• Key point 6-06.2. Officers and directors must be legally authorized to act on behalf of their church. Legal authority can be express, implied, inherent, or apparent. In addition, a church can ratify the unauthorized actions of its officers or directors, but this is not required.

A New York court ruled that a church could be liable on a contract for a construction project signed by its pastor, without board authorization, because the church had ratified similar transactions in the past. A contractor sued a church for breach of contract because of its refusal to pay for remodeling work performed at the church at the request of the church’s pastor. The church claimed that it was not obligated to pay the contractor because its board of trustees neither authorized the work nor empowered any individual trustee or corporate officer to authorize the work. As a result, even if an oral contract existed between the pastor and contractor, the church was not bound by such a contract and cannot be held liable for an alleged breach of it. The contractor conceded that the board of trustees never authorized the work. But he insisted that the work was “constructively authorized” by the prior practice and course of conduct of the church. Specifically, the contractor argued that it was the practice of the church to delegate to the pastor the power to authorize the kind of work that the contractor performed. He claimed that because he had been paid by the church for work previously performed by him at the sole request of the pastor, his current work (also performed at the express request of the pastor) was authorized, especially since the pastor was also the president of the board of trustees of the church. Further, the contractor alleged that authorization for the work was established by the church’s knowing receipt, without protest, of the substantial benefits of the work.

The court quoted the following provision of the New York Religious Corporation Law which sets forth the general duties and powers of the trustees of a religious corporation:

The trustees of every religious corporation shall have the custody and control of all the temporalities and property, real and personal, belonging to the corporation and of the revenues therefrom, and shall administer the same in accordance with the discipline, rules and usages of the corporation … for the support and maintenance of the corporation …. [T]hey may also, in their discretion, delegate and grant to the trustee or custodian designated by them all or any portion of the powers, responsibilities and discretionary authority possessed by them with respect to the retention … of such property or any part thereof.

The court noted that several courts have interpreted this language to mean that “neither the trustees nor other officers of a religious corporation have separate individual authority to bind the corporation to a contract. Collective action by the board of trustees as a board is ordinarily necessary to authorize the making of a binding contract or to empower a particular individual to bind a religious corporation.” However, the court acknowledged that actual authorization by the board of trustees of the religious corporation is not always required to bind the church. Authorization may be “implied from the nature of the office” of the person who enters into an agreement on behalf of a church, or “from previous similar dealings recognized by the corporation.” Furthermore, it is “well-established that no particular form of evidence is required to establish” authorization. The court noted that “because the facts which may establish the element of authority usually are peculiarly within the knowledge of the religious corporation, only ‘slight evidence’ of authority need be presented by the plaintiff to shift the burden of proof to the religious corporation to establish the absence of authority to make the contract in question.” The court observed:

Here, there is no evidence that the board of trustees of the [church] expressly authorized the alleged contract for [the contractor’s] work. Contrary to [its] contention, however, the absence of proof of express authorization is not fatal to [the contractor’s] breach of contract claim. A religious corporation also may be liable on a contract between its officers/agents and third parties when it can be shown that the corporation constructively authorized the contract …. [The contractor] alleged that he “thought” [the pastor] had the authority to authorize the work which he performed because [he] was previously paid by [the church] for work previously performed by him at the sole request of the [pastor]. Given that course of conduct, [the contractor] believed that his current work, likewise performed at the express request of the pastor … was similarly authorized, especially since [the pastor] was also a trustee of the board of trustees of the church. [The contractor] further alleged that [the church] knowingly received, without protest, the substantial benefits of [his] observable work and services upon the [church’s] premises. These allegations are sufficient, at the very least, to raise a material question of fact on the issue of constructive authority-which is all the [contractor] was required to do to successfully defeat the motion for summary judgment. Notwithstanding [the church’s] contention to the contrary, [the contractor] was not required to demonstrate that [the church’s] board of trustees adopted a specific resolution authorizing the contract in order to expose [it] to liability. Significantly, requiring [the contractor] to prove express authorization by the board of trustees would work a substantial injustice in this case. It would be a complete travesty of justice to hold, as [the church] implicitly urges, that a religious corporation could receive and enjoy, by its pastor’s/agent’s procurement, the substantial benefits of a completed contract and then turn around and disclaim any liability or responsibility therefor on the remarkable ground that the board of trustees actually never explicitly authorized the work. This court cannot countenance such a result.

Application. This case illustrates an important point-churches may be liable for contracts signed by an officer even if not duly authorized by the congregation or board. Actual or “express” authority to enter into the contract is not required in order to hold the church liable. Implied or “constructive” authority also will suffice. And, as this case demonstrates, implied authority can be proven in various ways, including prior transactions. Butler v. Sacred Heart of Jesus English Rite Catholic Church, 680 N.Y.S.2d 909 (N.Y. 1998). Church Officers, Directors, and Trustees

© Copyright 2000 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m56 m86 m35 c0100