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Bankruptcy Trustee Can’t Recover Gift to Church As Conduit for Charity

Church was not considered “initial transferee” when funds were specifically earmarked for third party
A bankruptcy trustee seeking to recover a $62,500 contribution from a Ponzi scheme cannot recover from the church to which the funds were given when the church was merely a conduit for the gift to a third-party charity. A Bankruptcy Court in Florida has dismissed the trustee’s claim when the church acted in good faith and passed the funds on as required. ( In Re: Engler, Tardif v. St. John the Evangelist Catholic Church , No. 9:08-bk-04360, 7/17/13 .)

Court Orders Charity To Return Contribution

Shelter “unilaterally decided” not to honor conditions placed on gift by donors
An animal shelter that decided not to build a new and expanded facility has been ordered to return a $50,000 contribution from donors who made the gift expressly for the construction of new rooms for large dogs and older cats. An appellate court in New Jersey, in a harshly worded opinion it said was a case of first impression, said that the penalty was possibly the “most lenient sanction” in a case that could include breach of fiduciary duty and civil fraud. ( Adler v. SAVE , Superior Ct., NJ, App. Div.,8/5/13. ) SAVE, a “no kill” shelter operating in Princeton Township, began a sophisticated fundraising drive to raise funds for a new shelter. Its brochures provided renderings of a new...

Religious School Keeps $500,000 After Reneging on Illegal Contract

Court refuses to enforce agreement to pay commission to group that helped file false application for contribution
When Kohl’s Department Store initiated a $10 million grant program for schools in the United States in 2010, the Jewish Educational Movement in Beverly Hills, CA, became interested. Because JEM did not meet the criteria Kohl’s had established for obtaining the award, a rabbi from JEM approached the Netan Eli Hebrew Academy, a nearby school that met the criteria, offering help to Netan Eli in applying for the award that JEM wanted for itself. They agreed that JEM would help Netan Eli apply for the grant, and Netan Eli would give JEM $450,000 as a “commission based salary” if they were successful. When Netan Eli won the grant, it refused to honor the agreement. JEM intercepted delivery of the...

Court Grants Preliminary Injunction To Stop Removal of Collection Bins

St. Vincent de Paul claims that for-profit interfered with business relationship and destroyed clothing gifts
A federal District Court in Michigan has granted a preliminary injunction to the St. Vincent de Paul Society and two other charities who have claimed that a for-profit company interfered with their relationships with landowners who had allowed them to place collection bins for used clothing on their property, removed the bins without adequate notice, and destroyed the bins and their contents without adequate opportunity to get them back. The Court said that the charities showed a likelihood of succeeding on the merits of the case.

Ousted Directors Must Join Nonprofit in Suit to Recover Seats

Corporation is deemed a “necessary and indispensible” party for declaratory judgment
A suit invalidating the ouster of two directors of a nonprofit corporation has been reversed because the ousted directors sued only the other directors individually and did not join the corporation itself as a party to the action. An appellate court in Missouri has held that the corporation was a “necessary and indispensible” party to the declaratory action and failure to join it as a party to the suit required reversal of the trial court’s decision.

Court Affirms Removal of Trustees, Order for Exec to Repay $2 million

Charitable nursing home failed to file required reports, or document exec’s claimed loans to the corporation
Several officers and directors of a failed nonprofit nursing home in Illinois have been removed from their positions upon suit by the state Attorney General, and the executive director has been ordered to return $2 million paid to her after sale of the home as a purported repayment of loans. The Appellate Court of Illinois has affirmed a series of summary judgment rulings sought in long-standing litigation brought against the corporation and its leaders by the state Attorney General. ( People v. Maxwell Manor , App. Ct. IL, First Dist., Third Div., No. 1-11-3132, 12/31/13. ) A for-profit partnership in which JoeAnn McClandon held a 50% interest owned real estate in Chicago that it rented...

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