Category: Uncategorized

CHURCH PLANTING BY FISSION

Many of the churches that dot the North American cultural landscape were founded due to a church split. It does not matter whether the split was equal or left only a remnant in the original church or in the new church. This method of church planting is messy and painful, and does not always result in the survival of the older or the newer church. It happens, it seems, in every “religion” and in every type of religious group, including independent churches and denominations.

In Sentinel Insurance Company v Shaarei Tzion; Ahavat Israel, Slip Op. (D. Az., 2017), it was a “synagogue split” that created the property issues that led to a declaratory judgment action by the property insurer for Shaarei Tzion. Shaarei Tzion made a claim for $176,040 regarding property allegedly taken by former members when they left to form Ahavat Israel. The property included “several Torahs, prayer books, books, other religious artifacts, tables, chairs, and bookcases.” Of course, Shaarei Tzion and Ahavat Israel, both corporations, were suing each other. The opinion carefully untangles the competing claims and is a textbook example of how not to divide a congregation’s property in a church fission.

One argument that Ahavat Israel made was both unique and clever. Ahavat Israel could not deny that the property taken was in the possession of Shaarei Tzion. But, Ahavat Israel asserted Shaarei Tzion did not own the property because the property belonged to the “greater “Bucharian Jewish Community.”” The Court recognized that was an ecclesiastical argument it could not address but noted under neutral principles of law the Court did not need to resolve that issue and that the claim did not deflect Shaarei Tzion’s claim to possession. The Court noted that Shaarei Tzion, whether as custodian or permissive user of the property, if not outright owner, had a right to possession that Ahavat Israel did not have and that Ahavat Israel had committed conversion to take the property.

The lesson from this is that unless the fission creates a financial need great enough to force both entities to negotiate property divisions, the departing founders of the new church should simply leave all the property behind and invest their resources not in legal fees but in their own heritage and its material manifestations. Among some religious groups, the religious artifacts and worship tools are admittedly difficult to replace, but the alternative is protracted legal problems and protracted resentments.

TAXING CHURCHES – CALL IT SOMETHING ELSE

While most people want everyone to pay their fair share of taxes, however that may be defined, most people do not want government anywhere near the church or anything that belongs to the church. Indeed, for centuries in the United States we have forbidden taxation of churches.

But, if the tax is not called a “tax,” but is called a “special assessment,” well then, that is different is it not? Apparently, in Minnesota, that is the law. In Bryant Avenue Baptist Church v City of Minneapolis, Slip Op. (MN Civ. App. 2017), the Court explained why a church of about 80 members was the proud recipient of a “special assessment” for street repairs in the amount of $31,191.30 to be paid off in five annual installments. The Court was convinced that the state constitution did not exempt churches from “special assessments” for civic improvements even though cemeteries and other types of entities were exempt.

The Court solved the 1st Amendment entanglement issue by pretending it did not exist. Indeed, there is no mention of it in the opinion. It is possible the church did not raise the 1st Amendment as a defense, but that seems unlikely, and even so, most courts would inquire into their own jurisdiction to hear a matter obviously touched by a fundamental federal right. Apparently, there is no prohibition of entanglement with religion in the Minnesota constitution.

“History is particularly compelling in the present case because of the undeviating acceptance given religious tax exemptions from our earliest days as a Nation. Rarely if ever has this Court considered the constitutionality of a practice for which the historical support is so overwhelming.” Walz v. Tax Comm’n of City of New York, 397 U.S. 664, 681 (1970) (Brennan, J., concurring).

PARA-CHURCH ORGANIZATIONS AND THE KEYS TO THE KINGDOM

The rise of para-church organizations, no doubt necessary to the support of the church or its ministry are also the inspiration for limitations on the reach of the Ecclesiastical Abstention Doctrine (1st Amendment prohibition of entanglements between secular courts and church doctrine) and the Ministerial Exception (to federal and state employment laws). Para-church organizations include bible colleges, foundations, and corporations set up to control secular property, and sometimes even church buildings. Whether positions on the boards that govern the para-church organization are subject to either the Ecclesiastical Abstention Doctrine or the Ministerial Exception can only be determined after careful inquiries. Secular or ecclesiastic characterization will likely depend on organizational documents of the para-church organization that describe the goals and work as well as the job descriptions of the leadership. Just because board members must be clergy of the denomination does not automatically trigger either legal doctrine.

Puri v Khalsa, Slip Op. (9th Cir. 2017) is a case in which the 9th Circuit merely reversed a trial court’s decision to dismiss a case on the pleadings based on the 1st Amendment. Nevertheless, it took 33 pages for the Court to work through the issues, even though all that was before it were the pleadings. (Because of the high standards that Motions to Dismiss must meet, when a court does this, it usually is not an ultimate statement of the law. Nevertheless, this well reasoned opinion probably does cast a strong light on this issue.) Once the case is returned to the trial court, the case may follow a litigation track, may develop a more sophisticated factual record, may be tried to the bench or to a jury, and may return again to the appellate court.

The 9th Circuit was not moved by the fact that the board members had to be ministers of the denomination or religion served by the work of the para-church organization. The Court ordered Neutral Principles of Law applied by the trial court to determine the eligible board members for the para-church organizations (which all appear to have been corporations). One of the para-church organizations owned secular businesses.

There was an idea that surfaced many years ago that churches could set up a para-church corporation, transfer their property to it, and that would effectively make their property judgment proof. States with strong fraudulent transfer policies or laws might neutralize such arrangements. Also, such arrangements typically divorced the revenue stream from property ownership making the property unavailable as a credit source. Some encountered tax problems because the argument was made that the property was no longer owned by a church and therefore no longer exempt.

Para-church organizations that want to limit their work and property ownership to ecclesiastically recognizable activities, rather than risk that they are, indeed, secular and governed by civil law, need to carefully design their foundational documents and possibly amend them with the assistance of competent counsel. Many corporations set up using a form book, or worse a homemade document, are secular in design and not ecclesiastic in design, much to their surprise.

ROOFING WARS

Few things present a greater maintenance challenge to a church than the roof. Even medium size churches usually have under the roof a lot of square footage, some not being visually beheld, if at all, except for very short times during their main worship time. Also, as a volunteer organization, typically led by Pastors that have been to Bible college or seminary but not worked as roofers or contractors, churches are usually hard pressed to maintain a commercial size roof.

Insurance companies and churches have one thing in common: the insurance company will not invest in underwriting prior to policy issuance and the church usually has poor roof maintenance records even if the roof has been well maintained. Neither usually has a photo history updated annually or bi-annually.

In State Auto Property Casualty Insurance Company v El Shaddai Christian Ministries, Inc., Slip Op. (USDC, SD, N Div, 2017), the church claimed it had roof damage and water intrusion from a storm in March 2012. The church had policies, one at a time, with Brotherhood Mutual, State Farm, and State Auto, one right after the other. The church made the claim on all three policies, again one after the other, and was denied by all three on the claim that the roof damage was caused by neglect. The Court was not deciding the case; the Court overruled State Auto’s Motion for Summary Judgment finding factual disputes and set the case for trial later in 2017. The church had to hire a PhD in meteorology to prove there was a storm and an expert that opined the damage to the roof was storm related. The insurance carrier expert claimed the damage was due to neglect, wear and tear.

All three insurers did not appear, from the evidence reviewed in the opinion (but which might be presented at a trial), to have performed underwriting prior to policy issuance beyond accepting an application and a check. While it may be that at trial the carrier may be able to prove that the application contained misrepresentations, that was not the subject of the Court’s opinion. Likewise, the church might have substantial evidence that all three carriers were on notice and the church was transparent in its business dealings with the carriers. If so, the church will be hard to beat.