Tag: church property

ECCLESIASTICAL ENTANGLEMENTS DEFENSES

A civil court will only apply Neutral Principles of Law to a dispute if the court holds that the court will not become entangled in ecclesiastical issues. If the court holds there could be entanglement, then a court will not proceed by invoking the Ecclesiastical Abstention Doctrine. Merely because a church claimed there would be entanglement will not make the defense viable. The court must agree.

In Russian Orthodox Convent v Sukharevskaya, 2018 NY Slip Op 08167 (NY App. 2018), the Defendant Nun claimed one of the convent priests was engaged in sexual misconduct. Her allegation did not find favorable review and the ruling bishops directed her to vacate the convent. The Defendant Nun refused to vacate and an ecclesiastical court disciplined her by making her ineligible to wear the apparel of a nun or receive communion for two years. However, this did not silence her and she renewed her complaint about the conduct of the priest. An ecclesiastical court permanently defrocked her and ordered her to vacate. She refused and the convent sued to evict her. In defense of the lawsuit, she claimed the ecclesiastical court was attempting to silence her. The trial court held the nun stated an equitable defense to the eviction and dismissed the eviction. The convent appealed the decision. The appellate court affirmed the trial court on Ecclesiastical Abstention Doctrine grounds holding that to determine whether the eviction was justified would require the court to determine if the defrocking of the nun was in retaliation for whistleblowing.

Generally, a court will find that ownership and possession of church property is subject to Neutral Principles of Law and decide the issue. But, in the rare event the ownership or possession of church property cannot be decided without deciding an ecclesiastical issue, the court will leave it where it finds it. The church and the adverse claimant could literally have to wait for the other to die or compromise, no matter how long that might take.

CHURCH PROPERTY AT TAX AUCTION

Many investors troll tax auctions conducted by city, county, state or federal taxing authorities. Because the properties are often distressed or abandoned, the amounts bid typically remain modest. But, the successful bidder gets only a “tax deed,” or whatever that might be called in each state’s practice. Tax deeds are generally enforceable but unlike warranty deeds which can be all but unsaleable and insured, tax deeds can be set aside in a few cases. Buying a church property at tax auction, therefore, may or may not be “final.”

In Spiritlove Ministries v Blessed Peace Church, Slip Op. (Mich. App. 2018), the church property was abandoned by a predecessor owner that was a denominational church. The denomination declared the church property abandoned pursuant to the denominational governance documents and the reversionary clause in the title. The denomination sold the property to the Plaintiff and delivered a quit claim deed. Almost simultaneously, the Defendant discovered the church property and bought it from the taxing authority acquiring a tax deed (or whatever it might be called in Michigan). The Defendant moved onto the property. The Plaintiff church discovered this and asserted its rights and reached an accord with the Defendant church that the Defendant would vacate the property by a date certain. The Defendant acquired a quitclaim deed from the predecessor owner church that had abandoned the property in the first place and reasserted ownership of the property. The Plaintiff sought and obtained from the trial court by summary judgment a quieted title. The court concluded that under the Ecclesiastical Exception Doctrine, the court could not review the denominational decision to declare the property abandoned or the sale of the property to the Plaintiff, making it the enforceable transaction.

Denominational governance documents and reversionary clauses in church property titles remain enforceable. In obtaining a church property by purchase, or in any other way including by gift, these documents must be inspected. Claims the documents are lost or unavailable should not be relied upon. Usually, the documents are in the public record or someone’s attic, because they always seem to turn up. While a tax auction can be a wonderful investment, certain caution must accompany the investment. If due diligence prior to the purchase cannot be completed it should be immediately after. Easy sounding solutions to title problems rarely are either, easy or solutions.

CHURCH PROPERTY RECOVERY

Denominational churches often are not only members of the denomination but through the organizational documents of the church, the denomination, and even a filed real estate title the congregation does not have the power to withdraw their property or assets from the denomination. The rationale for this is that denominational members are believed to trust the denomination to protect their offerings, which are turned into property and assets at the local level, even after the member has died or moved to another local church.

In Ohio District Council of the Assemblies of God v Speelman, 2018 Ohio 4388, Slip Op., (Ohio App. 12th, 2018), declining local church membership caused the remnant of the local congregation to seek a merger with another denominational group and to “disaffiliate” with the Plaintiff. The local church joined the Plaintiff denomination in 1972. The Pastor Defendant was paid $200 per week during his tenure from 2006 to 2011 but he could not arrest the decline in church attendance although his efforts were briefly summarized by the Court and seemed genuine. The trial court after a bench trial (a trial without a jury) ruled in favor of the Pastor Defendant holding the “disaffiliation” and merger with another denominational group was lawful. The appellate court reversed and ordered the trial court to consider organizational documents of the denomination and the local church. The local church title to property did not contain a reservation of the denomination’s ownership interest. On remand, the trial court entered judgement in favor of the Plaintiff denomination but on the damages theories only ordered the property and assets, an 18,000 square foot facility and equipment, returned and only $100 in monetary damages. The Plaintiff denomination appealed the damages award and the appellate court ordered the trial court to assess reasonable monetary damages for loss of use of the facility and affirmed the ordered return of property and assets. Punitive damages, though sought by the denomination, were not assessed because the Pastor Defendant admitted he had assumed the local church denominational affiliation was “voluntary” and terminable at will and did not read the local church organizational documents. Thus, the court found no “malice” with which to support an award of punitive damages.

Local church titles often do not contain reversionary clauses because lending institutions do not believe by foreclosure they can recover clear title against such clauses. Denominations do not require such clauses because local churches need mortgages. This case, as in most, a reversionary clause in the title does not matter. The organizational documents of the local church and denomination control in most cases. Even in cases where the local church documents are unavailable or otherwise murky, the denominational organizational documents will usually be sufficient to force reversion of the property and assets to the denomination. Monetary damages judgments may also be possible and the losing local church leadership should not count on mercy from the denomination bent on recouping litigation costs the denomination often feels were unnecessarily expended. Indeed, if the local church leadership acted with intent or maliciously, punitive damages might be awarded.

CHURCH MERGER LITIGATION

The economic pressures that bring out the purchase, sale and merger of business entities both small and enormous also do the same with churches. Churches are also impacted by the constant drain of members to the latest fads and movements, such as the mega-church complexes of this age. Churches also have life cycles; they are born, they grow, they age out and some die out. While ecumenical churches seem to preserve their outer shell against the ravages of time, nevertheless their congregations go through the same cycles and face the same economic pressures.

In Pure Presbyterian Church v Grace of God Presbyterian Church, Slip Op. (Va. 2018) the Supreme Court of Virginia, affirmed a trial court decision enforcing a merger agreement between two churches. By the time the dissenting group decided to challenge the merger, the merger was well along. Indeed, the opinion implied that the decision to challenge the merger coincided with the attempt of the dissenters to sell their property to a third party before the title transferred to the surviving entity in the merger. The dissenting group argued the Court lacked jurisdiction to hear the dispute under the Ecclesiastical Abstention Doctrine of the First Amendment. Another factor was that the jurisdictional challenge was not pressed until after the adverse jury verdict. While jurisdictional challenges can be made at any time, including on appeal, the psychology of late presentation of the challenge cannot be underestimated. An after thought never has the credibility of a challenge from inception. Be that as it may, the court held the First Amendment did not preclude application of neutral principles of contract law to the merger, even if that had an impact on church governance. The court could verify that the two congregations voted to adopt the merger contract even though that had an impact on church governance. Both could be accomplished to determine the owner of the church property. The dissenters tried to stop the merger enforcement litigation by a bankruptcy filing and automatic stay but, again, were probably too late and the bankruptcy plan was silent as to the merger.

While merging churches often are tempted to move slowly to allow everyone to adjust to the new normal, some members may never adjust. Leaving such minorities opportunities to interfere with or further slow the merger are invitations to expensive legal dramatics. Mergers should be closed on a day certain and all church property re-titled the same day. All bank accounts should be liquidated and closed in the extinguished entity. Indeed, new accounts may be wise in the surviving entity.