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.
Determining whether a local church is a “member” of a denomination is usually no harder than looking at the name on the building or the signage. But, sometimes determining church paternity requires a review of church governance documents at both the local and denominational level. Church property issues may also include review of property deeds and state laws governing non-profit corporations or associations. Further, if a local church attempts to end its denominational “membership,” whether it can unilaterally do so or do so at all, requires review of these documents as well as creation of “divorce” documents.
In District Advisory Board, Church of the Nazarene v Centro De Alabanza Oasis, Slip Op. (FL. App. 2022) the trial court granted summary judgment to the local church based on the local churches’ attempt to end its membership in the denomination. The appellate court reversed. The trial court was required to conduct a review of the evidence to determine whether the denomination was hierarchical. If so, the denomination would control the property of the local church. The trial court also had to determine if the local church was actually a “member” of the denomination. The reported case recited instances in which the local church arguably admitted it was a denominational “member,” starting with the signage, and in documents submitted to the denomination to end the membership. The documents submitted to end the “membership” were arguably insufficient.
Local churches contemplating a departure from a denomination should determine if it is possible and probably engage a lawyer with writing skills to assist in completing the documents. Other departure strategies may have to be considered, too. Clinging to property without careful consideration of the foregoing can burn through the cash needed to start a new church.
Generally, the local church in a hierarchical denomination owns its own property but holds it in trust for the denomination. This is often also true in denominations that are not hierarchical but in their governing documents require the local church to own its property but hold it in trust for the denomination. The rationale for such trust provisions is that generations of members of the local church, that also thought they were members of the denomination, gave offerings based on that premise. The attempt by a future generation of local church members or leaders to divorce from the denomination does not, so the rationale goes, keep faith with the generations that came before.
In Presbyterian Church of the Palisades v Hwang, Slip Op. (NJ App. 2021), the local church lost membership and financial stability to the point it was about to lose its property to foreclosure. The local church managed to salvage the situation by selling the property to a third-party non-church entity. The funds paid by the third-party non-church entity were placed in escrow. The litigation proceeded over who was entitled to the purchase funds placed in escrow. The local church corporation claimed to be the owner but so did the denomination. The mortgage default by the local church triggered the trust clause in the denominational governing document. As a result, the local church was no longer owner of the property. The denomination assumed the role as owner under the trust provision. The “owner” would be entitled to the escrowed purchase funds. The trial court determined under the trust provision the denomination was the “owner.” The appellate court affirmed the trial court and ordered the escrowed funds released to the denomination.
If the denomination is hierarchical, most courts will under the “deference doctrine” defer to the decisions of the denomination regarding disposition of local church property. The denominational governing documents generally compel the result. If the denomination is not hierarchical, the “neutral principles of law doctrine” will generally compel the enforcement of the denominational governing documents. If the denominational governing documents require that the local church owns its property in trust for the denomination, Neutral Principles of Law will generally dictate that the denomination is the owner. There are few exceptions, the most recognized being when the deed filed of record expressly excluded the ownership of the denomination and the denomination approved the deed.