The Nat. Grange of the Order etc. v. The California Guild
C080523
| Cal. Ct. App. | Nov 30, 2017Background
- The National Grange is the national governing body of a fraternal organization that issues charters to State Granges; its Digest of Laws (constitution and by‑laws) governs subordinate granges.
- The California State Grange (chartered 1873) became a nonprofit mutual benefit corporation in 1946; record title to its Sacramento headquarters is in its corporate name.
- Following internal disputes beginning in 2011, the National Master revoked the California State Grange’s charter in March 2013 under National Grange by‑laws (amended 2012) that permit charter revocation and provide that property of a revoked State Grange becomes National Grange property held in trust pending reorganization.
- The National Grange sued for declaratory and injunctive relief seeking a ruling that property held by the unchartered State Grange reverted to the National Grange (and to a newly chartered California State Grange chartered in 2014).
- The trial court granted summary judgment for the National Grange, declaring that (1) the unchartered State Grange had no standing to retain Grange property, (2) the newly chartered State Grange is entitled to control Grange property, and (3) property in the old State Grange’s possession as of charter revocation must be transferred to the new chartered State Grange.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was statutory notice defective because the summary judgment motion was served before the operative (second) amended complaint was served? | National Grange: defendants had actual notice of the proposed complaint and suffered no prejudice. | Guild/McFarland: summary judgment was set before the 75‑day service period for supporting papers had run and the operative complaint was different. | No reversal; defendants failed to show prejudice and had knowledge of the proposed complaint; court treated motion as addressing the operative (third) amended complaint. |
| Were Subordinate Granges indispensable parties whose absence required reversal? | National Grange: third amended complaint removed claims about subordinate granges’ property, mooting the joinder issue. | Defendants: trial court’s judgment affected non‑parties and thus required joinder. | No reversal; joinder argument was moot after amendment and defendants relied on post‑judgment evidence not before the court at summary judgment. |
| Under neutral principles, did beneficial ownership of State Grange property revert to the National Grange upon charter revocation? | National Grange: governing documents (charter, State articles/by‑laws, National by‑laws) constituted clear and convincing proof that the State Grange agreed to be bound and that property passes to the National Grange to hold in trust after revocation. | Guild/McFarland: record title and California corporate statutes prevent unilateral transfer; statutes (Corp. Code) require express article provisions and/or preclude such trusts. | Held for National Grange: neutral‑principles analysis shows the State Grange voluntarily submitted to National by‑laws; those by‑laws lawfully transferred property to the National Grange upon revocation, rebutting record‑title presumption. |
| Do California corporate statutes (e.g., Corp. Code provisions cited) prevent enforcement of the National by‑laws transfer? | National Grange: statutes do not preempt other lawful agreements; section allowing article provisions is optional and subdivision (b) preserves enforceable agreements. | Guild: pre‑1980 mutual benefit corporation status and lack of specific article amendments mean assets cannot be transferred on revocation. | Held for National Grange: cited statutes do not preclude enforcement of the contractual/governing‑document regime here; no statutory bar to the imposed trust. |
Key Cases Cited
- Saelzler v. Advanced Group 400, 25 Cal.4th 763 (court referenced for viewing facts in light most favorable to losing parties)
- Episcopal Church Cases, 45 Cal.4th 467 (2009) (applies neutral‑principles approach to intra‑church property disputes and accepts governing instruments as evidence of an express trust)
- Jones v. Wolf, 443 U.S. 595 (1979) (announces neutral‑principles approach and explains parties can embody trust rights in deeds or governing instruments)
- Callahan v. Chatsworth Park, Inc., 204 Cal.App.2d 597 (1962) (discusses limits on summary judgment where intent to defraud is at issue; distinguished here)