CHURCH MERGER LITIGATION

The economic pressures that bring out the purchase, sale and merger of business entities both small and enormous also do the same with churches. Churches are also impacted by the constant drain of members to the latest fads and movements, such as the mega-church complexes of this age. Churches also have life cycles; they are born, they grow, they age out and some die out. While ecumenical churches seem to preserve their outer shell against the ravages of time, nevertheless their congregations go through the same cycles and face the same economic pressures.

In Pure Presbyterian Church v Grace of God Presbyterian Church, Slip Op. (Va. 2018) the Supreme Court of Virginia, affirmed a trial court decision enforcing a merger agreement between two churches. By the time the dissenting group decided to challenge the merger, the merger was well along. Indeed, the opinion implied that the decision to challenge the merger coincided with the attempt of the dissenters to sell their property to a third party before the title transferred to the surviving entity in the merger. The dissenting group argued the Court lacked jurisdiction to hear the dispute under the Ecclesiastical Abstention Doctrine of the First Amendment. Another factor was that the jurisdictional challenge was not pressed until after the adverse jury verdict. While jurisdictional challenges can be made at any time, including on appeal, the psychology of late presentation of the challenge cannot be underestimated. An after thought never has the credibility of a challenge from inception. Be that as it may, the court held the First Amendment did not preclude application of neutral principles of contract law to the merger, even if that had an impact on church governance. The court could verify that the two congregations voted to adopt the merger contract even though that had an impact on church governance. Both could be accomplished to determine the owner of the church property. The dissenters tried to stop the merger enforcement litigation by a bankruptcy filing and automatic stay but, again, were probably too late and the bankruptcy plan was silent as to the merger.

While merging churches often are tempted to move slowly to allow everyone to adjust to the new normal, some members may never adjust. Leaving such minorities opportunities to interfere with or further slow the merger are invitations to expensive legal dramatics. Mergers should be closed on a day certain and all church property re-titled the same day. All bank accounts should be liquidated and closed in the extinguished entity. Indeed, new accounts may be wise in the surviving entity.

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