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Decision No. 160

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October 16 1959
In Re: Ruling of Bishop Nolan B. Harmon That Funds in the Permanent Trust Fund of the South Carolina Annual Conference Are Disposable by That Annual Conference

Digest of Case

Funds in the Permanent Fund of an Annual Conference are disposable by an Annual Conference.

Statement of Facts

A request to Bishop Harmon for a Ruling by the Board of Trustees of the South Carolina Annual Conference set out the following facts: "In 1955, The Board of Trustees of the South Carolina Annual Conference, by authority of the Conference and for investment purposes, for $25,000, purchased a tract of mountain land, containing about 300 acres, in Greenville County, South Carolina, with a view of its division between the Board of Education for Youth Camp purposes and a conference controlled corporation for development as a Methodist retreat. The Board of Trustees were to be repaid from the sale of lots by the Retreat Corporation (1955 Journal, pages 47, 82, 150). "So far as the records indicate the funds so used were not taken from the funds of any specific trust, but were part of the general trust funds in the hands of the conference Board of Trustees. "Division of the land between the Board of Education and the Retreat Corporation having proven to be impossible because of the needs of the Youth Camp project, the Board of Trustees so reported to the 1956 Annual Conference (Journal, pp. 151-152), which adopted the following resolution: "'Substitute Motion - R. B. Herbert moved as a substitute that the Board of Trustees be instructed to transfer a deed to the 300 acres in exchange for a mortgage of $25,000 on the property - that the Trustees be further instructed to reduce the face of the mortgage by such sums as they be legally free to allocate to the Board of Education. The motion was adopted.' (Id. P. 48.) "Pursuant to the substitute motion of Dr. Herbert the Board of Trustees executed a deed for the 300 acres of land to the Board of Education in exchange for a mortgage, of $25,000 on the property." The questions then submitted were: " (1) Is the definition of the permanent fund of the Annual Conference, 1956 Discipline, Sec. 711, the same as the definition of the permanent fund of the General Conference in the 1956 Discipline, Sec. 709? "(2) Do all trust funds of the Annual Conference Trustees which are not known to belong to some specific trust belong to the permanent fund? " (3) Can the trust funds in the hands of the Trustees which are not known to belong to a specific trust be legally allocated to reduce the face of the real estate mortgage executed by the Board of Education to the Board of Trustees? " (4) Can the trust funds in the hands of the Trustees which are not known to belong to a specific trust be legally disposed of by the Annual Conference?" The Bishop ruled that the answer to question (1) was No and to the others was Yes. The Ruling was duly reported in writing to the Council by the Bishop. JURISDICTION We take jurisdiction under Par. 909. ANALYSIS In answering the questions Bishop Harmon used the following language, which we adopt as our own: "The first question by the Conference Board of Trustees: 'Is the definitionof the permanent fund of the Annual Conference, 1956 Discipline, Section 711, the same as the definition of the permanent fund of the General Conference in the 1956 Discipline, Section 709?' "The answer is, No. The permanent fund referred to in Paragraph 709 of the Discipline of 1956 is to be held and administered by the Board of Trustees of The (entire) Methodist Church. The permanent fund - and the words 'permanent fund' are in quotation marks in the book of Discipline as referred to in Paragraph 711, Subsection 2 refer to the permanent fund of an Annual Conference. If the questioners really intend to ask whether the words 'which shall be kept intact forever,' now applied to the permanent fund of the Annual Conference, I should again say, No. No such regulation regarding what may be called the permanent fund of any Annual Conference has been promulgated by the General Conference.... "In response to Question Two of the Trustees: 'Do all trust funds of theAnnual Conference Trustees which are not known to belong to some specific trust belong to the permanent fund?' "I answer, Yes. The Discipline specifically states in Paragraph 711, Subsection 2, with reference to the Board of Trustees of the Annual Conference, that these 'Trustees' 'shall receive. collect, and hold in trust for the benefit of the Annual Conference any and all donations, bequests, and devises of any kind or character, real or personal, that may be given, devised, bequeathed, or conveyed to the said board or to the Annual Conference as such for any benevolent, charitable, or religious purpose, and shall administer the same and the income therefrom in accordance with the directions of the donor, trustor, or testator, . . .' Then the Discipline definitely adds: 'When the use to be madeof any such donation, bequest, or devise is not otherwise designated, the same shall be added to and become a part of the "Permanent Fund" of the Annual Conference.' "In response to Question Three of the Trustees: 'Can the trust funds in thehands of the Trustees which are not known to belong to a specific trust be legally allocated to reduce the face of the real estate mortgage executed by the Board of Education to the Board of Trustees?' "The answer is, Yes. Where trust funds have been put in the hands of Trustees and they do not belong to a specific trust, the Annual Conference will have full power to direct the Trustees as to the use and administration of such funds. The paragraph above referred to, 711, Sub-Section 2, states that 'The said corporation (that is, the Trustees) shall receive, collect, and hold in trust for the benefit of the Annual Conference any and all donations, etc.' The same paragraph states that the administration of any trust funds given shall be done 'in accordance with the directions of the donor, trustor, or testator. . . . under the direction of the Annual Conference.' The entire paragraph ends by stating that 'Funds committed to this board may be invested by it only in collateral that is amply secured and after such investments have been approved by the said board or its agency or committee charged with such investment, unless otherwise directed by the Annual Conference.' "These three references to Conference control (which I show above in italics), spanning as they do the whole paragraph, indicated plainly that the Annual Conference itself is able to direct such trust funds as are in the hands of the Trustees when these are not known to belong to a specific trust. "In response to Question Four of the Trustees: 'Can the trust funds in thehands of the Trustees which are not known to belong to a specific trust be legally disposed of by the Annual Conference?' "The answer is, Yes. The reasons for this are given in the response to Question Three. An Annual Conference is entirely competent to manage its own funds and dispose of these as it sees fit, provided that in so doing it does not breach a trust, that is to say, break an understanding or stipulation, established by a grantor when said grantor's funds are turned over to the Annual Conference." That Bishop Harmon's ruling is correct is further indicated by the General Conference having restricted the use of the principal of its own Permanent Fund without requiring all undesignated gifts to be put in such Fund, whereas, the use of the principal of an Annual Conference Permanent Fund is not restricted though all undesignated gifts to an Annual Conference or its Board of Trustees must be put in such Fund. (See Paragraphs 705, 709 and 711 of the 1956 Discipline.) It only remains for us to add that it would seem that an Annual Conference's Permanent Fund should not be used for current expenses of the Conference. The word "Permanent" in the Disciplinary description of such Fund should at least be given the effect that the moneys therein be used consonantly with that description. We, therefore, affirm the ruling of Bishop Nolan B. Harmon.

Decision

All undesignated gifts to the Board of Trustees of an Annual Conference or to an Annual Conference are to be added to that Conference's Permanent Fund, and are disposable by that Conference.

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