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 intermediate appellate court ruled that an Episcopal diocese was the rightful owner of the property of a local church that voted to disaffiliate from the denomination.
After operating as an Episcopal congregation for more than 100 years, the members of an affiliated church voted to incorporate as a nondenominational church. The following year the Episcopal diocese declared the church to be "extinct." The diocese asked a court to determine who owned the church property. The trial court ruled that the diocese was the rightful owner of the church property, and this ruling was affirmed on appeal.
The appeals court began its opinion by noting that "by accepting the principles of the national church and the diocese for approximately 100 years, the [church] was subject to their canons, rules, and practices." Those principles included the so-called "Dennis Canons," adopted as Canons I.7.4 and I.7.5 of the Episcopal Church in 1979. These canons were adopted in response to the United States Supreme Court's decision in Jones v. Wolf, 443 U.S. 595 (1979), in which the Court ruled that the governing documents of a hierarchical church can be crafted to recite an express trust in its favor concerning the ownership and control of local church property:
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.
To that end, Canon I.7.4 provides that all real and personal property held by or for the benefit of any parish, mission, or congregation is held in trust for the Episcopal Church and the diocese in which such parish, mission, or congregation is located. This canon also provides that the existence of this trust shall in no way limit the power and authority of the parish, mission, or congregation otherwise existing over such property, so long as that parish, mission, or congregation remains a part of, and subject to, the Episcopal Church and its constitution and canons.
The court noted that "the fact that the dissident church preexisted the Dennis Canons did not render those canons inapplicable" since "there is sufficient evidence of an intent to create an implied trust to hold church property in favor of the Episcopal Church and the diocese, based upon the … Episcopal Church's establishment of an express trust in the relevant canons. Accordingly, both an express trust and an implied trust exist for the benefit of the [diocese] with respect to the real property held by the church. Consequently, upon the church's schism from the Episcopal Church and the diocese in 2008, the church forfeited the real property under Canon I.7.4 of the Episcopal Church."
What This Means For Churches:
The court correctly noted that most church property disputes can be 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. 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.
It is noteworthy that the court rejected the dissident church's argument that it was not bound by the Dennis Canons since it never agreed to them. The court observed:
"[T]he fact that the dissident church preexisted the Dennis Canons did not render those canons inapplicable" since "there is sufficient evidence of an intent to create an implied trust to hold church property in favor of the Episcopal Church and the diocese, based upon the … Episcopal Church's establishment of an express trust in the relevant canons."
Episcopal Diocese of Long Island v. St. Matthias Nondenominational Ministries, Inc., 157 A.D.3d 769 (N.Y. Sup. 2018).