California Supreme Court Throws out the Statute of Frauds

The California Supreme Court has now joined the ranks of State courts who uphold trusts created by the Dennis Canon, without any action on the part of the parishes that actually own the property in question other than the act of aligning with the Episcopal Church (USA). In a 7-0 decision, it ruled that the Diocese of Los Angeles could go forward with its suit to reclaim the buildings and land of St. James Church in Newport Beach, California, which voted to leave ECUSA in July 2004. (Justice Joyce Kennard dissented only on the point that as construed by the Court, the California statute which saves the Dennis Canon [Corporations Code section 9142, discussed below] is not a "neutral principle of law.")

I will have more to say about the full consequences of the decision for other pending California cases later. For the moment, I just want to focus on the problems with the result reached by the Court in this case. I reviewed the arguments to the Supreme Court in this series of past posts: a summary of the case, a discussion of the arguments for and against the Dennis Canon, and a discussion of the effect of California's unique charitable donor enforcement statute, Corporations Code section 9142. Readers of those posts will remember that the principal question presented on appeal was this, as asked in oral argument by the counsel for St. James, Eric Sohlgren:

"By what power or authority is a trust beneficiary, even if it is a church, able to create in California a trust without the signature of the trustor on the trust?"

The California Supreme Court's answer to this question is that a church can do so, because Corporations Code section 9142 (c) (2) says it can. In other words, the Court has held that section 9142 (c) repealed the California Statute of Frauds with regard to trusts in real property (expressed in Probate Code section 15206). (The original "Statute of Frauds" was enacted by Parliament in 1677, and it has been a mainstay of the law ever since. It requires (among other things) that an interest in real property be created only by an instrument in writing. As applied to trusts in real property, section 15206 requires that to be valid, they must be created in a writing signed by the owner of the real property in question.) To make 9142 (c) read so as to repeal section 15206 in the case of religious trusts, the California Supreme Court disgracefully kowtows to the dictum of Justice Blackmun in Jones v. Wolf (which I quoted and discussed at length in this post). Remember, in responding to criticism from the dissenters in Jones that the "neutral principles" approach would unduly burden a hierarchical church, Justice Blackmun said, among other bits of legal advice to the churches which were mere obiter dicta, or "matters said in passing":

They [the churches] can modify 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. The burden involved in taking such steps will be minimal.

(443 U.S. at 606.) Well, now look at how the California Supreme Court takes this little judicial aside and turns it into a pronouncement of binding legal effect:

Defendants focus on the high court’s reference to what the “parties” can do, and argue that Canon I.7.4, to be effective, had to have been enacted by the parties — in other words, that some kind of agreement must have been reached between the general church and St. James Parish (and presumably every other parish in the country) ratifying Canon I.7.4. We do not so read the high court’s words. Use of the passive voice in describing the possible “alternative[]” of making the general church’s constitution recite the trust suggests the high court intended that this could be done by whatever method the church structure contemplated. Requiring a particular method to change a church’s constitution — such as requiring every parish in the country to ratify the change — would infringe on the free exercise rights of religious associations to govern themselves as they see fit. It would impose a major, not a “minimal,” burden on the church governance. (Jones v. Wolf, supra, 443 U.S. at p. 606.)

(Opinion, at pp. 22-23.) With this passage, the Court not only kowtows to Justice Blackmun's legal advice to churches, it transforms a mere dictum into a "requirement" of the law. "Requiring a particular method to change a church's constitution" is nonsense, and shows a complete failure to comprehend the issue at stake here. No one is arguing that California has the right to tell a church how to "change" its own constitution. (Justice Ming Chin appears to think that St. James was arguing that in order to pass a canon, the Church would have to have the written consent of all of its 7000+ parishes---a straw man, if there ever was one.) All that St. James was arguing is that to create a trust in its property (whether by canon or otherwise), the national church, just like any other beneficiary of a trust in California, had to get the written consent of the property owner. What would make that requirement any more of a "major" burden on the church than for any other entity that wanted to establish a trust over 7,000 separate properties? Why should a church receive the benefit of a judicially enacted shortcut, just because it is a church?

In sum, the California Supreme Court has abdicated its responsibility to decide cases with regard just to the legal principles established by prior cases. In combination with a number of other State courts who have done so, it takes Justice Blackmun's dictum about how a church could change its constitution and elevates that dictum into a rule of law that overrides even the Statute of Frauds.

The Court then compounds this major misstep, as courts are wont to do, with a dictum of its own: it brushes aside any further inquiry into the validity of the Dennis Canon, saying that "this is one of those questions regarding 'religious doctrine or polity' . . . on which we must defer to the greater church’s resolution" (op. at 29). To which I say: what "resolution"? When, or where, has General Convention ever "resolved" the issue of whether it properly passed the Dennis Canon? General Convention has said absolutely nothing about the Dennis Canon ever since 1979---and the Canon itself was not even referred to by the Church's own news service for over twenty years after that. This, unfortunately, is all too typical of the way judges dispose of matters that might, if looked into, disturb the major result on which they have decided.

The bottom line, therefore, is this: dictum has prevailed, and neutral principles of law have lost. The Court's dressing up its ruling as a decision based on "neutral principles of law", as Justice Kennard rightfully points out in dissent, is a charade. The proper way to describe the Court's result today was anticipated by the Court of Appeal in California-Nevada Annual Conference v. St. Luke's United Methodist Church (2004) 121 Cal.App.4th 754, at page 771, when it said:

“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.”