for the use of an individual involved in religious work may be considered gifts to the religious organization with which the individual is affiliated. In Winn, for example, it was held that where money was given to the taxpayer’s cousin, a missionary, in response *1243to a church-sponsored solicitation, for deposit ultimately to her personal account, and was used, as intended, to support her mission work, it was sufficiently established that the funds were donated “for the use of” the church(es) to permit the contribiiting taxpayers to claim deductions for contributions. Similarly in Morey v. Riddell, 205 F.Supp. 918, 921 (S.D.Cal.1962), it was held that where money contributed to a totally unorganized religious association by way of checks to individual “ministers” was used to meet expenses of the church, including the ministers’ living expenses, deductions for religious contributions would be permitted. But see Cox v. Commissioner, 297 F.2d 36 (2d Cir.1961) (not deductible when intent was to make bequest to individual). The Reverend Moon’s claim that he held the Chase Funds and the Tong II stock as trustee for the Unification Church movement likewise raised the question whether the donors intended this property to be used for religious purposes. In this context, then, I think it was incumbent upon the court to make certain that the trust charge not only properly state the factual elements that were involved, but that it also clearly emphasize that the Government had the burden of proof beyond a reasonable doubt on this difficult issue.
Moreover, as we are referred to state law in respect to ownership, see United States v. Mitchell, 403 U.S. 190, 197, 91 S.Ct. 1763, 1768, 29 L.Ed.2d 406 (1971); United States v. Manny, 645 F.2d 163, 166 (2d Cir.1981); see also Treas.Reg. § 301.7701-4 (1974), the instructions must be viewed in light of New York law pertaining to assets given to a religious leader for use by the trust. While I by no means agree with the appellants’ contention that New York law establishes a presumption that any assets given to a religious leader are held by him in a charitable trust, it at least permits of a finding to this effect.
This conclusion stems from the following facts. First, the law favors charitable trusts and will draw reasonable inferences and resolve ambiguities to find and uphold them. In re Price’s Will, 264 A.D. 29, 35 N.Y.S.2d 111, 114-15, aff’d, 289 N.Y. 751, 46 N.E.2d 354 (1942); In re Estate of Nurse, 35 N.Y.2d 381, 389, 362 N.Y.S.2d 441, 446, 321 N.E.2d 537 (1974). See N.Y.Est. Powers & Trusts Law § 8-1.1 (McKinney 1967). Second, when a gift appears to have been made for charitable or religious purposes, the gift may be found to have been made in trust even if no trust language has been used and even if the gift was in form absolute. In re Durbrow’s Estate, 245 N.Y. 469, 477, 157 N.E. 747, 749 (1927); see also New York City Mission Society v. Board of Pensions, 261 A.D. 823, 823, 24 N.Y.S.2d 395, 396 (1941). Third, there are numerous cases holding that a minister or other church official who held title to property in his own name did so as trustee for the church. See, e.g., Sears v. Parker, 193 Mass. 551, 79 N.E. 772 (1907) (fund for widows and orphans of church ministers); Jones v. Habersham, 107 U.S. 174, 182, 2 S.Ct. 336, 343, 27 L.Ed. 401 (1882) (devise to church trustees to benefit of poor and feeble churches in state). See 4 A. Scott, The Law of Trusts §§ 371.3, at 2885 & n. 4, 351 at 2797-98 (3d ed. 1967). Finally, where the source of the assets is a church source, added to the fact that the donee is a religious official, a trust may be imposed. See Fink v. Umscheid, 40 Kan. 271, 19 P. 623 (1888) (Catholic bishop using money supplied by congregation to purchase land in his own name for a church and school, later attempting to sell property; land concededly held in trust). See also Archbishop v. Shipman, 79 Cal. 288, 21 P. 830 (1889). Thus the key issue was whether the funds were given to Moon for his own use or for that of his international church movement, and whether, even though some of the funds were utilized for his own living purposes, the donors intended to permit such use.2
*1244I reprint in the margin 3 the instructions on the “key issue” or the “central question” as the judge in his instructions to the jury termed it. The ensuing discussion relates *1245to this material. In my view those instructions contained errors which, because they were on the crucial issue of the case, must be considered prejudicial.
First, in referring to the fact that the jury should consider all the evidence on the issue whether the Unification Church movement existed and whether the movement or the Reverend Moon owned the funds in the Chase accounts and Tong II stock, the court listed eight factors as set forth in Paragraph Six of the footnote. Listed among these, but not emphasized, was “the intent of the parties who caused the stock and funds to be transferred to Reverend Moon’s name.” Rather than simply including intent as one of the things for the jury to consider, the court in my view should have advised the jury to accord the greatest weight to this factor. The church source of the funds and Moon’s role as church leader were likely to cast light on the issue of the donors’ intent, and accordingly the charge should have specifically directed the jury’s attention to them. The instruction as given allowed the jury to find against Moon on the issue of beneficial ownership without even considering the crucial issue of donors’ intent. See Sandstrom v. Montana, 442 U.S. 510, 99 S.Ct. 2450, 61 L.Ed.2d 39 (1979).
Secondly, though the issue was whether funds were given to a religious trust, the charge was that the intent to create it must be “clear and unambiguous,” as in the case of private trusts. I recognize that the majority believes this portion of the charge to be correct under New York law, but the cases it cites for that proposition do not support it. County of Suffolk v. Greater New York Councils, Boy Scouts of America, 51 N.Y.2d 830, 832-33, 433 N.Y.S.2d 424, 425, 413 N.E.2d 363, 364 (1980), dealt only with the issue when a donation to a charitable organization, concededly subject to charitable trust restrictions, will be subject to additional specialized restrictions on use narrower than the organization’s general charitable purpose; the court reversed a holding that a bequest to the Queens County Council of the Boy Scouts had to be used forever for a particular Boy Scout camp as distinct from the Boy Scouts generally. Lefkowitz v. Cornell University, 35 A.D.2d 166, 173, 316 N.Y.S.2d 264, 271 (1970), aff’d, 28 N.Y.2d 876, 322 N.Y.S.2d 717, 271 N.E.2d 552 (1971), held that a trust was not created by the donee’s actions. Relying upon In re Fontanella, 33 A.D.2d 29, 30, 304 N.Y.S.2d 829, 831 (1969), the court held that the evidence was insufficient to show that the donee ever intended to create a trust. Fontanella simply involved a private trust, not a religious trust, and the donee was not the leader of a religious group.4
*1246Thus, there appears to be no good basis for finding that “clear and unambiguous” intent is necessary to create a charitable trust under the law of New York. The strong policy of New York trust law and of trust law generally is to uphold charitable trusts whenever possible and to construe their terms liberally. See, e.g., In re Price’s Will, 264 A.D. at 29, 35 N.Y.S.2d at 111; In re Durbrow’s Estate, 245 N.Y. at 469, 157 N.E. at 747. In light of this fact, it is anomalous to require “clear and unambiguous” proof of the donor’s intent to establish a charitable trust.
The second crucial error in the instructions lies in the charge that the jury should consider as the very first factor whether the International Unification Church movement “had a specific organizational structure, written charter or constitution .... ” (See supra note 3, 13.) The Government concedes that it is a cardinal rule of trust law that a charitable trust cannot fail for lack of a specific beneficiary. The court should have said that a specific organizational structure was not a prerequisite to the existence of a charitable trust because in fact no beneficiary of a charitable trust need be designated at all. See N.Y.Est. Powers & Trust Law § 8-1.1 (McKinney 1967).5 See 4 A. Scott, The Law of Trusts § 364, at 2838-39 (3d ed. 1967).
Moreover, the court's instructions regarding the use or misuse of trust funds were at the very least confusing. (See supra note 3, 114.) First, while it may be correct as a matter of law that a trustee who diverts trust property to his own use is taxable to the extent of the diversion, diversion was not charged in the indictment. Thus, evidence of diversion was irrelevant to the case. The diversion instruction, given over defense objection, was at variance with the theory on which the Reverend Moon was indicted and on which the entire case was tried.
Second, a trust may exist even though the trustee is endowed with the freedom to use for his own personal benefit a portion of the funds he holds in trust and such use will not nullify the existence of the trust. United States v. Scott, 660 F.2d 1145, 1166 n. 38 (7th Cir.1981), cert. denied, 455 U.S. 907, 102 S.Ct. 1252, 71 L.Ed.2d 445 (1982); Rev.Rul. 71-449, 1971-2 C.B. 77. This is particularly true in the case of monies held in trust by religious leaders, since often use of such funds to pay a leader’s living expenses are within the scope of the church’s religious purposes. See, eg., Morey v. Rid-dell, 205 F.Supp. at 918. Moreover, the instruction failed to explain that, even if the Reverend Moon had improperly diverted some of the Chase funds to a nontrust use, such partial diversion could not make the entire corpus, and thus the interest thereon, taxable to him. United States v. Scott, 660 F.2d at 1145; see also Herbert v. Commissioner, 377 F.2d 65 (9th Cir.1967). The inclusion of the phrase “to the extent so diverted” in the diversion portion of the charge could not have conveyed this concept at all.
Finally, in my view the instructions shifted to the defendant the burden of proof on the issue of beneficial ownership. The jury was charged that “if” it found the Chase funds were the property of the International Unification Church movement or were held in trust by Moon for the movement, “then” the interest “would not be taxable income to Moon.” The implication of this *1247instruction was that Moon had to convince the jury that the property belonged to the movement. See Notaro v. United States, 363 F.2d 169, 175-76 (9th Cir.1966) (condemning an “if/then” instruction as obscuring the locus of the burden of proof). By saying that the donor’s intent must be “clear and unambiguous,” not only was the law of charitable trusts being misstated, but the burden of proof improperly placed upon the defendant was made heavy indeed. I do not believe that the mention of “beyond a reasonable doubt” at the tail end of this discussion overcame the improper language within the curative concept of Cupp v. Naughten, 414 U.S. 141, 146-47, 94 S.Ct. 396, 400, 38 L.Ed.2d 368 (1973).
Thus in a case where the crucial issue, and indeed the only real factual question, was whether property unquestionably held in Moon’s own name was beneficially owned by him personally or was held by him on behalf of his international church movement, the charge fell short in several respects.
While often a charge is simply a way to achieve rough justice with the help of a jury, when a critical issue separating criminal conduct from civil is involved, in my view it must be accurate in all respects. This charge, I believe, was not.

. For example:
*1242But I do think you have got to get before the jury the notion that if the jury believes that the people who gave the money intended it to be for the International Unification Church Movement, and if Moon believed he was holding it for that purpose, and if he believed he was using them for that purpose, even though he may have in a few instances made bad investments or used some of it for himself, that the monies could still be viewed as not being his but being the Movement’s.
T. 6122.

. I note here that Moon was indicted, and the case was tried, on the theory that the funds were never in trust to begin with, and not on the theory that he had “diverted” to his own use funds originally given in trust.

. The key issue is whether or not the bank accounts at the Chase Manhattan Bank and the Tong II stock issued in Reverend Moon’s name belonged to Reverend Moon.
The defense contends that these funds and stock were beneficially owned by the International Unification Church Movement which supported the activities of the various national church entities in the United States and elsewhere.
The government contends that these funds belong to Reverend Moon.
This is the crucial issue of fact for you to decide.
If you find that the funds in the Chase accounts were the property of International Unification Church Movement or were held in trust by Moon for the International Unification Church Movement and used for church purposes and that the interest on those funds also belonged to the International Unification Church Movement and were used for it, then that interest would not be taxable income to Moon. You should not consider whether that interest income would be taxable to anyone other than Moon; that is, you should not concern yourself with whether the International Unification Church Movement had any tax liability for the interest earned by the time deposits, because that is not an issue in this case.
In determining whether in 1973, 1974 and 1975 the International Unification Church Movement existed and whether the Movement owned the funds in the Chase accounts and Tong II stock or whether Reverend Moon owned them, you should consider all the evidence, including such factors whether the Movement had a specific organizational structure, written charter or constitution, the existence of other Unification Church corporate entities during the relevant time period, the fact that the accounts were maintained under Reverend Moon’s name, the source of the funds, the intent of the parties who caused the stock and funds to be transferred to Reverend Moon’s name, evidence of any agreements as to how the funds would be used, the manner in which the stock and funds were administered and whether there is any evidence Moon ever accounted to anyone for the use of the funds.
This list is by no means exhausted. You should consider all the evidence in making your determination.
In considering] the evidence, there are a number of related issues which may occur to you. I want to briefly instruct you on the law applicable to these issues.
As I have mentioned, you may consider whether the International Unification Church Movement had a specific organizational structure in making your decision. However, the lack of a formal corporation does not prevent a religious movement from being the beneficial owner of property held in the name of another.
Now, the defendants contend, among other things, that Moon held the Tong II stock and the funds of the Chase accounts as trustee for the International Unification Church Movement. Let me briefly explain to you the essentials of a trust in order for you to evaluate these contentions.
A trust is created when a person is given money or property to be held and used for the benefit of someone else. The person holding the property is called the trustee.
The person who transfers the property to the trust is referred to as a “settler”; the person who holds the property is the “trustee”; and the person or entity on whose behalf it is held is the “beneficiary.”
Whether a trust is created depends on the intent of the person giving the property at the time of the transfer, and that intent must be clear and unambiguous. A trust can be created orally or by the conduct of the parties. The trust need not be reflected in a written document.
In order for a trust to exist, the trustee must be obligated to use the property for the benefit of the beneficiaries; a gift with a mere request or expectation that the property would be used a particular way does not create a trust. There is no trust if the person who receives the money is free to use it for his own benefit. If a trust does exist and the trustee diverts trust property to his own use, the funds diverted become taxable to him at the time and to the extent so diverted.
In determining whether a trust relationship existed, you should, as I have already mentioned, consider all the evidence before you.
It is unnecessary for there to be a written agreement between Reverend Moon and the International Unification Church, providing he held the time deposits and the Tong II stock on behalf of the church. All that is required is that both parties to the relationship understand that the first person is holding the property for the benefit of the second, and you can find such an understanding on the basis of the party’s conduct.
Also the mere fact that Reverend Moon exercised control over the funds and the stock is not necessarily indicative of his personal ownership. A person who holds property on behalf of another may be given broad authority and discretion to deal with that property as long as he does so in a manner consistent with the purpose for which he was given title to the property in the first place.
I would like to say a few final words on the subject of religious movements.
Such organizations can invest and conduct businesses. While the income from such businesses is taxable, this fact does not make *1245taxable the religion’s income from other sources, including interest it earns on funds it has on deposit.
There is no legal requirement that a religious society be incorporated prior to making business investments. It is legal for an unincorporated church or religious association to be the beneficial owner of property held for its use in the name of others.
A religious organization can properly pay the living expenses of [its] leaders or ministers in order to allow them to pursue its religious purposes and can make loans to its ministers or leaders on arm’s length terms. T. 6583-88.

. The majority is equivocal in saying, on the one hand, that the only burden on Moon was to present a prima facie case that he held the assets in trust, and not to establish this as an affirmative defense and, on the other, that a review of the evidence reveals no proof that Moon actually held the subject funds in trust. The majority states that “the only evidence presented was the testimony of three church members who simply stated that they gave money to Moon intending to donate it to their church. Nothing was said about creation of a trust.” This statement runs contrary to the New York and other trust law I have cited above. It was not necessary that the creation of a trust be mentioned. See N.Y.Est. Powers & Trusts Law § 8-1.1 (McKinney 1967); Restatement (Second) of Trusts § 351 comment b (1959) (“No particular form of words or conduct is necessary for the manifestation of intention to create a charitable trust. Compare, as to private trusts, § 24(2). A charitable trust may be created although the settlor does not use the word ‘trust’ or ‘trustee.’ ”).
In this connection the trial court and I agree. There was evidence sufficient, though by no means conclusive, to present the question to the jury. The majority and I agree that, if this were the case, the burden of proof beyond a *1246reasonable doubt remained upon the Government. But the majority thinks there was not enough evidence to present the issue to the jury at all.

. N.Y.Est. Powers & Trusts Law § 8-1.1(a) (McKinney 1967) reads as follows:
No disposition of property for religious, charitable, educational or benevolent purposes, otherwise valid under the laws of this state, is invalid by reason of the indefiniteness or uncertainty of the persons designated as beneficiaries. If a trustee is named in the disposing instrument, legal title to the property transferred for such a purpose vests in such trustee; if no person is named as trustee, title vests in the court having jurisdiction over the trust.