Unpublished CA 1-2 | Legal News

Filed 2/21/20 The Episcopal Church etc. v. Episcopal Senior Communities CA1/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

THE EPISCOPAL CHURCH IN THE DIOCESE OF CALIFORNIA et al.,

Plaintiffs and Appellants,

EPISCOPAL SENIOR COMMUNITIES et al.,

Defendants and Respondents.

A152934, A153165

(San Francisco County

Super. Ct. No. CGC-15-547681)

ORDER MODIFYING OPINION

AND DENYING REHEARING

BY THE COURT:

It is ordered that the opinion filed herein on January 29, 2020, be modified as follows:

On page 31, the first sentence of the second full paragraph is modified to: “In its respondent’s brief, SRW argues that the Church Entities lack standing to bring a cause of action for breach of charitable trust, relying primarily on Patton v. Sherwood (2007) 152 Cal.App.4th 339 (Patton).”

On page 32, the sentence before heading “b.” is modified to: “The Church Entities do not address SRW’s argument in their reply brief.”

The petition for rehearing is denied. This modification does not change the judgment.

Dated: _______________________ ____________________________

Richman, Acting P.J.

A152934, A153165

Filed 1/29/20 The Episcopal Church etc. v. Episcopal Senior Communities CA1/2
(unmodified opinion)

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

THE EPISCOPAL CHURCH IN THE DIOCESE OF CALIFORNIA et al.,

Plaintiffs and Appellants,

EPISCOPAL SENIOR COMMUNITIES et al.,

Defendants and Respondents.

A152934, A153165

(San Francisco County

Super. Ct. No. CGC-15-547681)

This case concerns the corporate governance of defendants Episcopal Senior Communities (ESC) and Senior Resources of the West (SRW), which were formed in the 1960’s as nonprofit corporations to provide housing and related services to seniors. Both ESC and SRW were incorporated by leaders of The Episcopal Church in the Diocese of California (Diocese), and the initial bylaws of both ESC and SRW stated that the corporations would function as “Diocesan Institution[s],” a status that entails the participation of The Episcopal Bishop of California (Bishop) and the Diocese (collectively, the Church Entities) in corporate governance. In the more than 50 years since their establishment, SRW and ESC underwent significant changes in their governance and operations, their relation to one another, and their relation to the Church Entities, as we shall explain. Of particular importance, although SRW and ESC were formed as wholly separate entities, in 2007 SRW became the sole member of ESC and effectively its corporate parent.

In 2015, in connection with a proposed affiliation between ESC and another nonprofit corporation that provides housing and services to seniors (Northern California Presbyterian Homes and Services), the boards of ESC and SRW took steps to limit the Church Entities’ roles in their governance on a going forward basis. After the parties’ attempts to reach an accommodation failed, the Church Entities filed suit against ESC and SRW alleging breach of charitable trust and breach of contract, and seeking injunctive relief, damages, and a declaratory judgment concerning the rights of the parties. ESC and SRW filed a cross-complaint seeking a declaratory judgment that the actions taken by their boards did not constitute breach of charitable trust or contract, or breach of their articles, bylaws or California law.

After a bench trial, judgment was entered for ESC and SRW on the claims alleged by the Church Entities in the complaint. As to the cross-complaint, the trial court concluded that the 2015 governance changes made by SRW and ESC were ineffective to the extent they applied to ESC. The Church Entities filed a new trial motion, which was denied. In these consolidated appeals, the Church Entities challenge the judgment and the denial of their new trial motion. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The facts are largely undisputed, though their legal significance is contested. We draw this summary from uncontested portions of the trial court’s statement of decision, uncontradicted testimony, and documents admitted into evidence.

A. Parties

1. The Church Entities

The Episcopal Church is divided geographically into dioceses, of which the Diocese of California is one. The Diocese is a California nonprofit religious corporation, with about 80 churches and 400 ordained clergy. The Bishop is a California religious corporation sole, formed to administer and manage the affairs of the Diocese. The present incumbent is the Right Reverend Marc Handley Andrus; the previous incumbent was the Right Reverend William Edwin Swing.

The Diocese is governed by the Bishop and a legislative Convention comprised of the Diocese’s clergy and lay representatives elected by its congregations. Under the leadership of the Bishop, the Diocese exercises ecclesiastical jurisdiction over Episcopal churches and Diocesan Institutions in the San Francisco Bay Area. The Diocese’s Convention adopts its own canon law (the Canons), subordinate to the canon law of The Episcopal Church which is adopted by a General Convention.

The Bishop exercises governing authority alongside the Diocese’s Standing Committee, a senior governing body with four clergy members and four lay members. The Bishop holds the authority to interpret the Canons.

The Diocese regularly carries out charitable work through Diocesan Institutions. The Canons set forth the requirements for Diocesan Institutions, which must be incorporated as California not for profit corporations. As California not for profit corporations, Diocesan Institutions are subject to California law. In the establishment of homes and care facilities for seniors, which may involve borrowing from banks or the issuance of municipal bonds, the corporate structure of Diocesan Institutions provides financial protection to the Diocese.

As relevant to this action, the Canons require that the governing board of a Diocesan Institution must include the Bishop or a Bishop’s appointee, and that a majority of board members must be Episcopalians. These requirements are at the center of this dispute, and we refer to them (as do the parties) as the Governance Prerogatives.

2. ESC

ESC is a California nonprofit corporation that operates an extensive network of elder care facilities from Santa Rosa to Pacific Grove, including San Francisco Towers. Formed in 1965 as Episcopal Homes Foundation, in 2007 the corporation was renamed Episcopal Senior Communities, which was its name at time of trial. Its articles of incorporation provided that it was formed “to provide housing, related facilities, and services for elderly persons on a non-profit, religious, and charitable basis; and to receive donations, gifts, and other funds for use in the advancement of the religious and charitable work done on a non-profit basis by the [Diocese], its Diocesan Institutions, and the parishes and missions affiliated with it.” Its property was “irrevocably dedicated to religious and charitable purposes,” and “on liquidation or dissolution all properties and assets . . . shall be distributed and paid over to a fund, foundation or corporation organized and operated exclusively for charitable purposes by the [Diocese].”

The original bylaws stated, “This Corporation will function as a diocesan institution of the [Diocese] and, to the extent permissible under the law of the state will observe and conform to all provisions of the Constitution and Canons of the Protestant Episcopal Church in the United States of America and in the [Diocese] not inconsistent with the interest of the Corporation.” (Italics added.) The bylaws incorporated the Governance Prerogatives, requiring that the board of directors would include the Bishop or his appointee and that two-thirds of the board members were to be Episcopalian.

3. SRW

SRW is a California nonprofit corporation that was formed in 1963 as John Tennant Memorial Homes, Inc. Its articles of incorporation provided that its purpose is “to provide housing, related facilities and services for elderly persons on a nonprofit basis,” and its property “is irrevocably dedicated to religious and charitable purposes and upon the liquidation, dissolution or abandonment will not inure to the benefit of any private person except a fund, foundation or corporation organized and operated for religious or charitable purposes.”

Its original bylaws stated, “This corporation is organized to operate as a Diocesan Institution of the [Diocese]. So long as it is accepted and certified by Convention of said Diocese as such Diocesan Institution, it will function as such and, to the extent permissible under the laws of the State, observe and conform to all provisions of the Constitution and Canons of the Protestant Episcopal Church in the United States of America and in said Diocese.” The bylaws incorporated the Governance Prerogatives, requiring that the board of directors would include the Bishop or his appointee and that two-thirds of the board members were to be Episcopalian.

The bylaws also stated that after the approval of the corporation as a Diocesan Institution by the Diocese’s Convention, “so long as it is approved and certified by Convention as such” any amendments to Article I (SRW’s organization as a Diocesan Institution that conformed to canon law) or to Section 1 of Article VI (the make-up of the board of directors) required the written consent of the Bishop and the Standing Committee. SRW’s bylaws thus differed significantly from those of ESC, which did not require approval of the Bishop and Standing Committee for any amendments.

SRW owned and operated Canterbury Woods, a home for seniors in Pacific Grove, until 1972 when the corporation’s assets, liabilities, life care commitments and operations were transferred to ESC. As the Church Entities concede, SRW “largely became dormant” at that point, though it maintained its tax-exempt status and continued to receive gifts and make expenditures from those gifts for the benefit of Canterbury Woods residents. As of 2004, the sole function of the SRW board was to approve on an annual basis the balance sheet audit of its assets, which amounted to about $6,000.

B. The Church Entities and ESC Enter into the Sponsorship Agreement

in May 2005

The trial court found, and no party contests, that by 2003, nonprofit senior living communities faced intense competitive pressure from for-profit providers of the same services. To counteract the pressure, non-profit providers collaborated though affiliations and mergers, which allowed them to reduce overhead, gain economies of scale, and enhance their ability to operate in an increasingly regulated industry. Combining forces also allowed non-profits to have greater access to capital to make investments going forward.

1. Proposed Merger with NCPHS Leads to Negotiations Between

Church Entities and ESC

Against this background, in 2003 then-Bishop Swing was presented with a proposal for a merger of ESC and another non-profit corporation, Northern California Presbyterian Homes and Services (NCPHS). The merger never took place, but the proposal precipitated negotiations between the Church Entities and ESC that culminated in the execution of a “Sponsorship Agreement,” which is a focus of this litigation.

Under the proposal presented to Bishop Swing in 2003, ESC and NCPHS would combine to form a new entity that would have both Episcopal and Presbyterian identities, with a board that had equal representation from each organization. Bishop Swing testified he thought the proposed merger “was a radical departure from being an Episcopal institution to being a possible Presbyterian Episcopal institution, which presented a lot of issues.” He wrote an open letter to ESC and the Diocese outlining his concerns. The proposed merger of ESC and NCPHS led the Diocese and ESC to negotiate written “Principles” to define the relationship between them. In developing the Principles, the parties recognized that in view of the proposed merger with NCPHS, there would have to be agreement as to “the role of the [Diocese] in relation to a consolidated business structure.” Bishop Swing testified that eventually, after “a lot of confrontation and dialogue,” he “made his peace with” the merger of ESC and NCPHS, and was “okay with [it].” He was surprised when, shortly after the Principles were executed in 2004, he learned that ESC voted down the merger.

However, building on the Principles, discussions continued between the Church Entities and ESC, and after months of extensive negotiations and joint drafting sessions, the Church Entities and ESC entered into a Sponsorship Agreement that was executed in April 2005. The negotiators for the Church Entities were Bishop Swing and the Diocese’s Chancellor (chief legal officer), who was then William H. Orrick, III. The negotiators for ESC were its President and CEO, Laurence O. Pratt, Jr., and ESC’s counsel.

2. Pertinent Terms of the Sponsorship Agreement

The Sponsorship Agreement is a forward-looking document: it continues on a perpetual basis, subject to the possibility of termination due to changes in the law. The recitals state that ESC sought to “define a relationship with the [Church Entities] that provides clarity to [ESC] in the types of business operations and relationships it may pursue and the business structures it may use in order to enhance its capabilities” to serve its “Mission of providing housing and related support services to the elderly in a safe, quality and nurturing environment.” The Church Entities sought “to provide flexibility to [ESC] to enter into endeavors and business relationships that will permit enhancement of its Mission,” while meeting their obligations as stewards over “certain of the real estate assets of [ESC] as required by Church Law.”

The Sponsorship Agreement requires ESC to establish the Darby Betts Fund (Program) with $1 million. The Program is to be a “collaborative effort” of the Diocese and ESC to “expand programs for senior services within the broad charitable purpose of the ministry to the elderly.”

Under the Sponsorship Agreement, ESC agrees “to make best efforts to conduct its activities in a manner that respects and supports the role of its status as a Diocesan Institution and the role of the Bishop as steward of certain [ESC] real estate assets and the protector of the values of the Episcopal Church.” The Church Entities acknowledge ESC’s “current status” as a Diocesan Institution and its status as a “secular public benefit corporation.” The Church Entities waive any right to impose a trust on the assets of ESC, and agree that their role in ESC affairs is “strictly limited to those rights and prerogatives set forth in this Agreement and no others.”

The Sponsorship Agreement includes a Statement of Values, which is to serve as the “framework from which to guide the relationship of the parties” and “the framework for collaborative relationships of [ESC] in building and serving its Mission.” The Statement of Values identifies ESC’s “first priority” as “the continued care and security of residents in a manner that reflects a deep respect for the spiritual core central to the founding institutions.” ESC agrees to “maintain chaplaincies in the facilities” and “maintain institutions with faith-based care that honors the elderly.” The Statement of Values requires ESC and the Church Entities to “actively pursue opportunities to serve and provide housing and services to low-income seniors through a combination of private and public funds” and to “consider opportunities to link with other organizations to facilitate this Mission-based development.” The Statement of Values delimits the Bishop’s role as a “ ‘steward[]’ over certain of [ESC’s] real estate assets.” Thus, the Bishop has the right to approve the transfer or encumbrance of ESC’s real estate assets “only under circumstances in which [the] assets will no longer be used to provide senior housing and related programs and services to the elderly in accordance with the Statement of Values.”

The Sponsorship Agreement requires that in the event of a change in ESC’s business structure, and in particular if ESC becomes controlled by or the subsidiary of a “new parent organization” (referred to as a Related Company), ESC will maintain the Governance Prerogatives, which are, as we have described, the Bishop’s right to appoint at least one director to the ESC board, and an Episcopalian-majority ESC board. Articles 2.3(a) and 2.3(c) of the Sponsorship Agreement provide that the Governance Prerogatives are to be protected in the articles of incorporation and bylaws of ESC and the Related Company. Article 2.3(a) also required (by reference to an incorporated “Exhibit 2”) that “[any] revision or amendment of the articles of incorporation or bylaws” of ESC, including any change in the right of the Bishop to appoint a member of the ESC board, requires a vote of no less than two-thirds of the Related Company board and a majority of the ESC board. As we shall see, the Church Entities and ESC disagree about how this “supermajority” voting provision, which permits amendments to corporate governing documents, interacts with the provisions of article 2.3 that protect the Governance Prerogatives. This is a principal dispute on appeal, so we set forth relevant portions of article 2.3 verbatim:

“2.3 Rights and Prerogatives of the Church Entities Concerning New [ESC] Business Relationships and/or Structures. [ESC] agrees that in the event that it undertakes changes in its business structure or enters into business relationships with other organizations, it will maintain the following rights and prerogatives concerning [ESC] and the assets of [ESC] and will not take actions to circumvent or otherwise diminish the rights set forth herein. Specifically this includes any structural changes [ESC] may need to make to its business organization to carry out its Mission. In any such reorganization activities, [ESC] will maintain the following:

“a. Governance Structure. The formation documents of any new business structure in which [ESC] becomes controlled by, or becomes a subsidiary of a new parent organization (hereafter, ‘Related Company’), will protect the right of the Bishop to have influence over the governing board selection of [ESC]. Specifically, [ESC] shall require that: (i) the Bishop and the Standing Committee will have the right to appoint at least one director to the [ESC] board and (ii) any director appointed by the Bishop shall be removed only with the consent of the Bishop and the Standing Committee. In addition, in the creation of any new business structure, the bylaws of Related Company will include the requirement that certain corporate actions pertaining to [ESC] have a supermajority vote requirement before such actions will be effective against [ESC]. The specific Related Company corporate actions that will require a supermajority vote are set forth in Exhibit 2.

“. . .

“c. Episcopalian Majority of [ESC]. In any new business structure in which a Related Company has the right to appoint members of the board of directors of [ESC], the governing documents shall provide that at least a majority of persons appointed to the [ESC] board will be Episcopalians.”

Exhibit 2, entitled “Supermajority Requirements,” states in its entirety:

“The formation of another governing structure or changes in the existing governing structure of [ESC] will require that the following actions, pertaining to [ESC], require a vote of no less than two-thirds of the members of any Related Company board of directors and a majority of the [ESC] Board:

“1. Any change in the right of the Bishop and the Standing Committee to appoint a member of the [ESC] board;

“2. Any change in the right of the Bishop and the Standing Committee to approve the candidates to the [ESC] board;[ ]

“3. The elimination or substantial reduction in chaplaincies in [ESC] facilities;

“4. The dissolution and wind-up of [ESC];

“5. Merger of [ESC] with another organization, or the sale of all, or substantially all, of its assets; and

“6. The revision or amendment of the articles of incorporation or bylaws of [ESC].”

The Sponsorship Agreement states that it “constitutes the entire Agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous Agreements.”

C. Reorganization of ESC and SRW in 2007

In March 2007, ESC’s CEO, Kevin Gerber, and its CFO and general counsel, William Tobin, arranged a meeting to discuss a new business structure with Bishop Andrus, Chancellor Orrick, and John Tornquist (the Bishop’s appointee to the ESC board). At the meeting, Gerber and Tobin explained that ESC intended to have SRW become its parent organization to facilitate ESC’s affiliation with other organizations, including Lytton Gardens, a nonprofit that provided services to low income seniors. SRW would become the sole member of ESC and the sole member of Lytton Gardens. ESC would loan SRW $10 million, which would then be loaned to Lytton Gardens to pay off its debt. The Church Entities expressed no objection to the new structure.

To implement the change in structure, the boards of ESC and SRW unanimously adopted amended and restated articles of incorporation and bylaws for each corporation. Two-thirds of the members of each board were Episcopalian, as required by the ESC and SRW bylaws at the time.

In its amended bylaws, ESC identified SRW as its sole member. The amended ESC bylaws retained the Governance Prerogatives, and, like the bylaws in existence before the amendments, stated that ESC would function as a Diocesan Institution.

Of relevance to the appeal before us, SRW’s amended bylaws, as adopted in April 2007 did not include provisions that SRW would function as a Diocesan Institution and abide by the Canons, or provisions requiring the Bishop and Standing Committee to consent to bylaw amendments. With one exception not relevant here, the new SRW bylaws provided that any bylaw provision could be amended by majority vote. The amended bylaws no longer required an Episcopal-majority board, although the bylaws continued to allow the Bishop to appoint a director.

The SRW articles of incorporation, which had previously stated that corporate property was “irrevocably dedicated to religious and charitable purposes” (italics added) were amended in June 2007 to state that property was “irrevocably dedicated to charitable purposes.”

Until the present dispute arose in 2015, the Church Entities made no objection to the content or validity of the SRW bylaws that were adopted in 2007. But when this dispute did arise, the Church Entities challenged the 2007 amendments on the ground that they had not received the written consent of the Bishop and Standing Committee. As we discuss below, the trial court found that by 2007, SRW was no longer certified as a Diocesan Institution and therefore such consent was not required under the bylaws in effect at the time the 2007 amendments were approved by the SRW board. The trial court also concluded that any claims regarding the 2007 amendments to SRW’s bylaws are time barred.

Some residents of ESC facilities raised objections to the 2007 reorganization and the loan from ESC to SRW to pay off Lytton Gardens’ debt. In response, Chancellor Orrick, who had participated in negotiating the Sponsorship Agreement for the Diocese, wrote a detailed 2-page letter to the president of the San Francisco Towers Residents Council on June 12, 2007, and provided his “perspective of what the Diocese achieved in negotiating the Sponsorship Agreement.” The Chancellor wrote, “From the Diocese’s perspective, the Sponsorship Agreement was a good agreement for the Diocese and the residents of [ESC] because of the commitments [ESC] made in the Statement of [Values] and in the funding of the social mission of [ESC] through the Darby Betts fund.” The Chancellor affirmed that the Diocese “does not have a veto power over decisions” of ESC; that even under the Sponsorship Agreement the Diocese “does not . . . have control in a legal sense over the management and operation of [ESC]”; and if ESC “refused to abide by” the Canons “because of the impact on its business and loan covenants, it could simply have chosen to no longer be a Diocesan Institution.” A copy of the Chancellor’s letter was sent to Gerber, the CEO of ESC, and to Bishop Andrus. Neither Bishop Andrus, nor any other representative of the Church Entities raised any objection to the contents of the Chancellor’s letter until this dispute arose.

D. 2014 Amendment to ESC Bylaws

In February 2014, ESC amended its bylaws in several respects. As relevant here, the amended bylaws provided, “[s]o long as the Corporation chooses to and is accepted and certified by the Convention of [the Diocese] as a diocesan institution it will function as such.” (Italics added.) As we discuss below, this amendment was challenged when this dispute arose, the Church Entities contending that under the Canons, the Diocese’s Convention has the exclusive power to terminate the status of a Diocesan Institution. The trial court found that ESC had the right to choose to no longer be a Diocesan Institution, as stated in the Chancellor’s June 12, 2007 letter, on which ESC had relied in making the amendment.

E. Proposed Affiliation with NCPHS in 2014 and 2015

In 2014, ESC and NCPHS once again entered into discussions about a potential merger, believing that a combination of like-minded nonprofit providers of senior services could better address the competitive pressures from for-profit providers. In the course of these discussions NCPHS was concerned that the Bishop’s right to appoint directors to the boards of ESC and SRW created “representational governance,” which was contrary to the duty of undivided loyalty ordinarily owed by corporate directors. NCPHS was also concerned that the requirement of a majority-Episcopalian board made it difficult to establish a workable governance structure for affiliated or merged entities.

In January 2015, ESC, SRW and NCPHS executed an “Affiliation Agreement,” contemplating transactions that would make SRW the sole member of NCPHS, as it already was of ESC. The Affiliation Agreement provided that as of the closing of the transactions, ESC and SRW would change their governance structures to eliminate the Church Entities’ Governance Prerogatives, and ESC would “withdraw its election and cease to be [a Diocesan Institution].” NCPHS would remove any requirements that a certain proportion of its board of directors be Presbyterian.

The Church Entities learned of the proposed affiliation with NCPHS in late 2014, and from January to June 2015, they sought to negotiate terms that would preserve their Governance Prerogatives. The negotiations were unsuccessful.

On June 23, 2015, the SRW board voted 5-1 to adopt amendments to its bylaws eliminating the Bishop’s representative on its board, effective upon the closing of the affiliation with NCPHS. The SRW board also voted 5-1 to amend ESC’s bylaws to eliminate the Governance Prerogatives, effective upon closing. The SRW board voted on ESC bylaw amendments because the boards of both SRW and ESC understood that SRW was ESC’s “Related Company” under the terms of the Sponsorship Agreement, and that therefore a supermajority of SRW’s board had to approve the bylaw amendments. In each case, the only dissenting vote was cast by the Bishop’s representative on the SRW board.

On June 25, 2015, the ESC board voted 14-1 to adopt the bylaw amendments that had been approved by SRW. At the time of the 14-1 vote, a majority of the ESC board members were Episcopalian; the Bishop’s representative on the ESC board cast the only dissenting vote.

But in August 2015, before the affiliation could close, the Church Entities filed this action, which put the affiliation on hold. In August 2016, before trial in this matter began, NCPHS decided to terminate the affiliation. ESC, SRW and NCPHS executed a “Mutual Termination and General Release,” which relieved ESC, SRW and NCPHS of obligations imposed by the Affiliation Agreement.

F. Trial Court Proceedings

1. Complaint by the Church Entities and Cross-Complaint by

ESC and SRW

In August 2015, the Church Entities filed a complaint against ESC and SRW alleging five causes of action: breach of charitable trust against ESC; breach of contract against ESC for breaching the Sponsorship Agreement by acting to nullify the Governance Prerogatives; intentional interference with contractual relations against SRW for disrupting ESC’s performance of the Sponsorship Agreement; and inducing breach of contract against SRW for intentionally causing ESC to breach the Sponsorship Agreement; and declaratory relief against ESC and SRW. The Church Entities also sought injunctive relief including specific performance of the Sponsorship Agreement, and damages.

Defendants filed a cross-complaint seeking a declaration that the bylaw amendments eliminating the Governance Prerogatives, as approved by the SRW and ESC boards in June 2015 in anticipation of the NCPHS affiliation, did not constitute a breach of charitable trust, or of their articles and bylaws, or the Sponsorship Agreement or California law.

2. Trial and Judgment

The trial court held a four-day bench trial in September and October 2016. Ten witnesses testified, including Bishop Swing, Bishop Andrus, Tobin, Gerber and Tornquist. In July 2017, after extensive rounds of briefing and several post-trial hearings, including one with additional testimony from Tobin and Gerber, the court issued a 75-page statement of decision.

The trial court ruled against the Church Entities. The court rejected the claim that ESC breached the Sponsorship Agreement and perforce the claims that SRW interfered with and induced breach of the Sponsorship Agreement. The court rejected the claim that ESC breached a charitable trust on two separate grounds. First, it concluded that by the terms of the Sponsorship Agreement, the Church Entities waived any right to use the charitable trust doctrine to maintain the Governance Prerogatives; second, it concluded that a breach of charitable trust would require that ESC divert assets away from its charitable purpose and found that ESC had “not diverted its assets to serve a purpose different from its declared charitable purposes, much less that ESC’s Board acted to remove the [Governance Prerogatives] in order to divert its assets.” And the court denied the Church Entities’ declaratory relief claims in light of its findings as to the breach claims, and on the further basis that neither the Canons nor the SRW or ESC governing documents prevented SRW and ESC from changing the Governance Prerogatives.

As to the cross-complaint by ESC and SRW, the trial court concluded that the June 2015 actions by SRW and ESC were ineffective in eliminating the Governance Prerogatives as to ESC because of the context in which the votes were taken. The trial court found that these votes were to eliminate the Governance Prerogatives as they pertained to ESC but not votes to establish a new business structure under the Sponsorship Agreement. For that reason, the votes were not consistent with the Sponsorship Agreement, which the trial court interpreted as permitting changes to the Governance Prerogatives only in connection with a vote on a new business structure where there was some need to eliminate the Governance Prerogatives to realize the economic benefits of the new structure.

Judgment was entered in August 2017, and the Church Entities timely appealed (appeal A152934). In response to a motion by SRW, the trial court amended the judgment to conform to the statement of decision, and the amended judgment was entered in September 2017. In October 2017, the trial court denied a motion by the Church Entities for a new trial, and shortly thereafter the Church Entities timely appealed from the amended judgment and the denial of the new trial motion (appeal A153165). We consolidated the two appeals at the parties’ request.

DISCUSSION

On appeal, the Church Entities argue that the trial court erred in entering judgment against them on their complaint and abused its discretion in denying them a new trial. The Church Entities challenge the trial court’s judgment on the cross-complaint to the extent that the court ruled against them by concluding that the June 23, 2015 SRW vote was effective in authorizing the elimination of a Bishop’s appointee from the SRW board.

A. Breach of the Sponsorship Agreement by ESC

The Church Entities’ cause of action against ESC for breach of contract, as well as their claim for declaratory relief against ESC as to the requirements of the Sponsorship Agreement, rest on their interpretation of the Sponsorship Agreement as preventing any change in the Governance Prerogatives without the Church Entities’ consent. The Church Entities argue that under the Sponsorship Agreement, their Governance Prerogatives as to ESC continue in perpetuity, and the trial court erred in interpreting the Sponsorship Agreement as providing that the Governance Prerogatives may be changed by a supermajority vote in certain circumstances and erred in failing to hold ESC liable for breach of contract as a result of the June 25, 2015 bylaw amendments. As we explain, we find no error in the trial court’s judgment against the Church Entities on these causes of action.

1. Standard of Review

As a general matter, we review the interpretation of a contract de novo, “according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect.” (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865, citing Civ. Code, §§ 1635-1661 and Code Civ. Proc., §§ 1856-1866.) “Any contract must be construed as a whole, with the various individual provisions interpreted together so as to give effect to all, if reasonably possible or practicable. [Citations.] Courts must interpret contractual language in a manner which gives force and effect to every provision, and not in a way which renders some clauses nugatory, inoperative or meaningless. [Citations.] The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties. [Citations.] The mutual intention to which the courts give effect is determined by objective manifestations of the parties’ intent, including the words used in the agreement, as well as extrinsic evidence of such objective matters as the surrounding circumstances under which the parties negotiated or entered into the contract; the object, nature and subject matter of the contract; and the subsequent acts and conduct of the parties. [Citations.]” City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 473-474 (City of Atascadero).) In particular, “[t]he conduct of the parties after execution of the contract and before any controversy has arisen as to its effect affords the most reliable evidence of the parties’ intentions.” (Kennecott Corp. v. Union Oil Co. (1987) 196 Cal.App.3d 1179, 1189.)

“ ‘When a dispute arises over the meaning of contract language, the first question to be decided is whether the language is “reasonably susceptible” to the interpretation urged by the party. If it is not, the case is over. [Citation.].’ ” (Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441, 1448.) “If a contract is capable of two different reasonable interpretations, the contract is ambiguous.” (Ibid.) “The trial court’s determination of whether an ambiguity exists is a question of law, subject to independent review on appeal. [Citation.] The trial court’s resolution of an ambiguity is also a question of law if no parol evidence is admitted or if the parol evidence is not in conflict. However, where the parol evidence is in conflict, the trial court’s resolution of that conflict is a question of fact and must be upheld if supported by substantial evidence. [Citation.]” (WYDA Associates v. Merner (1996) 42 Cal.App.4th 1702, 1710 (WYDA Associates).)

2. Analysis

The two Governance Prerogatives, that is, the Bishop’s right to appoint an ESC board member and the requirement that the ESC board be majority-Episcopalian, are treated separately in the Sponsorship Agreement, and we analyze them separately here.

a. The Bishop’s Right to Appoint an ESC Board Member

We begin with the Church Entities’ argument that the Sponsorship Agreement unambiguously gives the Bishop and Standing Committee the right to appoint an ESC board member who cannot be removed without their consent, until and unless the Bishop and Standing Committee consent to give up that right. We find no error in the trial court’s conclusion that as a matter of law, the language of the Sponsorship Agreement is not reasonably susceptible to the Church Entities’ interpretation.

Article 2.3 of the Sponsorship Agreement addresses conditions that ESC must meet if it “undertakes changes in its business structure or enters into business relationships with other organizations.” In such circumstances, ESC must maintain certain rights and prerogatives that attach to the Church Entities. The Bishop’s right to appoint an ESC Board member is addressed in article 2.3(a) and Exhibit 2, reproduced above.

All of the language of article 2.3(a), including Exhibit 2, must be read together, not in isolation. Although the formation documents of any new business structure must respect the right of the Bishop and Standing Committee to appoint at least one director to the ESC board, the same paragraph refers to Exhibit 2, which describes how and when a corporate action can be taken to change that right of appointment. Specifically, there must be a supermajority vote by the Related Company’s board, and a majority vote by the ESC board. The Church Entities’ argument that the right of the Bishop and Standing Committee to appoint a board member continues in perpetuity would make meaningless part of article 2.3(a), as well as Exhibit 2, and we reject it. (City of Atascadero, supra, 68 Cal.App.4th at p. 473.)

b. The Requirement of a Majority-Episcopalian ESC Board

We turn now to the Church Entities’ argument that the Sponsorship Agreement requires that the majority of ESC’s board must be Episcopalian unless the Church Entities agree otherwise. ESC argues that the Sponsorship Agreement allows this requirement to be changed by supermajority vote of the Related Company and a majority of the ESC board.

At first glance, the Church Entities’ argument has some appeal, because article 2.3(c) of the Sponsorship Agreement states in its entirety, “Episcopalian Majority of [ESC]. In any new business structure in which a Related Company has the right to appoint members of the board of directors of [ESC], the governing documents shall provide that at least a majority of persons appointed to the [ESC] board will be Episcopalians.” Furthermore, article 2.3(c) does not mention Exhibit 2 to the Sponsorship Agreement, which lists the corporate actions that require supermajority approval of the Related Company board, plus majority approval of the ESC board, and Exhibit 2 does not state in so many words that the Episcopal-majority requirement can be changed by a supermajority vote.

But ESC argues that because Exhibit 2 provides broadly that “[t]he revision or amendment of the articles of incorporation or bylaws of [ESC]” are actions that can be accomplished by a supermajority vote of the Related Company board and a majority of the ESC board, the Sponsorship Agreement authorizes a change to the Episcopalian-majority requirement through an appropriately-approved bylaw amendment, so long as the majority-Episcopalian requirement was previously imposed by ESC’s bylaws. And because there is no dispute that ESC’s bylaws were the source of the requirement that a majority of its board members be Episcopalian, from the time of ESC’s original bylaws, through the various amendments, including the version in effect in 2005 when the Sponsorship Agreement was signed, including the bylaw amendments adopted in February 2014, the requirement can be changed by the procedure set forth in Exhibit 2.

Reading the Sponsorship Agreement in its entirety, we conclude (as did the trial court) that the article 2.3(c) absolute requirement of an Episcopalian majority, when combined with the Exhibit 2 authorization of a change in the bylaws by supermajority vote, creates an ambiguity. The trial court resolved the ambiguity by considering uncontradicted extrinsic evidence in the form of testimony from Bishop Swing, and therefore we consider the resolution de novo. (WYDA Associates, supra, 42 Cal.App.4th at p. 1710 [where parol evidence is not in conflict, resolution of ambiguity is a question of law].)

Bishop Swing, who negotiated and signed the Sponsorship Agreement, testified that he understood that in connection with a “new entity that comes in with [ESC]” changes to subject areas listed on Exhibit 2 could be made. They required the approval of a supermajority of the related board and a majority of the ESC board, but they could be made. Even though article 2.3(a) is the only place in the Sponsorship Agreement where Exhibit 2 is specifically mentioned, Bishop Swing’s testimony undermines any limitation of Exhibit 2 to the issues addressed in article 2.3(a). Exhibit 2, which includes subject areas referenced in parts of the Sponsorship Agreement other than just article 2.3(a), is broad in scope. It includes the potential elimination or substantial reduction of chaplaincies in ESC facilities, an issue addressed in the Statement of Values; or a dissolution and wind-up of ESC, an issue addressed in article 2.5 of the Sponsorship Agreement; or the revision or amendment of ESC’s articles of incorporation of bylaws. Accordingly, to the extent that ESC’s bylaws impose the requirement that the ESC board have an Episcopalian majority, that requirement can be changed under the procedure described in Exhibit 2 and does not require the approval of the Church Entities.

Furthermore, our conclusion is bolstered by the fact that where the Sponsorship Agreement requires the Church Entities’ approval, it says so. For example, article 1.4 provides that any change to the Statement of Values requires the written agreement of ESC and the Church Entities. And article 2.5 requires approval of the Bishop and Standing Committee to alter the requirement that assets remaining upon dissolution of ESC shall be distributed to a charity organized and operated by the Diocese.

In sum, we find no error in the trial court’s conclusion that the Episcopalian-majority requirement for the ESC board, stated in article 2.3(c), can be changed without the consent of the Church Entities. Because we find no error in the trial court’s rejection of the Church Entities’ proposed interpretation of the Sponsorship Agreement, we find no error in the trial court ruling against the Church Entities on their cause of action for breach of contract and the related claim for declaratory relief, which rest upon that proposed interpretation.

3. The Church Entities’ Argument that “ESC Anticipatorily

Breached the Sponsorship Agreement”

Attempting to preserve their breach of contract claim in the face of the trial court’s interpretation of the Sponsorship Agreement, the Church Entities argue in the alternative that the trial court erred in failing to find that ESC’s attempt to eliminate the Governance Prerogatives was a repudiation of the Sponsorship Agreement and therefore an anticipatory breach of contract. The Church Entities argue that even if we affirm the trial court’s interpretation of the Sponsorship Agreement, the trial court’s decision on the cross-complaint filed by ESC and SRW (in which the trial court concluded that the actions taken by ESC in June 2015 to change the Governance Prerogatives were ineffective because they were not taken in connection with approving a new business structure) required the trial court to find that ESC anticipatorily breached the Sponsorship Agreement. The Church Entities rely on Gold Mining & Water Co. v. Swinerton (1943) 23 Cal.2d 19 (Gold Mining) which states, “[a] contract is totally breached and an anticipatory repudiation occurs when the promisor without justification and before he has committed a breach, makes a positive statement to the promisee indicating that he will not or cannot substantially perform his contractual duties.” (Id. at p. 29.)

The trial court rejected the Church Entities’ argument, which was first raised after trial in response to the trial court’s tentative decision. This argument is forfeited on appeal because the Church Entities do not adequately develop it in their 147-page opening brief, where they simply assert that the trial court decided that the Sponsorship Agreement did not permit the June 2015 changes to the Governance Prerogatives for ESC, and that this constitutes anticipatory breach because “ESC repudiated its obligations under the Sponsorship Agreement without right under that contract to do so.” The Church Entities do not explain how they had proved that ESC’s actions constitute repudiation: nowhere in their appellate briefs do the Church Entities explain how the ESC board’s June 25, 2015 vote to amend the bylaws constitutes “a positive statement to the [Church Entities] indicating that [it] will not or cannot substantially perform [its] contractual duties.” (Gold Mining, supra, 23 Cal.2d at p. 29.) Nor do they adequately address the fact that even after they argued in the trial court that their complaint had pleaded facts constituting anticipatory breach, the trial court concluded that the only breach of contract claims by the Church Entities that were at issue in this case were the claims that the Governance Prerogatives last in perpetuity. Only in their reply brief do the Church Entities attempt to address the contents of their complaint, and the attempt is inadequate: they simply assert that they pleaded facts constituting anticipatory breach and provide bare citations to numbered paragraphs in their complaint with no explanations. (Cal. Rules of Court, rule 8.204(a)(1)(B) [briefs must “support each point by argument and, if possible, by citation of authority”].) This is too little, too late.

B. Tort Claims Against SRW

As the Church Entities acknowledge, their tort claims against SRW for intentional interference in contractual relations and inducing breach of contract depend upon their claims for breach of the Sponsorship Agreement. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.) Because we conclude the Church Entities have not shown error in the trial court’s rejection of their breach of contract claims, we likewise conclude that they have not shown error in the trial court’s rejection of their tort claims against SRW.

C. Breach of Charitable Trust

The Church Entities argue that SRW and ESC breached a charitable trust by abrogating the Governance Prerogatives and by renouncing their religious purpose, as reflected in their declining to operate as Diocesan Institutions. The particulars of the causes of action against SRW and ESC are different. As to SRW, the Church Entities alleged a claim for declaratory relief based on the existence of a charitable trust, while as to ESC they alleged a separate cause of action for breach of charitable trust as well as a claim for declaratory relief. Because the facts and causes of action pertaining to SRW and ESC are different, we address the Church Entities’ claims against them separately, as did the trial court.

1. Applicable Law

“ ‘A charitable trust is defined as: “. . . a fiduciary relationship with respect to property arising as a result of a manifestation of an intention to create it, and subjecting the person by whom the property is held to equitable duties to deal with the property for a charitable purpose.” (Rest.2d Trusts, § 348, p. 210.)’ (Hardman v. Feinstein (1987) 195 Cal.App.3d 157, 161 [(Hardman)]; see also Gov. Code, § 12581.)” (L.B. Research & Education Foundation v. UCLA Foundation (2005) 130 Cal.App.4th 171, 177.) “[A]ll the assets of a corporation organized solely for charitable purposes must be deemed to be impressed with a charitable trust by virtue of the express declaration of the corporation’s purposes.” (Pacific Home v. County of Los Angeles (1953) 41 Cal.2d 844, 852.)

2. SRW

Over the course of this litigation, the Church Entities appear to have shifted their position as to a breach of charitable trust by SRW. In their complaint, the Church Entities contended that they are beneficiaries of a charitable trust established by the articles of incorporation and bylaws of SRW, and sought a declaration that such a charitable trust exists, that they are entitled to enforce it, and setting out the rights and duties of the parties under the charitable trust. After trial, in their proposed statement of decision, the Church Entities revised their position, seeking instead a declaration that the 2007 changes to the SRW bylaws and articles are unlawful because they were made without the written consent of the Bishop and Standing Committee, which was required under the then-existing bylaws. In its statement of decision, the trial court ruled that the 2007 bylaw amendments did not require the approval of the Bishop and Standing Committee, and that the claim was time-barred. On appeal, the Church Entities argue that the trial court erred in denying their breach of charitable trust claim as to SRW.

a. Lack of Standing to Claim Breach of Charitable Trust

To the extent that the Church Entities contend that the 2007 amendments of SRW’s bylaws and articles constitute a breach of charitable trust that merits declaratory relief, the claim fails for lack of standing.

The Corporations Code authorizes any of the following to “bring an action to enjoin, correct, obtain damages for or to otherwise remedy a breach of a charitable trust: (1) The corporation, or a member in the name of the corporation . . . . [¶] (2) An officer of the corporation. [¶] (3) A director of the corporation. [¶] (4) A person with a reversionary, contractual, or property interest in the assets subject to such charitable trust. [¶] (5) The Attorney General, or any person granted relator status by the Attorney General.” (Corp. Code, § 5142, subd. (a).) The beneficiaries of a charitable trust, though “ordinarily indefinite and therefore unable to enforce the trust in their own behalf” (Holt v. College of Osteopathic Physicians and Surgeons (1964) 61 Cal.2d 750, 754), can sue to enforce the trust, as was the case in San Diego County Council, Boy Scouts of America v. City of Escondido (1971) 14 Cal.App.3d 189, 193, 196, where the Court of Appeal concluded that the governing board of scouts in the San Diego area, charged with representing and protecting the scouts in its districts, could sue on behalf of scouts in one of those districts who were beneficiaries of trust property dedicated to the scouts’ “use, benefit and enjoyment.”

The Church Entities assert that they are beneficiaries of SRW’s charitable trust. If that were so, they might sue to enforce the trust, but they cite no authority for their assertion, which is contradicted by SRW’s articles of incorporation, which identify seniors as beneficiaries. Seniors are the beneficiaries of the charitable trust; the Church Entities are not.

SRW’s argument that the Church Entities lack standing to bring a cause of action for breach of charitable trust relies primarily on Patton v. Sherwood (2007) 152 Cal.App.4th 339 (Patton). As Patton explains, “ ‘Other than the Attorney General, only certain parties who have a special and definite interest in a charitable trust, such as a trustee, have standing to institute a legal action to enforce the assets of the trust.’ ” (Id. at p. 342, quoting Hardman, supra, 195 Cal.App.3d at pp. 161-162.) Patton holds that “the settlor of a charitable trust who retains no reversionary interest in the trust property lacks standing to bring an action to enforce the trust independently of the Attorney General” (id. at p. 342), and SRW contends that the Church Entities “neither showed nor argued below that they had a reversionary interest in SRW’s assets.” The Church Entities do not address SRW’s argument, and therefore impliedly concede its validity.

b. Claim for Violation of Bylaws

Next we turn to the Church Entities’ alternative argument as to their entitlement to declaratory relief with respect to SRW’s 2007 bylaw amendments, which is that the amendments violated SRW’s then existing bylaws. We find no error in the trial court’s rejection of the Church Entities’ claim.

We interpret corporate bylaws under the principles of contract interpretation. (Singh v. Singh (2004) 114 Cal.App.4th 1264, 1294.) Under the SRW bylaws adopted in 1965 and amended in 1980, “after approval of [SRW] as a Diocesan Institution . . . by Convention of [the] Diocese, then so long as [SRW] is approved and certified by Convention as such,” changes to the bylaw provisions that concern SRW’s status as a Diocesan Institution or the Governance Prerogatives required the written consent of the Bishop and Standing Committee. There is no dispute that such consent was not obtained for the 2007 bylaw amendments that eliminated reference to SRW’s status as a Diocesan Institution and that eliminated the requirement that SRW’s board be majority-Episcopalian, so the validity of the bylaw changes turns on whether SRW was “approved and certified” as a Diocesan Institution in April 2007 when the amendments were made.

The trial court concluded that SRW was not certified as a Diocesan Institution in 2007. The Church Entities argue that was error and further argue that SRW is estopped from contesting its status as a Diocesan Institution by virtue of a 2007 declaration by SRW’s corporate secretary that was submitted to the Attorney General, stating that SRW “remained organized as a Diocesan Institution” even when it was dormant. SRW argues that the trial court was correct. We need not resolve the issue because the Church Entities’ claim that SRW breached its existing bylaws by amending them in 2007 is barred by the four-year statute of limitations on claims for breach of contract (Code Civ. Proc., § 337, subd. (a)), which expired in 2011.

The Church Entities argue that there is no limitations period on charitable trust claims and the trial court thus erred in concluding that its claim for declaratory relief against SRW is time-barred. This argument misses the point: even if the Church Entities were correct that there is no limitations period for charitable trust claims, they have no standing to assert such a claim against SRW, as we discussed above. The only claim for which the Church Entities could be granted declaratory relief as to SRW is for breach of the bylaws, and that claim is subject to a four-year limitations period.

The Church Entities argue that the limitations period was tolled by wrongful concealment at the March 2007 meeting about the restructuring of ESC and SRW There, according to the Church Entities, Gerber and Tobin concealed from them that SRW’s original bylaws stated that SRW was organized to be a Diocesan Institution and that this would not be the case under the restructuring. The trial court found that Gerber and Tobin did not conceal any information from the Church Entities about the history of SRW, a finding that is supported by substantial evidence. Tobin testified that he did not discuss the history of SRW at the March 2007 meeting with Bishop Andrus and the Chancellor, because he “believed there was a common understanding of what [SRW] was.” Tobin testified that he had no motivation to deceive anyone about the history of SRW, because if there had been any objection to the restructuring proposal, ESC could have proceeded with the restructuring by creating a new entity to be its member; the only reason for selecting SRW was to save the modest cost of forming a new corporation and the administrative burden of a new corporation applying for tax exempt status, which at that time took about a year. Gerber testified that at the time of the March 2007 meeting, he understood SRW to be “a defunct organization,” which held “a meeting once a year for five minutes” to approve an audit. As far as he knew, SRW was simply a shell corporation. Substantial evidence supports the trial court’s finding that, to the extent Bishop Andrus or the Chancellor or Tornquist, as the Bishop’s representative on the ESC board, was unaware of SRW’s history, the relevant information was available to them in the SRW bylaws and the records of the Diocese. Accordingly, we see no abuse of discretion in the trial court’s finding that Gerber and Tobin did not hide information about the history of SRW from the Church Entities.

In sum, we find no error in the trial court’s determination that the Church Entities’ claim that SRW violated its bylaws in 2007 is barred by the statute of limitations, and that the statute was not tolled by concealment on the part of SRW. Because we uphold the trial court’s conclusion that the Church Entities have not proved any claim against SRW in connection with the 2007 bylaw amendments, we uphold the trial court’s conclusion (made in ruling on the cross-complaint filed by SRW and ESC) that the 2015 amendment to SRW’s bylaws would be effective in eliminating the Bishop’s right to appoint a member of the SRW board.

3. ESC

The trial court concluded that under the terms of the Sponsorship Agreement, the Church Entities waived their right to bring a claim for breach of charitable trust against ESC to enforce the Governance Prerogatives, and that in any event, the Church Entities could not prevail on a breach of charitable trust claim in light of the court’s finding (which the Church Entities do not contest) that ESC had not diverted its assets to serve a purpose different from its declared charitable purposes. To the extent that the Church Entities argued that the unanimously-approved 2014 amendment to the ESC bylaws, which allows ESC to choose whether to be a Diocesan Institution, is a breach of charitable trust or violation of ESC’s bylaws or the Canons, the trial court rejected the argument, concluding that ESC was free to amend its bylaws to change the provision that it would operate as a Diocesan Institution. Accordingly, the trial court rejected the Church Entities’ cause of action against ESC for breach of charitable trust, and the cause of action against ESC for declaratory relief, to the extent it was based on breach of charitable trust. We consider each argument in turn.

a. Governance Prerogatives

The Church Entities argue that the trial court erred in concluding that under the Sponsorship Agreement they waived any right to bring a charitable trust claim against ESC. We reproduce the relevant provisions of the Sponsorship Agreement, articles 1.2 and 2.2, below, because each discusses waiver.

“1.2 Role of the Church Entities in [ESC] Affairs. The Church Entities acknowledge the current status of [ESC] as a Diocesan Institution and acknowledge the role of [ESC] as a secular public benefit corporation qualified under federal and California law. The Church Entities recognize the right of [ESC] to own and operate facilities and to advance its Mission under the direction and control of the [ESC] board of directors. To that end, the Church Entities agree that their proper role in [ESC] affairs is strictly limited to those rights and prerogatives set forth in this Agreement and no others. Further, as a key element of an enduring relationship with [ESC] the Church Entities do hereby individually and collectively waive rights, if any, they may have under the Canons or California Canons to seek the imposition of a “trust” on any assets of [ESC], and acknowledge that they will not support an amendment to the Canons or California Canons in any manner that would eliminate or limit the rights of [ESC] as set forth in this Agreement. . . . (Italics added.)

“2.2 Relinquishment of Rights to Seek to Impose Trust on [ESC] Assets. The Church Entities have supported the position that they have the rights to impose a trust on [ESC] assets under certain circumstances by citing section 19.03 of the California Canons. [ESC] has challenged the legal authority of the Church Entities to impose such a trust in a civil court of law and cited key differences in the language of 19.03 of the California Canons with that of Canon 7, section 4 of the Canons. [ESC] and the Church Entities recognize that this difference of opinion on the legal right of the Church Entities or any one of them, to assert a trust presents a serious problem for the business operations and business planning activities of [ESC]. The Church Entities agree (1) that each of them waive, and will not assert legal rights, if any, to seek to impose a trust on any of the assets of [ESC], and (2) none of them will support an amendment to the Canons or California Canons in any manner that would eliminate or limit the rights of [ESC] as set forth in this Agreement. In reliance upon the covenants of the Church Entities to so waive and refrain from making any such assertions, [ESC] agrees to maintain the rights and prerogatives as set forth in section 2.3 through section 2.5 below, in the formation of business arrangements or the creation of business structures that involve [ESC] facilities and/or assets.”

The Church Entities argue that the Sponsorship Agreement waives only the right created by the canons of Church law to enforce an express private trust of which they are the beneficiaries (see 13 Witkin, Summary of Cal. Law (11th ed. 2017) Trusts, §§ 47-48, pp. 655-657 [a private trust requires a beneficiary]), and does not waive their right to enforce a charitable trust. The Church Entities urge us to interpret the waivers in articles 1.2 and 2.2. as “somewhat duplicative[ ].” In support of their interpretation, they point to the references to canon law in articles 1.2 and 2.2, including the reference in article 2.2 to section 19.03 of the California Canons.

We are not persuaded by the Church Entities’ argument. The waivers in the Sponsorship Agreement are striking in their breadth and in their centrality to the agreement itself. Recall that the purpose of the Sponsorship Agreement was to define the relationship between ESC and the Church Entities on a going forward basis. In setting out the “role of the Church Entities in [ESC’s] affairs,” which is at the heart of the Sponsorship Agreement, article 1.2 contains broad language limiting the Church Entities’ role in ESC. The Church Entities agree that their role is “strictly limited” to the “rights and prerogatives set forth” in the Sponsorship Agreement and “no others,” and they recognized “the right of [ESC] to own and operate facilities and to advance its Mission under the direction and control of the [ESC] board of directors.” Immediately after this statement proscribing what the Church Entities may do (and its acknowledgment of ESC’s rights) comes an express waiver clause delimiting the Church Entities role even further: they have no right under church Canons to impose a “ ‘trust’ ” on any ESC assets. Underscoring the significance of the waiver, it is described as a “key element” of the Church Entities’ relationship with ESC, and an enduring one: article 1.2 concludes with an acknowledgment that the Church Entities will not support an amendment to church Canons that “in any manner would eliminate or limit the rights of [ESC]” as set forth in the Sponsorship Agreement.

The second express waiver is in article 2.2 under the heading “relinquishment of rights to seek to impose trust” and it is even broader. This article refers to disputes pertaining to the legal authority of the Church Entities to impose a trust on ESC’s assets “in a civil court of law,” citing different canons. The waiver in this article is equally unequivocal: the Church Entities agree that each waives “and will not assert legal rights, if any, . . . on the assets of [ESC],” language that is not linked to church Canons. As with Article 1.2, this article reiterates that the Church Entities will not support an amendment to the Canons in the future that would eliminate ESC’s rights as set forth in this Sponsorship Agreement.

We interpret the language in these two articles and the recital that the Sponsorship Agreement “defin[es] a relationship” between the Church Entities and ESC as a bar to any claim by the Church Entities that ESC has breached a charitable trust.

The Church Entities also argue that since they retain certain controls over ESC’s assets under the Sponsorship Agreement (specifically, the right in certain circumstances to approve the transfer or encumbrance of ESC’s real estate assets, as stated in article 2.4, and the right to designate the Diocesan charity to which ESC’s assets are distributed upon its dissolution, as stated in article 2.5), the trial court erred in construing the Sponsorship Agreement to waive the Church Entities’ right to enforce a charitable trust. Essentially, the Church Entities argue that their retention of some rights with respect to assets is inconsistent with their waiver of the right to enforce a charitable trust. The argument is supported by a fleeting reference to a footnote in Huber v. Jackson (2009) 175 Cal.App.4th 663, which concerns the interpretation of a deed conveying real estate from the Bishop of Los Angeles to a parish. (Id. at p. 677, fn. 4.) The Church Entities do not explain how Huber has any relevance here.

In any event, the Church Entities’ argument ignores the provision in article 1.2 of the Sponsorship Agreement that the Church Entities’ “proper role in [ESC] affairs is strictly limited to those rights and prerogatives set forth in this Agreement, and no others.” There is nothing inconsistent in waiving the right to bring a claim for breach of charitable trust and retaining certain other rights with respect to assets: under the Sponsorship Agreement, the Church Entities can enforce the rights it has retained in an action for breach of contract. It is precisely because the Church Entities retain certain controls over ESC’s assets that the waiver of the right to enforce a trust, including a charitable trust, is appropriate: under the Sponsorship Agreement, the relationship between the parties going forward is strictly a contractual relationship and the Sponsorship Agreement establishes its terms.

Because we conclude that under the Sponsorship Agreement the Church Entities have waived any right to bring a claim for breach of charitable trust against ESC, we need not reach the question whether a breach of charitable trust can exist in the absence of a diversion of assets from the declared charitable purposes.

b. Status as Diocesan Institution

The Church Entities contend the trial court erred in concluding that ESC was free to amend its bylaws in 2014 to provide that it could choose whether to be a Diocesan Institution. The Church Entities argue that ESC was bound by its bylaws to remain a Diocesan Institution until and unless the Diocese decided otherwise, that ESC had previously made an “unconditional promise[] to obey the . . . Church’s canon law,” that the Canons do not permit a Diocesan Institution to decide to change its status, and that in failing to defer to the Church Entities’ interpretation of the Canons, the trial court infringed upon the Church Entities’ right to interpret canon law.

The Church Entities’ arguments fail, even if we assume that the 2014 bylaw amendment could give rise to a cause of action for breach of charitable trust and that the Church Entities had not waived the right to bring such a cause of action. To begin, the ESC bylaws at the time of the 2014 amendment did not contain an unconditional promise to remain a Diocesan Institution or obey the Canons. The bylaws provided that ESC would conform to provisions of the Canons “not inconsistent with the interests of this corporation.” And the bylaws gave the ESC board of directors the right to amend the bylaws without the approval of the Bishop and Standing Committee.

The Church Entities point to a Canon that authorizes the Convention to revoke an entity’s status as a Diocesan Institution and argue that the trial court was obliged to defer to Bishop Andrus’s testimony at trial that the Canon provided the only means for termination of Diocesan Institution status, apart from an entity going out of business. The Church Entities argue that failure to defer to the Bishop’s interpretation infringes on the Bishop’s right and duty to interpret and apply canon law. We are not persuaded.

First, as a California nonprofit corporation, the rights and duties of ESC are controlled by California law, not church law, and the Church Entities have not shown that ESC’s 2014 bylaw amendment violated any California law. Furthermore, “[w]hile . . . courts will not purport to exercise ecclesiastical jurisdiction . . ., they will determine civil and property rights which depend essentially upon the contracts of the parties.” (Rosicrucian Fellowship v. Rosicrucian Fellowship Nonsectarian Church (1952) 39 Cal.2d 121, 131.) This is not a case in which the trial court exercised any ecclesiastical jurisdiction: it did not resolve any controversies over church doctrine. (Episcopal Church Cases (2009) 45 Cal.4th 467, 485 [“State courts must not decide questions of religious doctrine; those are for the church to resolve”]; New v. Kroeger (2008) 167 Cal.App.4th 800, 824 [“ ‘Ecclesiastical decisions are not reviewable by the secular courts . . . . Where the subject matter of a dispute is purely ecclesiastical in its character, a matter which concerns church discipline or the conformity of its members to the standard of morals required of them, the decision of the church tribunal will not be interfered with by the secular courts’ ”].) Instead, it is a case in which the court applies “neutral principles of law,” considering such sources as bylaws, articles of incorporation, church canons, and relevant statutes. (See Episcopal Church Cases, supra, 45 Cal.4th at p. 485 [listing sources a secular court can properly consult in resolving a property dispute without reference to church doctrine].) The Bishop’s interpretation, especially in view of its coming after this dispute arose, is not definitive. Moreover, it is contradicted by the Chancellor’s much earlier statement, which the Bishop did not challenge, that ESC could elect to terminate its status as a Diocesan Institution.

The Canons clearly give the Diocese the right to qualify an entity as a Diocesan Institution or terminate its status as such, but nothing in the language of the Canons suggests that the status is anything but voluntary: the fact that the Convention “may revoke the status of any group or entity as a Diocesan Institution” after considering a report from the Bishop and Standing Committee that the entity does not conform to the required standards does not entail that such revocation is the only means of terminating Diocesan Institution status.

The trial court found that the charitable purpose of ESC requires it to provide housing and related facilities to seniors on a non-profit basis, but does not require it to do so as a Diocesan Institution. The Church Entities contend that in making this finding, the trial court modified the charitable trust under which ESC holds assets by effectively eliminating ESC’s religious purpose, and that such a modification is impermissible under section 12591 of the Government Code because the Attorney General is not a party to this action. We disagree that the trial court modified any charitable trust. In its Registration of Charitable Trust, ESC identified a purpose of the trust as, “To provide housing and related services for elderly persons on a non-profit basis.” The Registration makes no reference to providing services on a religious basis, or to providing services as a Diocesan Institution. There is no evidence that ESC has in any way changed the manner in which it provides housing and services to seniors, or that it has in any way renounced the Statement of Values, in which ESC affirmed that its first priority is care of residents “in a manner that reflects a deep respect for the spiritual core central to the founding institutions,” and agreed to maintain chaplaincies in its facilities, characterized as institutions with “faith-based care.”

In sum, we conclude that the Church Entities have not shown that the trial court erred in rejecting their claims that ESC breached a charitable trust by amending its bylaws in 2014 or by approving 2015 bylaw amendments that would eliminate the Governance Prerogatives.

D. The Church Entities’ Motion for New Trial

The Church Entities argue that the trial court erred in denying a motion for a new trial based on newly discovered evidence. (Code Civ. Proc., § 657, subd. (4). To prevail on this statutory ground for a new trial, the moving party must show that the evidence is in fact newly discovered; that the party exercised reasonable diligence in discovering and producing it; and that it is material. (Plancarte v. Guardsmark (2004) 118 Cal.App.4th 640, 646.) We review a trial court’s decision denying a new trial for abuse of discretion. (Id. at p. 645.)

1. Additional Background

In the months after the trial was completed, there were several rounds of post-trial briefing in which parties answered questions posed by the trial court, including questions concerning the business structure that would result from the Affiliation Agreement with NCPHS. The trial court authorized further depositions of several witnesses to testify on issues related to the court’s questions, in preparation for a “factual hearing as to the business structure.” Thus, in February 2017, the Church Entities conducted a second deposition of William Tobin, the general counsel and chief risk officer of ESC and SRW.

The following exchange took place during the deposition:

Q: “So if ESC and NCPHS ultimately merged, they would not agree for the Episcopal Church to retain any reversionary interest in the assets of the combined entity on a later dissolution or winding up; is that correct?”

A: “ESC wouldn’t have existed anymore and the reversionary rights would have been extinguished by the merger.”

Q: “And that would be because NCPHS would be the surviving entity in the merger?”

A: “No, there was no discussion of what that structure would be like. It was—but it would have been very unlikely that ESC would have merged and then NCPHS or vice versa. There likely would be a structure that was the 2003, 2004 case[ ] where there [would] be a new company and both companies would merge into that new company. So both ESC and NCPHS would have gone out of existence.”

2. Analysis

The Church Entities claim that Tobin’s post-trial testimony is newly discovered because it is “different from and not cumulative of the evidence produced at trial.” And they claim that the testimony is material because it shows an intent to destroy the Church Entities’ reversionary rights, and such destruction would be a breach of the Sponsorship Agreement as well as a diversion of assets, which the trial court held to be a key element of a claim for breach of charitable trust. But even if we assume that the evidence is newly discovered and material, we find no abuse of discretion in denying the motion for new trial.

That is because there is substantial evidence to support a finding by the trial court that the Church Entities did not exercise reasonable diligence in discovering and producing Tobin’s testimony, and such a finding means that the trial court would have abused its discretion if it had granted a new trial. (See Doe v. United Air Lines, Inc. (2008) 160 Cal.App.4th 1500, 1506 [order granting new trial on the basis of newly discovered evidence is an abuse of discretion if the moving party fails to establish all required elements].)

The Church Entities contend that they unsuccessfully sought evidence in the pretrial depositions of ESC CEO Gerber and NCPHS CEO Berg that ESC and SRW intended to use the planned merger with NCPHS to destroy the Episcopal Church’s reversionary rights, and that the evidence became available only because Tobin, the general counsel of ESC, waived attorney-client privilege on the subject by testifying at trial about the substance of the affiliation with NCPHS, “including the nature and value of ESC’s assets and the Church’s reversionary interest.” From this, the Church Entities conclude that they could not have discovered the evidence of a plan to destroy the reversionary rights in any way other than a post-trial deposition of Tobin. This argument is unpersuasive: even if we assume that Tobin had been asked about this issue at his pre-trial deposition and refused to answer on grounds of privilege (and the Church Entities do not claim that such is the case), the Church Entities do not explain why they did not ask Tobin about the issue at trial, once he had purportedly waived attorney-client privilege. (Code Civ. Proc., § 657, subd. (4) [referring to evidence that party “could not, with reasonable diligence, have discovered and produced at the trial”].)

In sum, the Church Entities fail to show that the trial court’s denial of their new trial motion constituted an abuse of discretion.

DISPOSITION

The judgment is affirmed. Respondents shall recover their costs on appeal.

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Miller, J.

We concur:

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Richman, Acting P.J.

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Stewart, J.

A152934, A153165, Episcopal Church in the Diocese of California, et al. v. Episcopal Senior Communities, et al.

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THE EPISCOPAL CHURCH IN THE DIOCESE OF CALIFORNIA v. EPISCOPAL SENIOR COMMUNITIES