An Orange County Superior Court judge said Friday that a prior deed restriction on the St. James the Great Episcopal Church property in Newport Beach doesn't bar the Episcopal Diocese of Los Angeles from selling the property for another use because the restriction was not renewed.
In the meantime, a developer that planned to buy the church site says it can't proceed with the purchase because its investment partner has dropped out.
Ownership rights to the church property at 3209 Via Lido were transferred from the Griffith Co. to the diocese in 1945 with the restriction that the site remain a church. The Griffith Co. developed much of Lido Isle, beginning in the 1920s.
Lawyers for the diocese argued in court documents that the use restriction expired when the Griffith Co. failed to file a notice of renewal within a time frame outlined in state law.
The diocese said the church in 1984 negotiated removal of the use restriction from the deed, granting the diocese the right to sell the property for other purposes. Court documents indicate the restriction was lifted from several lots on the property. But one — a courtyard that sits amid the church buildings — was not listed in the 1984 agreement.
The other lots included the main sanctuary, the parish hall and other church facilities, court records show.
"Neither of the two Griffith officers who signed the 1984 quitclaim, nor any other Griffith representative, could give an explanation for why Lot 1199 was left off the [document]," court records state.
A law enacted in 1982 mandates that deed restrictions be formally renewed every 30 years. For deeds in which the 30-year period for renewing a restriction had expired before 1982, the deadline was extended for five years until 1987, according to court documents.
"In short, the Griffith Co. had until 1987 to file a notice of renewal but failed to do so," Judge David Chaffee wrote in his ruling, which is tentative until he formally publishes it.
Walter Stahr, a member of the St. James congregation, said attorneys for the Griffith Co. indicated they plan to appeal the ruling.
"It's disappointing, but it's not the end of the day," Stahr said. "The case is still in court, the building is still there. We've lost a battle, but the war ain't over."
Attorneys for the diocese and Griffith did not respond to phone calls seeking comment Tuesday.
The dispute between the Episcopal Diocese and the Griffith Co. began after Bishop J. Jon Bruno announced during a church service in May 2015 that the church was being sold for about $15 million to developer Legacy Partners, which planned to build luxury townhomes on the site. Less than a month later, parishioners held their last service in the church, and days after that, Bruno had the locks changed and wouldn't allow the congregation back inside, churchgoers said.
In June, the Griffith Co. sent a letter to Bruno asserting that the company had never released the deed restriction requiring that the property be used exclusively for church purposes. In response, Bruno sued Griffith for clear title and for interfering with the sale.
A letter last month to one of Griffith's attorneys from Morgan Stewart of Manly Stewart & Finaldi, a law firm representing Legacy Partners, contends that Legacy, which was not a party to the lawsuit, was damaged by the situation.
According to Stewart's letter, which was filed in court, Legacy's investment partner in the deal, AIG Global Real Estate, "decided not to proceed, citing the volatile position of the property and Griffith's claim to still hold a revisionary interest in one of the lots."
AIG's decision came shortly after receipt of Griffith's June 10 letter, Stewart wrote.
Following AIG's withdrawal from the agreement, Legacy also fell out of the contract for the property, according to the letter.
"At present, Legacy does not believe it can consummate the purchase of the property without a joint venture with another entity," Stewart wrote.
He added that Legacy spent about $160,000 in consultant fees, investigation fees and legal costs during the time it sought to purchase the property.
It is unclear whether another possible buyer is interested. A representative of the diocese did not return a call seeking comment.
Since being locked out of the church, the Rev. Canon Cindy Evans Voorhees, vicar of St. James the Great, has been holding Sunday services in a local park, in leased space at an art museum and at Newport Beach City Hall.
Given that the purchase deal apparently began to fall apart at about the time parishioners were barred from the church property, Voorhees said: "This is simply appalling. After all we've been through, to find out that it was all completely unnecessary — well, I'm speechless."