As previously reported, the break-away San Joaquin, California Diocese of the Episcopal Church appears poised to lose in its attempt to keep Diocesan property after its affiliation with the more conservative Province of the Southern Cone. A collateral aspect of the property lawsuit filed against the Diocese in 2008 by the Episcopal Church USA is a dispute over use of Diocese funds to pay attorneys' fees in the litigation. Virtue Online on Saturday reported in detail on a state trial court's resolution of the dispute.
Back in 2007, the Diocesan Council paid $500,000 as an advance on legal fees to its law firm, Wild, Carter & Tipton of Fresno, California, in anticipation of litigation that might be filed over property ownership. After the break-off, ECUSA appointed new officials to continue as the Episcopal diocese. They sued the law firm for declaratory relief and to recover the advanced attorneys' fees, invoking several theories of wrongful transfer. The court dismissed most of them, invoking the rule that an agent cannot conspire with its own principal. The court concluded, however, that the claim the transfer was a fraudulent conveyance could succeed, but only if ECUSA is able to prove its allegation that the transfer of funds was undertaken with the intent to injure ECUSA and that the Diocese did not receive reasonably equivalent value in exchange for the fund transfer.
