Key point 7-03.3. Most courts apply the "neutral principles of law" rule in resolving disputes over the ownership and control of property in "hierarchical" churches. Under this rule, the civil courts apply neutral principles of law, involving no inquiry into church doctrine, in resolving church property disputes. Generally, this means applying neutral legal principles to nondoctrinal language in any one or more of the following documents: (1) deeds to church property; (2) a church's corporate charter; (3) a state law addressing the resolution of church property disputes; (4) church bylaws; or (5) a parent denomination's bylaws.
A New York court ruled that a local church retained ownership of its property following its disaffiliation from a parent denomination.
A church affiliated with the Presbyterian Church (U.S.A.) voted unanimously to disassociate from the parent denomination. A denominational agency (the "regional church") asked a court to declare that it was the lawful owner of the church's property including real estate, vehicles, investments, parishioner donations, furniture, ecclesiastical and sacramental items and church records and documents.
The court noted that it could resolve church property disputes without violating the First Amendment if it did so on the basis of neutral principles of law requiring no analysis of church doctrine. The court applied the following test announced by the New York Court of Appeals (the highest state court) in a previous case:
In applying neutral principles, the focus is on the language of the deeds, the terms of the deeds, the terms of the local church charter, the State statutes governing the holding of church property, and the provisions in the constitution of the general church concerning the ownership and control of church property. The court must determine from them whether there is any basis for a trust or similar restriction in favor of the general church, taking special care to scrutinize the documents in purely secular terms and not to rely on religious precepts in determining whether they indicate that the parties have intended to create a trust or restriction. First Presbyterian Church of Schenectady v. United Presbyterian Church in the United States of America, 476 N.Y.S.2d 86 (N.Y. 1984).
The court examined the deeds to the church's property and noted that none of them contained any language vesting a present or future interest in the favor of the regional or national church. However, in 1981 the national church amended its constitution (Book of Order) to create an express trust provision for congregational property. It states that all property held by a local church "is held in trust nevertheless for the use and benefit of the Presbyterian Church (U.S.A.)." It further provides, "Whenever property of, or held for, a particular church of the Presbyterian Church (U.S.A.) ceases to be used by that church as a particular church of the Presbyterian Church (U.S.A.) in accordance with this constitution, such property shall be held, used, applied, transferred, or sold as provided by the presbytery." Finally, under a provision entitled "Property of Church in Schism", the Book of Order provides that the relationship to the Presbyterian Church (U.S.A.) can only be severed by action by the presbytery.
The issue in this case, the court noted, was whether these provisions were binding on the church that voted to disassociate itself from the denomination. It concluded that they were not:
Only the owner of real property can convey an interest in the property; B can not create a future interest in A's property without A's consent …. In the absence of any language in the deed to [the church] indicating that title is held subject to the laws or discipline of the national church a change in the laws of the national church does not affect title to the property held by the local church. Moreover, when [the church] acquired the real property [the amendments to the Book of Order] did not exist.
The court distinguished several cases recognizing the legal validity of the so-called "Dennis Canon" adopted by the Episcopal Church in 1979. This canon specifically states that all real and personal property held by or for the benefit of a local parish or congregation is held in trust for the national church and the diocese in which the local church is located.
The New York court acknowledged that the courts have awarded title to the national Episcopal Church in several cases on the basis of this canon, but it stressed that the canon "codified a trust relationship which has implicitly existed between the local parishes and their dioceses throughout the history of the Protestant Episcopal Church."
Local churches, by accepting the principles of the Protestant Episcopal Church and the diocese, became subject to denominational canons, rules and practices. Such provisions "not only indicate that local church property was to be held for the benefit of the Protestant Episcopal Church and its dioceses, but they demonstrate the established customs of said church." In short, an implied trust was implicit in the polity of the Episcopal Church, but not the Presbyterian Church.
The national and regional churches argued that the local church was bound by the amendments to the Book of Order since it remained affiliated for 25 years after the amendments were adopted. The court disagreed, noting that "mere silence and continuing its membership in the denominational church, absent more, is an insufficient expression of an intent to create a trust."
What this means for churches
Most church property disputes are resolved on the basis of neutral principles of law contained in deeds, local church charters and bylaws, and denominational bylaws. So long as a civil court can resolve such a dispute by referring to neutral provisions in these documents, without any inquiry into doctrine or polity, it may do so.
The court in this case concluded that the local church had never ceded any control of its property to the national or regional churches in a deed, trust, or in its bylaws. Further, the church had never expressly recognized or adopted the amendments to the national church's Book of Order pertaining to church property, and therefore the national and regional churches had no claim to the church's property upon its withdrawal.
It is worth observing that the United States Supreme Court has noted that one of the principal advantages of the neutral principles of law approach to resolving church property disputes is that it permits religious organizations to "order their affairs" in advance of a property dispute through "appropriate reversionary clauses and trust provisions" that could reflect the intentions of a church and its members. Many churches and denominational agencies have done so. Several examples are cited in section 7-04 of Richard Hammar's, Pastor, Church & Law.
Presbytery v. Trustees of First Presbyterian Church, 821 N.Y.S.2d 834 (N.Y. App. 2006).