Los Angeles County Pioneer Society v. Historical Society
Los Angeles County Pioneer Society v. Historical Society
Dissenting Opinion
I cannot agree that Pioneer was a charitable organization. The Los Angeles County Pioneer Society was organized in 1897 as an unincorporated association. In 1910, it was in
Over the years, membership in the organization decreased until in 1941 there were less than 100 members; at the time of this action there were approximately 58 members still living. It would appear to be clear that the Pioneer Society was organized by a group of people who were brought together by their common interest in the history and historical relics of Los Angeles County and the state and that their purpose in so organizing was to enjoy each other’s companionship, to
The members of the Pioneer Society held meetings, gave picnics for themselves, held a meeting honoring the memory of the pioneers who discovered gold in California, erected a plaque to commemorate the site of the first school building at Inglewood, California, discussed the pioneers of California and (according to the majority opinion) “recollected” the activities of those pioneers. According to Webster (Int. Diet. 2d ed.) the word recollect means “to recover or recall the knowledge of; to call to mind; to remember.” Taking into consideration the average age of 75 years of the members of Pioneer, it seems logical to assume that they were the children of these pioneers to whom they paid tribute and that their purpose in honoring them was not for the benefit of society at large, but to honor their own ancestors as well as to consolidate their fast dwindling ranks for their own social benefit. An organization of canary fanciers, rose horticulturists, or of those interested in purebred cattle, or purebred Irish Setters, or an association of breeders of Palomino horses could hardly be called charitable organizations even though an incidental benefit might be said to result to society at large, or that portion of society also interested in the particular subject. Groups of people vitally interested in the same subject
In Abalian v. Townsend Social Center, Inc., 112 Cal.App.2d 441 [246 P.2d 965], it was held that a social center whose articles of incorporation disclose that its purpose was to acquire a club building for the convenience of its members and other persons interested in the old age pension movement was a nonprofit corporation for the benefit of its members, and not a charitable corporation holding assets charged with a public trust. In Estate of Dol, 186 Cal. 64 [198 P. 1039], (a case holding Pioneer a charitable organization) it was pointed out that if the “only” object of an organization were to cultivate social intercourse and friendship among its members, it would be for the benefit of the members alone and would not be a charitable organization. I cannot agree that an organization may not be organized for social purposes with a common interest in an educational program without being classified
In summary, and in applying the tests laid down in Estate of Henderson, supra, 17 Cal.2d 853, (1) Pioneer’s aims were
In a nonprofit corporation existing for the private benefit of its members, upon dissolution assets are distributed among the members (Corp. Code, § 9801; Brown v. La Societe Francaise Etc. Mutuelle, 138 Cal. 475, 477 [71 P. 516]; Abolian v. Townsend Social Center, Inc., 112 Cal.App.2d 441, 449 [246 P.2d 965]; 168 A.L.R. 956). This, I believe, is the result which should be reached here. It seems quite apparent that Pioneer was a nonprofit organization existing for the private benefit of its members who should, upon dissolution, receive a distributive share of the assets held by Pioneer.
Assuming, however, only for the purposes of the following argument that Pioneer is a charitable organization, I see no valid reason why it should not be able to correct its deviation from its articles of incorporation. In other words, why should not Pioneer be permitted to continue to operate as a society and to revoke its former petition to dissolve the corporation! It is admitted in the majority opinion, that Pioneer’s “abandonment of its trust was brought to light in the dissolution proceeding.” Section 4691 of the Corporations Code provides that “if the cause of action is a matter or act which the corporation has done or omitted to do that can be corrected by amendment of its articles or by other corporate action, such suit shall not be maintained unless (a) the Attorney General, at least 30 days prior to the institution of suit, has given the corporation written notice of the matter or act done or omitted to be done, and (b) the corporation has failed, neglected, or refused to institute proceedings to correct it within the 30-day period or thereafter fails to prosecute such proceedings.” (Emphasis added.) The majority calls attention to the fact that during the time intervening after the interlocutory judgment, the order appealed from and the affirmance by the District Court of Appeal, Pioneer’s attention was repeatedly called to its status as a charitable organization. No mention is made of the fact that there was still to be made a determination by this court. In the event that this court had not decided that Pioneer was a charitable organization, it would have had the right to dissolve and distribute its assets among its members. Why then, should it not be given notice
I would, therefore, reverse the judgment.
Schauer, J., concurred.
Appellants’ petitions for a rehearing were denied May 28, 1953. Carter, J., and Schauer, J., were of the opinion that the petitions should be granted.
The following opinions were then filed.
Opinion of the Court
Los Angeles County Pioneer Society and Harry Lelande, a member thereof, appeal separately from an order appointing the Historical Society of Southern California trustee of all property in the possession of Pioneer. The order was entered after the trial court determined that Pioneer held its property for charitable purposes, that Pioneer had repudiated its trust, and that appointment of Historical as trustee was necessary to carry out the purposes of the trust. We have concluded that the order is amply supported by the evidence and must be affirmed.
Pioneer was founded in 1897 as an unincorporated association of pioneers living in Los Angeles County, with about 600 members. In 1910 the members incorporated as a nonprofit corporation. Over the years membership decreased until in 1941 there were less than 100 members. In that year and later years Mrs. Emma Stoltenberg, a member of Pioneer, made substantial gifts to Pioneer and on her death in 1946 left additional sums to Pioneer by will. Her gifts amounted to about $53,000. The money was used to purchase a building that was used for meetings of Pioneer and rented for commercial purposes. The membership continued to decrease and in 1948 the members decided to dissolve the corporation, distribute the assets among themselves, and continue the organization as an unincorporated association to carry out the purposes of the articles of incorporation.
To determine whether its assets were impressed with a trust, Pioneer filed an action for declaratory relief against a member of the society. On June 1, 1949, judgment was entered declaring that no trust of any kind was impressed upon the assets. Thereafter the membership, by a petition signed by 53 of the 58 members, agreed to dissolve the corporation. The assets were converted to cash and, since the property owned by the corporation had greatly appreciated in value, $95,243.54 was realized. Pioneer then petitioned the superior court for judicial supervision of the dissolution. (Corp. Code, § 4607.) Several members of Pioneer objected to the dissolution. Pursuant to stipulation of the parties, the attorney general filed a petition in intervention, alleging that Pioneer held its assets in trust and praying that a new trustee be appointed on the ground that Pioneer had abandoned its trust. The court ordered that the assets be impounded. On May 19, 1950, the court entered judgment that Pioneer was a charitable corporation, that its assets were dedicated to charitable purposes, that it had abandoned its trust and was threatening
The first question presented is whether the trial court correctly determined that all of the assets of Pioneer were given and received for charitable purposes and held by Pioneer for those purposes.
Pioneer contends that the declaratory relief judgment is res judicata as to the question whether Pioneer holds its assets for charitable purposes, and characterizes the opposition to the dissolution proceedings as a collateral attack on the former adjudication, relying upon City of San Diego v. Superior Court, 36 Cal.2d 483 [224 P.2d 685]. Historical, on the other hand, contends that the declaratory relief action was collusive and a fraud on the court, pointing out that all evidence therein was presented by stipulation, that Pioneer paid the attorneys ’ fees for both plaintiff and defendant in that action, and that the two opposing attorneys subsequently joined forces and together represented Pioneer at the trial of the dissolution proceedings. (See Guardianship of Jacobson, 30 Cal.2d 326, 333 [182 P.2d 545].) It is unnecessary to pass upon Historical’s contention, since the declaratory relief judgment is res judicata only against persons who were parties or in privity with parties thereto. (Rest. Judgments, § 77; Bernhard v. Bank of America, 19 Cal.2d 807, 813 [122 P.2d 892]; City & County of Denver v. Denver Land Co., 85 Colo. 198, 201 [274 P. 743].) The attorney general ivas not a party to the declaratory relief action and was not in privity with parties thereto and, accordingly, he was not bound by that adjudication and was free to contend in the dissolution proceedings that Pioneer held its assets for charitable purposes.
The attorney general and Historical contend that the “interlocutory judgment” entered on May 19th was an appealable judgment that became final through the failure of Pioneer to appeal therefrom, and that it is now res judicata that Pioneer holds its assets for charitable purposes. The label of the judgment as “interlocutory” is not determinative upon
An appeal lies only from a final judgment, except in certain cases not applicable here. (Code Civ. Proc., § 963.)
“ As a general test, which must be adapted to the particular circumstances of the individual case, it may be said that where no issue is left for future consideration except the fact of compliance or noncompliance with the terms of the first decree, that decree is final, but where anything further in the nature of judicial action on the part of the court is essential to a final determination of the rights of the parties, the decree is interlocutory.” (Lyon v. Goss, supra, 19 Cal.2d 659, 670.) In the present case the May 19th judgment provided that Pioneer should account to the court for the performance of its duties as trustee, that a new trustee should be appointed to replace Pioneer, and that the court would from time to time “make such other and further orders as are competent, lawful and proper for a complete determination of this action.” The assets of Pioneer were impounded by the court on February 15, 1950, but it was not ordered that they be turned over to Historical until the order of October 18th. Since the court expressly reserved for future decision questions regarding the rights, duties, and liabilities of Pioneer, the May 19th judgment was not final as to Pioneer and was not appealable. (Erickson v. Boothe, 35 Cal.2d 108, 109 [216 P.2d 454]; Lacey v. Bertone, 33 Cal. 2d 649, 653 [203 P.2d 755]; Lyon v. Goss, supra, 19 Cal.2d 659, 671; see cases collected in 4 C.J.S., Appeal and Error, pp. 184-193.) The conclusion that Pioneer could not appeal from the judgment of May 19th disposes of the contention of appellant Lelande that the appeal by Pioneer must be dismissed because it was taken too late.
Since neither the declaratory relief judgment nor the May 19th judgment settled the issue whether Pioneer held its assets for charitable purposes, the determinative question is whether substantial evidence supports the order of October 18th. The articles of incorporation of Pioneer provide: “That the purpose for which this corporation is formed is to cultivate social intercourse and friendship among its members, to collect and preserve data touching the early history of Los Angeles County and the State of California, to collect and preserve articles, specimens and material things illustrative
The commemoration of historical events and the collection and preservation of data of historical interest are for the educational and recreational benefit of the community as a whole and are recognized charitable purposes. (Rest., Trusts, § 374; Estate of Butin, 81 Cal.App.2d 76, 81 [183 P.2d 304]; In re Centennial & Memorial Assn. of Valley Forge, 235 Pa. 206, 211 [83 A. 683]; Steenis v. Appleton, 230 Wis. 530, 533 [284 N.W. 492]; Missouri Historical Society v. Academy of Science, 94 Mo. 459, 466 [8 S.W. 346]; 12 A.L.R. 2d 888-896.) By the allegations in its answer, Pioneer conceded that it was actively engaged in carrying out such objectives. Even if the concessions in the answer are disregarded, the articles of incorporation supply sufficient evidence to sustain the action of the trial court. It may be assumed that if
Pioneer contends that the gifts of Mrs. Stoltenberg were for the benefit of the members of Pioneer personally and were not received for charitable purposes. Her will provided: “the Balance of my estate to be given to the Pioneer Society Meeting at the Biltmore Hotel.” The gifts during her lifetime were subject to an oral understanding that the money would be used to purchase a permanent home for the society. Pioneer erroneously assumes that the gift could not be for charitable purposes unless the instrument of gift expressly so provided. 11 [A] devise to a society organized for a charitable purpose without a declaration of the use to which the gift is to be put is given in trust to carry out the objects for which the organization was created.” (Estate of Clippinger, 75 Cal.App.2d 426, 433 [171 P.2d 567]; Estate of McDole, 215 Cal. 328, 332 [10 P.2d 75).) Similarly, in the present case the gift of Mrs. Stoltenberg in her will was for the purposes expressed in Pioneer’s articles, and the gifts during her lifetime were for a building to be used to carry out those purposes.
The conclusion that Pioneer held its assets for charitable purposes disposes of Pioneer’s contention that the trial court
The next question to be determined is whether the trial court was justified in appointing a successor trustee. Pioneer contends that the only remedy available to the attorney general was an order of the trial court directing Pioneer to comply with its articles. As previously pointed out, substantial evidence supports the finding of the trial court that Pioneer held its assets for charitable purposes. Under the Corporations Code a charitable corporation is subject to the same supervision by the attorney general as is a nonprofit corporation holding its assets subject to a charitable trust (§§ 9505, 10207; see 26 So.Cal.L.Rev. 80), and deviations from the purposes stated in Pioneer’s articles are thus subject to the same corrective measures that would be taken against a trustee of a charitable trust that similarly refused to carry out its duties.
Pioneer amended its by-laws to close its membership and provide that existing members had a proprietary interest in its assets;
Pioneer invokes cases where the evidence showed that the corporation involved was a nonprofit corporation that existed for the private benefit of the members thereof and that the assets were not held for charitable purposes. In such cases it is properly held that the assets are distributed among the members upon dissolution (Corp. Code, § 9801; see Brown v. La Societe Francaise DeB. Mutuelle, 138 Cal. 475, 477 [71 P. 516]; Abalian v. Townsend Social Center, Inc., 112 Cal. App.2d 441, 449 [246 P.2d 965]; 168 A.L.R. 956), but those decisions are not controlling here, since substantial evidence supports the determination of the trial court that Pioneer holds its assets for the charitable purposes expressed in its articles of incorporation.
Pioneer points out that in 1948 its by-laws were amended to provide that active members 11 shall have exclusive proprietary rights in the property and assets of the corporation. ’ ’ Whatever may have been the prospective effect of this amendment, it does not appear from the record that any donations were received by Pioneer after the amendment and, of course, the members of Pioneer could not appropriate to themselves the assets previously acquired by the device of renouncing the purposes expressed in its articles.
Pioneer contends that upon dissolution the assets must be distributed among its members and any^ holding allow
Pioneer contends that in proceedings under section 10207 a charitable corporation must be given an opportunity to correct its deviation from its articles, as it would if the proceeding were in quo warranto. (§4691.) Pioneer’s contention comes too late. The attorney general’s petition in intervention alleged that Pioneer had failed to comply with its articles and prayed that the court distribute Pioneer’s assets to a trustee willing to comply with the charitable purposes expressed in Pioneer’s articles. Pioneer stipulated that the petition of the attorney general could be filed and filed an answer denying that its assets were held for charitable purposes, alleging that it had at all times complied with its articles, and praying that its assets “be distributed pro rata among the members of the Los Angeles County Pioneer Society.” By the stipulation and the answer Pioneer failed to put in issue in the trial court the question whether the attorney general was obliged to give Pioneer an opportunity prior to the petition in intervention to comply with its articles.
On January 26, 1953, at the oral argument of this ease, Pioneer filed a motion to remand the case to the trial court “for the purpose of making a further order in the above entitled case to permit the society to continue to operate as a society and to revoke- its former petition to dissolve the
Pioneer contends that even if it is held that neither Pioneer nor its members may receive the assets, the trial court should have distributed the assets to the heirs of Mrs. Stoltenberg and not to Historical. We will assume that Pioneer is entitled to raise this point. In cases where property is conveyed to a trustee with an express declaration of a charitable purpose by the donor, a court of equity will appoint a successor trustee to carry out the charitable purpose expressed by the donor upon failure of the original trustee (Fay v. Howe, 136 Cal. 599, 603 [69 P. 423]; Estate of Upham, 127 Cal. 90, 94 [59 P. 315]; 14 C.J.S. Charities, §27), and Historical contends that these cases govern here. But in cases where, as here, property is conveyed without restriction to a charitable
Decisions holding that gifts to charities revert to the donors upon dissolution have been subjected to severe criticism (see Simes, The Law of Future Interests, § 185; Gray, The Rule Against Perpetuities [4th ed.], §51.1; Turrentine, Suggestions for Revision of Provisions of the California Civil Code Regarding Future Interests, 21 Cal.L.Rev. 1, 14), and other states reach a contrary result. (In re Centennial & Memorial Assn. of Valley Forge, supra, 235 Pa. 206, 213; McAlhany v. Murray, 89 S.C. 440, 446 [71 S.E. 1025]; see, also, Wilson v. Leary, 120 N.C. 90, 94 [26 S.E. 630, 50 Am.St.Rep. 778, 38 L.R.A. 240]; Hopkins v. Crossley, 138 Mich. 561, 566 [101 N.W. 822].) We have concluded that the latter rule should be followed and that a court of equity should appoint a successor trustee to carry out the charitable intent of the donor whether the charitable purpose is found in the terms of the conveyance to the corporation or in the articles thereof, or Avhether the failure of the corporation is through dissolution or other disqualification. The policy of the law in favor of charitable gifts requires a court to carry out the dominant purpose of the donor to make a charitable gift for the purposes expressed in the articles of the original cor
Pioneer contends that Historical is not qualified to act as trustee of the assets. Even if it is assumed that this question can be raised by Pioneer (see Society of Calif. Pioneers v. McElroy, supra, 63 Cal.App.2d 332, 342), the selection of Historical as trustee is supported by the record. Historical is a charitable corporation first organized in 1883 and incorporated in 1891. It has 492 members and is actively engaged in collecting and preserving material of historic interest in Southern California. The order appointing Historical trustee provides that it shall hold the transferred assets as trustee for the same purposes as those expressed in Pioneer’s articles. If Historical does not faithfully perform its duty as trustee, the attorney general will institute appropriate proceedings to correct the noncompliance.
Appellant Lelande, although not questioning Historical’s fitness to act as trustee, contends that the order appointing Historical trustee should have defined Historical’s duties in more detail. The order of the court followed the
The order is affirmed. The motion by appellant Los Angeles Pioneer Society to remand the case to the trial court, the motion by appellant Lelande to dismiss the appeal of appellant Los Angeles Pioneer Society, and the motion of appellant Los Angeles Pioneer Society to dismiss the appeal of appellant Lelande, are, and each is, denied.
Gibson, C. J., Shenk, J., Edmonds, J., and Spence, J., concurred.
By-Iaws adopted May 4, 1948, provided: ‘ ‘ The class of active memberships shall have exclusive proprietary rights to the property and assets of the corporation and the voting power of the corporation shall be vested exclusively in the holders of active memberships. Each active member shall be entitled to one vote.
‘ ‘ The social memberships shall have' no proprietary rights whatsoever in the property or assets of the corporation and shall not have any voting rights. . . .
"The present paid up memberships of this corporation shall constitute the active memberships of the corporation and those who hereafter become members shall be social members only.”
The petition, 2 Civil 18328, was denied by the District Court of Appeal without opinion on January 11, 1951, and a hearing was denied by this court on March 8, 1951. Pioneer contended that it “was organized for the private interest and advantage of its members,” that “the fair and proper thing to do was to dissolve the corporation and distribute the assets,” and that “neither the public at large, nor the community of Los Angeles” had “any interest in the affairs of petitioner. ”
The motion was not made until about 32 months after the interlocutory judgment, 27 months after the order appealed from, and 6 months after the District Court of Appeal affirmed the order. During this period Pioneer’s attention was repeatedly called to its status as a charitable corporation.
The order of October 18, 1950, provided that Historical "is hereby appointed trustee of all property . . . for which the Los Angeles County Pioneer Society is accountable as Trustee” and orders all persons having assets or records of Pioneer to forthwith turn such assets over to Historical. Execution of the order has been stayed pending outcome of this appeal. The assets have been impounded and are in the custody of the Farmers and Merchants National Bank of Los Angeles.
111. To cultivate social intercourse and friendship among its members;
“2. To collect and preserve data touching the history of Los Angeles County and the State of California;
“3. To collect and preserve articles, specimens and material things illustrative or demonstrative of the customs, modes, and habits of the aforesaid times in said State;
“4. To perpetuate the memory of those who by their labors and heroism contributed to make the history of said County and State;
“5. And in furtherance of the aforesaid purposes, to receive, purchase, sell, hold, convey, encumber, lease, rent and maintain all kinds of property, both real and personal;
“6. To build clubhouses and do any and all acts, including but not limited to- the borrowing of money, as may be necessary and convenient for the promotion of the aforesaid purposes,
“And it is further ordered [that the appointment is ineffective until Historical files an acceptance of the trusteeship providing that Historical] accepts the trusteeship for the specific purposes set forth above and not for any purpose which will result in any benefit to any, private shareholder, member or individual, and that said assets shall in no way be devoted to the carrying on of propaganda or otherwise attempting to influence legislation. ’ ’
The resolution provided that the funds -would be used to erect a building, known as the Emma Stoltenberg Building, that it would be a home for the Historical Society, would have offices for Native Sons of the
Concurring Opinion
I concur generally in the reasoning and conclusion of Justice Carter. Particularly do I find no justification whatsoever for refusing to permit Pioneer to take the corrective action which it could not know it should take until this court had ruled that it could not rely on the prior final judgment or its charter from the state.
Pioneer, by its articles of incorporation and the laws of California was not a charitable corporation; it never intended or pretended to be a charitable corporation; it paid taxes as a noneharitable corporation; it was adjudicated not to be a charitable corporation. With that background it instituted a proceeding for dissolution as it had a right to do. Its every act shows the good faith of the fine citizens composing it. Now this court rules that it is a charitable corporation and in the same judgment punishes Pioneer for instituting the lawful dissolution proceeding by stripping it of its assets and giving them to another; it refuses even to permit Pioneer, despite the authorization of the statute, to discontinue the dissolution proceeding and to carry out the trust which the court adjudges to exist.
Such action in my view is contrary to fact, to law, to justice, to reason and to constitutional guarantees.
Dissenting Opinion
I dissent from the order denying appellant’s petition for rehearing, and in view of the contention of appellant in said petition that the effect of the decision of this court is to deprive it of its property without due process of law, I am constrained to comment on this contention.
The record in this case presents one of the most outrageous examples of legalized larceny which has come under my observation.
The Pioneer Society was organized as an unincorporated association; the evidence shows clearly, and without contradiction, that it was intended to be, and was, a purely social organization. As such an unincorporated association and social organization, it had the right, upon dissolution, to distribute its assets among its members.
The record discloses that Pioneer has acted with the utmost good faith throughout. In the first instance, Pioneer sought a judicial determination of its charitable, or social, status. The first judicial determination was that it was a nonprofit, non charitable organization. A later judicial determination by the same court held it to be a charitable organization. Pioneer then sought to abandon its dissolution proceedings and, in accordance with the last judicial determination, carry on as a charitable organization. This it has not been permitted
With respect to corporations, this court is empowered only to apply the statutory law of the state as it was written by the Legislature; it is not empowered to ignore the statutory provisions relating to corporations and effect a distribution of corporate assets as its collective whim may dictate.
For the reasons stated herein, and in my dissenting opinion, T would grant a rehearing and reverse the judgment.
Reference
- Full Case Name
- In Re LOS ANGELES COUNTY PIONEER SOCIETY, a Corporation, in Process of Voluntary Dissolution. LOS ANGELES COUNTY PIONEER SOCIETY Et Al., Appellants, v. HISTORICAL SOCIETY OF SOUTHERN CALIFORNIA (A Corporation) Et Al., Respondents; THE PEOPLE Et Al., Interveners and Respondents
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- 75 cases
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- Published