City of Palm Springs v. Living Desert Reserve

• Citation: 82 Cal.Rptr.2d 859,70 Cal.App.4th 613
• Decision Date: 03 March 1999
• Docket Number: No. E018472,E018472
• Court: California Court of Appeals Court of Appeals
• Parties: , 99 Cal. Daily Op. Serv. 1664, 1999 Daily Journal D.A.R. 2123 CITY OF PALM SPRINGS, Plaintiff and Respondent, v. LIVING DESERT RESERVE, Defendant and Appellant.

Page 859

82 Cal.Rptr.2d 859

70 Cal.App.4th 613, 99 Cal. Daily Op. Serv. 1664,

1999 Daily Journal D.A.R. 2123

CITY OF PALM SPRINGS, Plaintiff and Respondent, v. LIVING DESERT RESERVE, Defendant and Appellant.

No. E018472.

Court of Appeal, Fourth District, Division 2, California.

March 3, 1999.

Review Denied June 3, 1999.

[70 Cal.App.4th 617] Redwine and Sherrill, Justin M. McCarthy and Steven B. Abbott, Riverside, for Defendant and Appellant.

Rutan & Tucker, LLP, David J. Aleshire and David B. Cosgrove, Costa Mesa, for Plaintiff and Respondent.

O P I N I O N

McKINSTER, J.

Not infrequently, wealthy individuals, intending both to promote the common weal and to memorialize themselves, give property to a city on the condition that it be used in perpetuity for some specified purpose. With disturbing regularity, however, the city soon tires of using the donated property for the purpose to which it agreed when it accepted the gift, and instead seeks to convert the property to some other use.

In this case, for instance, the City of Palm Springs ("City") built a golf course on 30 acres of donated property which it had accepted in 1986 on the express condition that it be used in perpetuity as a desert wildlife preserve. The trial court reluctantly approved. We reverse.

FACTUAL AND PROCEDURAL BACKGROUND

In June of 1986, the Bank of America, as trustee of the McCallum Desert Foundation ("Foundation") under the will of Pearl M. McManus, deceased, executed a grant deed ("Deed"), conveying 30 acres of land ("Land") to the City. ¹ The Deed provides:

"THIS DEED IS MADE AND ACCEPTED ON THE EXPRESS CONDITION that the land hereby conveyed be used solely as the site of the McCALLUM DESERT PRESERVE AND EQUESTRIAN CENTER, and that grantee, its successors or assigns shall forever use the land and premises for the purpose of maintaining a public park for the exposition of desert fauna and flora, named as the McCALLUM DESERT PRESERVE AND EQUESTRIAN CENTER.

"In the event that the property is not used solely and perpetually as the site of the McCALLUM DESERT PRESERVE AND EQUESTRIAN CENTER, then the interest in the land and premises herein conveyed shall pass to the Living Desert Reserve, Palm Desert, California, and grantee shall forfeit all rights thereto."

The City expressly accepted the grant in October of 1986. Less than three years later, however, the City decided that it would rather build a golf course on the Land. Believing that the golf course would be inconsistent with the condition in the Deed, the City asked the Living Desert for permission to buy other property for use as a preserve instead of the Land. Those negotiations continued periodically without success. The City's final offer was made in November of 1992, when it offered to buy the Living Desert's reversionary interest in the Land for $200,000 and threatened to take the interest by eminent domain if the Living Desert did not agree.

After the Living Desert declined that offer, the City adopted a resolution of necessity (Code Civ. Proc., § 1245.210, et seq.) by which it found that the public health, safety and welfare required the acquisition of the Living Desert's reversionary interest in the Land for the purpose of expanding the City's municipal golf course. In March of 1993, the City filed a complaint in eminent domain (Id., § 1250.310) by which it sought to do so. Simultaneously, the City applied for an order for immediate possession of the reversionary interest within 30 days, relying on an appraisal valuing that interest at $200,000 and on a deposit in an equal amount. (Id., § 1255.010, et seq.) The trial court granted the application and issued the order for immediate possession.

In October of 1993, the Living Desert recorded a notice of breach of condition subsequent. (Civ.Code, § 885.050.) The notice alleges that the City breached the conditions of the Deed by (1) adopting the resolution by which it declared the necessity of acquiring the reversionary interest to permit the golf course expansion and (2) implementing that resolution by filing its eminent domain action and obtaining an order for immediate possession. In the same month, the Living Desert cross-complained against the City to quiet title to the Land. It alleged that, as a result of the City's breach of the conditions and the notice of that breach, the fee-simple interest of the City in the Land had reverted to the Living Desert.

The parties stipulated that the issues of whether (1) the reversionary interest held by the Living Desert is a compensable interest and (2) the City had breached the conditions of the Deed would be bifurcated from and tried before the issue of the amount of any compensation due for the reversionary interest.

At the beginning of trial, the City moved for judgment on the pleadings. The trial court granted the motion as to the cross-complaint, finding that the interest of the Living Desert is measured as of the date the complaint in eminent domain was filed, that as of that date the City had not yet changed the use of the Land or otherwise violated the Deed, and that the Living Desert therefore owned only a reversionary interest, not the fee title to the Land. However, it denied the motion on the issue of whether the reversionary interest was compensable. Following an evidentiary bench trial, the trial court issued a statement of decision in which it ruled that the reversionary interest was not a compensable interest and hence no payment was due to the Living Desert, and entered judgment in favor of the City.

The Living Desert appeals. The Attorney General of the State of California appears as an amicus curiae.

CONTENTIONS

In its opening brief, the Living Desert does not challenge the trial court's adverse ruling on its cross-complaint. However, on the complaint, it contends that the trial court erred by relying on Code of Civil Procedure section 1265.410, subdivision (a)(1) ["section 1265.410(a)(1)"], to determine that the reversionary interest was not compensable. Specifically, it argues that the statute does not apply to efforts by a condemnor to relieve itself of the obligation to comply with conditions accompanying a gift of property, and that if it does, the statute permits the taking of property without just compensation, in violation of the federal and state constitutions.

Challenging the assumptions under which the case was tried below, the Attorney General contends that the Foundation gave the Land to the City in a charitable trust, not in fee simple subject to a condition subsequent, that the effect of the judgment was to terminate that trust, and that therefore the judgment must be reversed because the trial court lacked subject-matter jurisdiction to terminate a charitable trust.

In its reply brief, the Living Desert adopts the Attorney General's argument as an alternative analysis.

DISCUSSION

A. THE DEED GRANTED A FEE SIMPLE SUBJECT TO A CONDITION SUBSEQUENT.

The Attorney General raises a fundamental issue: What is the nature of the interests created by the Deed? The Deed obviously does not convey the Land to the City in fee simple absolute. But was the Land given to the City in trust, or in fee simple subject to a condition subsequent? ²

No extrinsic evidence having been introduced to aid in the construction of the Deed, the issue is purely one of law, which we determine independently. (City of Manhattan Beach v. Superior Court (1996) 13 Cal.4th 232, 238, 52 Cal.Rptr.2d 82, 914 P.2d 160.)

"A charitable trust is a fiduciary relationship with respect to property arising as a result of a manifestation of an intention to create it, and subjecting the person by whom the property is held to equitable duties to deal with the property for a charitable purpose." (Rest.2d, Trusts, § 348, p. 210; Hardman v. Feinstein (1987) 195 Cal.App.3d 157, 161, 240 Cal.Rptr. 483.) The elements essential to its creation are a proper manifestation by the settlor of an intention to create a trust (Prob.Code, § 15201), a trust res (id. § 15202), and a charitable purpose ³ (id., § 15203) promoting the welfare of mankind or the public at large, of a community, or of some other class of persons which is indefinite as to numbers and individual identities (id., § 15205, subd. (a); Estate of Schloss (1961) 56 Cal.2d 248, 256, 14 Cal.Rptr. 643, 363 P.2d 875; Estate of Dol (1920) 182 Cal. 159, 163-164, 187 P. 428). (Prob.Code, § 15004; Estate of Heil (1989) 210 Cal.App.3d 1503, 1510, 259 Cal.Rptr. 28.)

The legal title of the res or corpus of any trust is held by the trustee, but the beneficiaries own the equitable estate or beneficial interest. (Title Ins. & Trust Co. v. Duffill (1923) 191 Cal. 629, 647-649, 218 P. 14; Reagh v. Kelley (1970) 10 Cal.App.3d 1082, 1097, 89 Cal.Rptr. 425.) In the event of a breach of duty by the trustee of a private trust, the beneficiaries may sue the trustee for damages and for an equitable decree enforcing the trust. (Prob.Code, § 16420.) But because a charitable trust has an indefinite class of beneficiaries, standing to enforce the trust is generally limited to the Attorney General as the representative of the public. (Hardman v. Feinstein, supra, 195 Cal.App.3d at pp. 161-162, 240 Cal.Rptr. 483.)

"However, a gift may have a charitable purpose and yet not constitute a charitable trust." (Schaeffer v. Newberry, supra, 235 Minn. at p. 286 .) Rather than create a trust, the owner of property may transfer it to another on the condition that if the latter should fail to perform a specified act the transferee's interest shall be forfeited either to the transferor or to a designated third party. (Rest.2d, Trusts, § 11, com. a, p. 32.) "In such a case the interest of the transferee is subject to a condition subsequent[ ⁴] and is not held in trust." (Ibid.; Walton v. City of Red Bluff (1991) 2 Cal.App.4th 117, 125, 3 Cal.Rptr.2d 275.)

A gift of property in fee subject to a condition subsequent differs from a gift of that same property...