Opinion
C.A. No. 1461-K
Date Submitted: January 28, 2002
Date Decided: November 18, 2002
Jeffrey K. Martin, Esquire of Jeffrey K. Martin, P.A., Wilmington, Delaware, Attorney for Plaintiff.
Glenn E. Hitchens, Esquire of Morris James Hitchens Williams LLP, Dover, Delaware, Attorney for Defendant.
MEMORANDUM OPINION
This is a dispute over control of a cemetery in Milford, Kent County, Delaware and the more than twenty acres of commercial land that have been held for future expansion of the cemetery. The parties are not-for-profit entities. Plaintiff Grand Lodge of Delaware, International Order of Odd Fellows ("Grand Lodge"), is a fraternal organization, chartered in Delaware in 1831, which has the missions to educate orphans, to bury the dead, and to relieve the distressed. The Grand Lodge is the umbrella organization for thirteen subordinate male lodges ("local lodges") in Delaware and derives its authority from a national organization, the Sovereign Grand Lodge (the "National"), which has its offices in Winston-Salem, North Carolina.
There are also female lodges known as the Rebecca Assembly of Delaware.
The local Odd Fellows lodge in Milford was the Crystal Fount Lodge No. 10 of the International Order of Odd Fellows ("Crystal Fount Lodge"). Formed over a century ago, its membership had dropped to five by 1989, and it was officially disbanded by the Grand Lodge in 2000. Crystal Fount Lodge, in furtherance of the charitable work carried on by the Odd Fellows, owned and operated a cemetery, the Milford Odd Fellows Cemetery (the "Cemetery"), for more than a century. Recognizing that Crystal Fount Lodge was no longer viable, some of its members formed a Delaware corporation, Defendant Odd Fellows Cemetery of Milford, Incorporated (the "Cemetery Corporation") and in September 1991 conveyed the Cemetery's lands to the corporation. Under the Code of General Laws promulgated by the National and the Constitution of the Grand Lodge, a local lodge may not sell its lands without the Grand Lodge's consent and the Grand Lodge holds a reversionary interest in the property of its local lodges. In this action, the Grand Lodge asks that the Court set aside the conveyance to the Cemetery Corporation and place title to the Cemetery lands in the Grand Lodge because the conveyance was without its consent and in derogation of its reversionary rights. The Grand Lodge also seeks an accounting of the funds associated with the operation and maintenance of the Cemetery.
This is the Court's decision after trial.
FINDINGS OF FACT
The facts, as they are, are not seriously in dispute. As will become apparent, because the individuals principally involved with the actions that gave rise to this litigation were not able to testify, the factual record may fairly be characterized as incomplete.
The Cemetery consists of thirteen acres in the old portion of the Cemetery and approximately twenty-one acres of commercially valuable land which have been held for cemetery expansion. The Crystal Fount Lodge first operated the Cemetery, most likely, sometime during the 1870s, shortly after the cemetery monument company of William V. Sipple Son, Inc. was formed in 1869. Scott G. Sipple, Sr. ("Mr. Sipple"), a descendant of the founder of that firm, was a member of Crystal Fount Lodge and was involved, in a very limited manner, in the transfer of the Cemetery lands to the Cemetery Corporation. Currently, Mr. Sipple handles the day-to-day operations of the Cemetery, which he has done since before the transfer.
Approximately 90% of the grave markers in the Cemetery were designed, engraved and installed by William V. Sipple Son.
While the Crystal Fount Lodge claimed as many as 300 members in the mid-1900s, by 1989 it had only five members. It last duly filed an annual report with the Grand Lodge in 1989; incomplete annual reports were filed in 1990 and 1991. By 1993, the Grand Lodge had suspended the charter of Crystal Fount Lodge and seized its books and records. The local lodge's status was restored in 1995 and its records, or some of them, were returned. That new life was of short duration; Crystal Fount Lodge was declared defunct in May of 2000.
The Crystal Fount Lodge was governed by and subject to both the National's Code of General Laws and the Constitution of the Grand Lodge. Both of these documents address the rights of local lodges, such as the Crystal Fount Lodge, to own and dispose of real and personal property. The Code of General Laws provides in pertinent part:
H. Property.
(1) Real and Personal. A [local] lodge has the right to own real and personal property for its use consistent with the laws of the Order.
(2) Limitations. A lodge has no authority to dispose of its real or personal property and dissipate or distribute it for the purpose of defeating the reversionary interest of the Grand Lodge. No lodge has the right to sell, convey, or otherwise dispose of its property without the consent of the Grand Lodge if in session or the Executive Committee if not in session and provided that the proceeds can only be used for purposes authorized by the Order.
(3) Defunct Lodge. If a lodge, incorporated or unincorporated, becomes defunct, all real and personal property owned by it shall pass to and vest in the Grand Lodge. The Grand Lodge may apply to the civil courts for enforcement of the provisions of this section.
Pl.'s Ex. 2. The term "reversionary interest" appears to have been used in the sense of a right to be enjoyed after the termination of the local lodge's existence or estate and not in the sense of property returning to a former owner. There is no evidence that the Grand Lodge ever held any record interest in the Cemetery.
The Constitution of the Grand Lodge, as in effect at the time of the conveyance of the Cemetery to the Cemetery Corporation, also provided in part:
Sec. 12. PROPERTY, Limitations Upon Power of Disposition
No subordinate body of the Order shall have power or authority to dispose of its real or personal property and dissipate or distribute the same for the purpose of defeating the reversionary interest of the Grand Body having jurisdiction over it, in such property, nor shall a subordinate body have power or authority to sell, mortgage, convey or otherwise dispose of its real or personal property except for the purpose of applying the proceeds thereof to the uses and purposes of the Order. Subordinate lodges shall be required to obtain the consent of the Grand Lodge, if in Session, or the Grand Lodge Trustees or Executive Committee of said Grand Lodge during recess, prior to the sale, and/or disposition, of the real property of a subordinate lodge. Art. III. Sec. 547 of the Code of General Laws.
Pl.'s Ex. 16 (Article No. 8, Laws Governing Subordinates). Although the Constitution of the Grand Lodge is silent on the topic, the Code of General Laws allows local lodges to incorporate but specifically requires approval by the Grand Lodge. Also, any certificate of incorporation involving a local lodge is supposed to set forth the reversionary rights of the Grand Lodge in the local lodge's property.
Thus, the lands of the Crystal Fount Lodge, including the Cemetery, were held subject to these provisions. The Grand Lodge, through both its Constitution and the National's Code of General Laws, sought to maintain ultimate control over the assets of the local lodge, first, by requiring the local lodge to obtain its consent to any transfer of any of those assets and, second, by providing that those assets would be transferred to it upon the demise of the local lodge. The Grand Lodge did not, however, record among the appropriate land records any restriction or limitation on the local lodge's right to convey unencumbered title to its real property.
The Grand Lodge regularly holds its annual session on the second Saturday of each November. The annual session brings together all of the local lodges and provides an opportunity to discuss issues of importance and to vote on those matters requiring formal approval. Minutes of the annual sessions are regularly maintained. Also, the local lodges are required to submit annual reports on their activities each year in August. Until 1999, the local lodges were obligated to report generally on their activities; beginning in 1999, the local lodges were required to report specifically on their cemetery activities.
Local lodges of Odd Fellows have operated several cemeteries in Delaware over the years.
The Cemetery was owned by Crystal Fount Lodge until September 16, 1991, when it was conveyed by James R. Deputy, Crystal Fount Lodge's Noble Grand (its chief officer) and Richard P. Hall, the local lodge's secretary, to the Cemetery Corporation. The deed, which recites consideration of $1.00, was duly and promptly recorded in the Office of the Recorder of Deeds, in and for Kent County. The records of the events associated with the conveyance of the Cemetery appear to be somewhat incomplete and, with the exception of Mr. Sipple, all of those individuals involved at the time, on behalf of both Crystal Fount Lodge and the Grand Lodge, are deceased or were otherwise not available to testify at trial.
Crystal Fount Lodge held record fee simple title to the Cemetery. No inspection of the land records of Kent County, at least based on the evidence before me, would have revealed any interest of the Grand Lodge.
Crystal Fount Lodge managed the Cemetery through its Cemetery Board whose members were all active in the local lodge. By September 1990, the Cemetery Board was actively considering separating the Cemetery from the jurisdiction of the Grand Lodge. The minutes of the October 25, 1990, meeting of the Cemetery Board contain the following entry:
Since at least the early 1900s, the Cemetery had been supervised by the Cemetery Board which consisted of members of Crystal Fount Lodge and derived its authority from that local lodge.
The reasons for seeking independence from the Grand Lodge included: (1) a concern about the proliferation of "for profit" companies operating cemeteries; (2) dissatisfaction with the operation and maintenance of other Odd Fellow cemeteries in Delaware; and, most importantly, (3) a desire to assure continued local control of the Cemetery. The Cemetery Board, perhaps as part of this effort, had already sold the caretaker's house in June 1990. It had requested approval from the Grand Lodge in January 1990 and received that approval at the 1990 annual session in November. The caretaker had been terminated in 1988, and, thus, the caretaker's house was no longer needed for operation of the Cemetery.
James Deputy agreed to meet with the Grand Lodge to get their approval of our plan to incorporate the cemetery and remove it from any jurisdiction of the Grand Lodge. The Certificate of Incorporation and Bylaws prepared by Jackson Dunlap were discussed and several changes were made in the bylaws. Motion was made by Carson Ward that the attorney be authorized to proceed with the process of incorporation. Seconded by Harry Lynch and carried.
Def.'s Ex. 1 at 291. In fact, the certificate of incorporation for Odd Fellows Cemetery of Milford, Incorporated was filed on October 25, 1990. Def.'s Ex. 2. The certificate (at Article THIRD) provides:
The purpose for which the corporation is organized is:
(1) solely to own a cemetery, sell lots therein, and maintain these lots and unsold lots in a state of repair and upkeep appropriate to a final resting place so as to be an exempt organization under Section 501(c) of the Internal Revenue Code of 1954 or corresponding provisions of any subsequent Federal tax laws.
(2) The earnings the corporation shall be disposed of in one or more of the following ways:
a. for ordinary and necessary expenses to operate, maintain, and improve the cemetery;
b. as payment for cemetery property; and
c. for creating a fund for perpetual care of the cemetery or a reasonable reserve for any ordinary or necessary purpose.
Mr. Deputy and Mr. Hall represented the Crystal Fount Lodge at the 1990 annual session. They raised the question of whether the Cemetery could be transferred to the Cemetery Corporation. The Journal of Proceedings of the annual session for November 1990 included the following:
Moved by William A. Robinson No. 30 and seconded by John D. Dangle No. 34 that Crystal Fount Lodge No. 10 sale of the caretaker's house be approved but that the transfer of the cemetery property to a Cemetery Corporation be not approved without knowing the provisions. Motion carried.
Pl.'s Ex. 9 at 8.
Thus, the official records of the 1990 annual session reflect that the Crystal Fount Lodge's efforts to obtain approval for the transfer of the Cemetery to the Cemetery Corporation were not successful.
Mr. Sipple, however, testified that it was his understanding from meeting with Mr. Deputy and Mr. Hall after annual session that the transfer had been approved. His recollection is based upon the "sense" of the meeting. The minutes of the next Cemetery Board meeting, held on December 6, 1990, are not inconsistent with that understanding:
Tr. at 206.
Tr. at 212.
James Deputy reported he and Richard Hall attended a meeting of the Grand Lodge to present our plans for incorporating the cemetery, and were assured of their consent providing changes were made in bylaws regarding election of directors. Carson Ward said he had contacted our attorney, Jackson Dunlap, and that the required changes in by-laws had been made.
Def.'s Ex. 1 at 293.
From this, it appears that the Cemetery Board understood that the principal concern of the Grand Lodge was the election of directors. The Cemetery Board may also have believed that necessary changes to the bylaws had been made. I do not doubt Mr. Sipple's recollection of the Cemetery Board meeting. Unfortunately, the details of what Mr. Deputy and Mr. Hall may have understood are not now available, and there is no basis for assessing the reasonableness of their understanding. Mr. Sipple has no first-hand knowledge of the essential facts. Moreover, the representatives of the Grand Lodge involved in these discussions were not available. In any event, no written approval of the transfer has ever been found, but no other document specifically rejecting the request for approval of the transfer has been produced either. There also is no evidence that the certificate of incorporation (or bylaws) was ever amended.
In late December 1990, the Grand Secretary of the Grand Lodge wrote to Mr. Deputy requesting copies of the bylaws. His letter contained the following:
(1) Need three (3) copies of bylaw changes with one (1) copy of the original By-Law of your lodge. Received only one (1) copy with no seal. With these By-Law changes need date of three readings and those that were present with their titles.
(2) Need from you a letter expressing to the Grand Lodge that your Cemetery Association agreed to these changes (date and name of officers and their titles with the seal of said organization). Three (3) copies please.
(3) Make sure that 13 (Condition of Membership) be incorporated into your By-Laws preceding these proposed new By-Laws.
***
They have been reviewed by the Executive Committee of the Grand Lodge of Delaware when they are returned to me, they will be acted upon by the Executive Committee of the Grand Lodge of Delaware, be properly signed and returned to your lodge.
John E. Garland, who was the Grand Master of the Grand Lodge from November 1999 to November 2000, and thereafter served as a Special Deputy Grand Master with responsibility for cemeteries in the Delaware jurisdiction but who had no personal knowledge of any of the events in the period of 1990-92, testified that the reference to "13 (Condition of Membership)" referred to preserving the Grand Lodge's reversionary interest.
Tr. at 142.
On March 22, 1991, the Grand Lodge's Grand Master wrote to the National Grand Master and inquired about a proposal to incorporate an Odd Fellows cemetery in Delaware, which I accept as referring to the Cemetery. That letter provided in part:
Enclosed is a proposed copy of the incorporation of an Odd Fellow cemetery located in Delaware.
I feel Section 13, Paragraph 3 is contrary to the rules and regulations of the Order, according to Section 1, IV-5 of the Code of General Laws.
***
I hereby request your decision in regards to the reversionary rights for the enclosed incorporation proposal.
Please render your decision at your earliest convenience.
The National's response, written on July 10, 1991, provides as follows:
I have your letter of March 22, 1991 with a proposed copy of the incorporation of an Odd Fellow Cemetery located in Delaware.
Your Question: Section 13 Condition of Membership. Paragraph 3 Should the charter become revoked, defunct or inactive, the Directors shall be elected from those who were prior members in good standing of the lodge involved, at the time of revocation/or the lot holders of the cemetery who can substantiate ownership of the same.
Answer: Refer to Chapter IV Odd Fellows Lodges Section 1 Charter, H. Property (3) Defunct Lodge. If a lodge, incorporated or Unincorporated, Becomes Defunct, all real and personal property owned by it shall pass to and vest in the Grand Lodge. Section 13 Paragraph 3 must show that if the lodge ceases to exist the real and personal property must revert to the Grand Lodge.
Id.
Thus, the focus of this exchange between the Grand Lodge and the National was not about reversionary rights in general but, instead, was about reversionary rights if the local lodge became inactive or defunct.
The National held its annual session late in the summer of 1991 and the minutes of the annual session reflect that this topic was considered then:
Decision No. 3 — Delaware
Statement: A cemetery wants to incorporate with provisions that could possible [sic] defeat the reversionary interests of the Grand Lodge.
Question: Is it permissible for them to do so?
Answer: No. If a lodge, incorporated or unincorporated, becomes defunct, all real and personal property owned by it shall pass to and vest in the Grand Lodge. If the lodge ceases to exist the real and personal property must revert to the Grand Lodge.
Id.
Thus, the question before the National, at the time, clearly focused on the status of the reversionary rights in the certificate of incorporation employed by the local lodge in its efforts to incorporate its cemetery operations in an independent corporation. The answer, however, was ambiguous. In one sense, it can be read as providing that the reversionary interest, regardless of the circumstances, may not be defeated. It also, however, can be interpreted as limited to a situation where the local lodge becomes defunct, without regard to whether there was an intervening corporation or conveyance.
In any event, the Crystal Fount Lodge proceeded in September 1991 to convey the Cemetery to the Cemetery Corporation. The deed was executed on September 16, 1991, and recorded on October 24, 1991.
Pl.'s Ex. 1.
Based upon my consideration of the trial testimony, which was of limited value because the persons with first-hand knowledge were not available, and the records, such as they are, I find that the Cemetery Corporation has failed to prove that it received the consent of the Grand Lodge, either verbally or in writing, for the transfer of the Cemetery to the Cemetery Corporation. I make this finding because the minutes of the Grand Lodge reflect rejection of the request. They also suggest that approval might have been obtained if certain changes had been made. There is no credible evidence, however, that such changes were made. Moreover, the exchange of correspondence between the Grand Lodge and the National demonstrates that at least the officers of the Grand Lodge had questions about the propriety of the proposed transfer, thereby suggesting that they had not approved it, at least as of the summer of 1991.
Even though the deed recorded in 1991 purported to change legal title to the Cemetery, little else changed. The Cemetery since then has been operated by members (now former members) of Crystal Fount Lodge. The offices of W. V. Sipple Son have continued to house the Cemetery records, the bank accounts, and the documents associated with the Cemetery's perpetual care fund. From the time of the decision in 1989 to sell the caretaker's house until 1999, William V. Sipple Son maintained the Cemetery. That work is currently performed by Mr. Sipple and Wayne Perry, an employee of W. V. Sipple Son; each receives a weekly stipend from the Cemetery Corporation for his efforts.
The perpetual care fund accounts are held by financial institutions under the name of Crystal Fount Lodge, but the governing document shows that the successor to the Crystal Fount Lodge is the General Lodge.
After the correspondence trail ended in 1991, the Grand Lodge paid little, if any, attention to the Cemetery until 2000. No proper reports were submitted by Crystal Fount Lodge; indeed, for most years, no reports at all were filed. The charter of the Crystal Fount Lodge was suspended in 1993 and reinstated in 1995, but those events apparently did not pique the curiosity of the Grand Lodge's officials about the Cemetery. In November 1999, over eight years after the transfer of the Cemetery to the Cemetery Corporation and approximately six years after the charter of Crystal Fount Lodge was first suspended, Mr. Garland was installed as the Grand Master of the Grand Lodge. Through his efforts, he learned of the status of the Crystal Fount Lodge, declared it defunct as of May 1, 2000, and seized its records on May 6, 2000. Upon review of those records, Mr. Garland found the September 1991 deed conveying the Cemetery to the Cemetery Corporation. There is no evidence supporting any inference that the Grand Lodge had been expressly informed of the transfer.
The September 1991 deed may have been among the records seized in 1993 when the Crystal Fount Lodge's charter was suspended. The evidence is inconclusive.
CONTENTIONS OF THE PARTIES
The Grand Lodge's claims are straightforward: Crystal Fount Lodge held the Cemetery subject to a reversionary interest in favor of the Grand Lodge and it could not transfer those lands without its consent. The conveyance to the Cemetery Corporation was without the Grand Lodge's approval and, thus, did not defeat its rights in the Cemetery. Accordingly, either a constructive trust for the Grand Lodge's benefit should be imposed upon the Cemetery or the deed conveying the Cemetery should be cancelled. Also, because funds that have been received, managed, and spent by the Cemetery Corporation are properly within the concerns of the Grand Lodge, as it performs its charitable functions, the Grand Lodge is entitled to an order requiring that the Cemetery Corporation account for its handling of those funds.
The Cemetery Corporation starts from the premise that the deed is valid and properly transfers the Cemetery lands to the Cemetery Corporation unless the Grand Lodge, as plaintiff, can prove that no consent was given to the transfer. It argues that, with the passage of time and the resulting absence of witnesses and records, the Grand Lodge has failed to meet its burden. It further asserts that no fraud or nefarious conduct was involved in the transfer. Finally, it posits that the Grand Lodge's undue delay in pursuing this action prejudiced it to an extent that, through invocation of the doctrine of laches, the Grand Lodge's claim should be defeated.
ANALYSIS
1. Constructive Trust
The Grand Lodge seeks imposition of a constructive trust for its benefit over the Cemetery's lands. "A constructive trust is one imposed by a court of equity as a remedy to correct the unlawful vesting, or assertion of, legal title." As a subordinate lodge, the Crystal Fount Lodge held its property under the terms of both the Constitution of the Grand Lodge and the National's Code of General Laws. Each of these documents sets forth that the real estate of a local lodge is held subject to the reversionary rights of the Grand Lodge. Thus, unless consent to a transfer is given by the Grand Lodge, no transfer by the local lodge will defeat the reversionary rights. The burden of proving that consent was given is on the Cemetery Corporation. I have concluded that the Cemetery Corporation has failed to prove, by a preponderance of the evidence, that it ever obtained the Grand Lodge's consent to the transfer. Thus, the deed to the Cemetery Corporation, to the extent that it purports to convey title free and clear of any claim of the Grand Lodge, is not effective, where, as here, the consent and the founders of the Cemetery Corporation and its officers were all members of the Crystal Fount Lodge and aware of the need for the Grand Lodge's prior reversionary rights of the Grand Lodge. In short, the transfer attempted by the deed was wrongful as to the rights of the Grand Lodge, and the Grand Lodge has demonstrated an entitlement to imposition of a constructive trust for its benefit, a trust whose purposes would be effected by a reconveyance of the Cemetery. Specifically, it has demonstrated that the Constitution and the Code of General Laws would require, in the absence of any equitable defenses that might be available to the Cemetery Corporation, the conclusion that the conveyance of the Cemetery was ineffective because its consent was not obtained. In addition, title to the Cemetery should then be returned to the Crystal Fount Lodge, but, since the Crystal Fount Lodge has been disbanded, title should vest in the Grand Lodge as successor to the Crystal Fount Lodge and in accordance with its reversionary rights. Accordingly, I will now turn to the equitable defense of laches raised by the Cemetery Corporation.
East Lake Methodist Episcopal Church, Inc. v. Trustees of the Peninsula-Delaware Annual Conference of the United Methodist Church, Inc., 731 A.2d 798, 809 n. 4 (Del. 1999); Hogg v. Walker, 622 A.2d 648, 651-52 (Del. 1993).
Although couched in terms that sound as if they are based in real property law, the rights which the Grand Lodge seeks to enforce arise, not from the law of real property or from rights evidenced among the land records, but from its rights emanating from the Odd Fellows' organizational or "corporate" structure.
Once the Grand Lodge had proved that it held a reversionary interest in the Cemetery's lands and, thus, put the efficacy of the 1991 deed in question, the burden then fell on the Cemetery Corporation to demonstrate that the Grand Lodge had waived or relinquished its reversionary rights through its consent. This allocation of burden is partly in recognition of the differential difficulty between proving consent and proving the absence of consent. In any event, the weight of the evidence that exists, primarily the 1991 annual session minutes, supports the conclusion that the Grand Lodge did not give consent to the transfer to the Cemetery Corporation.
I do not address the question of whether the Grand Lodge's reversionary rights would have survived a transfer to an unrelated third-party.
The Grand Lodge is perhaps too enthusiastic when it claims that Mr. Deputy and Mr. Hill's actions in signing the deed amounted to theft. P1.'s Opening Post-Trial Br., at 36. While I have found that the transfer was not properly authorized and, thus, in this context, may fairly be characterized as wrongful, I have no reason to doubt that both were motivated by the best of intents, namely, seeking to assure that the cemetery needs of the Milford community would be met while recognizing that the Crystal Fount Lodge might not remain viable. Moreover, the Grand Lodge cannot so facilely avoid the indisputable fact that the Cemetery was the property of the Crystal Fount Lodge.
In addition, cancellation of the deed would also achieve the same result. See Hogg v. Walker, 622 A.2d at 652 ("Indeed, the only duty of the constructive trustee is to transfer the property to the equitable owner.").
2. Laches
The Cemetery Corporation observes that "[a] Court of equity will not grant relief to a complainant who has slept on his rights for an unreasonable length of time." Thus, the Cemetery Corporation asserts the equitable defense of laches. To succeed with the defense of laches, the Cemetery Corporation must demonstrate: "(1) the [Grand Lodge] waited an unreasonable length of time before bringing the suit and (2) the delay unfairly prejudices the [Cemetery Corporation]." These are questions of fact that depend upon the particular circumstances. I turn first to the question of whether the Grand Lodge delayed unreasonably in bringing this action.
Def.'s Post-Trial Answering Br., at 13 (citing Hutchinson v. Fish Eng'g Corp., 153 A.2d 594 (Del.Ch. 1959). Or, as framed by one of the maxims of equity, "Equity aids the vigilant, not those who slumber on their rights."
Hudak v. Procek, 806 A.2d 140, 153 (Del. 2002) (" Hudak II").
Hudak v. Procek, 727 A.2d 841, 843 (Del. 1999) (" Hudak I"); Hudak II, at 152.
The transfer of the Cemetery lands occurred in September 1991 and the deed was recorded in October 1991; this action was filed in September 2000. Thus, a period of almost nine years elapsed between the transfer and the bringing of this action. Because the doctrine of laches is not premised upon a specific duration, the length of time is but one factor in its evaluation. Thus, it is necessary to review the circumstances surrounding the delay. The deed was recorded and, thus, became publicly available in October of 1991. Although the recording provided constructive notice, the Grand Lodge did not receive actual notice that its rights had been affected. Where there is constructive notice, but no actual notice, the question then focuses on whether an obligation to investigate or inquire has been triggered. "In applying laches, a plaintiff is chargeable with such knowledge of a claim as he or she might have obtained upon inquiry, provided the facts already known to that plaintiff were such as to put the duty of inquiry upon a person of ordinary intelligence." I am satisfied, however, that the Grand Lodge had ample reason to look into the status of the Cemetery and its title in the years immediately following the conveyance. First, from what evidence is available, it is clear that the Grand Lodge was aware of the desire of the Crystal Fount Lodge to transfer the Cemetery to a separate legal entity. Second, the Crystal Fount Lodge, after 1989, never filed a proper annual report with the Grand Lodge. Third, the charter of the Crystal Fount Lodge was suspended in 1993. Although when considered separately it may be that none of these factors is compelling, but, when they are considered collectively, they served to impose the reasonable duty on the Grand Lodge to inquire into the status of the Cemetery and its lands. The reasonable inference is that during this period, the Grand Lodge simply was not paying attention. It had plenty of warning signals, but it ignored them.
"The precise time that may elapse between the act complained of as wrongful and bringing of suit to prevent or correct the wrong does not, in itself, determine the questions of laches." Adams v. Jankouskas, 452 A.2d 148, 157 (Del. 1982) (quoting Federal United Corp. v. Havender, 11 A.2d 331, 343 (Del. 1940)). See, e.g., Stengel v. Rotman, Del. Ch., C.A. No. 18109, mem. op. at 17, Strine, V.C. (Feb. 26, 2001) (laches found after little more than one month delay); Steele v. Ratledge, Del. Ch., C.A. No. 16455, mem. op. at 8, Jacobs, V.C. (Sep. 20, 2002) (laches found after ten year delay); see also Hudak II and Hudak I (laches rejected even though eighteen years had passed between the challenged transaction and the filing of suit).
See, e.g., Steele v. Ratledge, mem. op. at 7 (actual notice when boundary line fence was constructed).
Fike v. Ruger, 752 A.2d 112, 114 (Del. 2000). In the absence of circumstances counseling for inquiry into the record status of the Grand Lodge's holdings, it would be fundamentally unfair to hold the Grand Lodge subject to an equitable defense for that which it did not know and that which it had no reason to inquire into. One with interests in real property need not go to the Recorder's Office on a regular basis to assure herself that no documents adverse to her title have been recorded.
I note that the Crystal Fount Lodge had sold the caretaker's house without first having received approval from the Grand Lodge. Although approval was obtained after the transfer, it is not clear whether the Grand Lodge had notice that the conveyance had already been made without its prior approval.
The Grand Lodge contends that the proper filing of reports would have provided no useful notice because, in the early 1990s, the local lodges were not obligated to include information on their cemetery operations in their reports. That argument misses the point. The failure of Crystal Fount Lodge to submit reports or its submission of deficient reports informed the Grand Lodge that the local lodge was experiencing significant difficulties. These difficulties resulted in the suspension of the local lodge's charter. If the Grand Lodge was concerned enough to suspend the charter, one wonders why it was not concerned enough to inquire into the status of what appears to have been the primary activity of the local lodge — ownership and operation of the Cemetery.
As Mr. Garland conceded, his predecessors "took a softer approach" when it came to obtaining reports from the local lodges. Mr. Garland's testimony as a whole can fairly be understood as describing the 1990s as a period of benign indifference to the local cemetery activities on the part of Grand Lodge officials.
The Grand Lodge accurately observes that the Cemetery was operated in the same manner after the conveyance. However, it was not the mode of operation of the Cemetery that put the Grand Lodge on notice. Instead, that the Crystal Fount Lodge was disintegrating and its charter had been suspended, while the Cemetery continued on, should have alerted the Grand Lodge to inquire into the status of title to the Cemetery's lands.
It is not clear what actual knowledge the Grand Lodge officials had regarding the operation of the Cemetery during the early to mid-1990s.
In sum, I am satisfied that the Cemetery Corporation has demonstrated, by a preponderance of the evidence, that the Grand Lodge's delay of almost nine years in bringing this suit was unreasonable. After the deed was recorded, the events of the early to mid-1990s provided sufficient notice to the Grand Lodge that would have led the reasonable and prudent person to inquire about the status of the Cemetery and its property, something the Grand Lodge officials simply did not do.
I must now determine whether the Cemetery Corporation has demonstrated that it suffered prejudice from the delay. Prejudice can come in two forms: procedural prejudice and substantive prejudice. Substantive prejudice may occur, for example, "where a party suffers a financial detriment by relying on the plaintiffs' failure to seek relief in a timely manner." In this instance, the Cemetery Corporation has not demonstrated substantive prejudice. Procedural prejudice, on the other hand, may occur, "for example, where the delay prevents a party from calling crucial witnesses who could either help prove the party's case or refute the opposing party's claims, but where those witnesses have become unavailable because of intervening disappearance, illness, or death." This is precisely what occurred here.
Steele v. Ratledge, mem. op. at 8.
Id.
Mr. Hall and Mr. Deputy were the Crystal Fount Lodge's representatives to the 1990 annual session of the Grand Lodge when the request to transfer the Cemetery lands to the Cemetery Corporation was considered. Based on Mr. Sipple's testimony and the minutes of the December 6, 1990, Cemetery Board meeting, I am satisfied that they believed they would be successful in their efforts to obtain approval of the General Lodge. Without their testimony, however, I cannot evaluate the basis for that optimism or whether it was reasonable. Thus, the Grand Lodge's delay in bringing this action denied the Cemetery Corporation access to its only representatives with relevant and direct personal knowledge. Moreover, during the nine-year period, the records of the Crystal Fount Lodge were seized by the Grand Lodge, returned to the Local Lodge, and then seized again when the Crystal Fount Lodge was declared defunct. By the time of trial, these records were in disarray. Similarly, while the Grand Lodge appears to have maintained its minutes and some of its other records in a reasonable fashion, some question as to the completeness of its records was raised by the testimony of Mr. Garland who noted that some individuals who had been responsible for maintenance of the records over that period were somewhat lax in their discharge of that duty. In sum, in light of all the circumstances, I find that the Cemetery Corporation suffered procedural prejudice from the Grand Lodge's delay, a delay that I have already found to have been unreasonable. Accordingly, the Cemetery Corporation has met its burdens in demonstrating that the Grand Lodge, in this action, is barred from obtaining either the imposition of a constructive trust over, or cancellation of the deed for, the Cemetery.
Similarly, I cannot benefit from the recollections of Mr. Robinson or Mr. Janowski, the representatives of the Grand Lodge most involved at the time, for they too were not available. Thus, unlike Hudak I and Hudak II in which more than one knowledgeable person had survived and could testify, in this case, there is no one. Unfortunately, Mr. Sipple's involvement was too attenuated to allow him to provide any specific testimony based upon first-hand knowledge.
At issue is the failure of Crystal Fount Lodge to obtain the Grand Lodge's consent. If the Grand Lodge had acted timely, the remedy (for the breach of the duty to secure approval) would have been to restore legal ownership of the Cemetery to the Crystal Fount Lodge. If title had been restored to the local lodge, then the Grand Lodge's controls of prior consent to any transfer and acquisition of title if the local lodge ceased to exist would have continued thereafter. Here, the Crystal Fount Lodge no longer held title as of the time when it was declared defunct in 2000. Thus, the Cemetery, at that time, was not held by the local lodge and, accordingly, not subject expressly to the reversionary rights.
While the Grand Lodge cannot prevail in this action, I have also determined that the 1991 deed was not effective in defeating all of its interests in the Cemetery. If the Grand Lodge had made inquiry into the status of the Cemetery Corporation's lands in early to mid-1990s, it would have found that the Cemetery's lands were being used in the traditional manner to carry out the charitable function for which the lands had been used for more than a century. Thus, all that it could have learned from that effort was that title to the Cemetery had been transferred to another entity, controlled and operated by persons subscribing to the aspirations of the Grand Lodge. Reference to the certificate of incorporation of the Cemetery Corporation would have demonstrated that its lawful corporate purpose was limited to those activities necessary for cemetery operations. It is in this context that the scope of the defense of laches must be ascertained.
My determination that laches precludes the Grand Lodge from acquiring fee title at this time through assertion of its reversionary interest or its claim that consent to the transfer was not obtained does not necessarily mean that the Cemetery Corporation holds title free of any and all rights of the Grand Lodge. All of the officers of the Cemetery Corporation were aware of the reversionary rights of the Grand Lodge and that the Grand Lodge's consent was necessary. The lands were acquired by the Cemetery Corporation for the purposes of carrying on an important activity sanctioned by the Odd Fellows: operating a cemetery. Any reasonable inquiry that the Grand Lodge could have accomplished between 1991 and 2000 would have revealed that those purposes were not only being pursued but that they also were being achieved by the Cemetery Corporation. Thus, although the delay by the Grand Lodge was unreasonable as to the title of the Cemetery, the delay was not unreasonable as to the use of the lands because the lands were being put to the same purpose as they had been for many years. Through the exercise of equitable discretion, the scope and effect of an equitable defense may be tailored here both to reflect the unique circumstances involving common charitable goals and to avoid an inequitable result. Thus, under these circumstances, the ultimate rights of the Grand Lodge to the Cemetery's lands survive; however, because application of the equitable defense of laches, they cannot be enforced presently to deprive the Cemetery Corporation of legal title and possession for as long as the Cemetery Corporation holds those lands for the exclusive purpose of the Cemetery as it serves the needs of the Milford area.
Indeed, the Cemetery Corporation continued to use the Odd Fellows' name.
3. Accounting
The Grand Lodge has asked that the Cemetery Corporation be required to account for its handling of the funds associated with the Cemetery since the transfer. Its demand was, in substance, part of its effort to obtain control of the Cemetery. Because its efforts to acquire title to the Cemetery have failed, at least for the time being, the grounds upon which it expressly relied do not pertain.
Yet, I am satisfied that an accounting by the Cemetery Corporation is necessary. The Cemetery Corporation and the Grand Lodge appear to have an interest in, or, perhaps more importantly, an obligation with respect to, the perpetual care funds now held by the financial institutions, as trustees. It further appears that the relationships with the financial institutions on behalf of the Cemetery are through the Cemetery Corporation, and not the Grand Lodge. The evidence before me also leads to the tentative conclusion that the responsibility for the relationships may have vested in the Grand Lodge when the Crystal Fount Lodge was declared defunct. How the perpetual care funds have been spent by the Cemetery Corporation, if indeed any of those funds have been spent, is a matter which the Grand Lodge is entitled to know. Similarly, the income received by the Cemetery Corporation from lot sales and other sources, its expenditures, and funds set aside for future maintenance all have an impact on the prudent management of the perpetual care funds. Because of the uncertainties that have recently existed regarding the management, ownership, and funding of the Cemetery, an accounting will be required to assure a full understanding of the funding available to care for the Cemetery.
In short, the Cemetery Corporation's role with respect to Cemetery funds is in the nature of a fiduciary, and, as a result, it owes fiduciary duties to, among others, the Grand Lodge. The fiduciary duties running to the Grand Lodge arise, in part, out of control of the perpetual care funds and the relationship of the perpetual care funds to cemetery lot sales. See McMahon v. New Castle Assocs., 532 A.2d 601, 605 (Del.Ch. 1997).
Responsibility for the perpetual care funds is not a question before the Court, and it is a question that is not resolved here. Ultimately, proper management of the Cemetery into the future will require an understanding or an accommodation with respect to the perpetual care funds.
Also, my decision to order an accounting should not be viewed, in any way, as reflecting upon the manner in which the Cemetery funds have been handled.
CONCLUSION
For the foregoing reasons, I conclude that the Grand Lodge's claim to title of the Cemetery is barred by the doctrine of laches. Also, the Cemetery Corporation will be required to account for its handling of funds associated with the Cemetery since the transfer of the Cemetery to it.I ask that counsel confer and submit a form of order to implement this memorandum opinion.
Either the order, or an abstract of it, should be recorded among the land records of Kent County, Delaware, in order to inform any prospective purchaser of lands now held by the Cemetery of the limitations on the rights of those who might seek to convey them.