Category: Uncategorized

CORPORATE FORMS – FOLLOW THEM

Especially local congregational churches, but even denominational connectional churches, seem to adopt a corporate Constitution and Bylaws only to ignore them. When a church split arises, it may become a subject of secular litigation to identify the actual qualified voting members and the actually elected officers. A court will not select a Pastor, but sometimes the identification of the voting members or the officers has that indirect effect.

In Victory Valley Church, Inc. v Purported Victory Valley Church, Slip Op. (Wis. App. 2017) (unpublished subject to further editing)(Per Curiam), both sides in the church split had the right to resort to an “ecclesiastical court” under the church Bylaws, but neither did. Instead, both sides submitted the identification of voting members and officers to the court to decide, but one side was not happy with the decision and tried to demand a “do over” arguing the Ecclesiastical Abstention Doctrine. Once submitted by both parties, however, the court could, and did, decide the issue presented pursuant to Neutral Principles of Law, i.e., according to the church Bylaws that were adopted but not substantially followed. The court had to hold a trial to identify qualified voters and elected officers because the church had not kept its corporate minutes updated, had not kept its election(s), if it had any, recorded, and had not kept updated voting membership rolls (which should be done at least annually). Most churches do these things autonomically and quite simply. Even done sloppily would be better than not done at all.

The other problem was that the Bylaws envisioned removal of an officer but required the officers to preside over the removal, creating an inescapable conflict of interest because the officer to be removed would be part of the decision. The Court decided because of the inherent conflict the Bylaws were not workable in this instance and resorted to the state corporations statute which was the default rule if corporate Bylaws were silent or ambiguous. Thus, the other lesson of the case opinion was that churches should make sure the Constitution and Bylaws adopted by the church cover all foreseeable contingencies. Homemade foundational documents of this type, usually drafted by an interested party trying to protect their own interest, can and do backfire.

UPDATE REGISTERED AGENT STATUS — NOW!!

Often corporations and businesses do not update their registered agent’s name and address, typically with the Secretary of State of the state in which the principal place of business is located, so it is no surprise churches and non-profit entities fail to do so. This is especially true when a founder or long time business manager for a non-profit entity or a church dies or retires.

An example of this is found in Fernwalt v Our Lady of Kilgore, 2017 Ohio 1260 (Ohio App. 2017). This is such a strange little case that detecting the legal principles is hard due to the distractions.

Apparently, Fernwalt found himself “a fugitive of the law” and “attempting to leave the country and flee to Canada.” The opinion does not explain this tantalizing fact further. But, Fernwalt decided he could trust a priest named Steger and he transferred title to property to Steger. Good to his word, Steger transferred the property title out of Steger’s name and into the ownership of a non-profit corporation Steger created called Our Lady of Kilgore. Steger was the pastor of a church from which he resigned about a decade after the title transfer and then promptly died. A second decade passed and Fernwalt returned to reclaim title to his property. The opinion does not explain the triggering event that brought Fernwalt back. Fernwalt filed a lawsuit against Our Lady of Kilgore, the non-profit entity, to recover his property title. Fernwalt served the papers at the last address on file for Steger as the registered agent, which was the church he pastored a decade earlier. The church rejected the service and no one forwarded the papers. Fernwalt took a default judgment.

In the nick of time, Steger’s successor corporate officer found out about the lawsuit and moved to set aside the judgment. The trial court refused to set aside the judgment but the appellate court reversed the trial court.

Some jurisdictions would not have been so forgiving, and even then in this case it took an appeal to reverse the judgment. It is possible that due to a procedural error in entering the judgment, it would have been considered null and void and had to be reversed in any event. Thus, the reversal of the judgment might not have occurred without the defect in entering the judgment.

In other words, do not risk it. Make sure the church has a registered agent and that the registration is current and on file with the appropriate authorities…and do it now!

BIBLE COLLEGE MINISTRY DISCIPLINARY PROCESSES

While the Ecclesiastical Abstention Doctrine and the Ministerial Exception are both clearly understood with regard to churches and denominational organizations, the question whether and how far those doctrines radiate away from churches to para-church organizations seems perennial and persistent. For example, is a Bible College, seminary, or similar training school for ministers, pastors, priests and other clergy out of the reach of civil courts? If yes, just how far outside of the reach of civil courts are they? Some courts seem to be intent on using a microscope to study the boundary between the inside of these doctrines and their outer perimeters. But, not so Ohio.

In John Doe v Pontifical College Josephinum, Slip Op. (Ohio App. 2017), Mr. Doe was a year from graduating with a Masters in Theology from a school that trained students for the Roman Catholic priesthood. Mr. Doe was dismissed from the school for sexual conduct and his dismissal was the subject of a posted notice on the campus. The dismissal was part of the school’s disciplinary process.

Mr. Doe’s lawsuit was dismissed because the court held the claims of Mr. Doe were inextricably intertwined in the disciplinary process which the court held was shielded under the Ecclesiastical Abstention Doctrine. While that decision was not “news,” Mr. Doe claimed the school breached its contract with him as set forth in the school policies and handbooks regarding access to his records and violated federal educational privacy law by posting the notice. He wanted to use his records in a canon law appeal. The court dismissed these claims, too, because the court in order to hear these claims could not avoid reviewing the disciplinary process to determine if the notice arose from the ecclesiastically driven disciplinary process. Mr. Doe demanded money damages alleging the school was unjustly enriched by being allowed to keep his tuition and fees but the court dismissed the claim because in order to determine whether there was unjust enrichment would require inquiry into the disciplinary decision’s ecclesiastical validity.

ETERNAL TORTS – ETERNAL INSURANCE?

Allegations of sexual abuse, especially of children, by church members or church leaders are painful and difficult cases that will scar a congregation sometimes for decades. Nevertheless, there are limitations on lawsuits that sometimes allow a wrongdoer to escape secular punishment. One type are the statutes of limitation that require a lawsuit or criminal charges to be filed before the expiration of a length of time generally imposed by legislation. Statutes of limitation are based on the recognition that witnesses die or age beyond retrieval and documents and scientific evidence age beyond usefulness or are lost. [Try converting an uncorrupted photo, image or video from a format used before Y2K, for example, much less a corrupted data file.] But, sometimes the pain of the victim is permanent.

In Lewis v Bellows Falls Congregation, Slip Op. (D. Vt., 2017), the statute of limitations provided by state law for claims of “childhood sexual abuse” is six years beyond the age of majority (age 18) or from knew or should have known (i.e., the discovery rule). In the Lewis case, the sexual abuse was known before the victim reached 18 leaving the 18 year old six years to file a lawsuit. But, the victim did not file a lawsuit until nine years after reaching age 18.

The victim argued that the alleged fault of the church was not discovered until some years after the abuse which should have extended the statute of limitations under the discovery rule. However, because the abuse occurred in the home of the wrongdoer and the victim was not present in the home of the wrongdoer on a church function, the church had no duty monitor the wrongdoer (or ability to monitor). The victim was in the home of the wrongdoer through no fault of her own, or her parents, but that did not mean the church had control over the wrongdoer in the wrongdoer’s home. Had the abuse been on church property or at an official church function, there might have been a question of fact for a jury to consider regarding the responsibility of the church.

This outcome would have been the same for secular organizations like schools and day care providers. Just because two families meet at some organization like a church or school and develop a relationship outside of the purview of the organization that leads to sexual abuse does not usually alone represent “agency” or “control.” “Here, the Court can discern no evidence that True was continually subjected to the will of … the Congregation … .”

One lesson churches should take from these cases is that liability insurance (which will pay the legal fees to defend the case) should be maintained year in and year out with no gaps and for these types of cases should have very long “tails,” if needed. Well trained insurance agents understand and can solve these issues affordably. Any doubt should be resolved by consulting a second insurance agent independent from the first or legal counsel that is knowledgeable about insurance policy lore.