Author: churchlitigationupdate

TAXING CHURCHES – CALL IT SOMETHING ELSE

While most people want everyone to pay their fair share of taxes, however that may be defined, most people do not want government anywhere near the church or anything that belongs to the church. Indeed, for centuries in the United States we have forbidden taxation of churches.

But, if the tax is not called a “tax,” but is called a “special assessment,” well then, that is different is it not? Apparently, in Minnesota, that is the law. In Bryant Avenue Baptist Church v City of Minneapolis, Slip Op. (MN Civ. App. 2017), the Court explained why a church of about 80 members was the proud recipient of a “special assessment” for street repairs in the amount of $31,191.30 to be paid off in five annual installments. The Court was convinced that the state constitution did not exempt churches from “special assessments” for civic improvements even though cemeteries and other types of entities were exempt.

The Court solved the 1st Amendment entanglement issue by pretending it did not exist. Indeed, there is no mention of it in the opinion. It is possible the church did not raise the 1st Amendment as a defense, but that seems unlikely, and even so, most courts would inquire into their own jurisdiction to hear a matter obviously touched by a fundamental federal right. Apparently, there is no prohibition of entanglement with religion in the Minnesota constitution.

“History is particularly compelling in the present case because of the undeviating acceptance given religious tax exemptions from our earliest days as a Nation. Rarely if ever has this Court considered the constitutionality of a practice for which the historical support is so overwhelming.” Walz v. Tax Comm’n of City of New York, 397 U.S. 664, 681 (1970) (Brennan, J., concurring).

PARA-CHURCH ORGANIZATIONS AND THE KEYS TO THE KINGDOM

The rise of para-church organizations, no doubt necessary to the support of the church or its ministry are also the inspiration for limitations on the reach of the Ecclesiastical Abstention Doctrine (1st Amendment prohibition of entanglements between secular courts and church doctrine) and the Ministerial Exception (to federal and state employment laws). Para-church organizations include bible colleges, foundations, and corporations set up to control secular property, and sometimes even church buildings. Whether positions on the boards that govern the para-church organization are subject to either the Ecclesiastical Abstention Doctrine or the Ministerial Exception can only be determined after careful inquiries. Secular or ecclesiastic characterization will likely depend on organizational documents of the para-church organization that describe the goals and work as well as the job descriptions of the leadership. Just because board members must be clergy of the denomination does not automatically trigger either legal doctrine.

Puri v Khalsa, Slip Op. (9th Cir. 2017) is a case in which the 9th Circuit merely reversed a trial court’s decision to dismiss a case on the pleadings based on the 1st Amendment. Nevertheless, it took 33 pages for the Court to work through the issues, even though all that was before it were the pleadings. (Because of the high standards that Motions to Dismiss must meet, when a court does this, it usually is not an ultimate statement of the law. Nevertheless, this well reasoned opinion probably does cast a strong light on this issue.) Once the case is returned to the trial court, the case may follow a litigation track, may develop a more sophisticated factual record, may be tried to the bench or to a jury, and may return again to the appellate court.

The 9th Circuit was not moved by the fact that the board members had to be ministers of the denomination or religion served by the work of the para-church organization. The Court ordered Neutral Principles of Law applied by the trial court to determine the eligible board members for the para-church organizations (which all appear to have been corporations). One of the para-church organizations owned secular businesses.

There was an idea that surfaced many years ago that churches could set up a para-church corporation, transfer their property to it, and that would effectively make their property judgment proof. States with strong fraudulent transfer policies or laws might neutralize such arrangements. Also, such arrangements typically divorced the revenue stream from property ownership making the property unavailable as a credit source. Some encountered tax problems because the argument was made that the property was no longer owned by a church and therefore no longer exempt.

Para-church organizations that want to limit their work and property ownership to ecclesiastically recognizable activities, rather than risk that they are, indeed, secular and governed by civil law, need to carefully design their foundational documents and possibly amend them with the assistance of competent counsel. Many corporations set up using a form book, or worse a homemade document, are secular in design and not ecclesiastic in design, much to their surprise.

ROOFING WARS

Few things present a greater maintenance challenge to a church than the roof. Even medium size churches usually have under the roof a lot of square footage, some not being visually beheld, if at all, except for very short times during their main worship time. Also, as a volunteer organization, typically led by Pastors that have been to Bible college or seminary but not worked as roofers or contractors, churches are usually hard pressed to maintain a commercial size roof.

Insurance companies and churches have one thing in common: the insurance company will not invest in underwriting prior to policy issuance and the church usually has poor roof maintenance records even if the roof has been well maintained. Neither usually has a photo history updated annually or bi-annually.

In State Auto Property Casualty Insurance Company v El Shaddai Christian Ministries, Inc., Slip Op. (USDC, SD, N Div, 2017), the church claimed it had roof damage and water intrusion from a storm in March 2012. The church had policies, one at a time, with Brotherhood Mutual, State Farm, and State Auto, one right after the other. The church made the claim on all three policies, again one after the other, and was denied by all three on the claim that the roof damage was caused by neglect. The Court was not deciding the case; the Court overruled State Auto’s Motion for Summary Judgment finding factual disputes and set the case for trial later in 2017. The church had to hire a PhD in meteorology to prove there was a storm and an expert that opined the damage to the roof was storm related. The insurance carrier expert claimed the damage was due to neglect, wear and tear.

All three insurers did not appear, from the evidence reviewed in the opinion (but which might be presented at a trial), to have performed underwriting prior to policy issuance beyond accepting an application and a check. While it may be that at trial the carrier may be able to prove that the application contained misrepresentations, that was not the subject of the Court’s opinion. Likewise, the church might have substantial evidence that all three carriers were on notice and the church was transparent in its business dealings with the carriers. If so, the church will be hard to beat.

CRABAPPLE TREE TORTS

Trees have the uncanny ability in winter to stick their branches straight up and appear to need no trimming. But, in the spring, throw in a few leaves and those same branches bend, curve, and dance in the wind. Those branches that bend, curve and dance in the wind will smack roofs, twang power lines and wave at moving and stationary objects. Sidewalks that could be walked along for blocks are suddenly encroached by limbs.

In Kane v Bethany Community Church, Slip. Op. (Wash. App. 2017)(unpublished opinion) the crabapple tree on church property probably picked that very night in July (about 11pm) for its limb to obscure a stop sign. Of course, because such limbs on trees are a bit sneaky, it did not block the view of the stop sign from every angle on the street. A drunk driver with a blood alcohol of .116 ran the stop sign and injured the plaintiff, a moped pilot. In a deposition in the case brought against the church over the tree limb, the drunk driver admitted the crabapple limb might have obscured his vision. He could not under oath definitively state that it had.

The appellate court affirmed summary judgment, judgment without trial, awarded to the church by the trial court. “To say that the tree would have obscured the stop sign at the vantage point shown in a photograph is not inconsistent with, and does not overcome, [the drunk driver’s] testimony that he does not know why he failed to stop.”

The outcome in favor of the church is not the lesson that should be derived. The lesson is that church property should be inspected carefully, at least annually, and even something as minor as an errant crabapple tree limb should be mitigated, especially around public right of ways like streets and even church parking lot entrances and exits. The other lesson is the church liability policies should likewise be reviewed at least annually. However good these things are to do, in volunteer organizations like churches, and because the Pastor cannot be everywhere, they will not always be done or done effectively. In the case of tree limbs that move about especially in the wind, and that grow and change with the seasons, even a good inspection may not catch it.