Save Al Huda School Foundation v. Islamic Society of San Francisco

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MEMORANDUM DECISION RE DEBTOR’S
MOTION FOR SUMMARY JUDGMENT 	-1-
UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re
ISLAMIC SOCIETY OF SAN FRANCISCO,
a California nonprofit corporation,
Debtor.
SAVE AL-HUDA SCHOOL FOUNDATION,
a California nonprofit corporation,
Plaintiff,
vs.
ISLAMIC SOCIETY OF SAN FRANCISCO,
a California nonprofit corporation,
Defendant.
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Case No. 07-31379 TEC
Chapter 11
Adv. Proc. No. 07-3142 TC
MEMORANDUM DECISION RE DEBTOR’S MOTION FOR SUMMARY JUDGMENT
On March 7, 2008, this court held a hearing on Debtor’s motion
for summary judgment. 	Debtor seeks a determination that it does
not hold the Al-Huda School property as a trustee, but has
equitable as well as legal title. 	Iain A. Macdonald and Heather A.
Cutler appeared for Debtor. 	H. Paul Bryant appeared for Plaintiff
Save Al-Huda School Foundation, Inc. (hereinafter SAHSFI). 	Upon
Signed and Filed: March 13, 2008
________________________________________
THOMAS E. CARLSON
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
March 14, 2008
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 07-03142 Doc# 20 Filed: 03/13/08 Entered: 03/14/08 09:25:05 Page 1 of 5

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MEMORANDUM DECISION RE DEBTOR’S
MOTION FOR SUMMARY JUDGMENT 	-2-
due consideration, and for the reasons stated below, the court
determines that there is a genuine issue of material fact as to
whether Debtor holds the school property in trust, and the motion
for summary judgment is therefore denied.
Legal title is held by Debtor. 	This creates a presumption of
equitable ownership that can be rebutted only by clear and
convincing evidence. 	Cal. Evid. Code § 662.
The Al-Huda Islamic School is not incorporated and appears to
be a division of Debtor ISSF. 	The bylaws of the school state
“[a]ll assets of Al-Huda Islamic School shall be considered
property of the Islamic Society of San Francisco.” 	These bylaws
are thus consistent with the record title held by Debtor.
Property transferred to a charitable corporation may be held
in trust by that corporation for purposes more limited than the
stated purposes of the charitable corporation. 	Bogert’s Trusts and
Trustees § 324; Witkin, Summary of California Law, Trusts § 293;
Estate of Henderson, 17 Cal. 2d 853, 856-59 (1941); Cal. Corp. Code
§ 9142(a). 	The principal question in this case is whether Debtor
holds the school property in trust solely for use as a school, or
whether Debtor has full beneficial ownership and may use the school
property in furtherance of any of its charitable purposes,
including payment of its debts.
Debtor is a religious, non-profit corporation. 	Under section
9142(c) of the California Corporations Code, property of a
religious corporation will be “deemed to be impressed with any
trust, express or implied” only to the extent such trust is
expressly provided for in: (1) a resolution of the board of
directors; (2) the articles or bylaws of the corporation or the
Case: 07-03142 Doc# 20 Filed: 03/13/08 Entered: 03/14/08 09:25:05 Page 2 of 5

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MEMORANDUM DECISION RE DEBTOR’S
MOTION FOR SUMMARY JUDGMENT 	-3-
governing instruments of a “superior religious body or general
church;” or (3) in a written statement by the donor at the time of
the donation.
One declaration of trust sufficient to meet the requirements
of section 9142(c) is in Article X, Section 5 of Debtor’s
Constitution (bylaws), which states: “Any property of the ISSF
shall be entrusted with the NAIT (North American Islamic Trust).”
Plaintiff also submitted evidence that the Executive
Committee, Advisory Board, and general membership of ISSF adopted a
resolution expressly committing to hold the school property in
trust for the purpose of providing an Islamic school for the
members of the Bay Area Islamic community. 	Declaration of Abdullah
Alawdi at ¶¶ 3, 5, 7; Declaration of Anise Kaddoura at ¶ 9 and
Exhibit D thereto. 	This evidence is sufficient to create a triable
issue of fact as to whether there was a declaration of trust
sufficient under section 9142(c)(1).
It appears that at least some of the members of SAHSFI have
standing to enforce the alleged trust. 	At least some SAHSFI
members, as parents in the Bay Area Islamic community who want to
send their children to the Al-Huda School, are beneficiaries of the
alleged trust and are therefore entitled to bring suit to enforce
that trust under section 9142(a)(4).
Debtor has not established undisputed facts sufficient to
permit the court to apply the cy pres doctrine to permit sale of
the school property. 	The evidence submitted does not establish
that operation of the school is permanently impossible or
impractical. 	See Witkin, Summary of California Law, Trusts § 304.
Furthermore, Debtor’s argument for selling the school property is
Case: 07-03142 Doc# 20 Filed: 03/13/08 Entered: 03/14/08 09:25:05 Page 3 of 5

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MEMORANDUM DECISION RE DEBTOR’S
MOTION FOR SUMMARY JUDGMENT 	-4-
based at least in part on Debtor’s need to pay its debts. 	It is
not clear whether those debts arose in the course of administration
of the alleged trust (the school), as opposed to Debtor’s other
activities, and it is therefore unclear whether those debts are
properly charged to the alleged trust res. 	See Cal. Probate Code
§ 18004. 	Sale of the school property to pay debts unrelated to the
school would be in derogation of the alleged trust, not to preserve
the intent of the alleged trust, and could not be justified through
the cy pres doctrine.
Although the court discussed in its tentative ruling possible
revocation of the alleged trust, Debtor did not raise that argument
and did not submit any evidence that Debtor had in fact purported
to revoke the trust. 	Revocation is thus not a proper basis for
granting Debtor’s motion for summary judgment.
**END OF MEMORANDUM DECISION**
Case: 07-03142 Doc# 20 Filed: 03/13/08 Entered: 03/14/08 09:25:05 Page 4 of 5

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Court Service List
Iain A. Macdonald, Esq.
Macdonald and Associates
221 Sansome Street
San Francisco, CA 94104
Julie M. Glosson, Esq.
Office of the United States Trustee
235 Pine Street, Suite 800
San Francisco, CA 94104
H. Paul Bryant, Esq.
Law Offices of H. Paul Bryant
725 Washington Street, Suite 725
Oakland, CA 94607
H. Christopher Hittig, Esq.
Law Offices of H. Christopher Hittig
44 Montgomery Street, Suite 3780
San Francisco, CA 94104
Robert F. Kane, Esq.
Law Offices of Robert F. Kane
870 Market Street, Suite 1128
San Francisco, CA 94102
Case: 07-03142 Doc# 20 Filed: 03/13/08 Entered: 03/14/08 09:25:05 Page 5 of 5