Opinion
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. CV073180
Bamattre-Manoukian, Acting P.J.
These two appeals arise from two lawsuits involving a San Jose church known as Casa de Oracion, Church of God of Prophecy, and its former treasurer, Sam Carrasco. In the first action Casa de Oracion sued for breach of fiduciary duty and for an accounting. It further sought a declaration that Carrasco had been effectively removed as treasurer of Casa de Oracion and that Casa de Oracion had the sole right to control and possess the church’s property at 1333 South White Road, and it sought to enjoin Carrasco from withholding or diverting any money belonging to Casa de Oracion.
Sam Carrasco and his son Jorge Carrasco filed a separate action against Casa de Oracion, on behalf of themselves and an unincorporated association which had been known as the Church of God of Prophecy in San Jose prior to incorporation as Casa de Oracion, Church of God of Prophecy. They asked the court to determine the existence of a trust on the property at 1333 South White Road in favor of the unincorporated association, to quiet title in the unincorporated association, and to enjoin Casa de Oracion from interfering with the use and enjoyment of the property. Carrasco also sought a declaration that he had been improperly removed as a member and trustee of the church.
The two actions were consolidated for trial of the equitable issues, which resulted in disposition of the declaratory and injunctive relief causes of action in Casa de Oracion’s action and a judgment in the Carrascos’ action. The court found that the property rightfully belonged to Casa de Oracion and that Carrasco had been properly removed as treasurer and a member of the church. After judgment was entered, the court ordered that $95,157.95, which Carrasco had previously been ordered to deposit with the court, be released to Casa de Oracion.
Carrasco has appealed from the court’s order releasing the funds (Appeal No. H034092, Casa de Oracion v. Carrasco), and he and Jorge Carrasco have appealed from the judgment entered against them. (Appeal No. H034193, Carrasco v. Casa de Oracion). Carrasco argues that the court’s order releasing funds under Code of Civil Procedure section 572 was not supported by a proper showing, and that the court erred in ordering these funds released because ownership was yet to be litigated in the accounting cause of action. On appeal from the judgment, the Carrascos argue that under Evidence Code section 662, the property is presumed to be owned by the unincorporated association, because it is the record title holder. They argue that Casa de Oracion could not overcome this presumption with evidence of incorporation because it had failed to comply with the statutory requirements for incorporating. (Corp. Code, § 9121.) Carrasco also argues that the evidence did not support the court’s finding that he was properly removed as a trustee and member of the church.
We have considered the two cases together for purposes of oral argument and decision. We find there was a sufficient showing for the court to order funds released to Casa de Oracion, pursuant to Code of Civil Procedure section 572, notwithstanding the pending action between the parties. We further find that there was evidence to overcome the presumption of title in the unincorporated association, despite the lack of compliance with the formalities set forth in Corporations Code section 9121, and that the evidence supported the court’s finding that the church followed the proper process in disfellowing Carrasco and removing him as treasurer. We will therefore affirm both the order in appeal No. H034092 and the judgment in appeal No. H034193.
BACKGROUND
The San Jose church now known as Casa de Oracion, Church of God of Prophecy, was originally known simply as the Church of God of Prophecy when it became affiliated in 1953 with an international church of the same name headquartered in Cleveland, Tennessee. The San Jose church was one of numerous national and international affiliates of the Church of God of Prophecy, which traced its existence back to the early centuries of Christianity. At the time it became affiliated, the San Jose church was assigned an identification number of 277 by the headquarters in Tennessee. For many years, the San Jose church and the worldwide church operated as non-profit religious organizations using the same section 501(c)(3) non-profit exemption. In 1998 both the worldwide organization and the San Jose church became incorporated.
There was testimony that the San Jose church became affiliated in 1945, but the international church did not begin using the name Church of God of Prophecy until 1952.
Sam Carrasco moved to San Jose in the 1950s and was active in the San Jose church from its beginnings. He became treasurer of the San Jose church in 1958, and remained treasurer throughout the years until 2006. In 1992 he was ordained a deacon in the Church of God of Prophecy at the international offices in Tennessee. When the San Jose church incorporated in 1998, Carrasco continued as treasurer and chief financial officer of the corporation.
Local congregations of the Church of God of Prophecy follow church doctrine established by the decision-making body of the worldwide Church of God of Prophecy, the General Assembly, which meets every two years at church headquarters in Cleveland, Tennessee. Every member of the Church of God of Prophecy can attend these General Assemblies and participate in deciding issues, both doctrinal and temporal, that affect church members. The minutes of the General Assembly, which are published in book form, constitute the prevailing doctrine and rules of the Church of God of Prophecy, until the next meetings of the General Assembly are held.
The General Assembly also ratifies the selection of the church leadership. The General Overseer functions as the chief executive officer of the Church of God of Prophecy and serves for an indefinite period of time. He is responsible, through the Presbyters and Overseers, for ensuring that decisions and recommendations made by the General Assembly are being carried out by all the ministries of the church. The General Presbyters represent various geographical sections of the world, and the national, regional and state Overseers are selected by the General Presbytery. State Overseers in turn select pastors for local churches, such as the San Jose church. Local pastors are accountable to their Overseers, who are directly responsible to the General Presbyter of that area.
At the relevant times herein, Bishop Josue Jimenez served as pastor of the San Jose church from 1985 to 2001. Thereafter Jorge Mendoza was pastor until his resignation in 2004. Nicholas Hernandez was then appointed pastor by the State Overseer for Spanish-speaking affiliates, Bishop Jose Garcia.
To become a member of the Church of God of Prophecy, a person makes a public covenant through one of the Church of God of Prophecy affiliates. Once a member, the person continues to be a member until he dies, resigns, transfers membership to another church or is disfellowed, meaning that he is voted out of the church. Members of local congregations are expected to tithe ten percent of their income to the church, and local churches tithe to the national headquarters in Tennessee.
Over the years, the San Jose church has purchased and sold various pieces of real property for use as places of worship or parsonages. Sam Carrasco’s brother-in-law, Paul Garcia, a real estate agent, assisted in many of these transactions. In each case the San Jose church raised its own funds to make the purchase. However, local churches must ask for authorization from the international offices of the Church of God of Prophecy to purchase, mortgage or sell property, and the San Jose church did this.
In 1986, after receiving permission from the general trustees of the international church, the San Jose church purchased the real property located at 1333 South White Road, in San Jose, which is the subject of this dispute. Title to the property was taken in the name of “Church of God of Prophecy, a Non Profit Organization.” The San Jose church erected a new church building on the property and, when it was completed in 1995, gave it the name “Casa de Oracion.” Thereafter, the San Jose church began calling itself “Casa de Oracion, Church of God of Prophecy.” Sam Carrasco and Pastor Jimenez were both instrumental in helping the church to complete the construction of its sanctuary, including loaning money to the church when there were shortfalls from the construction loan and church offerings.
The San Jose church incorporated in September of 1998, at the recommendation of the General Assembly of the international church and with the agreement of a majority of the members of the congregation, including Sam Carrasco. Carrasco continued to serve as treasurer and a trustee of the new corporation. His duties as treasurer were the same as they had always been: to record all offerings and tithes and make deposits, to pay bills, to prepare monthly and quarterly financial statements and to report these finances to the pastor and to the church headquarters. Carrasco was also the principal signor on the church’s bank account and most of the bills, bank statements and other financial records were sent to Carrasco’s home. The corporation took the name of Casa de Oracion, Church of God of Prophecy, San Jose, California.
In the years that followed, fundamental differences of opinion about certain aspects of church policy and doctrine began to develop in the international Church of God of Prophecy, and among congregations in local churches, including Casa de Oracion. In April of 2004, Wade Phillips, a prominent bishop with the worldwide Church of God of Prophecy, resigned his office and started a new church known as the Zion Assembly Church of God. He and those who followed him had become dissatisfied with doctrinal and organizational changes occurring in the Church of God of Prophecy. They believed that their new church represented the true faith and practice of the Church of God of Prophecy as it had always been. Sam Carrasco attended the meetings in Tennessee where Bishop Phillips announced his departure from the Church of God of Prophecy. Carrasco believed that Phillips was following the true path.
In December of 2004, the Pastor of Casa de Oracion, Jorge Mendoza, resigned from the San Jose church and took a number of members of the congregation with him. Following Pastor Mendoza’s resignation, the State Overseer, Bishop Garcia, appointed Nicholas Hernandez as interim pastor of the San Jose Church, an appointment that later became permanent. Sam Carrasco began to express discontent with changes that he perceived were taking place within the international Church of God of Prophecy. He believed that the Zion Assembly Church of God more closely adhered to the true doctrine and founding principles of the Church of God of Prophecy. Although he was dissatisfied with changes in church doctrine, and with the leadership of Pastor Hernandez, he remained a member of Casa de Oracion and continued to act as a trustee and treasurer of the corporation.
On July 12, 2005, Casa de Oracion sold its parsonage property at 3098 Warrington Avenue, which it had purchased in 2003. The church received net proceeds of $251,256.18, and took a promissory note and deed of trust on the property, with a balloon payment due one year later in the amount of $70,000, plus interest.
Disagreements between Carrasco and Pastor Hernandez culminated in various confrontations in early 2006. Carrasco repeatedly asked Hernandez to hold a meeting of the membership of Casa de Oracion in order to discuss and resolve differences of opinion about church doctrine prior to the August 2006 General Assembly meetings in Tennessee. Pastor Hernandez in turn repeatedly asked Carrasco to provide financial reports on the status of the corporation’s accounts after the sale of the Warrington property. Carrasco had “very strong” feelings about what he perceived as changes in doctrine and policy in the Church of God of Prophecy, and he refused to provide the reports until a membership meeting discussing these matters was held.
In April of 2006, concerned about Carrasco’s failure to provide a financial report, Pastor Hernandez went to Summit National Bank, where Casa de Oracion had its account, and attempted to gain access to the account. Word of this was reported back to Carrasco, who feared that Pastor Hernandez was going to improperly seize church funds. After checking with his attorney, who advised him that his responsibility as treasurer was “to protect the church’s money, ” Carrasco made two withdrawals from the Casa de Oracion bank account: a check for $45,000 on April 18, 2006 and a check for $15,000 on April 19, 2006, both made payable to the Zion Assembly Church of God. After obtaining permission from the regional Overseer for the Zion Assembly Church of God, he deposited these checks in the regional account for the Zion Assembly Church of God in Vallejo. He stated that he did this because he wanted to put the “money that belonged to the church people in a safe place, ” and wanted to keep Pastor Hernandez from “getting his hands on the money.” Carrasco did not tell anyone at Casa de Oracion about these transfers of funds.
On April 27, 2006, a meeting of the Casa de Oracion Board of Trustees (the Board) was held. Pastor Hernandez read a letter apologizing for having made decisions affecting the church without the full consent of the Board, including going to the church’s bank without the knowledge of the treasurer. He apologized for what he called “inappropriate business practices” on his part as pastor of the church and president of the Corporation. The Board accepted his letter of apology. By corporate resolution, a decision was made that any withdrawal or expenditure over $2,500 required two signatures and was subject to approval by the Board. Although Carrasco had just made two withdrawals totaling $60,000, he did not mention this at the Board meeting.
The General Assembly of the Church of God of Prophecy was held in August of 2006. Pastor Hernandez attended. The doctrinal disagreements between Hernandez and Carrasco came to a head after Hernandez returned from these meetings. On September 10, 2006, Pastor Hernandez informed the congregation that he was removing Carrasco as treasurer. He also removed various other members of Carrasco’s family from offices they held within the church. He appointed Trustee Victor Velez to serve in the position of treasurer.
At a Board of Trustees meeting on September 12, 2006, the Board voted five to two to ratify the newly appointed officers. Pastor Hernandez requested that the corporate books be delivered to the new treasurer and also requested that Carrasco provide an accounting. A motion passed to change the signors on the bank account at Summit National Bank to Hernandez and Velez, and to remove Sam Carrasco from all financial accounts. On September 15, 2006, Hernandez and Velez closed the bank account for Casa de Oracion at Summit National Bank and ordered bank statements for the previous year.
Also on September 15, 2006, the $70,000 balloon payment on the Warrington property was made. Paul Garcia, the real estate agent in the transaction, accepted the payment. At Carrasco’s direction, Garcia asked the buyers of the Warrington property to reissue their final check, changing the name of the payee from Church of God of Prophecy to Church of God. A check in the amount of $70,157.95, dated September 15, 2006, and made out to the Church of God, was delivered to Garcia, who then gave it to Carrasco. Carrasco explained that he took possession of this check because the church’s bank account had been closed. He refused to accept that he had been relieved as treasurer and refused to relinquish the books and accounts of the corporation. Some members of the congregation continued to make their tithes and offerings to him.
On September 21, 2006, Carrasco wrote a letter to Pastor Hernandez, on behalf of 14 church members, informing him that they wanted him relieved as pastor. Pastor Hernandez responded with a letter dated September 29, 2006, summoning all of those who had put their names on Carrasco’s letter to a membership meeting on October 4, 2006, to address church policy and the status of their membership. The letter informed them that their “failure to attend will be accepted as [their] desire to no longer submit to the Teachings and Polity of the Church of God of Prophecy, San Jose, California.”
None of the 14 members came to the meeting on October 4, 2006. The other church members who did attend discussed the situation, and a motion passed that Carrasco and those aligned with him be charged with “division, heresy, disobedience, [and] rejecting teachings and practices of Casa de Oracion, Church of God of Prophecy.” Disfellowship from the church was also discussed.
On October 8, 2006, a Board of Trustees meeting was held. On reviewing the bank statements, Velez had discovered a number of questionable expenditures and withdrawals, including the $60,000 described above. There was discussion about a split in the church and a possible takeover attempt. A motion passed authorizing Velez to contact the San Jose Police Department regarding the funds missing from the church bank account, to open a new bank account with two signors, to change the locks on the church building, to change the mailing address of Casa de Oracion from Carrasco’s home address to a post office box, and to retain legal representation.
On October 14, 2006, Carrasco and his group of followers made their covenant with the newly organized Zion Assembly Church of God congregation in San Jose. Carrasco was ordained as a deacon of the Zion Assembly Church of God. He considered this church to be “an offshoot of the Church of God of Prophecy that wanted to stay with the same doctrine.” Carrasco also became treasurer of the new church and opened a bank account in the name of Zion Assembly Church of God, in San Jose.
On October 16, 2006, the two factions of the San Jose church, those remaining with Pastor Hernandez, and those following Carrasco, both attempted to gain control of the church building and property at 1333 South White Road. Police were called and eventually the locks were changed and access to the property was allowed only to Pastor Hernandez and the remaining congregation of Casa de Oracion.
On October 28, 2006, Pastor Hernandez wrote another letter to Carrasco and those members who had left the church, informing them that on October 4, 2006, they had been brought up on charges of committing public offenses and had been found to be “heretical” in their “practice of sound Biblical Doctrine and government as outlined in the General Assembly Minutes of the Church of God of Prophecy and the Word of God.” The letter informed them that they were “Member[s] Not in Good Standing, ” and that they had lost all their rights as members of Casa de Oracion.
On November 1, 2006, Carrasco transferred $25,000 from the regional account for the Zion Assembly Church of God into the San Jose account for the Zion Assembly Church of God. As to the balance of the $60,000 he had deposited into the Zion Assembly Church of God regional account in April of 2006, $30,000 had been transferred back to the Summit National Bank account for Casa de Oracion on May 25, 2006, and $5,000 had been deposited to Sam Carrasco’s personal account on September 25, 2006. On December 13, 2006, Carrasco deposited the check for $70,157.95 from the sale of the Warrington property into the Zion Assembly Church of God, San Jose account.
At a business meeting held January 23, 2007, the membership of Casa de Oracion voted unanimously in favor of “disfellowship” of Sam Carrasco, his son Jorge Carrasco, and ten others, on grounds that they had covenanted with the Zion Assembly Church of God and “no longer adhere[d] to the teachings and practices of Casa de Oracion, The Church of God of Prophecy....”
PROCEEDINGS IN THE TRIAL COURT
On October 18, 2006, two days after the confrontation between the two factions at the church property on South White Road, the initial complaint in this action was filed by Casa de Oracion, Church of God of Prophecy, in its corporate capacity, against Sam Carrasco, Paul Garcia and others. (Case No. 106-CV-073180.) The complaint contained causes of action for breach of fiduciary duty, for an accounting, for declaratory relief and for a preliminary and permanent injunction. Casa de Oracion alleged that Carrasco and Garcia had breached their fiduciary duties to Casa de Oracion by diverting funds and making unauthorized withdrawals and expenditures from the church’s bank account totaling $289,619.14. It sought a declaration that Carrasco had been effectively removed as treasurer of Casa de Oracion and that Casa de Oracion had the sole right to control and possess the real property at 1333 South White Road. Casa de Oracion further sought to enjoin defendants from interfering with the use of the property, and from withholding any property or money or diverting money belonging to Casa de Oracion.
On March 22, 2007, Sam Carrasco and his son Jorge Carrasco filed a separate action, “individually and for the benefit of Church of God of Prophecy, a non-profit organization, ” against Casa de Oracion. (Case No. 107-CV-082316.) As amended on May 17, 2007, their petition asked the court to determine the existence and construction of a trust on the property on South White Road in favor of the unincorporated association, and asked for a declaration that Sam Carrasco had not been properly removed as a trustee and treasurer of Casa de Oracion. The petition further sought injunctive relief and to quiet title to the real property at 1333 South White Road in the name of the Church of God of Prophecy, an unincorporated association.
On February 8, 2008, the two cases were consolidated for trial, and it was determined that the equitable issues would be tried first, which included all of the causes of action in the Carrascos’ petition (case No. 107-CV-082316), and the causes of action for an accounting, for declaratory relief and for injunctive relief in Casa de Oracion’s complaint (case No. 106-CV-073180).
A bench trial took place July 22, 2008 through July 29, 2008. On September 3, 2008, the court issued two tentative decisions. As to case No. 106-CV-073180, the complaint by Casa de Oracion, the court found that the legal cause of action for breach of fiduciary duty had been severed and remained to be tried. However, the court found that both Carrasco and Garcia owed fiduciary duties to Casa de Oracion. As to the accounting cause of action, the court found that issues remained as to whether an accounting submitted by Carrasco during trial was adequate. The court ordered a further hearing on the cause of action for an accounting. As to the other equitable causes of action in Casa de Oracion’s complaint, for declaratory and injunctive relief, the court granted this relief based on reasons stated in its tentative decision in case No. 107-CV-082316, and incorporated by reference its findings and conclusions in that case.
In its tentative decision in the Carrascos’ action against Casa de Oracion (case No. 107-CV-082316), the court found against the Carrascos on all causes of action in their petition. The court found that the unincorporated association no longer existed after the church incorporated in 1998. Thereafter, the incorporated entity, Casa de Oracion, Church of God of Prophecy, San Jose, became the only local affiliate recognized by the international Church of God of Prophecy. The court found there was no express trust on the property and declined to impose any implied trust. The court ruled in favor of Casa de Oracion on the quiet title cause of action. Finally, the court found that Carrasco had been properly removed as treasurer and that the church had later taken the proper steps to disfellow Carrasco and his followers.
On September 15, 2008, Carrasco filed detailed objections to the proposed statement of decision in case No. 107-CV-082316, and requested a revised statement of decision on specified controverted issues. On March 6, 2009, the court issued a final statement of decision and judgment in case No. 107-CV-082316, consistent with its tentative decision and specifically responding to the request for clarification of issues.
On October 29, 2008, between the time of the court’s tentative decisions on September 3, 2008, and its judgment on March 6, 2009, Casa de Oracion made an ex parte application in case No. 106-CV-073180 for an order, pursuant to Code of Civil Procedure section 572, requiring Carrasco to deliver sums in the amount of $95,157.95 to Casa de Oracion, or in the alternative to be held by the court. The accompanying declaration stated that uncontroverted evidence at trial had shown that Carrasco had withdrawn $60,000 from an account owned by Casa de Oracion, $25,000 of which had been eventually deposited by him in the Zion Assembly Church of God account in San Jose. The evidence further showed that Carrasco had deposited the final payment from the sale of Casa de Oracion’s property at 3098 Warrington, in the amount of $70,157.95, in this same Zion Assembly Church of God account. Carrasco’s testimony was that he had diverted these funds to protect them from Pastor Nicholas Hernandez. Casa de Oracion requested an order that $95,157.95, rightfully belonging to the church, be either returned to Casa de Oracion or deposited in court.
On October 31, 2008, the court issued an order granting Casa de Oracion’s ex parte application, and ordering Carrasco to deposit in court the sum of $95,157.95. On November 10, 2008, Carrasco deposited this sum with the court.
At the same time he deposited the funds, Carrasco filed a motion for leave to amend his answer to Casa de Oracion’s complaint in case No. 106-CV-073180, in order to plead an offset for sums in excess of $185,000, which he claimed he had loaned to the San Jose Church over the years, in particular during the early 1990s when the church was building its sanctuary on the South White Road property. In the alternative, Carrasco asked for leave to amend to file a cross-complaint in case No. 106-CV-073180 asserting debts owed to him by the San Jose church. A hearing on Carrasco’s motions, as well as on a motion by Casa de Oracion to amend its complaint to include a prayer for punitive damages and for attorney’s fees, was held on February 26, 2009.
On March 6, 2009, the same day the court entered judgment in case No. 107-CV-082316, the court also issued orders in case No. 106-CV-073180, denying Carrasco’s motions for leave to file an amended answer or cross-complaint in order to plead offsets and also denying Casa de Oracion’s motion to amend its complaint.
Consistent with its tentative statement of decision, the court in its judgment and decision in case No. 107-CV-082316 denied the Carrascos’ petition to determine that the South White Road property was held in an express or implied trust for the benefit of the unincorporated association known as the Church of God of Prophecy. The court found that the Carrascos were to take nothing by way of their complaint for quiet title to the South White Road property. The court found that the worldwide Church of God of Prophecy was a hierarchical organization and that the local corporation, Casa de Oracion, Church of God of Prophecy, San Jose, was its affiliate and was the sole and true owner of the property at 1333 South White Road, San Jose. The court further found that Sam Carrasco had been properly removed for cause as treasurer of the corporation and had been properly disfellowed from Casa de Oracion.
On March 17, 2009, Casa de Oracion filed an ex parte application seeking an order in case No. 106-CV-073180, directing the Controller of the County of Santa Clara to pay the sum of $95,157.95, previously deposited with the court by Carrasco, to Casa de Oracion. A briefing schedule and hearing date were set. The matter was heard on March 27, 2009. On the same day, the court issued an order directing the Controller to draw a warrant for the sum of $95,157.95, and any interest thereon, in favor of Casa de Oracion, Church of God of Prophecy, San Jose, California. A corrected order, addressed to the Finance Division of Superior Court, was filed April 1, 2009.
Carrasco’s petition for a writ of supersedeas or other stay order was denied by this court on April 18, 2009.
Carrasco has appealed from the court’s order of April 1, 2009 in case No. 106-CV-073180 (Appeal No. H034092), and he and Jorge Carrasco have appealed from the judgment entered on March 6, 2009 in case No. 107-CV-082316 (Appeal No. H034193).
Before proceeding to the merits, we first consider the question of appealability.
APPEALABILITY
In California, civil appeals are limited to the judgments and orders enumerated in Code of Civil Procedure section 901.4, which codifies the so-called “ ‘one final judgment rule.’ ” (Stern v. Fremont Cemetery Corporation (1992) 9 Cal.App.4th 1221, 1226.) In Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, our Supreme Court held that “... an appeal cannot be taken from a judgment that fails to complete the disposition of all the causes of action between the parties even if the causes of action disposed of by the judgment have been ordered to be tried separately, or may be characterized as ‘separate and independent’ from those remaining.” (Id. at p. 743.) The court noted that there are sound reasons for the one final judgment rule, including the fact that “ ‘piecemeal disposition and multiple appeals tend to be oppressive and costly’ ” and “ ‘[i]interlocutory appeals burden the courts and impede the judicial process....’ ” (Id. at p. 741, fn. 9.)
There are, however, exceptions to the rule. One exception is “[w]hen a court renders an interlocutory order collateral to the main issue, dispositive of the rights of the parties in relation to the collateral matter, and directing payment of money or performance of an act....” (In re Marriage of Skelley (1976) 18 Cal.3d 365, 368.) An appeal will lie from such a collateral order, even though there are other matters in the case that remain to be determined. (Lester v. Lennane (2000) 84 Cal.App.4th 536, 561.)
Appellant Sam Carrasco argues that the court’s order in case No. 106-CV-073180, releasing funds totaling $95,157.95 to Casa de Oracion, meets all of the requirements of the collateral order doctrine and is therefore appealable. This argument directly contradicts his contention in the appeal itself that ownership of the $95,157.95 is “the heart of this case.” We agree with the first argument. As we discuss further in the appeal, there was no dispute in the evidence before the trial court that the $95,157.95 consisted of funds belonging to Casa de Oracion that Carrasco was holding for safekeeping. He did not claim these funds belonged to him. The return of this money to Casa de Oracion is not dependent on the accounting or necessary to a determination of the issues remaining to be tried, namely whether Carrasco and Garcia breached fiduciary duties and if so, what damages resulted. We therefore conclude that this was an order for payment of money collateral to the main issues, and it is thus appealable under the collateral order doctrine.
As to the appeal from the judgment, it would appear that this judgment deciding only the equitable issues “fails to complete the disposition of all the causes of action between the parties....” (Morehart v. County of Santa Barbara, supra, 7 Cal.4th at p. 743.) Another exception to the one final judgment rule applies, however, where separate cases have been consolidated for the purpose of trial of related issues. (Code of Civ. Proc., § 1048.) In that event, although evidence presented can be applicable to both cases, separate findings and judgments must be made in each case in disposing of the issues submitted. (Stubblefield Construction Co. v. City of San Bernardino (1995) 32 Cal.App.4th 687, 701-703.) A judgment as to one of the actions is final and appealable. (Ibid.)
Here, although Sam Carrasco and Casa de Oracion are both parties in both cases, there were two separate and independent actions filed: Casa de Oracion’s action against Carrasco and Garcia (case No. 106-CV-073180); and Sam and Jorge Carrasco’s action, individually and representing an unincorporated association, against Casa de Oracion (case No. 107-CV-082316). The parties were not identical and there is no indication in the record that the two actions were merged. Rather the court’s order on the motion to consolidate makes clear that consolidation was granted “for trial only.” The consolidated trial of the equitable issues resulted in the disposition of all of the causes of action in the Carrascos’ complaint in case No. 107-CV-082316, and judgment was entered only in that case. We conclude that this is therefore an appealable judgment, even though issues are still pending in case No. 106-CV-073180.
APPEAL NO. H034092-RELEASE OF FUNDS HELD BY CARRASCO
The court made two orders here, the first on October 31, 2008, ordering that Sam Carrasco deposit $95,157.95 with the court, and the second on April 1, 2009 ordering that the funds be released to Casa de Oracion. The authorizing statute is Code of Civil Procedure section 572, which allows the court under certain circumstances to order that funds either “be deposited in court or delivered to [a] party.” The statute provides as follows: “When it is admitted by the pleadings, or shown upon the examination of a party to the action, that he or she has in his or her possession, or under his or her control, any money or other thing capable of delivery, which, being the subject of litigation, is held by him or her as trustee for another party, or which belongs or which is due to another party or which should, under the circumstances of the case be held by the court pending final disposition of the action, the court may order the same, upon motion, to be deposited in court or delivered to such party, upon those conditions that may be just, subject to the further direction of the court.” (Code Civ. Proc., § 572, italics added.)
As a matter of statutory construction, the word “may” denotes a permissive or discretionary grant of authority. (Sierra Club v. San Joaquin Local Agency Formation Com. (1999) 21 Cal.4th 489, 499; In re Richard E. (1978) 21 Cal.3d 349, 354.) The court’s order under this statute is thus a discretionary act, provided there is a proper showing on “the pleadings, or [] upon the examination of a party....” (Code Civ. Proc., § 572.) We therefore apply the abuse of discretion standard of review. “ ‘ “Discretion is abused whenever, in its exercise, the court exceeds the bounds of reason, all of the circumstances before it being considered. The burden is on the party complaining to establish an abuse of discretion, and unless a clear case of abuse is shown and unless there has been a miscarriage of justice a reviewing court will not substitute its opinion and thereby divest the trial court of its discretionary power.” ’ ” (Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443, 449, quoting Denham v. Superior Court (1970) 2 Cal.3d 557, 566.)
Cases have interpreted Code of Civil Procedure section 572 to require that the moving party establish ownership of the money, and show that the party holding the money does so in trust for the other and does not claim title to it. (In re Elias (1962) 209 Cal.App.2d 262; Frey v. Superior Court (1913) 22 Cal.App.421.)
Here, Casa de Oracion’s first ex parte application stated that the $95,157.95 had been “identified by SAM CARRASCO in the trial in this proceeding as the amount of money diverted from the CHURCH and held by SAM CARRASCO in a bank account in the name of ZION ASSEMBLY CHURCH OF GOD.” The ex parte application included a declaration by counsel for Casa de Oracion stating that “[b]y his own evidence, both oral and documentary, SAM CARRASCO has established as fact that he is holding funds belonging [to] the CHURCH. There was never any contention made by SAM CARRASCO that he had any right to those funds, rather his contention, in his pleadings and in his testimony, was that he was holding on to those funds to protect them from Pastor Nicholas Hernandez. According to SAM CARRASCO, he was merely protecting those funds for the benefit of the CHURCH. Regardless of his belief, the court has determined that those funds belong to the CHURCH and that SAM CARRASCO has no right to those funds.”
Counsel’s declaration further referred to evidence at trial establishing that Carrasco “withdrew the sum of $60,000, taken from the Church through two checks on April 18, 2006 and April 19, 2006, in the amounts of $45,000 and $15,000 respectively, ” and that he had “received the sum of $70,157.95 (exhibit #39), which was suppose[d] to have been paid to the Church.” The declaration stated that Carrasco had contended at trial that he had used $35,000 of the $60,000 for legitimate church expenses, but had not disputed that the remaining $25,000 had been deposited in the Zion Assembly Church of God account, controlled by Carrasco. The declaration concluded that “[t]he two amounts, $25,000 and $70,157.95, thus means that he is currently holding $95,157.95 which rightfully belongs to the CHURCH.”
The court found that this was a sufficient showing under Code of Civil Procedure section 572 and ordered Carrasco to deposit the $95,157.95 with the court, which he did.
Casa de Oracion’s second ex parte application, following the entry of judgment five months later, sought an order directing that the County Controller release to Casa de Oracion the funds paid into court by Carrasco. This was opposed by Carrasco, and the court ordered briefing from the parties and held a hearing. In his opposition, Carrasco argued that “[t]he $95,000 and who owns it is now the heart of this case.” Although Carrasco did not assert at trial that any part of these funds belonged to him personally, he contended in opposition to Casa de Oracion’s ex parte application that he had a personal claim to some or all of the $95,157.95, because he had loaned money to the church over the years, particularly during the process of construction of the church building on the property at 1333 South White Road. He trusted that the church would eventually pay him back and never got promissory notes evidencing these loans. He claimed that what the church owed to him for all of these loans and expenditures exceeded the $95,157.95 and that he should be allowed to litigate this in the continuation of the accounting action. In his proposed amended answer in that action, he had claimed amounts “exceeded $185,000” from asserted loans to the church in the early 1990s.
First, as we have noted in the case summary, Carrasco’s motion to amend his answer to assert these offsets in the accounting action had been denied by the court. Furthermore, claims of unpaid loans made by him to the church over the years would not have the effect of contradicting the facts shown by the evidence at trial, that he diverted $95,157.95 belonging to Casa de Oracion and placed it in an account under his control, in order to keep it safe from Pastor Hernandez.
In briefing in the trial court, Casa de Oracion attached portions of an accounting report prepared for Carrasco by a certified public accountant, which showed Casa de Oracion’s receipts and disbursements from January 1, 2002. This report traced the ownership of the $95,157.95 deposited in the Zion Assembly Church of God account back to Casa de Oracion. Tab 4 was a flowchart showing “Disposition of Questionable Disbursements.” Tab 8 was entitled “The Church of God of Prophecy-San Jose, CA, Timeline of Key Factors and Transactions.” These charts followed the $60,000 removed by Carrasco from the Casa de Oracion bank account at Summit National Bank in April of 2006, and deposited in the regional Zion Assembly Church of God account. Of this amount, $30,000 was returned to the Casa de Oracion account, $5,000 was deposited in Carrasco’s personal account, which he contended he used to pay church expenses, and $25,000 was deposited to the new bank account for the Zion Assembly Church of God in San Jose, “under the control of Sam Carrasco.” In addition, the evidence showed that the $70,157.95 cashier’s check from the sale of the church’s property at 3098 Warrington was given to Paul Garcia, who gave it to Sam Carrasco, who deposited it in the Zion Assembly Church of God account in San Jose. According to the accounting submitted by Carrasco, the $25,000 and the $70,157.95 were deposited in the Zion Assembly Church of God account in San Jose, “for safekeeping.”
There were actually three checks totaling $61,000 written on the Casa de Oracion account around the same time. The extra $1,000 was sent to the Zion Assembly Church of God in Alabama for relief from hurricane Katrina.
Consistent with this documentary evidence was Carrasco’s own testimony at trial that he removed the $60,000 from the Casa de Oracion account at Summit National Bank and that he deposited $25,000 of this sum in the Zion Assembly Church of God San Jose account. He testified that he and Pastor Hernandez had serious differences of opinion about church doctrine and policy and that he took funds out of the Casa de Oracion account because he believed Pastor Hernandez “wanted to control the church’s funds.” Carrasco also testified that he asked the buyers of the property on Warrington to reissue their final payment of $70,157.95 to Church of God rather than the Church of God of Prophecy so that he could negotiate this check, and that he deposited it into the account for Zion Assembly Church of God. As treasurer of the newly formed Zion Assembly Church of God in San Jose, Carrasco had control over the funds in that account.
Carrasco argues that because Code of Civil Procedure section 572 refers to an “examination of a party, ” this requires that a motion be supported by written transcripts from trial, and that counsel’s declaration in support of Casa de Oracion’s application was inadequate. He refers us to a civil practice treatise which suggests that a motion under Code of Civil Procedure section 572 “should refer to the parts of the pleadings, or of the defendant’s testimony in an examination, that constitute an admission of the above facts by the defendant.” (2 Cal. Civil Procedure Before Trial (Cont.Ed.Bar 4th ed. 2009) § 34.14, p. 1553.) While this may be a helpful guideline in practice, we do not find any such requirement in the statute. Moreover, Casa de Oracion’s supporting documentation referred to Carrasco’s testimony and also included portions of an exhibit submitted by him at trial. The court had presided over a five-day bench trial, had received and reviewed trial briefs from both sides, and had prepared a statement of decision in this case. The court was therefore familiar with the issues and the testimonial and documentary evidence. Under these circumstances we do not believe that a trial transcript was necessary to support an order under section 572.
Carrasco argues further that when he testified at trial that he had diverted money belonging to the “the church, ” he was referring to the part of the congregation that opposed Pastor Hernandez and followed what Carrasco believed was the true path of the Church of God of Prophecy. He argues that he never conceded that this money belonged to Casa de Oracion. The evidence established, however, that the money did belong to Casa de Oracion. Casa de Oracion’s supporting papers included copies of tabs 21 and 22 from Carrasco’s accounting, which showed that the bulk of the funds in the Casa de Oracion account at Summit National Bank at the time Carrasco made his withdrawals derived from proceeds from the sale of parsonage properties on Donahue and Warrington, which were owned by the church. The final payment on the Warrington property of $70,157.95 was also indisputably a payment on property owned by Casa de Oracion.
To the extent that Carrasco argues that these properties or funds actually belonged to a faction of the congregation, or to an unincorporated association that existed as the Church of God of Prophecy in San Jose prior to incorporation, the trial court had already disposed of that argument in the judgment in case No. 107-CV-082316. The trial court found that the unincorporated religious association known as the Church of God of Prophecy in San Jose no longer existed after it became incorporated in 1998. The non-profit corporation known as Casa de Oracion continued operation of the church and ownership of the church’s properties. The proceeds of the sale of the Warrington property, and the funds withdrawn from the Casa de Oracion bank account, thus clearly belonged to Casa de Oracion.
Carrasco contends that release of these funds to Casa de Oracion was error because it necessarily determined the rights of the parties in the pending accounting action. Therefore, its payment is dependent on the judgment to be rendered in the action. We disagree. The court’s order releasing these funds, the ownership of which was clearly established, did not decide any issues remaining in the accounting cause of action and was not dependent upon a judgment in the case. The accounting cause of action will proceed as to other withdrawals and expenditures that have been placed in issue. The court presiding over the accounting portion of the trial will be able to take into account that of the $289,619.14 in “questionable expenditures” claimed as damages, $95,157.95 has been identified as belonging to Casa de Oracion and has been returned to the church by court order.
Two cases relied on by Carrasco are distinguishable. In Green v. Duvergey (1905) 146 Cal. 379, the trial court dismissed plaintiffs’ case for rescission of a property sale prior to trial when plaintiffs refused to comply with an order to deposit a sum of money equaling amounts allegedly paid by defendants for the property. In reversing the dismissal, the Supreme Court found that it was error to require a pre-trial deposit of money that was the subject of the litigation prior to any evidence being presented. The high court found this violated Code of Civil Procedure section 572, reasoning that “[a] court ought not to require a litigant to surrender his property to another, or for his benefit, until there has been a judicial hearing and determination that he has no right to such property.” (Green v. Duvergey, supra, 146 Cal. at pp. 385-386.) In our case, in contrast, the court had completed five days of trial, during which the evidence had established Casa de Oracion’s right to the money released pursuant to section 572, regardless of the outcome of the rest of the trial.
Burke v. Superior Court of Los Angeles County (1907) 7 Cal.App. 178, also involved a pre-trial order. In that case, the party holding the funds had specifically pleaded an ownership interest in the funds. Therefore the trial court could not “compel him to surrender to another what he claimed to be his property” without a hearing upon the facts. (Id. at p. 181.) In our case there had been such a hearing. And no ownership interest had been specifically pleaded by Carrasco or shown by the evidence.
In sum, Casa de Oracion’s application under Code of Civil Procedure section 572 was supported by documentary evidence submitted at trial by Carrasco and by his own testimony, which showed without question that the $95,157.95 on deposit in the Zion Assembly Church of God account in San Jose was “under his [or her] control, ” and “belong[ed]... to another party.” (Code of Civ. Proc, § 572.) The court found “good cause” for ordering the funds to be deposited in court. In its second order the court stated that it had considered “all the pleadings and evidence in the files” and found that Casa de Oracion was “entitled to the money so deposited....” We conclude the court acted within its discretion when it ordered the funds “to be deposited in court or delivered to such party, ...” (Ibid.)
Just prior to oral argument in this case, we granted Casa de Oracion’s request to take judicial notice of the judgment and statement of decision filed March 22, 2010, following the completion of the trial on the accounting and breach of fiduciary duty causes of action in case No. 106-CV-073180. The judgment confirms the court’s April 1, 2009 order and finds that the funds released to Casa de Oracion pursuant to this order properly belonged to Casa de Oracion.
APPEAL NO. H034193-PROPERTY OWNERSHIP AND DISFELLOWSHIP
In this appeal from the judgment in case number 107-CV-82316, appellants raise two claims: 1) The court erred in ruling that the property at 1333 South White Road was owned by the corporation Casa de Oracion, Church of God of Prophecy, San Jose; and 2) the court erred in finding that Sam Carrasco was properly removed as treasurer of the corporation and as a member of the church.
Standard of Review
The trial court in this case issued a statement of decision, including numerous factual findings. We review those findings under the substantial evidence rule. (Central Coast Baptist Assn. v. First Baptist Church of Las Lomas (2007) 171 Cal.App.4th 822, 840.) “Under that standard, we must consider all the evidence in the light most favorable to the prevailing parties, giving them the benefit of every reasonable inference, and resolving conflicts in support of the judgment.” (Concord Christian Center v. Open Bible Standard Churches (2005) 132 Cal.App.4th 1396, 1408-1409.) Where the resolution of an issue turns on the application of a statute to undisputed facts, or facts as found, we independently interpret the statute, applying well established principles of statutory construction. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 432.) Similarly, to the extent that we interpret and construe written documents central to the case, this also involves an independent review. (Central Coast Baptist Assn. v. First Baptist Church of Las Lomas, supra, 171 Cal.App.4th at p. 840.)
Ownership of the Property at 1333 South White Road
At the outset, we note that “when asked to do so, secular courts may, indeed must, resolve internal church disputes over ownership of property.” (Episcopal Church Cases (2009) 45 Cal.4th 467, 478.) In doing so, however, we must bear in mind that the First Amendment precludes civil courts from adjudicating property disputes based on religious doctrine. “When called on to resolve church property disputes, secular courts must not entangle themselves in disputes over church doctrine or infringe on the right to free exercise of religion.” (Id. at pp. 478-479.)
In consideration of these concerns, our California Supreme Court has adopted the neutral principles of law approach in deciding church property disputes. “[I]f resolution of a property dispute involves a point of doctrine, the court must defer to the position of the highest ecclesiastical authority that has decided the point. But to the extent the court can resolve a property dispute without reference to church doctrine, it should apply neutral principles of law. The court should consider sources such as the deeds to the property in dispute, the local church’s articles of incorporation, the general church’s constitution, canons, and rules, and relevant statutes....” (Episcopal Church Cases, supra, 45 Cal.4th at p. 485.)
Applying this neutral principles approach, appellants argue that the property dispute here is governed by two statutes: Evidence Code section 662 and Corporations Code section 9121. They contend that the application of these statutes leads to the conclusion that the non-profit association known as the Church of God of Prophecy, which is on title to the property, did not merge into the corporation known as Casa de Oracion, Church of God of Prophecy, and therefore still owns the property.
Evidence Code section 662 provides that “[t]he owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.”
Corporations Code section 9121 sets forth the requirements for an unincorporated association to change its status to that of a corporation. First, there must be “proper authorization for such by the association in accordance with its rules and procedures.” (Corp. Code, § 9121, subd. (a).) Second, the articles of incorporation “shall set forth that an existing unincorporated association, stating its name, is being incorporated by the filing of the articles.” (Corp. Code, § 9121, subd. (b).) Next, the articles “shall be accompanied by a verified statement of any two officers or governing board members of the association stating that the incorporation of the association by means of the articles to which the verified statement is attached has been approved by the association in accordance with its rules and procedures.” (Corp. Code, § 9121, subd. (c).) Finally, “[u]pon the change of status of an unincorporated association to a corporation pursuant to subdivision (a), the property of the association becomes the property of the corporation....” (Corp. Code, § 9121, subd. (d).)
When the property at 1333 South White Road was purchased in 1986, the San Jose church had not yet incorporated. Title was taken in the name of “Church of God of Prophecy, a non-profit organization.” This evidence creates a presumption of title under Evidence Code section 662, which can be overcome only by clear and convincing evidence. However, in this case there is clear and convincing evidence that the property is now owned by the corporation Casa de Oracion, Church of God of Prophecy, which is the successor in interest to the non-profit organization.
Casa de Oracion concedes that it did not comply with two of the formalities set forth in Corporations Code section 9121 when it incorporated. There was no express statement in the articles of incorporation that the existing unincorporated association was being incorporated (Corp. Code, § 9121, subd. (b)), and there was no verified statement by two officers that the incorporation of the association had been approved by the association. (Corp. Code, § 9121, subd. (c).) On the other hand, there was overwhelming evidence that the church membership properly authorized and approved the change in status and that the intent was for the association to become merged into the new corporation.
First, consistent with the requirement in section 9121, subdivision (a), the evidence established that there was proper authorization for the change in status from an unincorporated association to a corporation. The initial impetus for changing status came from the international offices of the Church of God of Prophecy, following a resolution by the General Assembly to encourage local affiliates to incorporate. After a discussion of this matter, a majority of the 77 members of the church at the time, including appellants Sam Carrasco and Jorge Carrasco, added their signatures to a document approving incorporation. Pastor Jimenez testified that he did not recall anyone in the congregation objecting to the association incorporating. Thus, although there was no verified statement to this effect in the articles, the evidence unquestionably showed that incorporation of the association was “approved by the association.” (Corp. Code, § 9121, subd. (c).)
Pastor Jimenez himself drafted the articles of incorporation and bylaws, based on some samples he had obtained, and with the help of a paralegal. He was unaware of the formalities required by Corporations Code section 9121, subdivisions (b) and (c). However, he testified that the motivation for incorporating was so that the local church could be recognized as an entity by banks or other financial institutions. There was no intent to separate from the worldwide Church of God of Prophecy headquartered in Tennessee. And there was never any intent to create two separate entities. According to Pastor Jimenez, after the incorporation there was only the one local church, represented by the corporation Casa de Oracion, Church of God of Prophecy. In his view, the non-profit association no longer existed.
Although the articles do not expressly include the phrase “an existing unincorporated association... is being incorporated” (Corp. Code, § 9121, subd. (b)), other parts of the articles, as well as the bylaws and the application for tax status, clearly indicate the intent that the new corporation was to continue as an affiliate of the international Church of God of Prophecy, as it had been for years. Article two of the articles of incorporation states the corporation’s specific primary purpose is “To carry on and to promote in a corporative way the evangelistic, educational and religious work of the Church of God of Prophecy....” Article one of the bylaws provides that “The corporation is an integral subordinate unit and a constituent part of the Church of God of Prophecy with General Offices in Cleveland, Tennessee.” Article four of the bylaws provides that the affairs of the corporation shall be conducted by its Board of Trustees “[s]ubject to the ecclesiastical rights of the President/Pastor, the State Overseer, General Overseer and General Assembly of the Church of God of Prophecy with General Offices in Cleveland, Tennessee....”
The application to the State of California for tax exempt status stated that the San Jose Church had been in existence for 45 years, and that its leadership had come to recognize “the need to formalize its existence with the state of California.” Its stated purpose was “to continue its religious ministry, ” which it recognized could not be fulfilled without “full recognition and benefits from the State of California.” The property at 1333 South White Road was listed as the principal office of the corporation, and was also the church’s “permanent place of worship.” The application stated that the legal owner of the property was “the ‘Church of God of Prophecy’ through the local church trustees.”
In addition to these documents, which consistently reflect an intent for the association to become a corporation, the evidence showed that the new corporation took over the duties and responsibilities of the association. The same individuals who had served in a leadership capacity with the unincorporated association, including Sam Carrasco, continued as part of the new Board of Trustees of the Corporation. Carrasco, who had been treasurer of the association for 40 years, became treasurer and chief financial officer of the corporation. Following incorporation, Carrasco and the other trustees acted on behalf of the corporation in continuing the church’s business dealings, specifically with its bank, Summit National Bank.
Significantly, the corporation took on the obligation to pay the debt owed on the property on South White Road, as evidenced by two promissory notes in favor of Summit National Bank. On January 9, 2001, the church, in its corporate capacity, executed a promissory note for $774,697.59, secured in part by the property at 1333 South White Road. This transaction was accompanied by a “CORPORATE RESOLUTION AUTHORIZING BORROWINGS.” In several places, the promissory note and the accompanying documents identify the “Church of God of Prophecy A Non Profit Organization” as “a California Corporation.” Sam Carrasco, as treasurer of the Corporation, certified the corporate resolution in the name of “CHURCH OF GOD OF PROPHECY A NON PROFIT ORGANIZATION, a corporation duly organized and existing under the laws of the State of California....”
The second promissory note, on January 25, 2006, a partial renewal of the first note, was in the amount of $421,942.89, again secured by the property owned by Casa de Oracion at 1333 South White Road. This was also accompanied by a corporate resolution to borrow and to grant collateral. The resolution contained the following statement regarding “THE CORPORATION’S EXISTENCE”: “The complete and correct name of the Corporation is CASA DE ORACION, CHURCH OF GOD OF PROPHECY, SAN JOSE, California (‘Corporation’).” The corporate resolution was again certified by Sam Carrasco.
Against this evidence that the association had merged into the corporation, no evidence whatsoever was presented that the non-profit organization continued to operate and exist as a separate entity. There were no minutes of any meetings of an unincorporated association, and no indications of any activities of the unincorporated association. Rather the trustees at all times after incorporation acted on behalf of the corporation, making decisions affecting the corporation, borrowing money, and paying the corporation’s bills. Furthermore, although an unincorporated association has the capacity to file a lawsuit (Code Civ. Proc., §§ 367, 369.5), the unincorporated association that appellants claim to represent here did not file this action and did not make an appearance in the action.
We express no opinion as to the disagreements about church doctrine that underlie this property dispute. In such matters we defer to “the highest ecclesiastical authority” of the church. (Episcopal Church Cases, supra, 45 Cal.4th at p. 485.) Here the international offices of the Church of God of Prophecy recognize Casa de Oracion, the corporation, as its only affiliate in the San Jose area, with the same identification number of 277 as had been assigned by headquarters when it originally affiliated. Various officers and leaders in the hierarchy of the international Church of God of Prophecy testified to this. Thus, according to the international Church of God of Prophecy, Casa de Oracion is its affiliate in San Jose, and is the rightful owner of the property, held for the benefit of the general trustees of the Church of God of Prophecy. To the extent that this property dispute involves the resolution of issues of church doctrine and policy, we are bound to accept the church’s decision, which in any event is consistent in this case with the overwhelming evidence supporting the same result under the neutral principles of law approach.
We believe on this evidence that the trial court, sitting in equity, could find that the unincorporated association known as the Church of God of Prophecy had changed its status to a corporation known as Casa de Oracion, notwithstanding the failure to comply with all of the formalities of Corporations Code, section 9121. Incorporation of an association dissolves the association and property formerly owned by the association “becomes the property of the corporation.” (Corp. Code, § 9121, subd. (d); County of Trinity v. Rourke (1969) 275 Cal.App.2d 628.) Therefore, although there was no deed transferring title to the corporation, there was clear and convincing evidence to overcome the presumption of record title ownership, and to show that the corporation was the owner of the property. (Evid. Code, § 622.)
Removal of Carrasco as Treasurer and Disfellowship from the Church
The court found that “Sam Carrasco was properly removed as Treasurer of Casa de Oracion on September 10, 2006, and that he was subsequently properly disfellowed as a member effective January 23, 2007.” Substantial evidence in the record supports this finding.
Article five, section five of the bylaws of Casa de Oracion provides that the books of accounts of the corporation “shall at all times be open to inspection by any trustee or church member.” That same section provides that the treasurer “shall render to the President/Pastor and the Trustees, whenever they so request it, an account of all transactions as Treasurer and of the financial condition of the corporation....”
The evidence, including Carrasco’s testimony, was that Carrasco, despite repeated requests by Pastor Hernandez, refused to provide the accounts of church transactions, particularly regarding the sale of the Warrington property in 2005. Because Carrasco refused to discharge his duties as treasurer, on September 10, 2006, Pastor Hernandez removed Sam Carrasco as treasurer and appointed Victor Velez to that office. According to Bishop Jose Garcia, the State Overseer for California, this was within the power of a church pastor. The bylaws of Casa de Oracion provide that officers are appointed by the pastor-president, not selected by the church membership. Garcia considered it was “definitely an act of insubordination” for the treasurer to refuse to submit financial reports to the pastor and the congregation, since this is one of his stated duties. Garcia testified that Pastor Hernandez had talked to him about the decision to appoint Velez as treasurer and remove Carrasco, and Garcia saw nothing wrong with this. Pastor Hernandez also had the consent of the Board of Trustees. At a Board meeting on September 12, 2006, two days after Pastor Hernandez announced that he was removing Carrasco as treasurer, the Board voted five to two to ratify the newly appointed officers.
As to the disfellowship of Carrasco and 11 others, this occurred by unanimous vote of the membership at a business meeting on January 23, 2007. The minutes of that meeting state that these people had made their covenant with the Zion Assembly Church of God and that “[i]t is obvious that these persons no longer adhere to the teachings and practices of Casa de Oracion, The Church of God of Prophecy, San Jose California, Inc., nor are they willing to submit to the Assembly rulings or Assembly Minutes of the Church of God of Prophecy.” Therefore, their disfellowship was sanctioned because “they have gone astray from the teachings, practices, and government of both Casa de Oracion and The Church of God of Prophecy....”
Appellants argue that under the rules of the Church of God of Prophecy, disfellowship requires a process whereby the Pastor presents reasons for disfellowship at a membership meeting, the members for whom disfellowship is being considered can defend themselves, and the congregation then must vote unanimously to disfellow them. The contentious nature of the dispute in this case made orderly process difficult. However, we believe there is evidence that the requirements for disfellowship were present and that the process was followed.
Following his removal as treasurer, Carrasco refused to provide the books and accounts as requested. Instead, he continued to defy Pastor Hernandez, and on behalf of 14 church members he wrote a letter to Hernandez on September 21, 2006, asking for the pastor’s resignation. As Bishop Garcia testified, since congregations do not select their pastors, they have no authority to remove a pastor and this was highly improper. The proper procedure is to take concerns about pastors to the State Overseer. In any event, Pastor Hernandez responded with a letter on September 29, 2006, to Carrasco and those who had signed his letter, calling for a special meeting on October 4, 2006 to address the status of their membership. Hernandez’s letter stated that “failure to attend will be accepted as your desire to no longer submit to the Teachings and Polity of the Church of God of Prophecy, San Jose California.”
Carrasco and his group did not attend the meeting of October 4, 2006, where a motion to bring charges against them for “bringing division in the church and rejecting the teachings and practices of the Church of God of Prophecy” was passed unanimously. Disfellowship from the church was also discussed, although no vote was taken. The minutes of the meeting state that Carrasco and the others had been notified of the meeting and had the opportunity to present themselves, but did not attend. The minutes further state that these members “have been contacted in a Christian like manner in many ways” and that “the fact that they are not here gives witness to the division.”
Carrasco argues that he was still a member following this meeting, since there had been no vote for disfellowship, and that he received no further notice regarding a membership meeting to discuss his status and possible disfellowship. However, on October 14, 2006, Carrasco and the other former members of Casa de Oracion made their covenant with the newly organized Zion Assembly Church of God congregation in San Jose and Carrasco was ordained a deacon of the new church and was made treasurer. Furthermore, another letter from Pastor Hernandez dated October 28, 2006, informed these people that they had been brought up on charges of committing public offenses and had been found to be “heretical” in their “practice of sound Biblical Doctrine and government as outlined in the General Assembly Minutes of the Church of God of Prophecy and the Word of God.” The letter informed them that they were “Member[s] Not in Good Standing, ” and that they had lost all their rights as members of Casa de Oracion.
According to church doctrine, as expressed in the Book of Minutes of the General Assembly, an offense that brings “division within the church” may result in exclusion. State Overseer Bishop Garcia testified that he considered it grounds for exclusion for a member or members of the congregation to refuse to submit to the authority of the pastor of the church. In the case of Casa de Oracion, he explained, there was a group of people who had expressed discontent with the teachings and decisions of the General Assembly of the Church of God of Prophecy and had decided to join with the Zion Assembly Church of God. In his opinion, they were no longer members in good standing of the local affiliate of the Church of God of Prophecy. Another church leader, who testified on behalf of the international offices of the Church of God of Prophecy, explained that it is the position of the church that “if a member joins another church, they should be excluded from the membership of the Church of God of Prophecy.” When the membership of Casa de Oracion unanimously voted on January 23, 2007, to disfellow Carrasco and his followers, they had been members of the Zion Assembly Church of God for over three months.
In sum, substantial evidence supports the court’s finding that Carrasco was properly removed as treasurer of the corporation and as a member of the Church of God of Prophecy.
DISPOSITION
The superior court’s corrected order of April 1, 2009, ordering the Finance Division of the Santa Clara County Superior Court to release the sum of $95,157.95 to respondent Casa de Oracion is affirmed. The judgment filed March 6, 2009, is affirmed.
WE CONCUR: Mcadams, J., Duffy, J.