History taught us about the folly of wars that lasted decades; The Hundred Years War is an example heard at least passing mention of in some long ago school room. In these reports we have included cases arising from disputes caused by the failure of church founders or long time senior pastors to have succession plans. The resulting battle for control of church assets is always unseemly and inconsistent with the departed leader’s vision. Worse, these types of disputes often involve surviving family members that believe they inherited an entitlement to assets but no corresponding duty to develop the skill sets needed to lead. The problem is worse at the denominational level.
In Trustees of the General Assembly, etc. v Patterson, Memorandum [Opinion] (ED Pa., 2021), the federal district court recited the “almost thirty-year dispute in state court that resulted from the lack of succession planning. The church consisted of 50 satellite churches in the United States, 6,000 members of which 3,000 member were resident in Philadelphia. The church founder was the “bishop” and held a lifetime appointment. The first successor likewise held a lifetime appointment. The “bishop” had unilateral authority over membership rolls. The first successor had seven sons and a daughter, some of whom became clergy or trustees. The battle over succession “created a schism in the church.” Two factions formed around competing family members. The majority faction “disfellowshipped” the minority faction. Each faction claimed they had elected the next “bishop.” Lawsuits followed that were decided in various courts and forums, including mandatory arbitration. The arbitration award was set aside by a state court and then later by that state court held to be a final adjudication. Based on that ruling, the minority faction sought to evict the majority faction from the main church building and the leader of the minority was faction was declared to be the “receiver” of all church assets. However, the leader of the majority faction was left in office as “bishop,” and would also ostensibly have control. Thus, the federal court held it was not possible to determine who had control of the church assets based on the arbitration award and enjoined the eviction. It took the federal court 84 pages and 61 footnotes to navigate the litigation history and reach a conclusion. The federal court left the factions where they were at the end of the arbitration.
The amazing thing to gain from this report and this court’s opinion was that the membership tolerated this and financed it through a generation and a half of members. Another amazing thing is that an arbitrator would enter a decision guaranteed to perpetuate the schism by dividing the authority between the factions. The last amazing thing is that the state judiciary did not make definitive rulings based on the governing documents in the first instance or based on the arbitration award in the second. The receivership should have been quickly administered and wound up with no delay accepted. There were either financial irregularities or there were not.
When the church split spills into the street one issue is who has custody of the church building. Usually one faction is sufficiently predominate and in the majority that it retains control of the church building because it can pay the bills. The minority faction usually cannot. When the factions are sufficiently large, sufficiently financed, or otherwise equal, a court may have to decide who has custody of the church building.
In Yakob v Kidist Mariam Ethiopian Orthodox Tewahedo Church, Inc., Slip Op. (Ga. App. 2021), the pastor became a bishop. However, the church apparently did not want to support a part-time pastor. The pastor resided in the parsonage which was part of the church building. The trial court entered an injunction requiring that the faction not supporting the pastor as bishop could have the church building on Sunday morning and the faction supporting the pastor as bishop could have the church building on Sunday afternoon. The trial court later entered another injunction ordering some of the recalcitrants to attend a board meeting or that those in attendance constituted a quorum. The appellate court affirmed the building custody order but overruled the order for meeting attendance because it intruded on internal church governance.
Church building custody orders are an expensive, time consuming, and very public way of resolving factional disputes. Church building custody will usually go to the larger faction if a court can identify the larger faction because typically only the larger can pay the mortgage.
When church splits spill into the street one of the things that can happen is that the bank that serviced the church checking and other accounts may not know who should be authorized to transact business in the accounts. The bank will likely freeze all accounts and seek protection from a court. If the bank is sufficiently antagonized, it will interplead. That means the accounts will be liquidated and the funds deposited in the registry of the court. The court will then decide who can transact business and for what purposes. Generally, any expense the church incurred in happier times, including payroll, may be paid with court permission. Dealing with interpled funds is time consuming, expensive and slow.
In United Community Bank v Wakefield Missionary Baptist Church, 2021 NCCOA 89 (NC App., 2021), an audit revealed “deficiencies in bookkeeping and payroll records.” The pastor sought to add a signatory to the church accounts. The pastor also allegedly learned the prior signatories opened but did not disclose a Certificate of Deposit containing $123,000. The prior signatories objected to the additional signatory promoted by the pastor. The bank decided to seek court protection from the dispute and interpled the funds. The prior signatories appealed arguing the court could not direct how the church spent its money or determine the membership status of the prior signatories or the newly proposed signatory. The trial court held it could employ Neutral Principles of Law to determine who could control the church accounts. The appellate court held the interpleader order of the trial court was interlocutory, and therefore not appealable, and that the trial court had jurisdiction to determine who had the right to control the church accounts.
Most factional church disputes cause the bank to lock down church accounts while one faction or another continues to manage church finances through control of the offerings deposited in accounts at another bank. But, if the first bank is pushed in the least an interpleader will follow. As the semi-sentient computer learned in the movie War Games (1983), the only winning move is not to play.
We have reported many times the attempts of local churches, some clever and some blundering, to slip the ties that once happily kept them snug in the denomination once those ties became odious. Almost uniformly, those efforts have failed. Hierarchical denominations receive greater deference regarding internal decisions about property and ministers.
In Dong San Church Corporation v Park, Slip Op. (Cal. App. 2020), the trial granted summary judgment to the denomination in a lawsuit for declaratory judgment and to quiet title. The Court of Appeals affirmed. The local church was a member of the denomination for more than two decades. The local church was led by an interim pastor that was not confirmed as pastor by the denomination because of legal issues unresolved in South Korea. To keep the interim pastor, the local church sought disaffiliation with the denomination. The interim pastor and some members of the local church disassociated themselves from the denomination. The courts held that the disaffiliation effort by the local church was not effective under the denominational governance documents. The disassociation of the interim pastor and some of the members did not change the affiliation of the local church. The denomination appointed a new pastor and the court quieted title in favor of the denomination.
The denomination probably should have not have permitted the interim pastor to serve as long as he did given the serious nature of the unresolved legal issues in South Korea. Appointment of a replacement pastor should have been the choice rather than the wait and see choice made by the denomination. Waffling on employment or appointment decisions very often leads to protracted litigation.