Author: churchlitigationupdate

PAPERWORK TRAPS IN TITLE AND DEEDS

Title and deeds should be carefully crafted. Obtaining the services of an actual title or real estate lawyer is not too high a price to pay. Title transfers, especially in settlement of threatened or pending litigation, have to be carefully scrutinized.

In Melvin Morris v First Bethany Missionary Baptist Church, Cal. App., Slip. Op., 2016 (not for publication), the church owned two parcels. Upon one was built the church and part of the parking lot and on the second was built the remainder of the parking lot. The church fell on hard times and rather than lose the property in foreclosure agreed to transfer one of the lots to the creditor. To accomplish this, on church letterhead, in a document probably drafted by the pastor or a well-meaning member, the transfer was set forth in an agreement of a single page. A deed was drafted to effectuate the transfer. But, the deed and the agreement did not match because in one the legal description only reached one parcel but in the other the legal description reached both parcels. Of course, the document that reached both parcels was the deed and it was filed of record.

The creditor’s action against the church was dismissed when the agreement and deed were created. When the church discovered the mistake, it filed an action to have the deed set aside. The case was dismissed because the church claim should have been brought in the creditor’s original suit as a mandatory counterclaim. Without the counterclaim, the deed stood unchallenged.

The church argued that it did not discover the scope of the deed until the creditor dismissed. However, the three year statute had run and the new case filed by the church was barred.

EMBEZZLEMENT BY PASTOR

The United States Bankruptcy Court for the Southern District of Mississippi, as well as a Mississippi county court were not fooled by the machinations of a rogue Pastor. In, Cross Point Church v Andrews (In Re Andrews), Slip Op. 2016, the Pastor tried to withdraw the church from the denomination. The denomination removed him from the pastorate of the church. A part of the church board tried to support the Pastor by entering into an Employment Agreement with him after he had removed, but the Employment Agreement was not submitted to the congregation for a vote and the agreement did not specify the amount of compensation. Arguing that he was acting innocently under the Employment Agreement, the Pastor and a church treasurer withdrew a year’s salary from the church bank account and deposited the proceeds in the Pastor’s personal checking account. The Pastor lived on that money for a year while he founded a new church. The Pastor and the rump of the board locked out the other members from the church and it took them six weeks to regain control and to assist in the installation of the new pastor assigned by the denomination.

The church sued the Pastor in a state trial court and took a judgment for the amount of money withdrawn from the church bank account. The Pastor sought bankruptcy protection but the church initiated an adversary proceeding. The bankruptcy court found it did not have authority to revisit the removal of the Pastor under the Ecclesiastical Abstention Doctrine.

Also, the Pastor admitted that as pastor, church officer, and board member, he owed a fiduciary duty to the church to safeguard its funds. As a corporate officer, that duty was also imposed by statute. The Pastor was a signatory, two were required but his was often affixed by stamp, to the church bank accounts. The bankruptcy court found that taking the money was a breach of fiduciary duty. The Employment Agreement was ignored by the court because the Pastor had been defrocked by the denomination and could not perform as Pastor under the agreement. Also, the putative church board did not have authority to override the denomination. For those reasons, the Pastor’s claim that he believed he could scarf up the cash was deemed not reasonable. The debt to the church for the funds taken was excepted from the bankruptcy.

The lessons in this matter about denominational authority under the controlling foundational documents are routine. An outright finding that a Pastor exercising control over church assets and funds has a fiduciary duty, the highest duty in the law, to safeguard them should nearly always be considered the norm. Few Pastors will be sufficiently remote from control of the assets and funds to avoid such a finding.

FAILURE TO REPORT IS NEGLIGENCE, NOT SEXUAL ABUSE

The unpublished decision of the Court of Appeal of California in Jane Doe v Pleasant Valley Baptist Church, Slip Op. 2016, is interesting on so many levels it is difficult to be selective. The Plaintiff alleged she was molested in 2002 or 2003 by a youth pastor. She sued the church and the senior pastor to recover money damages. The senior pastor was also principal of the church high school in 2010. The trial court dismissed the case on statute of limitations grounds and the court of appeals affirmed. The basic reason was that the court of appeals agreed that the failure to report sexual abuse, while a violation of statute, is only actionable for the period of time permitted by the statute of limitations. The failure to report was classified as an act of negligence subject to the statute of limitations for all negligence actions. The failure to report was not classified as sexual abuse, and in California sexual abuse is governed by a longer statute of limitation.

The lesser issues in the case did not change the result. The Plaintiff alleged that the youth pastor remained employed by the church for seven days after her complaint before he was fired and that resulted in “secondary victimization” and “betrayal trauma.” In addition to the failure to report claim, the Plaintiff claimed she was forced to confront the abuser in a meeting with the senior pastor acting as principal, told that she was not believed, and two weeks before graduation was expelled in retaliation. Even if all of the claims were meritorious, none of them extended the statute of limitations beyond Plaintiff’s eighteenth birthday plus two years. All of these alleged wrongful acts, if they occurred, were after the alleged sexual abuse, and not a cause.

One of the likely psychological underpinnings of the decision, if not an actual basis, was that there was no allegation or proof that the youth pastor’s alleged misconduct could have been foreseen by the church or senior pastor. There was no alleged prior pattern of sexual misconduct. The record was silent as to whether a background check was performed prior to hiring but had there been, there might have been additional support for the defense of lack of foreseeability.

Turning Out the Lights

The case of In Re Glass & Garden Drive-in Church, Slip Op. (Ariz. App. 2016)(not for publication) is interesting because the church was trying to wind down its existence and allow, rather than resist, a denominational takeover (interestingly enough called “suppression”) because of inadequate membership growth, inadequate revenue growth, and property costs that were too much to carry. However, at least one member led a few others to resist the takeover of the property by the denomination. One of the members wanted $150,000 in compensation from the assets of the church but the reason for the demand was unclear.

The Arizona Appellate Court declined to allow the member(s) to proceed to oppose the “suppression” because the church’s foundational documents, articles of incorporation and bylaws, recognized the church’s existence as a part of the denomination. Thus, the actions of the denomination to marshal the assets of the local church were conducted under the shield of the ecclesiastical abstention doctrine.

As a result, civil courts cannot “inquire into internal organizational disputes between different factions of a religious organization or into property disputes that would require interpreting religious doctrine or practice.” [Citation omitted.] Rather, they “must accept the decisions of the highest judicatories of a religious organization of hierarchical polity on matters of discipline, faith, internal organization, or ecclesiastical rule, custom, or law.” [Citation omitted.]

Slip Op. at 7.

Petitioners’ characterization of the core issue as one of property simply does not transform this case into a church property dispute under the neutral principles doctrine.

Slip Op. at 10. The court noted the ownership of the church property was not in dispute. The property was owned by the local church (which was incorporated). The denomination simply had the right to take over the existence of the local church pursuant to the governing documents.