Court Opinion

ID: 9854311
Source: CourtListenerOpinion
Date Created: 2023-09-24 06:05:00.944334+00
Date Added: 2024-06-11T09:23:00.957089
License: Public Domain

CARTER, J.—I dissent.
I cannot agree that Pioneer was a charitable organization. The Los Angeles County Pioneer Society was organized in 1897 as an unincorporated association. In 1910, it was in*868corporated as a nonprofit corporation under the existing laws of this state. At the time of incorporation, section 593 of the Civil Code provided that “A nonprofit corporation may be formed by any number of persons, not less than three, for any lawful purposes such as religious, charitable, social, educational, recreational, cemetery or for rendering services, which do not contemplate the distribution of gains, profits or dividends to the members thereof, and for which individuals lawfully may associate themselves, subject to laws and regulations applicable to particular classes of nonprofit corporations or lines of activity. The carrying on of business at a profit incidental to the main purposes of the corporation and the distribution of assets to members on dissolution shall not be deemed forbidden to nonprofit corporations.” (Emphasis added.) Its articles of incorporation provided “That the purpose for which this corporation is formed is to cultivate social intercourse and friendship among its members, to collect and preserve data touching the early history of Los Angeles County and the State of California, to collect and preserve articles, specimens and material things illustrative or demonstrative of the customs, modes and habits of the aforesaid times in said State; to perpetuate the memory of those who, by their labors and heroism, contributed to make the history of said County and State; and in furtherance of said purpose, to receive, purchase, sell, hold, convey, lease, rent and maintain all kinds of property, both real and personal; to build clubhouses, and to do any and all other acts necessary and convenient for the promotion of the aforesaid purpose; and to exist as a social corporation under the provisions of the laws of the State of California, covering such corporations, and not for pecuniary profit.” (Emphasis added.) It was also provided that the corporation should exist for a period of 50 years.
Over the years, membership in the organization decreased until in 1941 there were less than 100 members; at the time of this action there were approximately 58 members still living. It would appear to be clear that the Pioneer Society was organized by a group of people who were brought together by their common interest in the history and historical relics of Los Angeles County and the state and that their purpose in so organizing was to enjoy each other’s companionship, to *869exchange reminiscences and information. In Bogert, Trusts and Trustees (vol. IIA, § 380, p. 182 et seq.) it is pointed out that “Gifts to provide social enjoyment for the members of a private club or other limited group have been held not to be charitable. Probably this is on account of the narrowness of their effect, rather than on account of the nature of the benefits to be derived. Good conversation, eating and drinking together, the playing of games, music, and other entertainment no doubt add to the pleasure of life and to some extent maintain health. A gift for a clubhouse where all citizens of the community might have such social intercourse has been held charitable. But donations for the support of private or limited organizations of a similar type are lacking in the breadth of influence necessary to give them a public or charitable character.” (Emphasis added.) In 1947, it was held in England that a trust to pay income to maintain an institute in London for people of Welsh descent where lectures, study, entertainment, recreation and refreshment could be obtained, for the purpose of promoting the moral, social, spiritual and educational welfare of the Welsh people, is not devoted solely to charitable purposes (Trustees of Sir Sowell Jones Williams’ Trusts v. Inland Revenue Comrs., 1 All Eng.R 513).
The members of the Pioneer Society held meetings, gave picnics for themselves, held a meeting honoring the memory of the pioneers who discovered gold in California, erected a plaque to commemorate the site of the first school building at Inglewood, California, discussed the pioneers of California and (according to the majority opinion) “recollected” the activities of those pioneers. According to Webster (Int. Diet. 2d ed.) the word recollect means “to recover or recall the knowledge of; to call to mind; to remember.” Taking into consideration the average age of 75 years of the members of Pioneer, it seems logical to assume that they were the children of these pioneers to whom they paid tribute and that their purpose in honoring them was not for the benefit of society at large, but to honor their own ancestors as well as to consolidate their fast dwindling ranks for their own social benefit. An organization of canary fanciers, rose horticulturists, or of those interested in purebred cattle, or purebred Irish Setters, or an association of breeders of Palomino horses could hardly be called charitable organizations even though an incidental benefit might be said to result to society at large, or that portion of society also interested in the particular subject. Groups of people vitally interested in the same subject *870matter enjoy ca.ch other’s company because of that interest and often form organizations to discuss, socially, their common interests. Any educational features of any of these organizations are primarily intended for their own benefit, not for the benefit of the general public although nonmembers may improve their knowledge through the efforts of the organization. Such general benefit is purely incidental, however, to the primary purpose of the organization. I am convinced that this is the situation we have here. Mrs. Stoltenberg’s first gifts to Pioneer, of which she was a member, were to enable the organization to purchase a building in which to hold its meetings which she attended; her last gift, by will, was to enable her fellow-members and friends to continue their meetings and social events. It is interesting to note that Historical, the organization appointed to act as trustee, was an organization existing at the same time as Pioneer during Mrs. Stoltenberg’s lifetime. Had she desired Historical to have the benefit of her gifts, undoubtedly she knew of its existence and could have interested herself therein; had she desired only to benefit the people of this state through the collection of historical data and relics, undoubtedly she would have made gifts to both organizations. To my mind, her membership in Pioneer and her gifts to that organization, clearly support the social character of Pioneer. Another point clearly supporting the social character of the organization is that neither outsiders nor members of the general public were admitted to the meetings of the society. If an organization is intended to benefit the general public, surely the general public should be admitted to meetings for its benefit.
In Abalian v. Townsend Social Center, Inc., 112 Cal.App.2d 441 [246 P.2d 965], it was held that a social center whose articles of incorporation disclose that its purpose was to acquire a club building for the convenience of its members and other persons interested in the old age pension movement was a nonprofit corporation for the benefit of its members, and not a charitable corporation holding assets charged with a public trust. In Estate of Dol, 186 Cal. 64 [198 P. 1039], (a case holding Pioneer a charitable organization) it was pointed out that if the “only” object of an organization were to cultivate social intercourse and friendship among its members, it would be for the benefit of the members alone and would not be a charitable organization. I cannot agree that an organization may not be organized for social purposes with a common interest in an educational program without being classified *871as a charitable organization. In Estate of Dol, 182 Cal. 159, 163 [187 P. 428] (involving the French Hospital in Los Angeles), it was held that “One of the essential features of a charitable use is that it shall be for the public benefit, either for the entire public or for some particular class of persons, indefinite in number, who constitute a part of the public. The persons to be benefited must consist of ‘the general public or some class of the general public indefinite as to names and numbers. ’ (Estate of Colemam,, 167 Cal. [212], 214 [Ann.Cas. 1915C, 682,138 Pac. 992, 993]; Estate of Lennon, 152 Cal. 327 [125 Am.St.Rep. 58, 14 Ann.Cas. 1024, 92 Pac. 870].) ” Here the members of Pioneer were definite and known. Here, as in Estate of Dol, supra, 182 Cal. 159, no one was entitled to the benefits of the society except those who became admitted as members and paid their dues. It was there held, in line with Stewart v. California Medical Etc. Assn., 178 Cal. 418, 419 [176 P. 46], that “the declaration in the articles alone are insufficient to establish the character of the St. Helena Hospital as a public charity, and the evidence of the manner in which it was conducted shows that it was not” and “the character of the institution is to be determined, not alone by the powers of the corporation as defined in its charter but also by the manner of conducting the hospital.” That statement is pertinent here. I have heretofore shown that this organization was conducted for the benefit of the members alone; that its meetings were not open to the public; that its primary purpose was the social benefit to be derived by the members from their association with each other. In Estate of Henderson, 17 Cal.2d 853, 857 [112 P.2d 605], this court said “A bequest is charitable if: (1) It is made for a charitable purpose; its aims and accomplishments are of religious, educational, political or general social interest to mankind. (People v. Cogswell, 113 Cal. 129 [45 P. 270, 35 L.R.A. 269]; Estate of Merchant, 143 Cal. 537 [77 P. 475].) (2) The ultimate recipients constitute either the community as a whole or an unascertainable and indefinite portion thereof. (People v. Cogswell, supra; Estate of Hinckley, 58 Cal. 457; Fay v. Howe, 136 Cal. 599 [69 P. 423].) The charitable nature of an institution is determined on the same basis.” (See In re La Societe Francaise Etc. Mutuelle, 75 Cal.App.2d 770 [171 P.2d 544].)
In summary, and in applying the tests laid down in Estate of Henderson, supra, 17 Cal.2d 853, (1) Pioneer’s aims were *872to promote the social life of its members through their common interest in California history; (2) The ultimate recipients of any benefits to be derived from the organization were the members in good standing of the organization, not the community as a whole or an unascertainable and indefinite portion thereof.
In a nonprofit corporation existing for the private benefit of its members, upon dissolution assets are distributed among the members (Corp. Code, § 9801; Brown v. La Societe Francaise Etc. Mutuelle, 138 Cal. 475, 477 [71 P. 516]; Abolian v. Townsend Social Center, Inc., 112 Cal.App.2d 441, 449 [246 P.2d 965]; 168 A.L.R. 956). This, I believe, is the result which should be reached here. It seems quite apparent that Pioneer was a nonprofit organization existing for the private benefit of its members who should, upon dissolution, receive a distributive share of the assets held by Pioneer.
Assuming, however, only for the purposes of the following argument that Pioneer is a charitable organization, I see no valid reason why it should not be able to correct its deviation from its articles of incorporation. In other words, why should not Pioneer be permitted to continue to operate as a society and to revoke its former petition to dissolve the corporation! It is admitted in the majority opinion, that Pioneer’s “abandonment of its trust was brought to light in the dissolution proceeding.” Section 4691 of the Corporations Code provides that “if the cause of action is a matter or act which the corporation has done or omitted to do that can be corrected by amendment of its articles or by other corporate action, such suit shall not be maintained unless (a) the Attorney General, at least 30 days prior to the institution of suit, has given the corporation written notice of the matter or act done or omitted to be done, and (b) the corporation has failed, neglected, or refused to institute proceedings to correct it within the 30-day period or thereafter fails to prosecute such proceedings.” (Emphasis added.) The majority calls attention to the fact that during the time intervening after the interlocutory judgment, the order appealed from and the affirmance by the District Court of Appeal, Pioneer’s attention was repeatedly called to its status as a charitable organization. No mention is made of the fact that there was still to be made a determination by this court. In the event that this court had not decided that Pioneer was a charitable organization, it would have had the right to dissolve and distribute its assets among its members. Why then, should it not be given notice *873after the final determination has been made, that it must conform to its articles or that a successor trustee will be appointed? It is interesting to note that the title of section 4691 is “Conditions precedent: Notice affording opportunity for corrective action." The majority states that under section 10207 of the Corporations Code, the attorney general has power to obtain the appointment of a successor trustee and that “there is nothing therein limiting the power of the Attorney General to cases where the assets of the charitable corporation have been distributed. ’ ’ The assets involved here have not been distributed but have been impounded pending the final determination of the issues involved. Section 10207 provides that “Bach such [charitable] corporation shall be subject at all times to examination by the Attorney General, on behalf of the State, to ascertain the condition of its affairs and to what extent, if at all, it may fail to comply with trusts which it has assumed or may depart from the general purpose for which it is formed. In ease of any such failure or departure the Attorney General shall institute, in the name of the State, the proceedings necessary to correct the noncompliance or departure. Except as specially approved by the Attorney General such a corporation shall not accumulate income for a period longer than five years." (Emphasis added.) The section provides for “correction" of a noncompliance or departure; it does not prohibit a self-correction by the erring corporation. If Pioneer terminates its dissolution proceedings, and continues as it has done in the past, then, under the view taken by the majority of this court, it will be carrying on its charitable purposes and there is no reason why a successor trustee should be appointed to administer Pioneer’s funds. No authority is cited for the proposition that Pioneer may not be permitted to correct its deviation from its articles by withdrawing or revoking its dissolution proceedings nor have I found any such authority. The Bestatement of Trusts (§ 392) provides that (comment a) “A suit in equity can be maintained by the Attorney General to compel the trustees of a charitable trust to perform their duties as trustees, or to enjoin them from committing a breach of trust, or to compel them to redress a breach of trust, or to appoint a receiver to take possession of the trust property; or to remove the trustees and appoint other trustees." There are, thus, several remedies other than the appointment of a successor trustee.
*874There was no bad faith on the part of Pioneer in voting to dissolve the corporation. It filed an action in declaratory-relief and obtained a judgment to the effect that no trust of any kind was impressed upon its assets; it voted to dissolve and then petitioned the superior court for judicial supervision of the dissolution; it agreed that the attorney general might file a petition in intervention. Under the circumstances presented and in view of the fact that the applicable statutes do not prevent it, there appears to be no sound reason why Pioneer should not be permitted to revoke its dissolution proceedings and carry out the trust imposed by its articles since it. is finally adjudged to be a charitable organization.
I would, therefore, reverse the judgment.
Schauer, J., concurred.
Appellants’ petitions for a rehearing were denied May 28, 1953. Carter, J., and Schauer, J., were of the opinion that the petitions should be granted.
The following opinions were then filed.