Title and deeds should be carefully crafted.  Obtaining the services of an actual title or real estate lawyer is not too high a price to pay.  Title transfers, especially in settlement of threatened or pending litigation, have to be carefully scrutinized.

In Melvin Morris v First Bethany Missionary Baptist Church, Cal. App., Slip. Op., 2016 (not for publication), the church owned two parcels.  Upon one was built the church and part of the parking lot and on the second was built the remainder of the parking lot.  The church fell on hard times and rather than lose the property in foreclosure agreed to transfer one of the lots to the creditor.  To accomplish this, on church letterhead, in a document probably drafted by the pastor or a well-meaning member, the transfer was set forth in an agreement of a single page.  A deed was drafted to effectuate the transfer.  But, the deed and the agreement did not match because in one the legal description only reached one parcel but in the other the legal description reached both parcels.  Of course, the document that reached both parcels was the deed and it was filed of record.

The creditor’s action against the church was dismissed when the agreement and deed were created.  When the church discovered the mistake, it filed an action to have the deed set aside.  The case was dismissed because the church claim should have been brought in the creditor’s original suit as a mandatory counterclaim.  Without the counterclaim, the deed stood unchallenged.

The church argued that it did not discover the scope of the deed until the creditor dismissed.  However, the three year statute had run and the new case filed by the church was barred.

 

The case of In Re Glass & Garden Drive-in Church, Slip Op. (Ariz. App. 2016)(not for publication) is interesting because the church was trying to wind down its existence and allow, rather than resist, a denominational takeover (interestingly enough called “suppression”) because of inadequate membership growth, inadequate revenue growth, and property costs that were too much to carry.  However, at least one member led a few others to resist the takeover of the property by the denomination.  One of the members wanted $150,000 in compensation from the assets of the church but the reason for the demand was unclear.

 

 The Arizona Appellate Court declined to allow the member(s) to proceed to oppose the “suppression” because the church’s foundational documents, articles of incorporation and bylaws, recognized the church’s existence as a part of the denomination.  Thus, the actions of the denomination to marshal the assets of the local church were conducted under the shield of the ecclesiastical abstention doctrine.

 

 As a result, civil courts cannot “inquire into internal organizational disputes between different factions of a religious organization or into property disputes that would require interpreting religious doctrine or practice.” [Citation omitted.]  Rather, they “must accept the decisions of the highest judicatories of a religious organization of hierarchical polity on matters of discipline, faith, internal organization, or ecclesiastical rule, custom, or law.”  [Citation omitted.]

Slip Op. at 7.

 

 Petitioners’ characterization of the core issue as one of property simply does not transform this case into a church property dispute under the neutral principles doctrine.

Slip Op. at 10.  The court noted the ownership of the church property was not in dispute.  The property was owned by the local church (which was incorporated).  The denomination simply had the right to take over the existence of the local church pursuant to the governing documents.

The case of Ohio District Council, Inc. of the Assemblies of God v Speelman, 47 NE 3d 954 (OH App., 2016) is an excellent example of how the real estate of a denominational church will be viewed by a court in a “neutral principles of law” jurisdiction.  In Speelman, the appellate court reversed the trial court’s abstention decision and ordered reconsideration on remand “based upon the nature of the relationship incident to affiliation in a hierarchical church polity.”  The trial court was instructed to review the constitution and bylaws of the general council of the Assemblies of God and of the district council.  Most likely, the review will or did result in the church property being deemed owned or held in trust by the district council or the general council, or both.

The church in the case fell on hard times and its membership dwindled.  It sought financial resources and eventually a merger with a church not a part of the Assemblies of God.  The merger would have had the effect of moving the church real estate and buildings out of the Assemblies of God.  The Assemblies of God district council sought to recover the real estate and buildings from the merged entity.

From the denominational side, the typical view is that the church real estate and buildings were paid for over a period of decades by several generations of members that had an expectation that their contribution would remain in the denomination to accomplish the mission even after they passed away or out of that local church.  In other words, the denominational leadership believes such a lawsuit is needed to protect the investment of prior generations of members.  Sometimes, the current generation of local church members come to believe the real estate and buildings are owned by them even though in most cases they inherited much of their capital from prior generations of members.  Neutral principles jurisdictions will usually ignore the arguments of both sides, no matter how pungent or equitable, in favor of the controlling constitution and bylaws.