Key Point 6-07.03 Church board members have a fiduciary duty to use reasonable care in the discharge of their duties, and they may be personally liable for damages resulting from their failure to do so.
The North Carolina Supreme Court ruled that it was barred by the First Amendment from resolving a complaint by church members that their pastor and two other church officials had breached their fiduciary duties by improperly using church funds. An independent church hired a new pastor. Shortly after being installed, the pastor began recommending various changes in church government. At a congregational meeting, the members approved a new set of bylaws for the church. The bylaws created an internal governing body, the "council for ministry," with broad authority to manage the business and affairs of the church. Some members expressed concern over the changes. On several occasions they requested access to the church's financial records, but were denied. Some of the concerned members (the plaintiffs) asked a court to compel the church to honor their request to inspect church records pursuant to the authority vested in them by the state nonprofit corporation law. A court ordered the church to turn over the documents the plaintiffs requested. After reviewing the documents, the plaintiffs believed that church funds had been misappropriated by the pastor, a church secretary, and the chairman of the board of trustees (the defendants). The plaintiffs, on behalf of the church, sued the defendants alleging conversion of funds, breach of fiduciary duty, and civil conspiracy. The plaintiffs sought a return of the disputed funds and punitive damages. The defendants asked the church to dismiss the lawsuit on the ground that it involved internal church matters that were beyond the jurisdiction of a civil court. The court declined to dismiss the case, and the defendants appealed.