Most churches are in urban or suburban areas and use municipal water systems much like everyone else. Thus, the few churches left in rural or undeveloped areas that use well water are so few that the lesson of the case reported below would at first blush seem to be of no interest to most. However, the case reported below points out there are other risks that should be considered.
In State of Ohio v Church of Troy, 2020 Ohio 4695 (Ohio App. 2020), the trial court held that the pastor was the “operator” of the church water system in an enforcement action by the Attorney General of Ohio. The church used well water at its building, typically Wednesday evening and Sunday services, which may have included bathrooms, kitchen and drinking fountains. The church membership was about 100 and the church used the building more than sixty days a year. The church was an unincorporated association. The church was required to submit total coliform samples every quarter and a nitrate sample annually to a laboratory for analysis and report the results to the state regulatory authority (“Ohio EPA”). The church submitted test results for years. The Ohio EPA regulated the church water system since 1986. Unfortunately, church water samples tested positive for total coliform and E. coli. The church claimed it posted notices and provided bottled water but did not give notice of its actions to Ohio EPA so they sent an inspector out to check. The pastor told the inspector that a legal consultant in another state, not one licensed in Ohio, was going to report back as to whether Ohio EPA had jurisdiction over the church and refused permission to inspect the church water system. Ohio EPA obtained a search warrant and inspected the church water supply. Their testing found positive coliform and a high level of nitrate. Based on the pastor’s past interaction with the Ohio EPA and the refusal of the pastor to authorize the inspection, the trial court concluded the pastor had apparent authority to operate the church water system. As the operator of a non-compliant water system, the pastor was fined $54,000 and judgment entered. The pastor represented himself. Four years separated the hearings in the trial court from the final judgment which the appellate court affirmed in the sixth year after the hearings in the trial court. There are several harsh lessons: (1) The pastor did not have a lawyer. (2) Even an unincorporated association can have minutes, agendas and minutes of votes that might prove the extent of the pastor’s actual authority in general and over the water system specifically. (3) The dispute with the regulatory authority went on for most of a decade because the church, or its pastor, did not take it sufficiently seriously and end it, one way or another. Four years passed between the evidentiary hearings and the final judgment. In that time, if not before, the church could have developed a record of compliance. The church could have cut off the well water supply to the interior of the building and used the water only for lawn maintenance controlled by locked faucets, or not at all. (4) The church did not consult a lawyer in their state able to deal with the regulators on their behalf, but rather consulted a legal ministry, which the church likely did not pay for its assistance, which could do no more than make some suggestions based on anecdotal consultations.
In the annals of church litigation, exemption from taxation is not usually controversial. If the “entity” can possibly, rather than merely plausibly, be considered a “church,” its exemption from taxation is generally assumed.
In Jaswant Sawhney Irrevocable Trust, Inc. v District of Columbia, Slip Op. (DC App. 2020), the Plaintiff was denied a property tax exemption because it was allegedly not “a single congregation” owning and using the building. The Plaintiff, however, was a non-profit corporation that operated the property as a Gurdwara, a place of assembly and worship. The Plaintiff also had other charitable functions besides operating the Gurdwara so the taxing authority held it was not a church. Ultimately, the appellate court reversed the trial court’s agreement with the taxing authority so that on remand the Plaintiff could put on proof at trial that the property was operated as a Gurdwara. The appellate court held there did not need to be an exact legal identity shared by the church owner and the congregants to qualify for the exemption. Also, the statutory use of the word “congregation” did not necessarily require a definition by “legal form, nor indeed by any legal formality.”
Church conferences and denominations may own church property in which meets an assembly of worshippers that may or may not be owners of the property owning entity. Tax exemption should still be available so that the taxing authority can refrain from ecclesiastical entanglement trying to determine whether the worshippers and the owning entity are “sufficiently” related. The real challenge in a tax exemption case may be simply to refrain from underestimating their complexity. In the case reported, the actual application for tax exemption submitted to the taxing authority was not put in the court record. Even though statutes may use the word “appeal” permitting a challenge to governmental administrative actions, it is not generally automatic that the record before the governmental agency would become part of the record before the court. An incomplete record is often an anathema to an appeal of any sort.
Churches that are denominational members, and not just affiliated loosely, are typically bound by the denominational governing documents and rulings of the denomination about the scope or meaning of the governing documents. These denominations and their local churches are often referred to as “hierarchical” even though a few denominations do not like that word. The denominational governing documents were generally developed over many decades.
In Presbytery of New York City v Zion Presbyterian Church of Brooklyn, 2020 NY Slip Op 31649(U), the trial court quieted the title to the local church property in the denomination upon the local church’s attempted secession from the denomination. One of the arguments made that caused this opinion to differ from many others arising from this denominational split was that the local church claimed they never agreed to amendments three decades earlier to the denominational governing documents that first included the property reversion clause. The Court rejected the argument, among other reasons, because during the decades following the amendment the local church did not object to the amendment. An odd statement in the opinion, which was otherwise well and conventionally articulated was the statement: “On July 2, 1979, in Jones v Wolf, the United States Supreme Court held that a state is constitutionally entitled to adopt secular, neutral principles of law that rely on objective, well-established concepts of trust and property law familiar to law and judges to resolve church property disputes (443 US 595, 603 )” (underlining added).
The local church’s conduct during several decades in silently ignoring or, indeed, accepting the adoption of the reversionary clause was deemed an acquiescence. The lesson for the denomination was to obtain a “sign off” from its local churches in some manner even if it was subtle or hidden in fine print, although in a manner of speaking the court held the denomination did so. The lesson for local church leaders is to read the fine print and opt out where permitted. Battles by local churches against reversionary clauses have not gone well.
It seems unlikely that states are “constitutionally entitled” to decide property disputes by using Neutral Principles of Law. While the Eleventh Amendment does protect the sovereign rights of states, the fact that the Eleventh Amendment was necessary indicates the Constitution as originally formulated did not “entitle” states rights. Because ownership of land and buildings is generally a secular activity rather than an Ecclesiastical activity in which states have a responsibility to govern, the highest courts have pointed the way to decisions that do not require Ecclesiastical inquiries by secular courts.
Denominational determinations that a church or parish is no longer viable usually start with a nearly empty church building the remaining membership of which, no matter how faithful, can no longer financially bear the burden of the corporeal existence of the church. Even without a mortgage, church buildings require maintenance, grounds must be maintained, and parking lot potholes must be filled.
In St. Cyrillus v Polish National Catholic Church, Slip Op. (unpublished) (NJ App. 2020) the local church building was destroyed by fire. All that was left of the church property was the land and the $1,000,000 paid out under the fire policy. The church building could not be rebuilt for $1 million but the local church had no fund-raising plan to accumulate the difference. The local church membership prior to the fire had dwindled. The denomination dissolved the local church and took control of the land and money. The trial court granted summary judgment to the denomination. The appellate court affirmed. The governance documents of the local church required the local church to obey hierarchical rulings as did the governance documents of the denomination.
The process by which a non-viable church is swept from existence is usually foreclosure by a lender. However, in those rare instances in which a church is no longer viable, and under denominational control, denominational decision making will likely be binding. For churches not under denominational control, winding up the affairs of the church, once the excruciating decision to do so has been made, an asset merger with a viable congregation is the most pain free method.