Determining the ownership of church property requires in denominational churches more than a copy of the deed. Likewise, determining who has authorization to act upon behalf of the property owner, to transfer or encumber the ownership interest, may require inquiry into governing documents from a denomination and the local church. This is especially true when the attempted transfer of ownership arises from a dissident faction
In Romanian Orthodox Episcopate v Estate of Carstea, Slip Op. (Mich. App. 2022), the trial court determined that application of Neutral Principles of Law, enforcing the denominational governance documents, required quieting title in the denomination. The appellate court affirmed the decision, but held Neutral Principles of Law did not apply because the dissident group, led by a disciplined and laicized former priest, did not have authority to transfer title to the new church corporation. The denominational governing documents allegedly prohibited “defecting parishes from retaining church property.” Therefore, even if the local church sought disaffiliation, the local church did not have right, title or interest in the church property with which to transfer the property to the new church corporation.
Generally, a local church in good standing in its denomination will have authority to transfer property or mortgage its property in usual and customary business transactions. A written waiver by the denomination may also be required by a lender. Even in usual and customary business transactions, the local church should confer with the denomination consistent with the governing documents. Almost never, however, will a defecting congregation be able to keep its church property if the denominational governance documents prohibit it.
The concept of Neutral Principles of Law is founded on the idea that certain documents are not so ecclesiastical in their composition, purpose and usage that courts can resolve certain church related disputes. Typically, those documents are property deeds, church corporate organizational documents required or authorized by a state, and denominational organizational documents. In denominational procedure and policy manuals and handbooks in which the operational rules of the organization are typically published, there may be secular sections that are removed from ecclesiastical issues.
In Re Texas Conference of Seventh Day Adventists, Slip Op. (Tex. Civ. App. 2nd 2022), the appellate court “allowed” the trial court to dismiss the case for lack of jurisdiction. Texas views the Ecclesiastical Abstention Doctrine as a jurisdictional limitation on the authority and power of Courts to hear cases involving churches. The denomination forced the pastor after a quarter century of service to retire. He continued to serve the local church for five more years. The local church during those years gathered money for the pastor’s pay and transferred the cash to the denomination so the denomination could exercise the payroll function. The denomination terminated the pastor at the end of the five years. The local church did not resist and prepared to wind down the payroll fund and pay the pastor the remaining balance. The denomination ordered the remaining balance transferred to the denomination but paid the pastor nothing further. The local church turned to its savings account to obtain funds to continue operating. The denomination prevented withdrawals from the savings account. The denomination changed the locks on the church property and excluded the local church leaders and members from gathering at the church property. The local church sued the denomination and alleged the denomination violated the secular provisions in the denominational manual that placed ownership of the funds taken and the church property in the ownership of the local church. The appellate court held that the Ecclesiastical Abstention Doctrine does not allow secular issues entangled with ecclesiastical issues, such as church governance and authority, to be heard in Texas courts. The trial court was permitted to dismiss the case.
The opinion does not explain how the denomination came to control the savings account otherwise held by the local church. The denomination apparently ordered the local church financial officer to transfer the payroll fund to the denomination. Therefore, implicitly, the denominational control of the finances of the local church predated the dispute. Local churches that wish to retain some financial autonomy must open their bank accounts in their own ownership and update authorizations periodically. Denominations that wish to avoid local church financial autonomy must require all local church funds be deposited in denominational sweep accounts. The denomination can fund a petty cash account at the local church for basic operational necessities.
In the changing denominational and doctrinal environments in which local churches and denominations find themselves, the ability of local churches to leave the denomination with their property intact is problematic at best. Organizational and governance documents of both denominations and local churches which were typically drafted in a past era, and rarely or never updated, generally drive the loss of local church property to the denomination. It seems less often, but property ownership documents like a deed, especially older ones, often buttress the organizational documents.
In Hebron Community Methodist Church v Wisconsin Conference Board, Opinion and Order (WD Wisc. 2022), the federal court dismissed the federal constitutional challenge by a local church against a Wisconsin statute that expressly preserved the ownership interest of the denomination in the event the local church “disaffiliated.” The argument, which may have been correct, was that the statute violated the Establishment Clause of the First Amendment. However, the federal trial court never reached the constitutional challenge because the local church could not overcome the traditional Neutral Principles of Law analysis adopted in Jones v Wolf, 443 US 595 (1979). The Jones case held “courts may look at the “language of the deeds, the terms of the local church charters, the state statutes governing the holding of church property”” and the provisions therein. In the reported case, the 1855 deed and the 1963 deed recited the property was owned by the denomination. The local church’s articles of incorporation adopted in 1963 stated the local church would “support the doctrine, and it, and all its property, both real and personal, shall be subject to the laws, usages, and ministerial appointments of the Methodist Church.” The denominational documents indicated the local church held its property in trust for the denomination. The local church amended its articles of incorporation a month after filing the lawsuit against the denomination to quiet title. No organizational or other document authorized “disaffiliation” by merely unilaterally amending articles of incorporation. The trial court held that because all of the Neutral Principles of Law markers, deeds and organizational documents, pointed the same way, and against unfettered ownership of the property by the local church there was no reason to reach the constitutional challenge of the statute.
These cases almost uniformly counsel against the effort of the local church to try to keep its property. The local church would be better off to borrow against the property if it is paid off and default, or simply hand a mortgaged property over to the denomination, and use the resources otherwise to be consumed in litigation to start anew. If the property value and the mortgage are not too disparate, the local church might be able to negotiate a different outcome because there may be little for the denomination to gain if equity is thin. While there might seem to be a lack of morality in the foregoing suggestions, and some might blanche at them, the only other alternative is simply to abandon property to the denomination and start anew. If there is a “moral” reason for the “disaffiliation,” it might have such a cost.
Whether a local church can break away (“disaffiliate” in some groups) from a denomination, and whether the local church has followed the procedure to do so to conclusion, are usually very difficult inquiries. Because the determination of whether there is an ability to break away, and whether it has been done, usually determine who owns the local church property some courts are tempted to decide these issues as if they were amenable to review under Neutral Principles of Law. Others refuse to decide the issues under the Ecclesiastical Abstention Doctrine.
In Blue v Church of God Sanctified, Inc., Slip Op. (Tenn. App. 2022), the trial court refused to determine whether the local church “disaffiliated” by holding the issue was shrouded in the Ecclesiastical Abstention Doctrine. Nevertheless, because the denomination determined that the local church held the church property in trust for the denomination, the trial court held that decision was also shrouded in the Ecclesiastical Abstention Doctrine. The Tennessee Court of Appeals in its lengthy and detailed opinion affirmed the trial court. While the appellate court authorized trial courts to review all governance and property ownership documents, the decision of the denomination that the local church property was held in trust for the denomination was ecclesiastical if it was enshrined in denominational governance documents. That was so regardless of whether or not the local church property deed contained a “trust clause” making the local church owner a trustee for the denomination.
Courts were sometimes hung up on the boundary between the ecclesiastical and secular property ownership. Such courts can elevate the presence or absence of language in deeds above denominational governance documents, or even local church governance documents. The approach in the reported case avoids blurring the ecclesiastical boundary by elevating the denominational governance documents and relying on other documents only in the event of silence or ambiguity in the denominational governance documents.