TRI-DELTA RETAINS UTAH SORORITY HOUSE AFTER LEGAL BATTLE WITH HOUSE CORPORATION

Adam Eckstein

After a legal battle with a house corporation, national sorority Delta Delta Delta recovered the title to the sorority house at the University of Utah that had served the inactivated Theta Phi Chapter.  The state trial court’s decision in this matter sheds light on a murky question of ownership that surrounds most fraternity houses but seldom arises.

By way of background, DDD’s Executive Board withdrew the charter issued to its Theta Phi Chapter at the University of Utah on April 30, 2006.  Then in a complaint filed July 27, 2006, DDD sued the Theta Phi House Corporation to convey the property, noting “despite withdrawal of the charter of Theta Phi Chapter and the inactivation of the Theta Phi Chapter, Theta Phi House Corp. has refused to convey title to the property to DDD.”

Reportedly, the alumni who operated the house corporation did not convey the title to the house so that the funds alumni and students had put into the house would benefit the University of Utah community instead of the national DDD organization.  This purpose, however, directly contrasted provisions in the house corporation’s bylaws that said,

Upon inactivation of the chapter, the house corporation shall be dissolved and all right, title, and interest in and to any assets held or owned by the house corporation or used by it in connection with the performance of its functions automatically shall revert to and become vested in Delta Delta Delta.

The House Corporation denied the applicability of this provision and the validity of amendments to its articles.  Ultimately, a Utah state court had to sort the matter out.

In ruling for DDD, Judge Anthony Quinn based his decision in favor of DDD on the relationship between the house corporation and the national fraternity.¹  “A tripartite relationship exists between the national fraternity, Delta Delta Delta, its Utah Theta Phi chapter and its Utah Theta Phi house corporation.”  And without the national fraternity, Judge Quinn noted, the house corporation would not exist.

The house corporation really only exists because it is the policy of the national fraternity to require its existence.  The primary flow of revenue to the Utah Theta Phi house corporation was from Delta Delta Delta members at the Utah Theta Phi chapter who were required to live in the house and pay rent per the terms of chapter bylaws.  Those chapter bylaw provisions were in turn required by the bylaws of Delta Delta Delta.

The house corporation’s affiliation with DDD was contractual, Judge Quinn found, with the revenue stream and the many services provided by DDD for the house corporation constituting the consideration for the contract.  For example, the Judge noted:

Substantial ongoing consideration was provided by DDD directly to Theta Phi House Corp. including the income stream for the operation of the Theta Phi House Corp. through Chapter bylaw provisions that required Delta Delta Delta chapter members to live in the facility, consulting services performed for the operation of house corporations, form housing contracts, grants upon application and upon acceptance of the applications of same, loans, insurance policies obtained on a national basis, directors’ and officers’ liability insurance, and liability insurance for volunteers associated with the house corporation.

But even without consideration, Judge Quinn continued, DDD was a third-party beneficiary to the house corporation’s promise, made in its bylaws, to convey the chapter’s assets to DDD in the event of deactivation.  Following this reasoning, the court ordered the house corporation to deed the property title and the deactivated chapter’s assets to DDD.

This is an important case with possible national ramifications for all Greek organizations.  When a national organization has to make the unfortunate decision to close a chapter, the issue of what happens to the Chapter’s assets, particularly any existing chapter house, must be considered.  In this case, Judge Quinn sided with the national organization versus the local house corporation.

The case is currently on appeal in the Utah Court of Appeals.  Look for updates in Fraternal Law as the case progresses through the appellate courts.

¹  Delta Delta Delta v. Theta Phi House Corporation of Delta Delta Delta, In the Third Judicial District Court for Salt Lake County, State of Utah, Trial Court Case No. 060912357.