Catholic Charities Clothes Bank of Lethbridge v. Roman Catholic Bishop of the Diocese of Calgary, 2012 ABQB 180

Court of Queen ’ s Bench of Alberta Citation: Catholic Charities Clothes Bank of Lethbridge v. Roman Catholic Bishop of the Diocese of Calgary, 2012 ABQB 180 Date: 20120315 Docket: 1106 00007 Registry: Lethbridge Between: Catholic Charities Clothes Bank of Lethbridge Applicant - and - Roman Catholic Bishop of the Diocese of Calgary Respondent _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice W.V.

Hembroff _______________________________________________________ [ 1 ] The Applicant, Catholic Charities Clothes Bank of Lethbridge (referred to as “CCCB”), is seeking a Declaration that two properties, 118 5 th Street South and 1802 2 nd Avenue South, both in the City of Lethbridge, are held in trust for CCCB by the Respondent, either on an express, resulting or constructive trust basis, subject to an equitable charge in favour of the Respondent in the amount of $164,815.86. CCCB is also seeking an Order that these two properties be transferred forthwith to CCCB subject to that equitable charge.

Alternatively CCCB alleges it is entitled to the properties by way of adverse possession subject to an equitable charge in favour of the Respondent. [ 2 ] CCCB says that it purchased the properties using its own funds and funds borrowed from the Respondent, but the titles to the properties stand in the name of the Respondent. CCCB says these properties are held by the Respondent in trust, and CCCB seeks to

terminate that trust. [ 3 ] CCCB alleges the present valuation is based on the Assessment by the City of Lethbridge for taxation purposes, and the values are $579,000.00 for the 2 nd Avenue property and $376,000.00 for the 5 th Street property. [ 4 ] The position of the Roman Catholic Bishop of the Diocese of Calgary (referred to as “the Diocese”) is that CCCB is an agency of the Diocese and is subject to the authority of the Catholic Church and the Bishop. It says, like all parishes and agencies of the Diocese, CCCB does not own the buildings it uses, cares and pays for.

All real property is owned exclusively by the Bishop, and thus the properties are properly in the name of the Diocese. [ 5 ] The argument of CCCB is succinctly set out in Paragraphs 12 and 13 of the Applicant’s Brief: 12. The CCCB has always treated the properties as it’s own for the purpose of accounting and for the purposes of it’s professionally prepared Financial Statements. The office of the Bishop in its charitable filings has similarly not included the properties as an asset belonging to the Bishop. 13.

The CCCB believes that the properties which it paid for belong to it, both legally and beneficially and it seeks relief in this Application to acquire title to those properties. [ 6 ] CCCB argues that this view is supported by a review of the financial arrangements between the Bishop and the CCCB at the time of the purchase of the properties. In order to consider the validity of the arguments it is necessary to review the history of the creation of the CCCB and the property purchases. [ 7 ] Much of the history, the purchase prices and the values of the properties are summarized in CCCB’s Brief.

Each of the allegations are supported by the Affidavit of Charles Kiely, who is the President of CCCB and who deposes that he has a personal knowledge of the facts and matters deposed to except where stated to be upon information and belief. CCCB History [ 8 ] Very extensive and well-organized Minutes have been kept by CCCB in its earlier identity and unincorporated forms, right up to the present. Initially the organization was called the Catholic Family Services. It was amalgamated with the Lethbridge Family Bureau in 1967, under the new name Lethbridge Family Services.

The history of CCCB indicates that even at the time of the amalgamation, however, those involved thought that the CCCB should be an entity by itself and not under the auspices of the new Lethbridge Family Services. [ 9 ] The Minutes kept by CCCB go on to say that there is no record that Catholic Charities of the Diocese of Calgary were advised of or dissociated themselves with the Lethbridge Clothes Bank.

It seems that Catholic Charities of the Diocese of Calgary were not advised of the existence of this separate entity. [ 10 ] This somewhat undefined situation continued for a number of years, without the interference or even the knowledge of the Diocese, until 1977. At that time the Chaplain reported that: Bishop Paul O’Byrne had been advised of the existence of Catholic Charities Clothes Bank and that an examination of the legal status is being carried out. A start was made on the bylaws made in 1977.

[ 11 ] There is a further note from the CCCB Minutes of the October 19, 1977 meeting that seemed to state the understanding the CCCB Board had with regard to its status. The entire note from October 29 of 1997 reads as follows: OCTOBER 29, 1977 Meeting with Bishop Paul O’Byrne for the purpose of discussing the identity of Catholic Charities Clothes Bank. Turning to the matter of our legal standing, His Excellency felt that we should have some linkage with the Diocese, with some reflection upon a reasonable association between ourselves and the Deanery with an exchange of operations.

Bishop Paul assured the meeting that it would not be his intent not the intent of the Diocese, Pastoral Council or Deanery to impose any form of control, but only to provide support and some linkage with the Diocese. In exchange, we could consider providing a simple Terms of Reference (sic) as to WHO we are, WHAT we are doing, and WHAT are our needs. We could be asked to support such things as setting up the Pastoral Council, but the decision would remain ours. By the same token, should we require help at any time, we could ask it from the Diocese.

An informal suggestion re the future home of the Clothes Bank - that we could entertain the idea of perhaps one day investing in property and a building of our own, which could house the Clothes Bank and Thrift Shop as well as offices of the Pastoral Council and various other Catholic Agencies and organizations, being known possibly as the Catholic Centre. [ 12 ] Certainly at that time the Diocese never expressed any intent to impose any control but actually the first thoughts of investing in and owning property were obviously discussed.

From the time of this communication this somewhat nebulous situation continued for a number of years and apparently without interest or any interference from the Diocese. [ 13 ] Ultimately the Bylaws of the existing non-registered charitable organization, the CCCB, were prepared by a member of the Board in early 1980 for study and after some further time, the Bylaws were approved and presented for registration.

On December 17, 1982, the CCCB became a society under the Societies Act as it existed in 1982. [ 14 ] There is no evidence in the history provided to the Court that the Diocese had any involvement or demonstrated any interest in the process of incorporation. [ 15 ] It was about the time that the incorporation occurred that a search was undertaken to find a new premise to replace the old facility. 1983 Building [ 16 ] The first purchase, that of the building at 118 5 th Street South, was negotiated by CCCB.

It was named as purchaser, and the Purchase Agreement, signed by officers of CCCB, was presented to the Diocese for approval. The approval was given and apparently in accord with the practice of the Church, the land was to be registered in the name of the Diocese. But as indicated in the letter from the Diocese of January 25, 1983, Tax Notices “and all other matters should be handled through your office”, that is to say, the office of CCCB. [ 17 ] The purchase price of the building was $290,000.00.

CCCB provided a down payment of $170,000.00 from its own funds and borrowed the rest of the funds from the Diocese. [ 18 ] The Minutes of CCCB from its regular meeting of February 18, 1983, approved the purchase. There was some discussion concerning the lodging of the titles. Those Minutes read as follows: TITLE OF OWNERSHIP OF NEW BUILDING The past history of the Clothes Bank was outlined by Anne Kirby, bringing forth the severance of the Clothes Bank from pastoral care , and concern was expressed regarding the title of ownership to the newly purchased building. [emphasis added]

After discussion, Father Sullivan carefully outlined why the Clothes Bank should be affiliated with the R.C. Bishop of the Diocese. [ 19 ] It is apparent to me from the Minutes that CCCB had some concern that the business of the Clothes Bank be separate from pastoral care. Nevertheless and after some discussion with the Pastor, Father Sullivan, this lodging of the title was approved. There is no evidence here or elsewhere in the documents to suggest that it was ever intended that the property should be owned by the Diocese.

It should also be pointed out that while counsel had apparently been involved in the setting up of the CCCB, there is no evidence that any legal advice was given as to the effect of the registration in the name of the Diocese. 1995 Building [ 20 ] The second building in issue is 1802 2 nd Avenue South, which was purchased in 1995. The purchase price was $365,000.00.

A down payment of $100,000.00 was provided by CCCB and the balance of $265,000.00 was borrowed from the Diocese. [ 21 ] Initially, in July of 1995, Lethbridge solicitors for CCCB returned titles to the Diocese covering the property in question and indicated the transaction had been concluded.

Thereafter, the Diocesan finance office provided closing documentation to the Executive Director of CCCB by a letter which very clearly states that the Diocese “is enclosing a cheque in the amount of $33,016.21 which is the balance of the loan plus interest.” The letter goes on to provide a Letter of Agreement, requesting execution by CCCB. [ 22 ] The Agreement was executed by the appropriate officers of CCCB and returned to the Diocese. A copy of the original document can be found in the Kiely Affidavit.

The Letter of Agreement signed by both parties clearly refers to “the terms of a loan received from the Central Fund”. The terms indicate that there was a Demand Note for $150,000.00 with interest payable and as well a 20 year term loan for $150,000.00 to be payable on a monthly basis. Reasoning [ 23 ] In response to all of the various trust and adverse possession claims made by CCCB, the Diocese’s overall position is that the Diocese’s refusal to turn the properties over is not subject to review. This position is succinctly stated in the overview of the Diocese’s argument: 1.

This application is an attempt to have this Honourable Court overrule an administrative decision made by the Roman Catholic Bishop of Diocese of Calgary (the “Bishop”) regarding two buildings owned by the Bishop. 2. The Catholic Charities Clothes Bank (“CCCB”) is an agency of the Roman Catholic Diocese of Calgary (the “Diocese”) and is subject to the authority of the Bishop. Like all parishes and agencies of the Diocese, the CCCB does not own the buildings it uses and cares for. All real property is owned exclusively by the Bishop. 3.

The CCCB made a request to the Bishop that the buildings it resides in be sold or encumbered for the purpose of funding the CCCB’s money-losing operations. The Bishop declined to sell the buildings without a proper business plan being presented justifying the proposed sales and the assertions by the CCCB that it could turn its money-losing operations around. That decision was within the Bishop’s authority to make. 4.

Having failed to present the requested plan and thereby failing to obtain the Bishop’s approval for sale, the CCCB now comes before this Court asserting that the buildings it operates out of are held in trust for it by the Bishop and seeking transfer of title so that it can sell and/or encumber the buildings to finance its operation. [ 24 ] It is further submitted by the Diocese that:

(

a) the CCCB is an agency of the Diocese and subject to the authority of the Bishop; (

b) the buildings at issue are owned exclusively by the Bishop and no express, constructive or resulting trusts, as alleged by the CCCB, exist; (

c) the CCCB has occupied the buildings with the knowledge and consent of the Bishop and no adverse possession exists; (

d) this Honourable Court should decline to interfere with the administrative decisions made by the Bishop; ... [ 25 ] I am prepared to accept the Diocese’s argument on the issue of adverse possession. As well, the Diocese argues there is no express trust, resulting trust, or constructive trust. I also accept there can be no constructive trust in this particular circumstance. [ 26 ] The issue of whether there is an express trust or a resulting trust remains.

I will deal with these issues after considering the position of the Diocese concerning the sovereignty of the Catholic Church over these matters. [ 27 ] Effectively the argument takes the position that all things “Catholic” are under the complete control of the Diocese and for the benefit of the Church. In the course of argument a very brief portion of the Code of Canon Law of the Church was quoted and it is reproduced below. BOOK V. THE TEMPORAL GOODS OF THE CHURCH LIBER V. DE BONIS ECCLESIAE TEMPORALIBUS Can. 1254 § 1.

To pursue its proper purposes, the Catholic Church by innate right is able to acquire, retain, administer, and alienate temporal goods independently from civil power. § 2. The proper purposes are principally: to order divine worship, to care for the decent support of the clergy and other ministers, and to exercise works of the sacred apostolate and of charity, especially toward the needy.

Can. 1255 The universal Church and the Apostolic See, the particular churches, as well as any other juridic person, public or private, are subjects capable of acquiring, retaining, administering, and alienating temporal goods according to the norm of law. Can. 1256 Under the supreme authority of the Roman Pontiff, ownership of goods belongs to that juridic person which has acquired them legitimately. Can 1257 § 1.

All temporal goods which belong to the universal Church, the Apostolic See, or other public juridic persons in the Church are ecclesiastical goods and are governed by the following canons and their own statutes. § 2. The temporal goods of a private juridic person are governed by its own statutes but not by these canons unless other provision is expressly made.

Can. 1258 In the following canons, the term Church signifies not only the universal Church or the Apostolic See but also any public juridic person in the Church unless it is otherwise apparent from the context or the nature of the matter. [ 28 ] There was some discussion as to what a juridic person is and I asked counsel subsequent to the argument to provide me with their comments relative to the above noted quotation regarding temporal goods. In her response to me, the Diocese’s counsel describes three categories of persons within the Church: natural or physical persons; moral persons; or juridic persons.

She defines “juridic person” as follows: A juridic person, on the other hand, is an artificial person, distinct from all natural persons or material goods, constituted by competent ecclesiastical authority for an apostolic purpose, with a capacity for continuous existence and with canonical rights and duties like those of a natural person (eg. to own property, enter into contracts, sue or be sued) conferred upon it by law or by the authority which constitutes it.

A juridic person, then, is a body within church law that is created by the proper Church authority to do a work that is greater than the individuals involved.

A juridic person can have rights and duties analogous to natural persons. [ 29 ] If such is the case, there is no evidence that the Diocese had any active membership or any kind of involvement in the CCCB Board or its operations for many years, and took no apparent interest in the operation of the Clothes Bank until the question of the ownership of the property came up. [ 30 ] As I have indicated above there are early communications on file, particularly from Bishop O’Byrne, suggesting the Diocese had no desire in involving itself in the operation of CCCB.

Even when CCCB starting looking for a more satisfactory location, the Church was aware, but still seemed to recognize its independence. [ 31 ] As one examines the numerous Minutes going back into the 1970's, there is never any indication that CCCB, in whichever identity it was, had any intention of anything other than owning property. Equally there is no evidence that the Diocese made it clear that CCCB could not or would not own property.

In fact the financial history of the CCCB quite clearly indicates that it was very successful, that it made a good deal of money, and that it put a good deal of money aside, even though some of this was taken by the Diocese.

In all events it was the money earned by CCCB that was used for the down payment in the purchase of both properties. [ 32 ] Is it any wonder that the Board of CCCB would expect that it was a separate entity and on its own to carry on its objects including the purchase and retention of property? [ 33 ] Clearly CCCB is a separate legal entity whose existence and powers are verified by the statutes and regulations of the Province of Alberta.

Pursuant to the Societies Act , RSA 2000, c S-14, CCCB may engage in specified activities: 17(1) A society may acquire and take by purchase, donation, devise or otherwise all kinds of real estate and personal property, and may sell, exchange, mortgage, lease, let, improve and develop it, and may erect and maintain any necessary buildings.

(2) The funds and property of the society shall be used and dealt with for its legitimate objects only and in accordance with its bylaws. 18(1) For the purpose of carrying out its objects, a society may borrow or raise or secure the payment of money in any manner it thinks fit, and in particular by the issue of debentures.

(2) The power of a society under subsection (1) shall be exercised only under the authority of the bylaws of the society and in no case shall debentures be issued without the sanction of a special resolution of the society.

[ 34 ] If CCCB is a “juridic person”, then pursuant to Canon 1257§1 the temporal goods, meaning the land and buildings, of a private juridic person are governed by it’s own statutes and not by these Canons unless other provision is expressly made. [ 35 ] In the Diocese’s response to my request for her observations about the

interpretation of the Canon Law discussed at the Application, she says, inter alia : There being no formal decree from the Diocese and Bishop of the Diocese of Calgary making the CCCB a juridic person, it is a private association of the Christian faithful without juridic personhood. [ 36 ] That observation is in keeping with the evidence provided in the material before me. Nowhere in that material can be found any “decree” or any other observation or edict claiming or declaring CCCB had been designated as a juridic person. In fact, all the evidence is to the contrary.

In particular it is clear the Bishop left CCCB to its own devices, never interfered, never directed, and never accepted CCCB as anything but an organization able to run its own affairs. [ 37 ] I find CCCB is not a juridic person and is therefore governed by the statutes which created it and govern its continued existence. Express Trust and Resulting Trust [ 38 ] If CCCB’s argument is correct at this point, it must still be determined whether the manner in which the Diocese obtained title to the properties gives rise to an express or a resulting trust. [ 39 ] There is no evidence of an express trust.

To the contrary the evidence suggests CCCB intended itself as owner and never gave any indication that it intended the property to be owned by the Diocese.

Similarly, the only evidence the Diocese considered itself the proper registrant of these properties came into existence when the CCCB requested transfer of its titles so that it could deal with the property as it saw fit. [ 40 ] There was nowhere to be found in the material before me an express trust or in fact any words of trust in favour of CCCB. [ 41 ] As well, nowhere is there to be found any intention that this was to be a gift or a transfer pursuant to some rules or regulations.

CCCB allowed the land to be registered in the name of the Diocese solely in order to obtain funds to complete the purchase and conduct its own affairs in its own way. [ 42 ] In the result, I find there was no express trust as to the transfer and registration of the properties. [ 43 ] Much has been written as to what constitutes a resulting trust. Professor Donovan Waters makes the following assertion in Donovan Waters QC, editor-in-chief, Mark Gillen & Lionel Smith, contributing editors, Waters ’ Law of Trusts in Canada , 3d ed (Toronto: Thomson Canada Limited, 2005) at page 260: 2.

Resulting Trust Situations Apart from the existence of express and constructive trusts, the facts in the particular case may be of such a kind as to give rise to a resulting trust. There is no resulting trust if A purchases land in his own name, the arrangement with B being that A will hold the land as security until B has paid A the purchase price. But if X buys land and has it conveyed to Y on terms that Y is to hold on trust for X, there is an express trust and the situation also gives rise to a resulting trust. Under each trust X is the trust beneficiary.

Like the constructive trust, the resulting trust arises by operation of law, and is expressly exempt from the provisions of the Statute. A resulting trust arises whenever one party buys property and has it gratuitously conveyed to another or into the joint names of himself and another. It also arises

when one party gratuitously transfers his own property into the name of another, or into the joint names of himself and another. It will therefore be seen that in many situations where land is conveyed on oral trust, the law would in any event presume proof is placed upon the transferee if he wishes to argue that a gift was intended. It might therefore have been possible at any time after 1677 for the courts to have ignored the express trust where a resulting trust also arose, and thus to have placed upon the transferee the burden of proof that a gift was intended.

It is true that neither plaintiff nor defendant can give evidence of the oral trust, but, if there was an express trust, it is most improbable that the transferee could find other evidence that would be sufficient to discharge his burden of proof. [footnotes omitted] [ 44 ] If one were to consider only the purchase documents, it would seem very clear that CCCB intended that ownership of the land was to be by CCCB and that the Diocese only held the title because of the loan being granted by it. In both purchases the borrowed funds were always treated as a loan.

The title was being held as security for the payment of the loan. I can find no evidence of any intention on the part of CCCB to make the equity in the property a gift or otherwise a benefit to the Diocese. It might be observed that such an arrangement is not unusual in commercial transactions where titles are hypothecated to the lender as security for the loan. [ 45 ] Further, nowhere in the material can be found any absolute or clear statement that the beneficial interest in either of the properties was to be in the Diocese.

All transfers of title were done to facilitate the purchase of these properties by CCCB. The purchase price in each case came from CCCB’s own revenue or from a clearly described loan from the Diocese. [ 46 ] One is compelled to ask if the loan was advanced by the Diocese to meet the balance of CCCB’s purchase price of these properties, how else could one construe the intent of the arrangements but as a recognition of who the owner of the property was to be and who was responsible for the discharge of the debt? [ 47 ] I find there is a resulting trust, and the Diocese holds the two properties in trust for CCCB.

The Diocese has no claim to the properties in question. Accordingly there will be an Order that the Diocese convey the properties back to CCCB in its capacity as a properly-constituted Alberta society.

The properties to be conveyed to CCCB are: 1. 118 5 th Street South, legally described as Lots 14 and 15, Block 7, Plan 4353S 2. 1802 2 nd Avenue South, legally described as Lot 23 to 26, Block 72, Plan 8210298 [ 48 ] Failing such a transfer within 30 days of the filing of this Order, the Director of Land Titles for the Southern Alberta Land Titles District shall cancel the present two titles and issue two titles to the properties in the name of CCCB. [ 49 ] In either case, the Diocese shall be entitled to a charge registered against both titles protecting the amount of the loan outstanding to it by CCCB at the time of this transfer.

In the event the parties cannot agree there will be an accounting. [ 50 ] The Applicant is entitled to its costs as agreed, if not as taxed. Heard on the 07 th day of February, 2012. Dated at Lethbridge, Alberta this 15 th day of March, 2012

W.V. Hembroff J.C.Q.B.A. Appearances: Krushel Farrington James R. Farrington for the Applicant Gowling Lafleur Henderson LLP Laurie C. Livingstone For the Respondent