Pacific Southwest Dist. of the Church of the Brethren v. Church of the Brethren CA2/4 ( 2014 )

Filed 6/23/14 Pacific Southwest Dist. of the Church of the Brethren v. Church of the Brethren CA2/4
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California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
PACIFIC SOUTHWEST DISTRICT OF B247729
THE CHURCH OF THE BRETHREN,
(Los Angeles Country
Plaintiff, Cross-defendant and Super. Ct. No. BC456826)
Appellant,
v.
CHURCH OF THE BRETHREN, INC.,
Defendant, Cross-defendant
and Appellant;
CENTRAL KOREAN EVANGELICAL
CHURCH et al.,
Defendants, Cross-complainants and
Respondents.
APPEAL from a judgment of the Superior Court of Los Angeles Country,
Malcolm H. Mackey, Judge. Affirmed in part, reversed in part, and remanded with
directions.
Gorman & Miller, Kenneth L. Heisz, for Plaintiff, Cross-defendant and Appellant
Pacific Southwest District of the Church of the Brethren.
Law Offices of Doonan & Doonan, D. Scott Doonan, for Defendant, Cross-
defendant and Appellant Church of the Brethren, Inc.
Law Offices of Steven C. Kim & Associates, Steven C. Kim and Gabriel
Colorado, for Defendants, Cross-complainants and Respondents Central Korean
Evangelical Church and Jang Kyun Park.
______________________________
Pacific Southwest District of the Church of the Brethren (PSWD) and Church of
the Brethren, Inc. (COBI)1 appeal from a judgment in favor of respondents Central
Korean Evangelical Church (CKEC) and its pastor Jang Kyun Park. The judgment gave
CKEC an 86-percent share and gave PSWD a 14-percent share in the proceeds from any
sale of CKEC’s real property, which consists of three lots in the Koreatown
neighborhood of Los Angeles. Appellants argue CKEC holds the property in trust for the
Church of the Brethren. We conclude that PSWD is estopped from asserting a trust over
the entire property because CKEC joined the denomination on assurances by church
representatives that a trust would not apply to property it owned at the time of affiliation,
and at that time it already owned two of the three lots. We also conclude that PSWD may
assert a trust over the after-acquired third lot. We affirm the judgment to the extent it
ordered partition of the property by sale, but reverse and remand for a redetermination of
each party’s share in the proceeds from any sale.
FACTUAL AND PROCEDURAL SUMMARY
The Church of the Brethren is a protestant church with a national office in Illinois.
It is divided into 23 districts. Local churches are subordinate to the district in which they
are geographically located. PSWD is the district controlling local churches in California
and Arizona. The district conference, a meeting of delegates from local churches, is the
1
PSWD and COBI appear in parts of the record under their earlier legal names
Pacific Southwest Conference and Church of the Brethren General Board.
2
final authority on district policy and procedure. The district board manages the district as
authorized by the district conference. The district executive is the executive officer of the
board who oversees the implementation of district work.
The annual conference, composed of a standing committee and delegates from
local churches, is the Church of the Brethren’s highest legislative authority. Its standing
committee, composed of district representatives, is the judicial body of the Church of the
Brethren. COBI is one of four approved agencies of the annual conference and its
principal administrative body.2 The annual conference decides matters of polity, which
are compiled in the Church of the Brethren’s governing document, “Manual of
Organization and Polity” (manual).
At all relevant times, the manual provided that all local church property is held in
trust for the benefit of the Church of the Brethren. It also provides that all deeds of
conveyances should include a restrictive covenant allowing title to vest in the district
board under certain conditions and requiring consent of the district board for
conveyances. Under the restrictive covenant, title vests in the district board “in trust . . .
only as a means of preserving property for the purposes of the Church of the Brethren.
This property has been purchased and developed by consecrated effort . . . by individuals
who have been loyal to the principles of the Church of the Brethren.”3 If a local church
2
COBI is not coextensive with the ecclesiastical body or denomination, which we
refer to as the Church of the Brethren. (See Central Coast Baptist Assn. v. First Baptist
Church of Las Lomas (2007) 171 Cal. App. 4th 822, 855, quoting Wheelock v. First
Presbyterian Church (1897) 119 Cal. 477, 485 [religious corporation is “a body separate
and distinct from the church proper”]; Berry v. Society of St. Pius X (1999) 69
Cal. App. 4th 354, 372 [“a religious organization of church members or congregants
coexists with the corporate entity”].)
3
The manual’s 1986 edition read that when the restrictive covenant results in
vesting title in the district board as trustee, “it is understood that this action is taken only
as a means of conserving for the Church of the Brethren property which has been
purchased and developed by consecrated effort . . . by individuals who have been loyal to
the principles” of the Church of the Brethren. That language was revised to its current
version by the 1987 annual conference. The 1987 annual conference also revised the
trust provision in response to Jones v. Wolf (1979) 443 U.S. 595 to “clearly establish a
3
“attempts by either majority or unanimous vote to withdraw from the Church of the
Brethren district in which it is located . . . , any property that it may have shall be within
the control of the district board and may be held for the designated purposes or sold or
disposed of in such a manner as the district board, in its sole discretion, may direct.”
Respondent CKEC was founded in 1979 and incorporated as an independent
church in California in 1982. In 1985, respondent Park and a CKEC elder, Koo Kim,
bought lots 48 and 49 for approximately $250,000, then quitclaimed the property to Park
as trustee for CKEC. Between 1985 and 1987, Park visited the Church of the Brethren’s
national office in Illinois and had conversations with various church leaders about
establishing a relationship between the two churches.
In March 1987, COBI sent CKEC the Parish Ministries Commission guidelines for
receiving established congregations as member churches. The guidelines set up a three-
stage process of affiliation. The congregation and the Church of the Brethren were to get
acquainted during a preliminary, “pre-covenantal,” stage, lasting from several months to
a year. The second, “covenantal,” stage, lasting from one to two years, was to be devoted
to an in-depth study of the Church of the Brethren’s “history, doctrine, polity, and
practice.” At the end of that stage, the congregation was to make a written request for
recognition, “indicating formal action by the group, a proposed name, a plan for
organization/charter including the property agreements and polity statements.” At the
third “confirmation and celebration” stage, the congregation was to be received by the
district conference. The district was to “[d]evelop a trust agreement on property issues,”
and the district and the congregation were to sign “an agreement of trust.”4
trust relationship.” The trust provision currently reads: “For the sake of uniformity and
continuity in the ownership of the Church of the Brethren property, all property held by
or for the use of a congregation, whether legal title is lodged in a corporation, a trustee or
trustees, an unincorporated association or any other capacity, and whether the property is
used in programs of the congregation or retained for the production of income, is held, in
trust, nevertheless, for the use and benefit of the Church of the Brethren.”
4
The 1987 annual conference revised the manual to add a new section on
“Receiving Unrelated Congregations,” which reads: “When an organized congregation
4
At some point during the affiliation process, Kwang Suk Kim, a Church of the
Brethren consultant for recruiting Korean churches, assured Park that no trust would be
imposed on property CKEC owned before joining the Church of the Brethren. According
to Kim, that was the position taken by Irven Stern, then-PSWD’s chief executive.
Park requested that the Church of the Brethren help CKEC buy an adjoining lot,
so as to convince his deacons that it would be beneficial to move from independent status
to becoming part of a denomination. Between 1987 and 1989, PSWD raised $250,000
towards the purchase of lot 44, which adjoined lots 48 and 49. PSWD’s board approved
the purchase of this lot on condition that the transaction be governed by the manual, and
that condition was to be made clear to CKEC.
In September 1987, CKEC expressed its desire to proceed to the second stage of
the affiliation process. By the fall of 1989, after CKEC had participated in various
denominational events and some of its members had attended annual and district
conferences, Park advised PSWD that CKEC was ready to become a member
congregation of the Church of the Brethren. PSWD’s delegates voted to receive it as a
congregation at the district conference and seated Koo Kim as a delegate. The following
year, Park was ordained as a minister of the Church of the Brethren.
In 1990, a year after CKEC joined the denomination, PSWD paid $250,000 and
one-half of the closing costs for the purchase of lot 44, and was listed as its sole title
owner. CKEC was responsible for the remaining $70,000 on a loan carried by the seller.
Also in 1990, CKEC applied to COBI for a $300,000 member church loan to build an
additional sanctuary and pay off existing debts. Those included the $70,000 owed on lot
44 and $127,000 still owed on a commercial loan that had been used to pay off debt
seeks to affiliate with the Church of the Brethren, the district board shall initiate a series
of exchange visits and conversations with the congregation to explore the theological,
biblical and ecclesiastical perspectives and beliefs of each. If there proves to be potential
for mutual compatibility and supportive participation, the district board shall recommend
to district conference that the district and congregation enter into a year of dialogue and
fellowship. During the ensuing year, the district board will review and evaluate the
relationship and make recommendation to district conference for final action.”
5
incurred during the original purchase of lots 48 and 49, and for remodeling the property.
PSWD co-signed the promissory note for the COBI loan.
In 1992, PSWD transferred lot 44 to itself and CKEC, and the three lots were
consolidated. Due to CKEC’s financial difficulties, COBI allowed it to suspend
payments on its loan in 1994. In 1996, CKEC and PSWD co-signed a promissory note
for a $513,750 loan from COBI, which allowed CKEC to pay off the prior COBI loan
and a commercial bank loan it had obtained in the meantime, as well as to complete
construction of its church building.
According to the manual, a local church is expected to recognize a foundational
covenant “to support faithfully the program of the Church of the Brethren, recognizing
Annual Conference enactments . . . as having governing force in its life,” and to remain a
member of the Church of the Brethren. The local church is to develop its constitution
and bylaws “in harmony with the Church of the Brethren and district polity.” CKEC did
not amend its bylaws to harmonize them with these polities. But it held itself out as a
member church, using the name “Central Evangelical Church of the Brethren” on its
letterhead and church building. Park renewed his ordination in 2000 and 2005,
reaffirming his vows, which included a vow to be subject to the Church of the Brethren’s
“discipline and government.”
In October 2006, Park sent a letter to then-PSWD executive Bryan Boyer, citing
financial difficulties due to declining membership and asking for district approval of the
church’s relocation and sale of its property. In November 2006, Boyer informed Park
that the district board had approved the sale on conditions that debts owed to COBI and
other institutions be paid off first from the proceeds of the sale, a new property be
purchased, and any remaining funds be held in trust by PSWD for CKEC. In an e-mail
he sent Park in February 2007, Boyer recounted that Park had either disagreed with or
misunderstood the conditions of the sale, and that Boyer and Park had agreed to have an
attorney review the matter. In subsequent correspondence, Boyer and attorney Cris
Klingerman, who was retained by PSWD, advised Park the Church of the Brethren’s
polity required that PSWD be listed as a trustee on the title of any new property to ensure
6
reversion if CKEC ceased to be “a Church of the Brethren.” Park also was told that if
CKEC decided to disassociate, the congregation would be allowed to keep the proceeds
of the sale of its church property after paying off the COBI loan and PSWD’s one-half
ownership interest in lot 44.
In July 2007, Boyer and Park discussed CKEC’s unwillingness to place a trust in
favor of PSWD on its new property, and Boyer told Park this showed lack of trust on the
congregation’s part. Boyer advised CKEC it needed to provide a formal letter stating it
had voted to disassociate, and the district board would respond by letter agreeing to the
disassociation; the property would be appraised, so that the proceeds from the sale of lot
44 could be divided between PSWD and CKEC; and once the COBI loan was paid off
and PSWD received its share of the proceeds on lot 44, the rest of the proceeds would go
to the CKEC congregation. In response, Park sent CKEC’s resolution to disassociate by
unanimous vote.
In the subsequent appraisal, lot 44, which was used as a parking lot for the church,
was valued at $930,000. That sum amounted to approximately 28 percent of the total
property value of $3,320,000. Two attempted sales of the property, in 2007 and 2008,
were unsuccessful. In various documents in connection with the second attempted sale,
PSWD represented its interest in the entire property to be 14 percent. The district board
adopted a resolution for the sale of lot 44 and PSWD’s one-half interest in it, and for a
proportionate share in the closing costs. PSWD submitted escrow documents to that
effect.
In March 2010, David Kraus of Gorman & Miller, PSWD’s new attorney, sent
CKEC a letter advising that PSWD wanted to either enter into an agreement with CKEC
to sell the property, or seek partition. In March 2011, PSWD filed a complaint for
partition, claiming a 250/760 share, or approximately one-third of the value of the entire
property.5 In December 2011, PSWD applied ex-parte for leave to file a first amended
complaint. In its application, it represented that it had changed attorneys, and that its new
5
The 250/760th share was based on PSWD’s contribution of $250,000 towards
the purchase of lot 44 in 1990 and the alleged $760,000 value of the property at the time.
7
attorney, Kenneth Heisz, also of Gorman & Miller, “learned that [the church’s] governing
documents dictated a different ecclesiastical and legal result.” The first amended
complaint alleged that, in October 2011, PSWD had made a formal demand that CKEC
convey legal title of its property to PSWD based on the trust provisions in the manual,
and that CKEC had refused to do so. The first amended complaint also alleged that
PSWD had not taken formal action to approve CKEC’s disaffiliation. PSWD asserted a
cause of action for breach of trust under Corporations Code section 9142, and sought
injunctive and declaratory relief. COBI was named as a defendant because of its interest
as a lender.
CKEC demurred on the grounds that the first amended complaint was barred by
the three-year statute of limitations in Probate Code section 16460 or the four-year statute
of limitations in Code of Civil Procedure section 343; that it failed to state a cause of
action because the property was owned by Park before CKEC joined the Church of the
Brethren; that it was a sham pleading because it contradicted the allegations of the
original complaint; and that PSWD lacked standing. The trial court overruled the
demurrer.
CKEC then filed an answer, asserting various defenses, including the statute of
limitations, laches, waiver, and estoppel. It also filed a cross-complaint for partition,
quiet title, breach of contract, and rescission. The court sustained the demurrer in part
with leave to amend, and CKEC filed a first amended cross-complaint, alleging the same
four causes of action. The court denied PSWD’s motion for summary judgment because
of defects in the moving papers.
After a bench trial, the court found that no trust was created under Corporations
Code section 9142 because there was no document showing that Park gave up the
property in which he had an investment. In the alternative, the court found that PSWD
had waived any trust by initially seeking only 14 percent of the proceeds of any sale and
then requesting a partition, and that it was unfair for PSWD to take CKEC’s entire
property. The court ordered that the property be sold to CKEC’s tenant unless PSWD
procured a higher offer within 90 days. The court stated it would not “get into the
8
percentage” of the proceeds to which PSWD would be entitled, but it mentioned “the 14
percent figure” and stated that the balance would be paid to CKEC, which would also be
reimbursed for expenditures to enhance the value of the property. The proceeds of the
sale were to be determined after the sale.
Respondents’ proposed statement of decision, which the court signed, included
many additional findings, some of which went beyond or contradicted the court’s
previous rulings. Among those were findings that PSWD failed to exhaust its remedies
under the manual; that PSWD lacked standing because it was not the beneficiary of any
trust; that PSWD’s complaint was barred by the statute of frauds and statute of
limitations; that CKEC never agreed to be bound by the manual; that Kim, as an official
representative of the Church of the Brethren, told Park that if CKEC joined the
denomination, no trust would be imposed on its real property; that because of these
representations, no trust agreement was developed and no restrictive covenant was
included in the deed for lot 44, even though that lot was acquired after CKEC joined the
Church of the Brethren; that PSWD was estopped from claiming more than a 14-percent
share in CKEC’s property; and that by agreeing to sell the property and divide the
proceeds, PSWD had irrevocably waived the right to enforce any trust.
The statement of decision, and the ensuing judgment, provided for the sale of the
property to CKEC’s current tenant unless PSWD could obtain a better offer. It set
PSWD’s share of the proceeds at 14 percent and CKEC’s at 86 percent. It provided for
PSWD’s proportional reimbursement of CKEC’s expenses relating to taxes, construction,
mortgages, interest, insurance, repairs, and maintenance of the entire property. From its
share of the proceeds, CKEC was to pay PSWD 14 percent of rents collected from the
tenant and to pay off the COBI loan. The parties were to share proportionally in the sale
costs.
After PSWD and COBI appealed, the trial court ordered the sale of the property,
directing the court clerk to sign the sale documents on PSWD’s behalf if PSWD refused
to sign. PSWD eventually posted an undertaking, which stayed the trial court
proceedings.
9
DISCUSSION
I
We have been asked to resolve a dispute over ownership of church property.
Secular courts may resolve such disputes so long as they do not violate the First
Amendment to the United States Constitution by addressing matters of religious doctrine
or by infringing on the right to free exercise of religion. (Episcopal Church Cases (2009)
45 Cal. 4th 467, 478–479.) Under the “neutral principles of law” approach, California
courts should resolve church property disputes by considering “sources such as the deeds
to the property in dispute, the local church’s articles of incorporation, the general
church’s constitution, canons, and rules, and relevant statutes, including statutes
specifically concerning religious property, such as Corporations Code section 9142.”
[Citations.] (Id. at p. 485.) The courts should defer “to the position of the highest
ecclesiastical authority” that has decided any points of religious doctrine involved in the
dispute. (Ibid.) Free exercise rights also require deference to the position of the general
church on matters of internal church governance when “local churches have submitted
themselves to the authority” of the general church. (Id. at pp. 486, 492.)
We apply the neutral principles of law approach and interpret the churches’
governing documents de novo. (Concord Christian Center v. Open Bible Standard
Churches (2005) 132 Cal. App. 4th 1396, 1408–1409.) To the extent the application
hinges on factual disputes, we review the record for substantial evidence favorable to the
judgment and draw all reasonable inferences in favor of the prevailing party. (Ibid.)
In Jones v. Wolf, supra, 443 U.S. 595, the United States Supreme Court allowed
churches to ensure beforehand who would retain church property in case of a dispute by
modifying “the deeds or the corporate charter to include a right of reversion or trust in
favor of the general church. Alternatively, the constitution of the general church can be
made to recite an express trust in favor of the denominational church.” (Id. at p. 606.)
The court stated that “the civil courts will be bound to give effect to the result indicated
by the parties, provided it is embodied in some legally cognizable form.” (Ibid.)
10
In 1987, the legislative body of the Church of the Brethren modified the trust
provisions in the manual, its governing document, to comply with Jones v. Wolf, supra,
443 U.S. 595. Respondents argue that those trust provisions are dispositive of the
property dispute under Episcopal Church Cases, supra, 45 Cal. 4th 467. Appellants claim
that case is distinguishable because CKEC did not agree to be bound by the manual or the
trust provisions, and the trust provisions are unenforceable against it under the doctrines
of waiver and estoppel.
Episcopal Church Cases, supra, 45 Cal. 4th 467 involved a dispute over the
ownership of the property of a local church that had disaffiliated from the Episcopal
Church. (Id. at p. 475.) The local church held title to the property, but the Episcopal
Church had adopted a canon providing that a local church’s property ‘“is held in trust’ for
the general church and the diocese in which the local church is located.” (Id. at p. 486.)
The local church had promised to be bound by the constitution and canons of the
Episcopal Church in its application to organize as a parish and in its articles of
incorporation. (Id. at pp. 485–486.) The court held that, under Jones v. Wolf, the canon
establishing a trust in favor of the general church strongly supported the conclusion that
the property reverted to the general church when the local church disaffiliated.
(Episcopal Church Cases, at p. 487.)
The court also held Corporations Code section 9142 compelled the conclusion that
the general church owned the property. (Episcopal Church Cases, supra, 45 Cal.4th at
p. 488.) Subdivision (c)(2) of that section provides: “No assets of a religious corporation
are or shall be deemed to be impressed with any trust, express or implied, statutory or at
common law unless . . . [¶] and only to the extent that, the articles or bylaws of the
corporation, or the governing instruments of a superior religious body or general church
of which the corporation is a member, so expressly provide.” 6 Subdivision (d) allows
6
Respondents contend this provision does not apply to lots 48 and 49, which Park
holds as trustee for CKEC, but they cite no authority that property held in trust for a
religious corporation is not that corporation’s asset. The manual creates a trust in “all
11
amendment or dissolution of trusts created by subdivision (c)(2) “by amendment from
time to time to the articles, bylaws, or governing instruments creating the trusts. . . .” The
court construed these statutory provisions to mean that, “under California law, a trust is
created by compliance with any one of the alternatives set forth in subdivision (c)(2), and
it can only be altered or dissolved by amending the creating instrument.” (Episcopal
Church Cases, at p. 489.)
Respondents argue the court’s holding in Episcopal Church Cases, supra,
45 Cal. 4th 467 was necessarily based on the local church’s application to organize as a
parish and on its articles of incorporation, which expressly declared its intent and
agreement “to be part of a larger entity and to be bound by the rules and governing
documents of that greater entity.” (Id. at p. 493.) They seek to distinguish the case
because, here, there is no writing memorializing CKEC’s agreement to be bound by the
manual, and its articles of incorporation do not mention the Church of the Brethren. The
court in Episcopal Church Cases cited with approval the proposition that ‘“in a
hierarchically organized church, the “general church” can impress a trust on a local
religious corporation of which the local corporation is a “member” if the governing
instruments of that superior religious body so provide.’” (Id. at p. 492.) We do not read
the court’s recitation of facts supporting its holding as creating a requirement that
membership in a general church and agreement to be bound by its governing documents
can be established only by the local church’s express written agreement. (See Episcopal
Church Cases, at p. 489, citing Guardian Angel Polish Nat. Catholic Church of L.A., Inc.
v. Grotnik (2004) 118 Cal. App. 4th 919, 929–930 [listing various acts of local church
showing intent to be part of national church].)
It is undisputed that CKEC became a part of the Church of the Brethren when
PSWD’s district conference received it as a member congregation. After that, CKEC
held itself out as “Central Evangelical Church of the Brethren,” and participated in
various programs and events within PSWD and the general church. It benefitted
property held by or for the use of a congregation,” even when legal title is lodged in a
trustee.
12
financially from the relationship by acquiring lot 44 with funds contributed by PSWD
and by obtaining member church loans from COBI that allowed it to repay its
commercial bank loans and complete construction of its church building. Park was
ordained as a Church of the Brethren minister, and he twice reaffirmed his ordination
vows, which subjected him to the Church of the Brethren’s “discipline and government.”
Since at least 1968, the manual has expressly provided that the annual conference
is “the final authority of the Church of the Brethren in all matters of procedure, program,
polity, and discipline.” Its actions “are directives for the whole life of the church, and
implementation is assumed to take place within a reasonable span of time,” without “acts
of enforcement or decree” and with channels of review when annual conference decisions
are questioned. The manual directs that a local church include a covenant in its
constitutions or bylaws “recognizing Annual Conference enactments of the Church of the
Brethren as having governing force in its life,” and agreeing to remain a member of the
Church of the Brethren. By its own terms, the manual assumes this directive will be duly
implemented. We see no reason why such a covenant should not be implied where, as
here, the general church’s governing document expressly anticipates that one will be
included in the local church’s governing documents.
The manual also provides that congregations “constantly need to examine and
renew their covenant with the denomination and to follow the counsel of the church.” In
the “rare” cases of disagreement, the goal is reconciliation, not dissent. In short, the basic
assumption in the manual is that member churches will agree to be bound by annual
conference enactments, disagreements will be the exception rather than the rule, and they
will be resolved in support of the enactments. The manual does not contemplate that a
member church will refuse to be bound at all, and the fact that CKEC did not amend its
bylaws after joining the Church of the Brethren does not require the conclusion that the
manual is not binding on it.7
7
At oral argument, respondents’ counsel retreated from the position that CKEC
was not bound by the manual at all, arguing only that CKEC did not agree to be bound by
the manual’s trust provisions.
13
Respondents argue CKEC did not agree to be bound by the trust provisions
because Kim, who acted as liaison and interpreter, and Stern, who was the district
executive at the time, expressly represented that the Church of the Brethren would not
interfere with the right of established churches to control property they owned before
joining it. It is unclear when these representations were made during the affiliation
process, which lasted from 1985 to 1989, but in 1987, the annual conference made
significant revisions to the manual: It revised its trust provisions pursuant to Jones v.
Wolf and it adopted a provision for receiving unrelated congregations. Neither provision
expressly exempted such congregations from the trust provisions, nor did the manual
require their express agreement to those provisions. Appellants maintain that the
representations made by Kim and Stern were unauthorized and of no legal effect because
changes in polity require a two-thirds majority vote at annual conference. Appellants
also rely on the provision in Corporations Code section 9142, subdivision (d) that a trust
created by a general church’s governing instrument can be altered or dissolved only by
amending the creating instrument. (See Episcopal Church Cases, supra, 45 Cal.4th at
p. 489.)
Stern interpreted the trust provisions as not applying to property owned by
established churches, an interpretation apparently supported by the stated assumption in
the manual that a district may assert a trust over property “purchased and developed . . .
by individuals who have been loyal to the principles of the Church of the Brethren.”
There is no evidence that the annual conference has sole authority to interpret the trust
provisions. But even assuming that Stern lacked actual authority to in effect waive those
provisions, the record contains substantial evidence that the Church of the Brethren
placed Stern and Kim in a position of ostensible authority to do so.
Ostensible authority is such authority “as a principal, intentionally or by want of
ordinary care, causes or allows a third person to believe the agent to possess.” (Civ.
Code, § 2317; Gulf Ins. Co. v. TIG Ins. Co. (2001) 86 Cal. App. 4th 422, 438–439.) The
doctrine of ostensible authority rests on principles of estoppel and requires
“representation by the principal, justifiable reliance thereon by the third party, and change
14
of position or injury resulting from such reliance.” (Hobart v. Hobart Estate Co. (1945)
26 Cal. 2d 412, 450; see also 3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency and
Employment § 96, p. 143.) Estoppel principles are “neutral principles of law” of general
application, “which can be applied without ‘establishing’ churches to which property is
awarded.” (See Presbyterian Church in U.S. v. Mary Elizabeth Blue Hull Memorial
Presbyterian Church (1969) 393 U.S. 440, 449.) Corporations Code section 9142,
subdivision (b)(3) incorporates such principles in providing that a court may “rescind or
enjoin the performance of a contract” only if it is equitable to do so.
In the letter that accompanied the copy of the guidelines for receiving established
congregations, Park was advised that Stern and Kim would help CKEC to “relat[e] to
these guidelines.” The guidelines specifically required the district to “[d]evelop a trust
agreement on property issues.” Kim was a paid consultant for the recruitment of Korean
churches, and he acted as an interpreter for Park in his meetings with Stern. According to
Kim, he and Stern “made it very clear” that established Korean churches would not lose
property they owned when they joined the Church of the Brethren because otherwise
those churches would not have been interested in joining. Since Park was encouraged to
discuss the guidelines with Kim and Stern, he was justified in relying on their
representations that the trust provisions would not apply to property CKEC already
owned, and PSWD is estopped from asserting a trust over lots 48 and 49.
The record does not support application of estoppel principles to lot 44 since that
lot was acquired after CKEC joined the Church of the Brethren. The vast majority of the
funds for the purchase of this lot was contributed by PSWD, and the purchase was
approved on condition that the transaction be governed by the manual. That condition
was to be made clear to CKEC. It is unclear if it was, because Park testified he did not
remember. But Kim did not testify about making any representation that after-acquired
property would be excluded from the trust provisions. Upon purchasing the lot, Stern
advised various Church of the Brethren officials that the district was named on the deed
of trust. There is no evidence that the subsequent transfer of the lot to PSWD and CKEC
in joint tenancy was intended to waive the trust provisions. Nor is the congregation’s
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development of the lot or repayment of the $70,000 loan to COBI such evidence. As the
court explained in Episcopal Church Cases, supra, 45 Cal.4th at pages 492–493, it is
impossible to be certain whether contributions made toward the purchase and
development of property while the local church was a member of the general church were
made for benefit of the local or general church.
Respondents rely on the position taken by PSWD’s attorneys and executives, who
appear to have waived the trust between 2007 and 2011 when they claimed a share in
only half of lot 44. Respondents recognize that the inconsistent position PSWD took in
its original complaint does not amount to a binding judicial admission because that
complaint was superseded by the first amended complaint. (See Minish v. Hanuman
Fellowship (2013) 214 Cal. App. 4th 437, 457–458 [statements in superseded pleadings
may constitute evidentiary admissions or prior inconsistent statements, but party against
whom they are used at trial may controvert them].) The explanation at trial was that a
waiver was consistent with the Church of the Brethren’s polity because the manual
placed the property of a withdrawing congregation in the sole control of the district board
and at its discretion. To the extent the position taken by PSWD as to lot 44 depends on
an interpretation of the Church of the Brethren’s governing document, it appears to be
inconsistent with the requirement in the manual that the district board exercise its
discretion “solely for the purpose of assuring that the property or its proceeds are not
diverted from use for the Church of the Brethren.”
Respondents’ contention that PSWD’s waiver was irrevocable or that PSWD
should be estopped from revoking it is not convincing without evidence that they would
suffer actual prejudice by revocation of the waiver as to lot 44. (See Aceves v. U.S. Bank
N.A. (2011) 192 Cal. App. 4th 218, 225–226 [promissory estoppel requires injury from
reasonable and foreseeable reliance on promise]; Kacha v. Allstate Ins. Co. (2006)
140 Cal. App. 4th 1023, 1035 [“waiver may ordinarily be revoked absent a showing of
prejudice”].) Respondents do not address this element, and exhibit 276, which is cited in
the statement of decision as evidence of their total expenditures, is not included in their
appendix on appeal. The evidence adduced at trial indicates respondents have been
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renting out the church building for 10 years. They have not been making full monthly
payments on the COBI loan. There is no evidence that the rental income has been
insufficient to cover the property-related expenses. Without such evidence we cannot
conclude that respondents would be prejudiced by the delay in PSWD’s assertion of a
trust over lot 44, of which they have made full use in the meantime.
We conclude that the manual creates an enforceable trust in lot 44, but not in lots
48 and 49. The trial court was correct in ordering a partition sale, but on remand must
redetermine the two churches’ shares in the proceeds, and their respective rights to
reimbursement for rents and expenses as to lot 44.
II
Respondents’ remaining arguments are based on findings included in the statement
of decision that the court did not make in the oral ruling. Respondents argue PSWD
lacks standing to assert a breach of trust claim under Corporations Code section 9142
because it is not a person who may bring such a claim under subdivision (a), namely the
corporation, a member, or a former member; an officer or director; and “[a] person with a
reversionary, contractual, or property interest in the assets subject to such trust.” The
manual delegates to the districts the right to enforce the trust provisions and contemplates
that a district conference will have a reversionary interest in church property, may assert
title to it, and have it vested in the district board, in trust, for the district. Under the
manual, PSWD clearly has an interest in church property. It is a proper plaintiff under
the statute.
Respondents also argue the action is barred by the statute of limitations in Probate
Code section 16460 or Code of Civil Procedure sections 338 or 343. This argument fails
both factually and legally. The statement of decision, which respondents drafted and the
court adopted, includes a general finding that the complaint “is barred by running of the
statute of limitations. The cause of action for breach of trust and declaratory relief had
accrued as of February 27, 2007 (Exh. 235).” The referenced exhibit is an e-mail from
then-PSWD executive Boyer to Park, recounting the latter’s disagreement with the
conditions on which the district board approved the sale of the property in 2006. The
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district board’s conditions were that debts be paid off, a new property be purchased, and
any remaining funds be held in trust by PSWD for CKEC. None of these conditions
invoked a trust in favor of the Church of the Brethren. Thus, any disagreement about
them is irrelevant to PSWD’s claim in the first amended complaint.
Moreover, the statutes of limitations on which respondents rely are inapposite.
The three-year statute of limitations in Code of Civil Procedure section 338, subdivision
(a) applies to actions “on liability created by statute.” Such a liability ‘“comes into being
solely by statute and . . . had no existence prior to the enactment creating it. Where
liability would exist in some form irrespective of the statute, it is not ‘. . . a liability
created by statute.”’ [Citation.]” (Brandenburg v. Eureka Redevelopment Agency (2007)
152 Cal. App. 4th 1350, 1362.) As the court explained in Episcopal Church Cases, supra,
45 Cal.4th at page 488, subdivisions (c) and (d) of Corporations Code section 9142 were
enacted in 1982, and are consistent with Jones v. Wolf, supra, 443 U.S. at page 606,
which three years earlier had sanctioned the creation of a trust in a general church’s
governing instruments. Liability for the breach of such a trust does not arise solely by
statute.
The three-year statute of limitations in Probate Code section 16460 applies only
“on receipt by the beneficiary of an ‘interim or final account in writing, or other written
report’ by the trustee . . .[,]” circumstances not present in this case. (See Di Grazia v.
Anderlini (1994) 22 Cal. App. 4th 1337, 1346.) The catch-all four-year statute of
limitations in Code of Civil Procedure section 343 applies to actions “other than for the
recovery of real property.” (See Code Civ. Pro., § 335.) The gravamen of PSWD’s
cause of action under Probate Code section 16460 is the recovery of real property. (See
Episcopal Church Cases, supra, 45 Cal.4th at p. 476 [describing complaint as “alleging
eight property-recovery-related causes of action”].) An action for recovery or possession
of real property is subject to the five-year statute of limitations in Code of Civil
Procedure sections 318 and 321. (Harrison v. Welch (2004) 116 Cal. App. 4th 1084,
1095–1096.) Respondents do not address that statute of limitations.
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DISPOSITION
The judgment is affirmed as to lots 48 and 49 and reversed as to lot 44. The case
is remanded for redetermination of PSWD’s and CKEC’s respective shares in the
proceeds from the sale of church property. The parties are to bear their own costs on
appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
EPSTEIN, P. J.
We concur:
WILLHITE, J.
MANELLA, J.
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