FIRST RULE OF CHURCH SPLITS: DO NOT PANIC THE BANK

When church splits spill into the street one of the things that can happen is that the bank that serviced the church checking and other accounts may not know who should be authorized to transact business in the accounts.  The bank will likely freeze all accounts and seek protection from a court.  If the bank is sufficiently antagonized, it will interplead.  That means the accounts will be liquidated and the funds deposited in the registry of the court.  The court will then decide who can transact business and for what purposes.  Generally, any expense the church incurred in happier times, including payroll, may be paid with court permission.  Dealing with interpled funds is time consuming, expensive and slow.

In United Community Bank v Wakefield Missionary Baptist Church, 2021 NCCOA 89 (NC App., 2021), an audit revealed “deficiencies in bookkeeping and payroll records.”  The pastor sought to add a signatory to the church accounts.  The pastor also allegedly learned the prior signatories opened but did not disclose a Certificate of Deposit containing $123,000.  The prior signatories objected to the additional signatory promoted by the pastor.  The bank decided to seek court protection from the dispute and interpled the funds.  The prior signatories appealed arguing the court could not direct how the church spent its money or determine the membership status of the prior signatories or the newly proposed signatory.  The trial court held it could employ Neutral Principles of Law to determine who could control the church accounts.  The appellate court held the interpleader order of the trial court was interlocutory, and therefore not appealable, and that the trial court had jurisdiction to determine who had the right to control the church accounts.

Most factional church disputes cause the bank to lock down church accounts while one faction or another continues to manage church finances through control of the offerings deposited in accounts at another bank.  But, if the first bank is pushed in the least an interpleader will follow.  As the semi-sentient computer learned in the movie War Games (1983), the only winning move is not to play.

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