Charities sometimes spar over entitlement to bequests and other planned gifts. Occasionally, their disagreements become epic legal battles that span many years.

In Breathe Southern California v. American Lung Association (2023) 88 Cal.App.5th 1172 , two former affiliates fought over the allocation of three bequests. The local organization prevailed, but only after two trips to the California Court of Appeal – that’s a long time to hold your breath.

Warm Up Breaths

Formed in 1903, the Los Angeles Society for the Study and Prevention of Tuberculosis became affiliated with the American Lung Association, a national organization, and the American Lung Association in California, a statewide constituent association.

In 2006, the Los Angeles organization disaffiliated from the state and national organizations, eventually taking the name Breathe Southern California. Its mission is “to promote clean air and healthy lungs through research, education, advocacy and technology.”

The litigation over the three bequests began in early 2015 when the American Lung Association in California (ALAC) sought a half share of three bequests that were created but not distributed before Breathe’s disaffiliation. The opinion does not state the value of the bequests, but presumably they were substantial.

Breathe and ALAC agreed to have the dispute heard by a court-appointed referee instead of a judge. The referee rules that Breathe had to share half the bequests and to pay a one percent per month late fee, plus legal fees.

Breathe appealed and the Court of Appeal reversed the referee’s rulings. The dispute went back to Alameda County Superior Court for further hearing.

A judge conducted a bench trial on whether the bequests were subject to sharing under the agreements that had existed between Breathe and ALAC prior to Breathe’s disaffiliation. By then, ALAC had dissolved and been succeeded by the American Lung Association (ALA). ALA’s mission is “to save lives by improving lung health and preventing lung disease.”

The court heard testimony from five witnesses, including ALA leaders, ALA’s former general counsel, and Breathe’s President/CEO.

In a ruling issued in June 2020, the trial judge found the contractual language on bequest allocation ambiguous, expressing shock that disputes over allocation were not more prevalent. The judge ruled that bequest sharing was mandatory unless the bequest contained “clear language” that the donor did not want the gift shared, and the bequests in question did not bar sharing.

Deep Breath – Court of Appeal to the Rescue (Again)

The Court of Appeal independently reviewed the judgment and once again revived Breathe’s claim to the entirety of the bequests.

The affiliate agreement required Breathe to share bequests except for “funds restricted in writing by the donor . . . to exclude or limit sharing.”

Breathe argued that no particular language was needed to preclude sharing with the parent organization. The Court of Appeal agreed, explaining: “donors are unlikely to be aware of the possibility of sharing [between affiliate organizations]. Accordingly, there is little reason to believe most donors would use express language referencing sharing, even if the language of the bequest makes it clear the donor intended for the entirety of the funds to go to the affiliate.”

Turning to the three bequests, the appellate court found it a “straightforward matter” to determine that the plain language of each of the bequests restricted sharing.

Alberta Patricia McNamara left the residue of her estate to several charities, including the “American Lung Association of California for use at its Los Angeles County affiliate.” Breathe was the only Los Angeles affiliate when McNamara signed her will. Hence the language dictated that the bequest go entirely to Breathe. 

The two other bequests specified that they were to be used to establish a singular, named fund. Splitting the bequests between Breathe and the ALA would have required the creation of multiple funds for each bequest. 

Reasoned the court: “The ALA effectively argues the intent will be substantially satisfied, because its funds pursue the specified types of research. But our obligation is to interpret the bequest to carry out the testators’ intent ‘as nearly as possible.’ Here, that is the creation of a single named fund as to each bequest. The ALA provides no authority or basis to conclude that the specification of a singular fund was not intentional.”

Breathe, with less than $1 million in annual revenue per its most recent Form 990, thus finally prevailed over ALA with $160 million in annual revenue.

Breathe In, Breathe Out

What can we learn if we meditate on this ruling? 

Agreements between charitable affiliates as to sharing bequests and other planned gifts should be as clear as possible to avoid a dispute. The litigation here spanned eight years, tying up the bequests and causing both organizations to incur hefty legal fees.

Likewise, estate planning attorneys should aim for precision when describing the intended beneficiary of each gift. As confirmed in California Probate Code section 21102, the intention of the donor as expressed in the signed writing controls the legal effect of the transfers made in the document. In a prior post, we explained the rules for the interpretation of ambiguous documents.

If the donor wants the funds to stay local, the will, trust or beneficiary designation should specify the organization by its legal name. Checking the name of the intended recipient, on the organization’s website and/or the Secretary of State’s website, may avoid future conflict.