Tag: Tithes and Offerings

DONATION SOLICITATION FRAUD

Generally, donation to a charity does not give the donor any legally protected interest in the operations, management or spending of the charity.  However, that does not give the charity free reign to issue any inducement to donate that is false or corrupt.  Donors must be able to show the amounts given and the economic loss from the gift.  Merely being offended or disappointed in the failure to perfectly appreciate or follow donative intent will not state a claim.

In Carrier v Zacharias International Ministries, Opinion and Order (ND GA, 2022), the federal trial court, in part, overruled a motion to dismiss.  The case will proceed but no outcome can be predicted at this stage.  The Plaintiffs alleged they donated money because they believed the representations that Ravi Zacharias and his company, RZIM, were worthy of trust.  However, Plaintiffs alleged Zacharias was a serial sexual predator.  Zacharias allegedly invested in two “health spas” at which “nearly two dozen therapists” reported inappropriate sexual behavior by Zacharias.  Zacharias allegedly used donated money to pay for silence and compliance.  Complaints in writing were made three years before Zacharias died but RZIM allegedly did not investigate the complaints.  Zacharias allegedly travelled to speaking engagements accompanied by a spa “therapist” using donated funds.  Plaintiffs alleged they would not have donated money if they had been made aware of the facts.  Plaintiffs filed a Class Action.  The Court held it was barred by the Ecclesiastical Abstention Doctrine from hearing claims that Zacharias or RZIM were engaged in immoral conduct in violation of their spiritual messages.  But, the Court held it would hear claims “predicated on misuse-of-funds allegations” because no ecclesiastical inquiry was required and Neutral Principles of Law applied.  In addition to “misuse-of-funds” claims, the Court held it would hear claims that Defendants “wrongfully failed to disclose their misuse of donor funds” even though they had “exclusive knowledge” of the alleged misconduct.

While it is nearly impossible for claims by angry donors to obtain a judicial remedy by objecting to management decisions by a charity, using donated funds for personal expenses like settling sexual misconduct claims and funding sexual misconduct might be viable with adequate detailed proof.  In the reported case, the Defendant non-profit entity investigated and self-reported the allegations, although allegedly only after many detailed claims were submitted, so the detailed proof might have been made public.

PROTECTING PAST GENERATIONS OF BELIEVERS

Generally, the local church in a hierarchical denomination owns its own property but holds it in trust for the denomination.  This is often also true in denominations that are not hierarchical but in their governing documents require the local church to own its property but hold it in trust for the denomination.  The rationale for such trust provisions is that generations of members of the local church, that also thought they were members of the denomination, gave offerings based on that premise.  The attempt by a future generation of local church members or leaders to divorce from the denomination does not, so the rationale goes, keep faith with the generations that came before.

In Presbyterian Church of the Palisades v Hwang, Slip Op. (NJ App. 2021), the local church lost membership and financial stability to the point it was about to lose its property to foreclosure.  The local church managed to salvage the situation by selling the property to a third-party non-church entity.  The funds paid by the third-party non-church entity were placed in escrow.  The litigation proceeded over who was entitled to the purchase funds placed in escrow.  The local church corporation claimed to be the owner but so did the denomination.  The mortgage default by the local church triggered the trust clause in the denominational governing document.  As a result, the local church was no longer owner of the property.  The denomination assumed the role as owner under the trust provision.  The “owner” would be entitled to the escrowed purchase funds.  The trial court determined under the trust provision the denomination was the “owner.”  The appellate court affirmed the trial court and ordered the escrowed funds released to the denomination.

If the denomination is hierarchical, most courts will under the “deference doctrine” defer to the decisions of the denomination regarding disposition of local church property.  The denominational governing documents generally compel the result.  If the denomination is not hierarchical, the “neutral principles of law doctrine” will generally compel the enforcement of the denominational governing documents.  If the denominational governing documents require that the local church owns its property in trust for the denomination, Neutral Principles of Law will generally dictate that the denomination is the owner.  There are few exceptions, the most recognized being when the deed filed of record expressly excluded the ownership of the denomination and the denomination approved the deed.