National Episcopal Church Owns Local Church Property

Local church votes to disaffiliate and loses ownership of church building.

Church Law and Tax Report

National Episcopal Church Owns Local Church Property

Local church votes to disaffiliate and loses ownership of church building.

Applying the “neutral principles of law” approach, the Virginia Supreme Court ruled that the national Episcopal Church owned the property of a local church that voted to disaffiliate from the denomination and align with the Church of Nigeria. The Protestant Episcopal Church in the United States of America (the “Episcopal Church”), organized in 1789, was the product of secession of the Anglican church in the colonies from the Church of England, the latter church itself being the product of secession from the Church of Rome in 1534. The Episcopal Church is governed by a general convention and a presiding bishop. In the United States, the Episcopal Church is divided geographically into dioceses, including the Diocese of Virginia. Each diocese is governed by a diocesan convention and a bishop. A diocese is itself divided into missions and parishes, which are individual churches where members meet to worship. A parish is governed by a rector and a board of elected lay persons called the vestry.

The Dennis Canon, and mutual consent

In 1979, the Episcopal Church added section 4 to Canon I.7 (Canon I.7.4, sometimes referred to as the “Dennis Canon”), which states:

All real and personal property held by or for the benefit of any Parish, Mission or Congregation is held in trust for this 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 Church and its Constitution and Canons.

The dissident church claimed that the Dennis Canon did not apply to it since there was no evidence that it ever consented to it, or in any other manner conferred any rights in its property to the national church. The court, in rejecting this argument, observed:

To determine the issue of mutual assent, we look exclusively to the expressions of the parties’ intentions which are communicated between them. Here, the record clearly establishes that [dissident church] affirmatively assented to the constitution and canons. Upon joining the Episcopal Church and the diocese in 1836, it agreed to “be benefited and bound … by every rule and canon which shall be framed, by any Convention acting under this constitution, for the government of this church in ecclesiastical concerns.” Moreover, [dissident church’s] Vestry Manual states “The church is subject to the constitution and canons of the national church and of the Diocese.” Thus, contrary to its argument, it is clear that the church agreed to be bound by the constitutions and canons of both the Episcopal Church and the diocese.

Similarly, the court rejected the dissident church’s argument that the Episcopal Church and diocese acted in a unilateral manner in passing certain canons:

The record demonstrates that the adoption of the canons is hardly “unilateral.” The triennial General Convention, the highest governing body of the Episcopal Church, adopts … the constitution and canons. The General Convention is composed of representatives from each diocese. The legislative body of each diocese (referred to in Virginia as the “Annual Council”) selects the representatives that are sent to the General Convention. The Annual Council is composed of representatives from each of the churches and other congregations within the Diocese. Thus, it is clear that each canon, including the Dennis Canon, is enacted through a process resembling a representative form of government.

Moreover, even if the implementation of the canons were unilateral, the court concluded it would not matter. It quoted from an earlier ruling by the United States Supreme Court: “Religious freedom encompasses the power [of religious bodies] to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine.'” Kedroff v. St. Nicholas Cathedral, 344 U.S. 94 (1952). As a result, “even if implementation of the Dennis Canon was unilateral, this court would be powerless to address any issues of inequity wrought thereby, as to do so would involve judicial interference with religion and clearly violate the First Amendment.”

Course of dealing

The court found the prior “course of dealing” between the parties to be relevant to the ownership of the dissident church’s property. It observed:

Turning to the course of dealing between the parties, the record clearly demonstrates that the church allowed the diocese to play an active role in its overall operations. Indeed, the trial court found that on at least two occasions, the diocese vetoed the employment of clergy at church [which] complied with the decision; bishops of the diocese and other bishops within the Episcopal Church have visited the church every year between 1934 and 2005; and the vestry members of the church have regularly “subscribed to the oath or declaration prescribed by Diocesan Canons.” It is worth noting that the church actively participated in the diocese, having sent representatives to the Annual Convention every year for at least 100 years (1909-2010).

Constructive trust

The court further concluded that “when one considers the constitution and canons, specifically the adoption of the Dennis Canon, and the course of dealing between the parties [the parties] intended, agreed and expected that the property at issue would be held in trust by the dissident church as trustee for the benefit of the Episcopal Church and diocese. As such, we find that the fiduciary relationship required to impose a constructive trust has been shown to exist. The fact that the church attempted to withdraw from the Episcopal Church and diocese and yet still maintain the property represents a violation of its fiduciary obligation to the Episcopal Church and diocese. Therefore, equity dictates that a constructive trust be imposed on the property for the benefit of the Episcopal Church and diocese.”

What This Means For Churches:

Church leaders should consider the following points:

1. In general. A decision by the Virginia Supreme Court is not binding on any federal or state court in any other state. Nevertheless, the case represents one of the most extended discussions of church property disputes in recent years by a respected state court, and as a result, it may be given special consideration by other courts. The impact of the case is doubtless enhanced by the court’s unanimous ruling in favor of the Episcopal Church.

2. Judicial resolution of church property disputes—in general. The United States Supreme Court has noted that a state “may adopt any one of various approaches for settling church property disputes so long as it involves no consideration of doctrinal matters, whether the ritual and liturgy of worship or the tenets of faith.” Jones v. Wolf, 443 U.S. 595 (1979). No single approach is prescribed by law. The only requirement is that a state court’s approach to resolving such disputes does not involve the interpretation or application of religious doctrine.

To illustrate, the so-called “departure from doctrine” approach that was used for many years to resolve church property disputes is no longer allowed since it requires civil courts to determine which faction in a church property dispute has departed from church doctrine. Such an inquiry is clearly barred by the First Amendment.

The Supreme Court has approved two methods for resolving church property disputes:

Under the “principle of government” approach (sometimes called the “compulsory deference” approach), “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. (13 Wall.) 679 (1871).

Under the “neutral principles of law” approach, the civil courts “rely upon provisions of state statutory law governing the holding of property by religious corporations, upon language in the deeds conveying the properties in question to the local church corporations, upon the terms of the charters of the corporations, and upon provisions in the constitution of the [national church] pertinent to the ownership and control of church property.” Md. & Va. Churches v. Sharpsburg Church, 396 U.S. 367 (1970).

3. The canons of the Episcopal Church. The Supreme Court has explained the neutral principles of law approach as follows:

Through appropriate reversionary clauses and trust provisions, religious societies can specify what is to happen to church property in the event of a particular contingency, or what religious body will determine the ownership in the event of a schism or doctrinal controversy. In this manner, a religious organization can ensure that a dispute over the ownership of church property will be resolved in accord with the desires of the members. Jones v. Wolf, 443 U.S. 595 (1979).

In 1979, shortly after the Jones case was decided, the Episcopal Church responded to the Jones decision by enacting Canon I.7.4 (the “Dennis Canon”) in an attempt, in the words of Jones, “through appropriate … trust provisions [to] specify what is to happen to church property in the event of a particular contingency [and] in this manner [to] ensure that a dispute over the ownership of church property will be resolved in accord with the desires of the members. The Virginia Supreme Court concluded that the Dennis Canon was a legitimate effort by the Episcopal Church to create a mechanism for resolving church property disputes internally.

The court’s ruling will serve as support for the efforts of any denomination to resolve church property disputes internally through the adoption of trust language, reversionary clauses, or any other “neutral principle of law” that can be applied by the civil courts without delving into church doctrine.

4. Limitations on the neutral principles of law approach. The Supreme Court has cautioned:

The neutral-principles method … requires a civil court to examine certain religious documents, such as a church constitution, for language of trust in favor of the general church. In undertaking such an examination, a civil court must take special care to scrutinize the document in purely secular terms, and not to rely on religious precepts in determining whether the document indicates that the parties have intended to create a trust. In addition, there may be cases where the deed, the corporate charter, or the constitution of the general church incorporates religious concepts in the provisions relating to the ownership of property. If in such a case the interpretation of the instruments of ownership would require the civil court to resolve a religious controversy, then the court must defer to the resolution of the doctrinal issue by the authoritative ecclesiastical body.” Jones v. Wolf, 443 U.S. 595 (1979).

5. Mutual assent. One of the most important aspects of the court’s ruling was its rejection of the dissident church’s argument that it could not be subject to the Dennis Canon because it never formally consented to it. As the court noted: “The triennial General Convention, the highest governing body of the Episcopal Church, adopts … the constitution and canons. The General Convention is composed of representatives from each diocese. The legislative body of each diocese (referred to in Virginia as the Annual Council) selects the representatives that are sent to the General Convention. The Annual Council is composed of representatives from each of the churches and other congregations within the Diocese. Thus, it is clear that each canon, including the Dennis Canon, is enacted through a process resembling a representative form of government.”

This is the very point that was missed by the Texas Supreme Court in a recent case in which it found that the Dennis Canon could not serve as the basis for resolving a property dispute between the Episcopal Church and a dissident congregation since the congregation never explicitly assented to it. Masterson v. Diocese of Northwest Texas, 2013 WL 4608632 (Tex. 2013).

Similarly, the Indiana Supreme Court issued a ruling in 2012 in a church property dispute in which it refused to award title to the property of a dissident church to the Presbyterian Church on the basis of a trust provision in the denominational Book of Order. The court concluded that the trust provision did not apply since the local church had never consented to it. Presbytery of Ohio Valley, Inc. v. OPC, Inc., 973 N.E.2d 1099 (Ind. 2012). While the court did not mention it in the Indiana case, an argument can be made that churches in some cases do affirmatively consent to provisions in the governing documents of a parent denomination that seek to impose a trust on church property if, for example, churches and their representatives comprise some or all of the voting delegates at denominational meetings in which governing documents are adopted and amended. Under these circumstances, which are common, denominational governing documents are not “imposed” by the national church on affiliated churches. Rather, the churches themselves, by their delegates and representatives, adopt and amend the denominational governing documents at the official meetings of the national church. This provides a compelling case of an affirmative assent by affiliated churches to the provisions of their denominational governing documents, but it is an argument that the Indiana Supreme Court failed to address, perhaps because it was not raised.

6. Course of dealing. The court found the dissident church’s long involvement in the Episcopal Church supported the existence of a fiduciary relationship that was breached by the dissident congregation’s attempt to disaffiliate and retain its property. Falls Church v. Protestant Episcopal Church, 740 S.E.2d 530 (Va. 2013).

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