Opinion
A145711
01-06-2017
JONES MEMORIAL UNITED METHODIST CHURCH, INC., Plaintiff and Appellant, v. JONES MEMORIAL HOMES, INC., et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (City & County of San Francisco Super. Ct. No. CGC-14-538144)
Plaintiff Jones Memorial United Methodist Church, Inc. (Church) sued two nonprofits it alleged were created to fulfill the Church's mission of developing low-cost housing for elderly and disadvantaged people, but breached their fiduciary duties because they excluded the Church from membership. On the defendants' motion for summary judgment, the trial court determined that the Church's action was barred by the statute of limitations, and that the nonprofits were legally independent from the Church. The Church argues that the trial court erred in granting summary judgment, and further argues that the court erred when it denied the Church's motion for a new trial. We affirm.
I. BACKGROUND
The Church was organized in 1945 as a nonprofit corporation. In the early 1960s, the Church investigated building low-cost housing at 1640 Steiner Street in San Francisco. During its acquisition of the property, the Church learned it could obtain favorable financing from the federal Housing and Home Finance Agency, but only if it formed a separate nonprofit corporation to develop the property. Church pastor Hamilton T. Boswell and other Church members then formed defendant Jones Memorial Homes, Inc. (Homes) as a nonprofit corporation. The original incorporators and directors were Church members appointed by Pastor Boswell with approval from the membership of the Church.
Homes filed its original articles of incorporation in April 1962. The articles of incorporation provided that "[t]he number of the members of the corporation and the method by which they are elected shall be governed by the by laws [sic]." The bylaws, in turn, stated: "The corporation shall have one class of members. Every person interested in the aims and ideas and willing to work to promote the goals of the corporation is eligible for membership. Applicants for membership shall be subject to the approval of the Board of Directors." Neither the bylaws nor the articles reference the Church. According to attorney Willie L. Brown Jr., who drafted the articles of incorporation and bylaws, Homes was formed with the intent that it would include the Church among its members. Brown believed the "power of control [of Homes] was to be in the membership of the church all of whom by church membership were members of the corporation and empowered to elect a board of directors to execute on behalf of the membership."
The Church acquired the Steiner Street property, and in January 1964, transferred title to the property to Homes. The housing development was completed in March 1965.
In the early 1980s, Homes sought to develop more affordable housing on Fillmore Street in San Francisco. In order to receive financing for this new development from the federal Department of Housing and Urban Development (HUD), the directors of Homes formed a separate nonprofit corporation, defendant Jones Senior Homes, Inc. (Senior Homes). The articles of incorporation for Senior Homes contain no provisions regarding membership. The bylaws for Senior Homes state that the board of directors shall consist of seven members but, unlike the bylaws for Homes, do not define the class of membership.
In 2006 during a Church open meeting, a Church member asked defendant Gerald Jones, the President of Homes and Senior Homes, about Homes' relationship with the Church. Jones' answer was evasive. This raised a concern among Church members that Homes and Senior Homes were separate and unrelated to the Church.
In November 2006, a Church parishioner wrote a letter to members of the Church's board of trustees and administrative council claiming that the directors of Homes and Senior Homes committed several "violations of church, state and federal law." The letter claimed that the directors violated Homes' bylaws by proposing that Homes should no longer have any members. It also claimed that the directors of Homes and Senior Homes were improperly repudiating that the two entities were Church subsidiaries. The letter stated the Church needed to take action quickly against Homes and Senior Homes to prevent the running of the statute of limitations. Otherwise, the Church risked losing $50 million in equity in the land owned by Homes and Senior Homes.
In response to the letter, Pastor James McCray formed a subcommittee of the Church's administrative council to examine the relationship between the Church and the two nonprofits. In March 2007, the subcommittee attended a meeting of the Homes and Senior Homes board of directors. The purpose of the meeting was to discuss the right of control the Church had over Homes and Senior Homes, and whether members of the Church had to be members of Homes and Senior Homes. At the meeting, the directors informed the subcommittee that the Church was not a part of either nonprofit. The directors also told the Church subcommittee that they amended the bylaws for both nonprofits, and provided copies of the amended documents. From a review of the documents, the subcommittee believed that the two nonprofits were non-member corporations, were legally separate from the Church, and that the Church had no right of control over the nonprofits.
In March 2014, the Church commenced this action against Homes, Senior Homes, and seven members of the board of directors for both nonprofits. The Church's amended complaint contained five causes of action against all defendants. In its first cause of action for breach of fiduciary duty, the Church alleged that defendants were wrongfully asserting that Church members were not members of Homes and Senior Homes and that the two nonprofits were not subsidiaries of the Church. The Church further alleged that if defendants altered the articles of incorporation and bylaws of the two nonprofits to impair their "subsidiary relationship," then defendants were in breach of fiduciary duties owed to the Church. The Church also alleged defendants breached their fiduciary duties in several other ways, such as not holding or scheduling annual membership meetings, not scheduling elections for directors, and mismanaging the properties.
The individual defendants are Gerald Jones, Emmett Cobb Jr., Charles Harris, Rozelle Lee, James McCray, Derek Tolliver, and Marvin Norman.
The second and third causes of action sought declaratory relief and a constructive trust imposed upon the assets of Homes and Senior Homes. In those causes of action, the Church sought a declaration that Homes and Senior Homes are Church subsidiaries, and that Church members are (and always have been) members of the two nonprofits. The fourth and fifth causes of action also seek declaratory relief and imposition of a constructive trust upon the assets of Homes and Senior Homes based on provisions of the Church's "Book of Discipline."
Defendants answered and raised several affirmative defenses, including the statute of limitations as a bar to the Church's causes of action. Defendants also filed a cross-complaint for declaratory relief seeking judicial declarations that Homes and Senior Homes were not subsidiaries of the Church, that members of the Church were not members of Homes and Senior Homes, and that the Church is a "separate legal entity" from homes and Senior Homes.
Defendants moved for summary judgment, arguing that the Church lacked standing, and that all causes of action were barred by the statute of limitations and the doctrine of laches. The trial court granted summary judgment for defendants on two separate grounds. It found that the undisputed evidence showed that Homes was "independent" from the Church. The court also determined that the Church's complaint was barred by any conceivable statute of limitations because the evidence showed the Church was on inquiry notice of the issues raised in its complaint in March 2007 but waited until March 2014 to file suit.
The trial court's order only states that Homes is independent, but is silent about Senior Homes' independence.
Judgment for defendants was entered on April 7, 2015. Defendants served the Church with a notice of entry of judgment on April 10, 2015.
The Church filed a motion for a new trial on May 1, 2015 and scheduled the motion for hearing on June 16. The thrust of the Church's motion was that defendants failed to disclose that HUD repeatedly rejected proposed amendments to the bylaws of Homes and Senior Homes, and also failed to produce regulations that required HUD's approval of amendments. Defendants opposed the motion, arguing the evidence was neither newly discovered nor material. On June 11, 2016, defendants filed a supplemental opposition arguing that the trial court lost jurisdiction to rule on the new trial motion under Code of Civil Procedure section 660 since more than 60 days had passed since defendants served the Church with notice of entry of the judgment.
Code of Civil Procedure section 660 states, in pertinent part, that "the power of the court to rule on a motion for a new trial shall expire 60 days . . . from and after service on the moving party by any party of written notice of the entry of the judgment[.]"
On June 16, the trial court issued an order denying the new trial motion on the ground that it had lost jurisdiction under Code of Civil Procedure section 660. The Church then timely filed this appeal from the judgment.
II. DISCUSSION
A. Summary Judgment
The Church argues that the trial court erred in granting summary judgment because there were triable issues of fact regarding whether the complaint was time-barred and whether Homes was independent from the Church. We conclude the Church's causes of action were barred by the statute of limitations, and also that Homes and Senior Homes were independent corporations from the Church and the Church lacked any control over them, and affirm on both grounds.
"The rules of review [of a summary judgment] are well established. If no triable issue as to any material fact exists, the defendant is entitled to a judgment as a matter of law. [Citations.] In ruling on the motion, the court must view the evidence in the light most favorable to the opposing party. [Citation.] We review the record and the determination of the trial court de novo. [Citations.]" (Shin v. Ahn (2007) 42 Cal.4th 482, 499.)
" 'To secure summary judgment, a moving defendant may prove an affirmative defense, disprove at least one essential element of the plaintiff's cause of action [citations] or show that an element of the cause of action cannot be established. . . . The defendant "must show that under no possible hypothesis within the reasonable purview of the allegations of the complaint is there a material question of fact which requires examination by trial." [Citation.] [¶] The moving defendant bears the burden of proving the absence of any triable issue of material fact, even though the burden of proof as to a particular issue may be on the plaintiff at trial. [Citation.] . . . Once the moving party has met its burden, the opposing party bears the burden of presenting evidence that there is any triable issue of fact as to any essential element of a cause of action.' " (Ochoa v. Pacific Gas & Electric Co. (1998) 61 Cal.App.4th 1480, 1485.)
The statute of limitations requires a plaintiff to file suit on a cause of action within the applicable limitations period after accrual. (Code Civ. Proc., § 312; Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397.) The longest possible statute of limitations applicable to the Church's first cause of action for breach of fiduciary duty is four years. (Thomson v. Canyon (2011) 198 Cal.App.4th 594, 606 [limitations period for breach of fiduciary duty is four years].) A four year limitations period also applies to the Church's other causes of action for declaratory relief and imposition of a constructive trust. (See Snyder v. California Insurance Guarantee Association (2014) 229 Cal.App.4th 1196, 1208 [limitations period applicable to a declaratory relief action is determined by the nature of the underlying obligation sought to be adjudicated]; Nelson v. Nevel (1984) 154 Cal.App.3d 132, 140 [four year limitations period for action to establish constructive trust].) "The general rule for defining the accrual of a cause of action sets the date as the time 'when, under the substantive law, the wrongful act is done,' or the wrongful result occurs, and the consequent 'liability arises. . . .' " (Norgart v. Upjohn Co., supra, 21 Cal.4th at p. 397.)
Defendants contend this case is governed by a three-year limitations period applicable to actions against directors and members of a corporation "to enforce a liability created by law." (Code Civ. Proc., § 359.) We need not decide whether a three or four-year statute of limitations should apply in this case since we conclude that the Church's causes of action are time-barred even under the four-year statute.
Here, the gravamen of the Church's action is that defendants wrongfully excluded Church members from membership in Homes and Senior Homes, thereby eliminating any oversight and control the Church was to have over the nonprofits. The undisputed evidence showed that the Church was informed in March 2007 that it had been excluded from membership in the two corporations. The directors of Homes and Senior Homes informed a Church subcommittee that the Church was not a part of either nonprofit. The Church subcommittee also reviewed copies of amended articles of incorporation and bylaws in March 2007 and believed that the two nonprofit corporations were non-member corporations, were legally separate from the Church, and the Church had no right of control over them. Accordingly, the Church's causes of action accrued no later than March 2007. The Church, however, did not file suit until seven years later in March 2014, well beyond four years after its causes of action accrued.
The Church attempts to argue this case was timely filed by invoking the "discovery rule," which postpones the accrual date of a cause of action "until the plaintiff discovers, or has reason to discover, the cause of action." (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807.) Specifically, the Church argues that its causes of action could not have accrued as early as March 2007 because any amendments to the nonprofits' bylaws that excluded the Church from membership were ineffective. The Church provides several reasons why this is so, including that the amendments were in contravention of the articles of incorporation and other provisions of the bylaws, and that the amendments violated HUD regulations and various provisions of the Corporations Code. Consequently, the Church argues that its claims "could not be barred based on having been on notice of Homes Inc.'s deletion of the class members when, in fact, no valid deletion of the Homes Inc. class of members has ever occurred."
We disagree. Under the discovery rule, "the statute of limitations begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing, that someone has done something wrong to her." (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110.) Here, there is no dispute that the Church suspected or should have suspected wrongdoing in March 2007 when the directors told Church subcommittee members that they amended the bylaws of the nonprofits and that Church members were not a part of either corporation. In arguing that the causes of actions did not accrue because the bylaw amendments were ineffective, the Church is conflating whether it had notice of a possible cause of action with whether it will prevail on a cause of action. These are separate issues. (See Cypress Semiconductor Corp. v. Superior Court (2008) 163 Cal.App.4th 575, 585 ["It is not the law that accrual of a cause of action depends upon the existence, as a matter of fact, of a winning claim."].)
The Church also argues this action is not time-barred because defendants "ongoing and continuing" refusal to acknowledge Church members as members of the two nonprofits is a "continuing injury." Our Supreme Court has recognized two types of continuing injury: the "continuing violation doctrine" and the "theory of continuous accrual." (See Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1197.) "The continuing violation doctrine aggregates a series of wrongs or injuries for purposes of the statute of limitations, treating the limitations period as accruing for all of them upon commission or sufferance of the last of them." (Id. at p. 1192.) Under the theory of continuous accrual, "a series of wrongs or injuries may be viewed as each triggering its own limitations period, such that a suit for relief may be partially time-barred as to older events but timely as to those within the applicable limitations period." (Ibid.)
The Church has not shown that its causes of action come within the limitations period under either doctrine. The only evidence of purported wrongdoing after March 2007 cited by the Church is a November 2014 letter from the directors of the nonprofits to the Church congregation regarding the Church's commencement of this lawsuit. In that letter, the directors stated they amended Homes' bylaws in 2006 to make it a nonmember corporation. At most, the letter shows that the Church was excluded from participation in Homes and Senior Homes because of the earlier amendments to the bylaws. This evidence is insufficient to support the Church's position under either continuing wrong doctrine because neither doctrine applies to "continuing injury from a completed act." (Vaca v. Wachovia Mortg. Corp. (2011) 198 Cal.App.4th 737, 745.) "[I]f continuing injury from a completed act generally extended the limitations periods, those periods would lack meaning. Parties could file suit at any time, as long as their injuries persisted. This is not the law. The time bar starts running when the plaintiff first learns of actionable injury [citation], even if the injury will linger or compound." (Ibid.)
Even were we to conclude the Church's causes of action were timely, we would affirm summary judgment. The Church did not show it has a right to control membership in or the affairs of Homes or Senior Homes. The Church claims it can control the nonprofits because it is their parent corporation. Not so. A parent company is generally treated as legally distinct from its subsidiaries, and the Church has cited no evidence showing why we should ignore the nonprofits' separate existence. (See Santa Clarita Organization for Planning and the Environment v. Castaic Lake Water Agency (2016) 1 Cal.App.5th 1084, 1104 [parent and subsidiaries are generally considered legally distinct].) In fact, the evidence showed the Church benefited from the nonprofits' legally distinct existence because they obtained favorable financing to develop low-cost housing that the Church could not obtain on its own.
The Church also argues it has control of the nonprofits because their members are also members of the Church. We disagree. The bylaws for Homes provide for "one class of members" but makes no reference to whether any of those members must be members of the Church. Membership in Homes is subject to approval by its board of directors, and the Church has cited no evidence showing any members of the Church were approved as members due to a requirement for Church membership or representation. As to Senior Homes, its bylaws state it is a non-member corporation, and the Church has cited no evidence showing any requirement that Church members be involved in the operations of Senior Homes.
The Church relies on the Brown declaration that Homes "was intended to include the membership" of the Church, and that the "power of control [of Homes] was to be in the membership of the church." But Brown's declaration contradicts the express terms of Homes' bylaws, which do not state that Church members control Homes. Instead, the bylaws state membership is open to "[e]very person interested in the aims and ideas and willing to work to promote the goals of [Homes]," and that Homes' affairs are to be managed by the board of directors. Corporate bylaws are construed according to general rules governing contracts and statutes, (Singh v. Singh (2004) 114 Cal.App.4th 1264, 1294), thus the plain and unambiguous language of the bylaws controls over any unstated intent. (Civ. Code, § 1638; State v. Continental Ins. Co. (2012) 55 Cal.4th 186, 195.)
In sum, the trial court correctly granted summary judgment in favor of defendants on both grounds.
In the trial court, the parties presented a litany of objections to each other's evidence. As far as we can tell, the trial court did not rule on the objections. Therefore, we deem them all overruled. (Reid v. Google, Inc. (2010) 50 Cal.4th 512, 534.) The parties have not raised their evidentiary objections as issues on this appeal.
B. Motion for New Trial
The Church contends that the trial court erred by denying its motion for a new trial. The motion was based on defendants' failure to disclose during discovery that HUD repeatedly rejected the amendments to the bylaws of Homes and Senior Homes, and also failed to produce HUD regulations that required HUD's approval of amendments to the bylaws.
Although the Church's motion was denied by operation of law because the trial court did not rule on it within 60 days, it is reviewable on appeal from the judgment, and we review the denial as if the trial court had expressly ruled. (Evarts v. Jones (1959) 170 Cal.App.2d 197, 207; In re Marriage of Liu (1987) 197 Cal.App.3d 143, 152.)
Code of Civil Procedure section 657, subdivision (4) authorizes a new trial where a party has "[n]ewly discovered evidence, material for the party making the application, which [the party] could not, with reasonable diligence, have discovered and produced at the trial." (Code Civ. Proc., § 657, subd. (4).) To prevail on a new trial motion, a party must establish that the newly discovered evidence is "material," meaning it was " 'likely to produce a different result.' " (Sherman v. Kinetic Concepts, Inc. (1998) 67 Cal.App.4th 1152, 1161.) We consider a ruling on a new trial motion by operation of law under the same standard of review that would apply if the trial court had explicitly denied the motion. (In re Marriage of Liu, supra, 197 Cal.App.3d at p. 152.) When the denial is based on newly discovered evidence, we review it for an abuse of discretion in light of the entire record, and make an independent determination as to whether any alleged error was prejudicial. (Sherman v. Kinetic Concepts, Inc., supra, 67 Cal.App.4th 1152, 1160-1161.)
Here, the newly proffered evidence regarding HUD's approval of the bylaws is immaterial because it has no bearing on whether the Church had cause to file its action within the statute of limitations period. The Church claims this new evidence is relevant to show the nonprofits' bylaws were not effectively amended. But, as we explained, whether the bylaws were effectively amended is a separate issue from whether the statute of limitations accrued on the Church's causes of action. Even if the Church is correct and the new evidence had a bearing on the legality of the nonprofits' actions, it would not change the fact that the Church was on notice of its claims for seven years before filing suit. The trial court did not err in denying the Church's motion for a new trial.
III. DISPOSITION
The judgment is affirmed.
/s/_________
Siggins, J. We concur: /s/_________
McGuiness, P.J. /s/_________
Pollak, J.