Church Disaffiliation Property Dispute

Court rules that national church holds title to local church’s property.

Key Point 7-03.2 Some courts apply the "compulsory deference" rule in resolving disputes over the ownership and control of property in "hierarchical" churches. Under this rule, the civil courts defer to the determinations of denominational agencies in resolving such disputes.

A California appeals court ruled that a national church held title to the property of a local church that had voted to disaffiliate.

A local Episcopal church voted to disaffiliate from the national church in 2004 and take the local church property with it. The church amended its articles of incorporation to delete all references to the national church. A majority of the congregation voted to support the decision, but a minority of 12 members voted against it. The national church, along with other plaintiffs, filed a lawsuit in which they asked a court to rule that the local church property was held in trust for the local diocese.

A state appeals court, in one of the most lengthy discussions of church property disputes, ruled that the local church property was held in trust for the diocese. It based this conclusion on the following considerations:

1. Six rulings by the California Supreme Court, spanning the years from 1889 to 1952, "consistently used a 'highest church judicatory' approach to resolve disputes over church property, an approach it applied to hierarchically organized churches and nonhierarchically organized churches alike." Under this approach, the civil courts must follow the rulings of the highest church tribunal as to the use and ownership of the property. The court quoted from a landmark 1871 decision by the United States Supreme Court: "Whenever the questions of discipline, or of faith, or ecclesiastical rule, custom or law have been decided by the highest of these church judicatories to which the matter has been carried, the legal tribunals must accept such decisions as final, and as binding on them, in their application to the case before them." Watson v. Jones, 80 U.S. 679 (1871). This approach, which is sometimes referred to as the "compulsory deference" or "hierarchical" rule, has been adopted in a few other states.

2. In 1969, the United States Supreme Court ruled that church property disputes also may be resolved on the basis of "neutral principles of law." Presbyterian Church in the United States v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440 (1969). The Court observed:

It is obvious, however, that not every civil court decision as to property claimed by a religious organization jeopardizes values protected by the First Amendment. Civil courts do not inhibit free exercise of religion merely by opening their doors to disputes involving church property. And there are neutral principles of law, developed for use in all property disputes, which can be applied without "establishing" churches to which property is awarded. But First Amendment values are plainly jeopardized when church property litigation is made to turn on the resolution by civil courts of controversies over religious doctrine and practice.

In 1970, the Supreme Court defined "neutral principles of law" to include nondoctrinal provisions in (1) state statutes governing the holding of property by religious corporations; (2) language in the deed conveying property to the local church; (3) language in the charter of the local church; and (4) provisions in the constitution of a parent denomination relating to the ownership and control of church property.

The California court noted that several California appeals court rulings, since 1970, had resolved church property disputes on the basis of neutral principles of law, without an adequate explanation of how such rulings were possible in light of the previous decisions by the state supreme court. The court stressed that the United States Supreme Court's rulings in 1969 and 1970 did not mandate use of the neutral principles of law approach, and therefore the previous state supreme court rulings required that the compulsory deference rule be applied and that the rulings of national church bodies be recognized and enforced by the civil courts.

3. In 1982, the California legislature enacted section 9142 to the Corporations Code. This section specifies that "no assets of a religious corporation are or shall be deemed to be impressed with any trust, express or implied, statutory or at common law unless one of the following applies … (2) the articles or bylaws of the corporation, or the governing instruments of a superior religious body or general church of which the corporation is a member, so expressly provide …. "The court concluded that this language permitted national churches to adopt a provision in their governing instrument imposing a trust on all local church property in favor of the national church. And this is exactly what the national Episcopal Church did in 1979 when it enacted Canon I.7(4). This Canon provides:

All real and personal property held by or for the benefit of any parish, mission or congregation is held in trust for [the national church] and the Diocese thereof in which such parish, mission or congregation is located. The existence of this trust, however, shall in no way limit the power and authority of the parish, mission or congregation otherwise existing over such property so long as the particular parish, mission or congregation remains a part of, and subject to this [national church] and its constitution and canons.

The court concluded: "What is abundantly clear … is that in a hierarchically organized church, the 'general church' can impress a trust on a local religious corporation of which the local corporation is a 'member' if the governing instruments of that superior religious body so provide. In the case before us, the enactment by the national Episcopal Church in 1979 of Canon I.7(4) readily qualifies as a governing instrument expressly providing for a trust on property held by local church corporations."

4. The court concluded its opinion with the following observation: "To be plain: Under [prior] California Supreme Court cases … the right of the general church in this case to enforce a trust on the local parish property is clear, and that right has not been affected by intervening United States Supreme Court decisions or any statute enacted by the legislature. To the degree that [the state statute] alters the common law rule enunciated by these cases, that alteration duplicates the result required under the common law given the facts of this case."

What this means for churches

On September 12, 2007, the California Supreme Court agreed to review the appeals court's decision, and ruled that its acceptance of the appeal "superseded" the appeals court's ruling. The decision of the California Supreme Court will be reviewed in a future edition of this newsletter. In re Episcopal Church Cases, 61 Cal.Rptr.3d 845 (Cal. App. 2007).

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