SAN DIEGO: Appeals court ruling favors diocese in property dispute

October 21, 2008

A California appeals court ruled October 21 that lay leaders of a San Diego Episcopal church did not have the authority to change parish bylaws and articles of incorporation after voting to realign with a Ugandan diocese.

The ruling -- which may have implications for other California property dispute cases -- reversed a lower court ruling that had favored former vestry members of St. John’s Church in Fallbrook, California, in the Diocese of San Diego. Although they resigned from the Episcopal Church (TEC) in July 2006 over doctrinal issues, they refused to relinquish the church’s property or assets.

Instead, the vestry members voted to change the church’s name to St. John’s Anglican Church and to amend the parish corporation’s bylaws and articles of incorporation -- actions deemed beyond the scope of their authority, according to the Fourth District Court of Appeals decision.

“The defendants lacked the power and authority to amend the bylaws and articles of incorporation of the Parish corporation to make it part of the Anglican Church … by taking the actions they did, defendants were no longer a part of the Episcopal Church and could not be lawful directors,” the court said in New v. Kroeger.

“We must give deference to the Episcopal Church and San Diego Diocese’s determination as to who constitutes the true members of St. John’s Parish,” the court added.

Bishop Jim Mathes, who in August 2006 determined that remaining members loyal to TEC constituted the parish’s true membership, said October 22 he was gratified by the decision. “The court of appeals has unanimously in a sweeping decision agreed with our position that those who remain within TEC had the authority and the obligation to take the mantle of leadership when others chose to leave TEC.”

The remaining membership elected a new vestry and Mathes appointed a priest-in-charge to replace the former rector, the Rev. Donald Kroeger, whom he inhibited from serving in an Episcopal Church. On October 22, Mathes noted the court’s ruling also “recognized my decision that this was an internal dispute within TEC and that the newly elected vestry remaining within the Episcopal Church were the rightful parish leaders.”

However, Mathes added that he is “keenly aware that this is a stressful time for everyone involved and while we are pleased at the decision, I know there are those who find it troubling. They, too, are in our prayers.” Recalling Jesus’ words in the Gospel of John, he noted, “We are to be one. I hope there’s a way through this that we can find our unity in Christ’s mission."

But Eric Sohlgren, of the Irvine-based Payne & Fears legal firm, who represented the defendants, said they are considering an appeal to the California Supreme Court.

“We believe that the Court of Appeal in San Diego erred in disregarding the overwhelming vote of the board of directors and members of St. John's corporation to change its Anglican affiliation, and that had the Court properly applied neutral principles of California corporate law, it would have affirmed the trial court's decision in favor of St. John's,” he said.

“We are surprised that the Court of Appeal would have issued a ruling now, knowing that the California Supreme Court is about to issue a ruling in the St. James, Newport Beach case,” Sohlgren said. “The Court of Appeal’s decision will not return to the trial court for further proceedings for at least 60 days, during which time St. John's will be seriously considering an appeal to the California Supreme Court.”

The appeals court reversed San Diego Superior Court Judge Jacqueline M. Stern, who had ruled for the dissident board members, concluding under neutral principles of California corporations law that they were the true directors because the plaintiffs could not show the defendants ever stopped being directors.

The Episcopal Church filed a brief in support of the San Diego diocese. Presiding Bishop Katharine Jefferts Schori's office released a statement calling the court ruling “a very strong opinion. It makes clear that Episcopal parishes are indeed subject to the church’s and their diocese’s constitutions and canons, and that the courts must consider those authorities, as well as the church’s determinations regarding qualification for ecclesiastical office, when resolving disputes involving the church’s constituent parts.”

Meanwhile, other property disputes continue. California Supreme Court justices heard oral arguments on October 8 in connection with a property dispute in the neighboring Diocese of Los Angeles. That dispute involves ownership of property and assets in four breakaway congregations. A decision is expected early next year.

A legal dispute is also underway in Central California’s Diocese of San Joaquin over diocesan property. In December 2007, 42 of 47 congregations approved realignment with the Argentina-based Anglican Province of the Southern Cone but dissident officials refused to surrender diocesan property or assets.

--The Rev. Pat McCaughan is Episcopal Life Media correspondent for the dioceses of Province VIII and the House of Bishops. She is based in Los Angeles.