Given these particular facts, the outcome of the decision is not particularly surprising (it is actually close on its facts to the earlier case of one of the four churches involved in Protestant Episcopal Church v. Barker  115 Cal.App.3d 599, 171 Cal.Rptr. 541). The trial court had purported to apply a strictly "neutral priniciples" analysis, in which it looked solely at the powers of the parish corporation to amend its articles and bylaws under California law. The Court of Appeal held that it had erred by not taking into account the provisions of the Diocesan canons as well. Even under a neutral principles analysis, said the Court, the Parish corporation was not free to amend its articles and bylaws so as to make them inconsistent with the paramount canons of the Diocese and of The Episcopal Church.
The opinion is a strange mixture of law and analysis, however. On the one hand, it tries to hedge itself against the effect of any decision by the California Supreme Court in The Episcopal Church Cases, which were argued earlier this month and in which a decision may be expected before the end of the year, by stating that it reaches the same result regardless of whether it follows a "neutral principles" or a "hierarchical deference" approach. On the other hand, the opinion goes out of its way to issue pronouncements on various peripheral issues, in an attempt to be encyclopedic and all-encompassing.
For example, the Court repeatedly notes that the issue before it is a narrow one: which vestry is the lawful vestry of St. John's---the ones who approved the amendments in July 2007, or the ones whom Bishop Mathes and the remnant parishioners put in place afterwards? Notwithstanding its emphasis that this is the only question that is before it---and that issues of who owns the Parish's property are involved in a separate lawsuit that was not before it---the Court of Appeal purports to decide that the Dennis Canon requires that the Parish property remain in trust for the Diocese and The Episcopal Church. And in so doing, the Court expresses not only its disagreement with an earlier appellate decision (which held that the Dennis Canon created only a "revocable" trust, which a Parish was free to change at any time), but it adopts a view of the Canon which turns it upside down (p. 29, with bold added for emphasis):
The California-Nevada case also made a fundamental error of trust law in holding a local church that held property in trust for a national church could revoke that trust, based upon the California rule that trusts are revocable unless made irrevocable by the trust instrument. (Id. at p. 767.) However, it is the national church that is the trustor of the trust it created, and only it could revoke the trust. (See § 9142, subds. c & d.) As discussed, ante, the Episcopal Church impressed a trust on local church property by enacting Canon 1.7(4) in 1979. Thus, we decline to follow the California-Nevada decision as contrary to the law governing religious corporations, as well as California trust law.This has it exactly backwards. The "trustor" of a trust is the person who owns the property that he or she puts into the trust. The Episcopal Church did not own any individual parish's property when it enacted the Dennis Canon in 1979, so it could not have been a "trustor" in doing so. It was instead a trust beneficiary, who set up a "trust" unilaterally, without the consent of any individual trustor---other than whatever consent could be implied from the mere fact of a parish's membership in The Episcopal Church. And the California-Nevada decision correctly held under California law, in my view, that section 9142 of the California corporations code did not change basic California law that only a trustor can create a trust. To the extent such a trust can be created, it requires the implied consent of the parish to the terms of the trust---and under the express provisions of the statute, such an implied trust may be amended or revoked at any time by amending the applicable instruments (such as the parish articles and bylaws, without which there can be no trust under the Dennis Canon).
This same question, incidentally, is squarely presented in the Episcopal Church Cases now awaiting decision. At issue is the following language of section 9142 of the California Corporations Code, added in 1981:
(c) 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 one of the following applies:The Court of Appeal for the Fifth District had construed this language in the California-Nevada case, as I noted earlier, to mean that a trust could be imposed on an individual parish's assets in favor of a governing church body only with its implied cooperation and consent, as indicated in its articles and bylaws expressing an intent to be bound by the governing body's rules. Under a different principle of California trust law, an irrevocable trust has to be in writing. Consequently, the California-Nevada court read the statute to mean that while a national canon could impose a trust (with the parish's implied consent), any such trust was revocable by the parish's amending its articles or bylaws at any time so as to repudiate that trust. In the Episcopal Church Cases, the Second District Court of Appeal took issue with that holding, and in effect held as the Fourth District does today: the national church "created" the trust when it passed the Dennis Canon, and so as the "creator", it is also the "trustor", and only the "trustor" can revoke the trust (e.g., by repealing the Dennis Canon).
. . .
(2) 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.
. . .
(d) Trusts created by paragraph (2) of subdivision (c) may be amended or dissolved by amendment from time to time to the articles, bylaws, or governing instruments creating the trusts.
This is a fallacious interpretation of the statute, because even under the reading of the Fourth and the Second District Courts of Appeal, two parties are needed to create a trust. The Dennis Canon would be devoid of meaning if there were no parishes in existence holding property to which the Canon could apply. So the parishes are every bit as much "trustors" for purposes of the statute as are the dioceses, or the national church. And as trustors, subsection (d) of the same statute (quoted above) gives them the power to "amend or dissolve" the trust at any time ("from time to time", as the statute has it). If this were not true, as the court in the California-Nevada case observed:
Although the hierarchical theory has supposedly been rejected in California, it will nevertheless live on under the label of “neutral principles of law,” if a church's own rules are viewed as trumping state statutes.Knowledgeable people who watched the oral argument in the Episcopal Church Cases on October 9 tell me that the Justices seemed somewhat naive, or even confused, in their grasp of the canonical underpinnings involved in this issue. Thus while we have no way of knowing how the Supreme Court will read section 9142, it is entirely correct to say that whatever it decides will render today's reading of the statute by the Fourth District either incorrect, or else superfluous. That is why I find it gratuitous of the Court to have offered its opinion on the statute after conceding that the issues before it did not involve anything about who actually owns the parish property.
The Fourth District's decision also has a number of inexplicable misstatements of fact about the Episcopal Church. For example, on page 4 it flatly asserts:
The second level of the Episcopal Church consists of 111 "dioceses," which are separate and distinct ecclesiastical entities that superintend the mission and ministry of the Church within their respective geographic areas. As a condition of its creation, each diocese must accede to the constitution and canons of the Episcopal Church and is required to recognize the authority of the church's general convention.It repeats the same error two pages later:
Since its inception in 1789, the Episcopal Church has required that every diocese accede to the constitution and canons of the Episcopal Church as a condition of being admitted into union with the church.There are two things wrong here. First, it is simply not true that every diocese in the Church has been required to accede to the national constitution and canons as a condition of either being created, or of ongoing membership: for example, neither the Diocese of Maryland, nor the Diocese of Washington (which was created out of the former in 1895) has any kind of accession clause in their respective constitutions. And second, as Mark McCall showed in his comprehensive paper on the subject, it is not true that there has been any such requirement in the national constitution since 1789.
The court also seems to have gained a fallacious view of how a diocese comes into being. It says, at pp. 4-5:
Upon being admitted into union with the church, a diocese then convenes its own annual convention, which adopts a diocesan constitution and canons consistent with the constitution and canons of the Episcopal Church. The San Diego Diocese is a diocese of the Episcopal Church and was created in this manner.Once again, the Court has it exactly backwards. Under Article V of the TEC Constitution, a diocese first has to be created as a legal entity under State law, which means it must have met in convention and adopted appropriate governing instruments---a constitution and canons, which contain language acceding to the TEC Constitution and canons. While it may meet again, after being admitted into TEC, to ratify its constitution and canons, it needs to have adopted them in the first instance for the versions which it submits to General Convention to be authoritative.
Thus the diocese is already a separate existing entity under state law when it applies for membership in TEC. (And those who, like D. C. Toedt, argue that before it became a separate diocese it was a mission wholly dependent on the national church for its existence overlook the step by which the diocese becomes independent. In so doing, it ceases being a legally subordinate part of TEC, and becomes a new entity of its own, capable of entering into covenant with General Convention. Indeed, it does not do so until it can stand on its own, without any help from the national church.)
So while the decision in New v. Kroeger may perhaps be correct under the particular facts recited in the opinion, the great number of factual inaccuracies and erroneous legal arguments it contains, plus its rush to pronounce on questions not properly before it, furnish little basis for confidence that it will serve as a meaningful precedent. The Court should have stayed with the narrow question it insisted it was addressing, instead of trying to be encyclopedic (one derives the latter intent from the fact that the Court certified its opinion for publication). As it is, its decision will either be eclipsed by the forthcoming decision of the Supreme Court, or else will have to be reversed because of it.