Most denominations, their subdivisions and local churches, generally prove their existence and right to own property by incorporating. However, while this may be the best practice, it is not the only way. Indeed, prior to the era of incorporation, most churches were associations of members and most denominations were associations of churches. While most now have governing documents and corporate documents filed with a regulatory authority, for purposes of real estate ownership if nothing else, that was not always the case even during the latter stages of the Twentieth Century. One of the reasons the organizational structure of the “association” fell into disuse was because of the need to obtain clear title to own real estate and bank accounts.
In Embassy University v Institute in Basic Life Principles, Inc., 2020 IL App (2d) 191140-U (2020), the trial court dismissed the case because the defendant alleged the Plaintiffs could not prove they were an association, and, indeed, could not prove up their own existence in order to be a party to a lawsuit. The Plaintiffs were claiming they were part of an association of churches or parachurch organizations and that the defendant owed them a fiduciary duty in the disposition of denominational assets. Further, to prove the point, the defendants noted that the Plaintiff university’s name was a “DBA” and not the name of the underlying entity. The appellate court reversed so that through discovery, and if necessary trial, the Plaintiffs could prove they were an association with the defendant imposing on the defendant a fiduciary duty as to denominational assets.
The lesson of history has been that associations have a harder time proving their existence, their governance, who can speak for them, and who can own their property. The Plaintiffs in the reported case might have an easier time than some because their founder, William Gothard, Ph.D, is still living, well known, even though he had to depart from leadership for a time, and can testify as to the formation of most of the entities. The Plaintiffs should have incorporated. It is still the cheapest and tried and true method of becoming an entity that can own property and accounts.
Church Litigation Update 