City, county, state and federal taxing authorities still use the mail to notify of tax obligations. While these notices are not always correct, and even some correct ones may be challenged, simply ignoring them does not make them go away. Reciting mantra’s like, “they can’t tax a church,” or “I’ll just give them a call to fix it,” are often the first words spoken in a church legal or financial disaster.
In Wings as Eagles Deliverance Ministry v City of Detroit, Opinion and Order (USDC, ED Michigan 2022), the city imposed property taxes on property owned by the ministry. The Plaintiff received from the City notices of taxes owed in several consecutive years. Finally, the City sought and received a Judgment of Foreclosure and transferred ownership of the property to a subsequent owner. (The federal trial court opinion does not explain the tax collection system in detail. But, somehow, the property ownership was transferred without an auction for zero dollars, implying not even the taxes were collected, and leaving no Excess Proceeds for the prior owner to collect. But, a more detailed study of the property tax collection system of Michigan is beyond the scope of this report.) The federal court entered judgment for the City because the state level Judgment was final and precluded review by the federal trial court. (Apparently, the Plaintiff took no action against the state level Judgment, such as an appeal to the Michigan court system. However, that is not completely clear from the federal trial court’s opinion.) Constitutional claims based on the Establishment Clause were unavailable because they were not asserted against the state level Judgment.
The Plaintiff in the reported case should have taken definitive action as to the first notice of tax delinquency and every notice thereafter. The state level Judgment should have been appealed. The best method of dealing with such matters, if a diplomatic visit to the taxing authority does not result in a written withdrawal of the notice in a timely way, is to pay the delinquent tax under protest and then sue to recover the money paid.
Most cities, counties, and states would not contest whether in any recognized and established denomination or church a parsonage owned by the local church inhabited by a Youth Minister would be a tax exempt residence. Indeed, most would not do discovery over whether a Youth Minister was really a “minister” whether ordained or not. Most would not have the courage to delve into whether religious doctrine permitted women to serve in ministry. Most courts would not allow such inquiries and would treat them as barred by the Ecclesiastical Abstention Doctrine and the Ministerial Exception. However, when courts snore, justice remains truly blind and ineffective.
In Trustee of the New Life in Christ Church v City of Fredericksburg, 595 US ___, Slip Op., Dissent of Denial of Certiorari (Gorsuch, Justice) (2022), the City of Fredericksburg conducted all the inquiries described in the introductory paragraph. The City of Fredericksburg declared that no local church in the Presbyterian Church in America could have a Youth Minister that was not ordained, that no woman could be “ordained” in that denomination, and that only “ordained” ministers residing in parsonages could qualify the church owned parsonage for tax exemption. The City took the position that “a church’s religious rules are “subject to verification” by government officials.” The trial court did not reverse the City or otherwise refuse to enforce its edict. On appeal to the Virginia Supreme Court, that court declined to review the judgment. The church sought certiorari to the United States Supreme Court but that court refused to hear the case. The dissent by Justice Gorsuch followed.
On the revenue side, cities, counties, and other levels of government are more like vampires than tax umpires. Only very brave and dedicated elected officials can stop such nonsense. The strange thing about the reported case was that as soon as the city government’s obvious effort to rule upon “church rules” became apparent, the local church should have sought, but did not, federal relief in a proceeding based upon §1983 or even the Religious Freedom Restoration Act.
As we have reported several times, after maintaining the governing documents themselves, maintaining valid membership lists at least annually is about survival. The local church that does not do both courts expensive legal repairs or a raid on assets. Membership rolls should annually be made a part of the minutes of the church governing board. Membership rolls kept in digital formats should at least annually be hard copy printed, or saved to media separate from the computer on which it is routinely hosted, and either or both attached to the minutes of the governing board.
In Cohen v Berliner, Unpublished Opinion (NY Supp Kings County 2021), the trial court held that the two hundred signatures submitted by the petitioner were not the valid ten signatures needed to demand a congregational meeting or vote. However, the court conducted evidentiary hearings in which thirteen witnesses were tendered for testimony. The local church owned a church camp primarily used in the summer. The local church also leased the church camp to a parachurch organization for a girl’s summer camp. Other local churches in the same denomination contributed money to the parachurch organization that operated the girl’s summer camp and that entity in turn leased the camp from the local church. At some point, a falling out resulted and the churches supporting the para-church organization sought control over the summer camp. The local church refused to surrender control. The churches supporting the para-church organization submitted a petition for a congregational meeting by the local church supported by two hundred signatures from members of those churches, but none of which were members of the local church that actually owned the camp. The petitioner sued to obtain a court order for the congregational meeting but the court upon holding extensive evidentiary hearings determined none of the two hundred signatories were members of the local church that owned the camp, but rather were members of the other churches. The court rejected the claim that membership in the denomination was the same as membership in the local church absent such language in the governing documents. The lease payments made by the parachurch organization did not constitute financial support of the local church that owned the camp, even if the lease payments were substantial.
Because the local church did not appear to have an official membership roll, each witness tendered had a shot at qualifying. The court in the case reported may have given the petitioner as many as thirteen tries. An official membership roll would have reduced the number of tries to one; only signatories also on the official membership roll could have been considered as “qualified” to call a congregational meeting. A joint denominational asset like a church camp should be placed in a corporate shell controlled by the member congregations or the denomination and not owned by one of the constituent churches of the denomination. Otherwise, no one but the owner of the denominational asset will have any say over its management, operation, sale or use as collateral.
While a church or denomination may have officers, directors, trustees, or similar leaders with ecclesiastical titles from the tradition of the denomination, generally no single officer can act for or bind the church or denomination without an enabling resolution of the governing body or authority granted by the governing documents. Likewise, just because such an officer is a named party in a lawsuit or arbitration does not mean that the church or denomination is bound by the outcome.
In Trustees of the General Assembly v Patterson, Slip Op. (3rd Cir. 2021), upon the death of the founder, the denomination split between his sons. Patterson went with one son to form a new church. Both sons claimed to be the “General Overseer” of the denomination. Patterson sued the son he had not followed and a board member of the Trustees. Patterson, the son and the board member decided to dismiss the lawsuit in favor of arbitration. An arbitration award was entered for Patterson. Patterson sought to have the arbitration award enforced against the denomination as to certain church property and assets. The federal trial court enjoined Patterson’s enforcement action and held the denomination was not a named party to the arbitration and was not bound by it even though a possible “General Overseer” and a single board member had been named. Further, the denomination had never been served with process. The federal court also determined that the denomination was not a “party in privity” with the alleged “General Overseer or named board member because the denomination did not agree to be bound by the arbitration, did have control of the litigation, and the legal relationship between those named and the denomination did not automatically make them representative of the denomination. The federal appellate court affirmed.
In church litigation, just like all other cases, the correct party must be named and served. If a church or denomination is incorporated, likely a service agent was appointed, so the correct service agent must also be served. Proceeding through a litigated matter like an arbitration without the correct party is a colossal waste of money. Lawyers must be cautious about merely following client advice about the nature of the legal relationship between the person named and the denomination or church to be bound and should independently verify the relationship will result in a binding outcome.