In 1982, the California legislature enacted the current version of Corporations Code Section 9142(c), which reads as follows (with my bold emphasis):
(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:Never mind for the moment that the only "members" of ECUSA are its dioceses, and that parishes are members of individual dioceses, not of ECUSA itself. In 2009, in its decision in The Episcopal Church Cases, the California Supreme Court read section 9142 (c) to empower ECUSA to impose a trust on all property of every Episcopal Church parish in California simply by the enactment of its Dennis Canon -- three years before the statute enabling the Canon was adopted.
(1) Unless, and only to the extent that, the assets were received by the corporation with an express commitment by resolution of its board of directors to so hold those assets in trust.
(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.
(3) Unless, and only to the extent that, the donor expressly imposed a trust, in writing, at the time of the gift or donation.
Ever since, ECUSA has used the Dennis Canon to win many suits against individual parishes in California who took steps to leave their diocese without the consent of the diocese or its ecclesiastical authority. The courts have held that, as given effect by section 9142 (c), the Dennis Canon trumps any State-law requirement of the statute of frauds, which prevents you or me from declaring a trust on someone else's property without a writing signed by that someone else who actually owns the property.
At the same time it added subsection (c) to the statute in 1982, the legislature added subsection (d), which reads (again, with my bold for emphasis):
(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....The California Supreme Court also held, in The Episcopal Church Cases, that pursuant to this language, a trust created by ECUSA in its national canons (bylaws) could be amended or revoked only by another amendment to those same canons -- in other words, that parishes could not revoke by themselves any Dennis Canon trust imposed unilaterally on their property.
ECUSA's lawsuits against individual parishes began in the Diocese of Los Angeles and Diocese of San Diego, as noted in earlier posts here and here. In those cases, as I mentioned, the parishes tried to leave and take their property without the consent of the ecclesiastical authorities of those dioceses. And in each case, the courts concluded that the attempts to amend the parish's governing documents contrary to the Dennis Canon were null and void.
In one case -- that against St. James parish in Newport Beach -- the trial court even refused to give effect to a written waiver of the Dennis Canon signed by the Diocese's Canon to the Ordinary (i.e., the diocesan bishop) on behalf of the Diocese of Los Angeles. The waiver had been requested by wealthy St. James donors who wanted to buy additional valuable property for the parish's expansion, but who did not want the property to be subject to the national trust. Amazingly, the trial court found that no single bishop (or his deputy) could waive the Canon, because it was part of the governing documents of ECUSA, and only ECUSA itself (i.e., acting through its General Convention) could amend its governing documents.
As I wrote here, this decision put a cloud on the title of all Episcopal parish deeds of real and personal property executed since 1979 in Orange County -- because none of those transfers had taken place with the consent of General Convention. Ever since the Church's formation in 1789, sales and alienations of parish property had required the consent only of the ecclesiastical authority of the diocese in which the parish was located. The national Church had never had anything to do with property transfers by individual parishes, nor could it -- General Convention is in session less than 1% of the time (10 days or so out of every three years).
When the Diocese of San Joaquin amended its constitution and canons in December 2007, however, things were different: the Dennis Canon applies by its language only to property held "by or for the benefit of any Parish, Mission or Congregation", and not to property owned by member dioceses. There was no language in ECUSA's governing documents prohibiting dioceses from amending their own governing documents as they chose, and in particular, there was no language preventing any diocese from withdrawing its membership in the Church.
Nevertheless, ECUSA still brought suit against Bishop Schofield and various entities that held the title to the diocesan real property and bank accounts, in which it claimed that Bishop Schofield was not authorized to transfer the properties and bank accounts. And then it also filed suit against the nine incorporated parishes in the diocese that owned their own real and personal property, and claimed title to that property under the terms of its Dennis Canon.
Fast forward now to the present day. One of the withdrawing San Joaquin parishes that ECUSA sued was St. John's, in Stockton. It brought a motion for summary judgment that its Dennis Canon applied to all of St. John's property, and that the withdrawing congregation had no right to any of it.
Notwithstanding that (in contrast to the Southern California cases) St. John's had not left on its own, but together with the entire Diocese and also with the express written consent of Bishop Schofield, the trial court judge today decided that Bishop Schofield or his diocese had no authority to consent to remove the Dennis Canon trust from any parish property.
He reached this conclusion despite the evidence that Bishop Schofield and his standing committee for all the years they ran the Diocese, just like every other diocesan bishop and standing committee elsewhere in the Church, had regularly consented to the sale and disposition of parish properties -- without ever seeking any kind of approval or release from the national body. In other words, the evidence was undisputed that the national Church had always, since 1979, allowed bishops and their dioceses to act as its agents in permitting sales of property free and clear of the Dennis Canon trust.
But no longer. Once again, a trial court's decision has beclouded the title of every transaction involving any sale or disposition of its real or personal property by any Episcopal parish in California from August 1979 forward. Technically, even goods purchased at a parish fundraiser or rummage sale are literally still impressed with a Dennis Canon trust under its broad language applying to "all" property.
To be sure, in most cases, the trust interest imposed by the Dennis Canon will have been extinguished by application of the bona-fide-purchaser doctrine, because it is an unrecorded interest. If you have an unrecorded trust interest in your cousins' property, say, but they sell it to someone else who has no way of knowing about your interest (because it is not part of the record title), then so long as the property is acquired for its fair value, the sale extinguishes your unrecorded interest, and the buyers take title free and clear of that interest.
But the bona-fide-purchaser exception is not automatic; it is a question of fact to be determined in each and every case, based on what the purchaser actually knew or could reasonably have been expected to know. Now that ECUSA has so many lawsuits pending in California, with stories about them appearing in many newspapers, it will become harder and harder for title companies to ignore the Dennis Canon interest in church cases involving just real property. And once they start writing exceptions in their title policies, the properties will become virtually unsaleable. That development, of course, would defeat the hope of ECUSA and its rump diocese in San Joaquin to recoup their costly legal expenses by putting on the market the properties they have acquired through litigation, and for which they have no current physical use.
For all these reasons, therefore, it seems doubtful that these legal rulings in Los Angeles and San Joaquin counties can stand. But that is of no comfort to the parishes who have to move out and leave the properties vacant until the courts sort things out.
Nor does it sound as though ECUSA or its attorneys have thought things through. At this point, by urging that no single bishop can act on ECUSA's behalf, they have shot themselves in the foot. (For instance, if that is the case, then how could only the Presiding Bishop have authorized the bringing of all these lawsuits in the Church's name? By their own admission, the suits are not authorized.)
And as they are currently arguing these cases, they are making it more and more difficult for themselves to dispose of any surplus properties gained through the (unauthorized) litigation, until they get General Convention to modify the Dennis Canon.
Said in those classic words, watch out what you ask for: you just might get it.
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