Category: Uncategorized

THE PRIESTHOOD OF THE LAW

Pastors, priests and professional ministers will sometimes bristle at the idea of “lay persons” infiltrating their profession and exercising their duties and functions.  It should come as no surprise that in secular courts, the church entity, typically a corporation or association, cannot be represented by the clergy but must be represented by a lawyer.  The “must” is not enforced by the lawyers, their advocacy for or against the law notwithstanding, but rather by the courts.

In Horowitz v Stewart Title, Order (D. Haw. 2017) the church leadership brought suit on behalf of the church corporation against a title company to enforce a real estate title insurance policy.  The case was dismissed because the church corporation was not represented by a lawyer.  The dismissal was “without prejudice” because the church corporation could engage counsel and refile the case (within certain time limits).  The church leadership had no claims in their individual capacities so their claims were dismissed.  The transfers of title and the attempts through foreclosure to obtain clear title were sufficiently convoluted that a more careful study of the court file would be required to accurately trace the motives and rights of the participants.  However, the allegation was that the real estate title in question was worth $6,000,000.  That would seem, if true, to have been enough to justify retention of competent legal counsel.

Nevertheless, the lesson to this point is that a church entity cannot represent itself in court and it cannot be represented by non-lawyer clergy or leadership.  That same rule applies to every corporate or alter ego entity and that is the law in every state or federal court.  The reason it probably should be the law, beyond my own bias in favor of full employment for lawyers, is that the entity may represent the assets and capital of a group of people, whether they be stockholders, stakeholders, donors or other participants and courts and governments want a licensed lawyer representing such group ownership so that accountability may be imposed when needed.

CORPORATE DEATH PENALTY

There is a corporate death penalty.  Religious organizations can be sentenced to oblivion.

Typically, a non-profit corporation ends up forcibly terminated because it failed to follow the corporate forms.  Usually, the failure to follow is not sporadic or just sloppiness but an abandonment.  The abandonment of the corporate life usually includes failure to maintain membership records, failure to define voting membership qualifications, failure to elect directors or other officers in accord with bylaws, failure to maintain proper financial records and controls, failure to conduct regular board meetings, and an inability by application of neutral principles for a court or court appointed receiver to identify those with a right to make decisions about the assets of the non-profit corporation.

In Ohio v Omar Ibn Khattab Mosque, Inc., 2017 Ohio 4453 (Ohio App. 10th Dist. 2017), the Attorney General of Ohio sought dissolution of the non-profit corporation and appointment of a receiver to form a successor non-profit corporation that would own the assets of Khattab Mosque, Inc.  The court affirmed a magistrate’s findings that board members were attempting to hold office beyond their terms, multiple efforts to elect successors had merely multiplied disputes and claims, the mosque’s bank froze its accounts so it could not pay its bills because of competing claims, each faction before the court wanted control of church assets and ouster of the board members representing the opposite faction, and each side was attempting to drag the Attorney General into ecclesiastical disputes over qualifications of board members.  The court refused to resolve any of the disputes, noting that years of litigation had already failed to do so, and simply granted the Attorney General’s petition to dissolve the corporation and appoint a receiver to supervise creation of a successor entity and all in only 40 pages.

Too often, such calamities arise from building programs.  The Khattab Mosque collapse began in a building program that may have resulted in a battle for control.  Churches, mosques, synagogues and para-church organizations that assume everyone will remain loyal, honest, and accommodating throughout the years will see no need for organizational documents, rules of corporate governance, and otherwise documented elections and regular meetings.  Strong leadership that seemed to make such things unnecessary will retire or die.  New members will sometimes become disenfranchised with the old ways.  These are the reasons corporate forms matter.

THE FINGER IN THE DIKE

From the perspective of church defendants, any weakening in the shield wall of the Ecclesiastical Abstention Doctrine creates concern because the future courts that will operate under the doctrine may further weaken it.  At its best, the Ecclesiastical Abstention Doctrine might be viewed as a limitation on the jurisdiction of the third branch of government, the secular courts.  However, if it is not a limitation on jurisdiction, then the secular courts are free to rule to the full extent of their jurisdiction in any subject an argument can be made that secular law does not interfere with doctrinal freedom.  Moreover, the cost of compliance with secular law can reduce the freedom of religion by indirectly making the free exercise cost too much.  This is especially true in the church school.

In Winkler v Marist Fathers of Detroit, Inc., Slip Op. (Mich. 2017), the student applicant to the church high school asserted she was denied admission due to dyslexia.  The defendant church school claimed the admission was denied because the student’s academic record did not meet the admissions requirements.  Michigan held in 1994 that the Ecclesiastical Abstention Doctrine deprived the secular court of jurisdiction to hear church school admissions cases.  Thus, the Michigan Supreme Court took up the question of jurisdiction only and none of the other questions raised by the facts or parties.  The Michigan Supreme Court reversed the lower courts and held that the Ecclesiastical Abstention Doctrine does not deprive the court of jurisdiction.  The case was remanded for further proceedings.  Indeed, the case might still be dismissed by the lower courts on other grounds such as whether Michigan’s Persons with Disabilities Civil Rights Act applies to church schools and on Ecclesiastical Abstention Doctrine grounds if a religious reason for the denial of admission is revealed in discovery.

However, whereas before in Michigan the case would not have survived long enough to become an independent search for neutral principles under which to decide the case it now could.  Likewise, other cases on other topics could.  “Congress shall make no law respecting an establishment of religion” will be very narrow if it is limited in effect to the ecclesiastical questions and does not limit the larger regulation by government of the day to day affairs of a church, such as operating a church school.  No matter how “good” an idea it may be to force public schools to main stream all disabilities without commensurate adequate additional funding such a financial burden will close most church schools (and does not seem to be doing the public schools much “good”).  As the Ecclesiastical Abstention Doctrine shrinks in scope church schools will find themselves increasingly outside the shield wall.

DONOR DO OVERS

In the typical church, fund raising to achieve an objective is not always successful.  To raise enough money to build a fellowship hall, or a youth facility, or some other adjunct facility is often started and not finished.  If insufficient money is collected to achieve a stated purpose what happens to the money that is collected can be a source of angst.  Returning the money may present administrative problems like identifying exactly who gave what because many donations are “anonymous.”  Most churches have a church treasurer sworn to secrecy but donations that have to be documented for tax purposes may make anonymity sometimes illusory.  Also, most churches do not have clear policies regarding whether donative intent is binding and if it is, for how long.  Also, if the money is returned to identified givers, must the money be returned with an IRS form 1099 requiring the church to have or obtain the donor’s social security number?

Rogers v St. John United Methodist Church, Slip Op., (unpublished) (Mich. App. 2017) was the reversal of a trial court’s grant of a Motion to Dismiss.  In most jurisdictions, obtaining a dismissal by motion based on the pleadings is problematic at best.  Also, at that stage, without discovery or a trial, the factual evidence is often not complete or cannot be considered.  However, it seems the donation for a new fellowship hall was probably not enough to build and additional fund raising was apparently not successful or for some other reason leadership decided not to build.  After a passage of time, the donors sought a refund.  Apparently the donors were sufficiently well identified and the money sufficiently segregated that it was identifiable as to amount.

The opinion of the court, again based on and reversing a trial court’s dismissal founded only on pleadings, was that “resolution of plaintiffs’ claims does not require a court to analyze questions of religious doctrine or ecclesiastical polity” and for that reason the trial court received the case back on remand for further proceedings.  In other words, the court was holding donative intent could be determined without considering religious considerations.

The opinion was silent about the law of donations in general, i.e., whether once donated the donor retains any authority over the use of proceeds.  The opinion was silent about the bylaws of the church.  Often well drafted bylaws clearly state a policy that donative intent is not binding on leadership and that no return of donated funds can occur even if a donative intent cannot be fulfilled.  Bylaws often also make donations religious by reciting Scriptural edicts regarding donations.

Thus, the opinion of the appellate court in Rogers should be viewed as provisional and not viewed as a general statement of law.  That intent could be determined may have been a projection based on the what the court had before it.  As the case proceeds, if it does, that intent may not be so easily determined.