Personal Injuries on Church Property and During Church Activities – Part 1

An Ohio court ruled that an indemnification clause in a “facility use agreement” required a charity that used a nonprofit camp to reimburse the camp for any legal judgments or settlements arising out of injuries occurring at the camp.

Key point 10-16.6. A release form is a document signed by a competent adult that purports to relieve a church from liability for its own negligence. Such forms may be legally enforceable if they are clearly written and identify the conduct that is being released. However, the courts look with disfavor on release forms, and this has led to several limitations, including the following: (1) release forms will be strictly and narrowly construed against the church; (2) release forms cannot relieve a church of liability for injuries to minors, since minors have no legal capacity to sign such forms and their parents' signature does not prevent minors from bringing their own personal injury claim after they reach age 18; (3) some courts refuse to enforce any release form that attempts to avoid liability for personal injuries on the ground that such forms violate public policy; and (4) release forms will not be enforced unless they clearly communicate that they are releasing the church from liability for its negligence.

* An Ohio court ruled that an indemnification clause in a "facility use agreement" required a charity that used a nonprofit camp to reimburse the camp for any legal judgments or settlements arising out of injuries occurring at the camp. A child ("Kyle") attended a week-long summer camp for childhood cancer patients sponsored by the American Cancer Society (ACS) at a Girl Scouts campground. Children were not charged a fee for attending the camp. The campground in question is owned by a regional entity of the Girl Scouts, and is frequently used by other groups for a fee pursuant to a "facility use agreement." At the time of the camp that Kyle attended there were 92 campers, 28 counselors, and 10 camp staff members on the premises. The Girl Scouts provided the horses to camp participants. While engaged in horseback riding at the camp, Kyle was involved in an accident that resulted in serious injuries. He died from his injuries a few months later. His parents sued the Girl Scouts, claiming that it was responsible for Kyle's death on the basis of its negligence. The Girl Scouts filed a cross claim against the ACS. Kyle's parents eventually settled all their claims out of court against both organizations. The Girl Scouts then sued the ACS, seeking a refund of its share of the settlement and payment of its attorneys' fees. The Girl Scouts relied on provisions in the facility use agreement that obligated the ACS to defend the Girl Scouts in the event of any claim, and "indemnify" the Girl Scouts for any judgment or settlement it paid as a result of injuries occurring during the use of the campground by the ACS. A trial court ruled in favor of the Girl Scouts, and ordered the ACS to pay the entire settlement amount plus an additional $120,000 of attorneys' fees incurred by the Girl Scouts in defending against the lawsuit. The ACS appealed.

The court began its opinion by noting that indemnification "is the right of a party, who has been compelled to pay what another should have paid, to require reimbursement. It arises from a contract, either express or implied." That is, an indemnification clause is a clause obligating one party to pay any judgment or settlement assessed against another party. Such clauses are usually included in facility use agreements, and specify that organizations using the landowner's property must indemnify the landowner against any expenses incurred as a result of accidents occurring on the property. The ACS insisted that the indemnification provision in the facility use agreement did not apply to Kyle's injury because horseback riding was "outside the scope" of this provision. The indemnification clause stated:

ACS agrees to indemnify, defend, and hold [the Girl Scouts] harmless from and against any and all claims, damages, demands, actions, duties, causes of action, judgments, costs, (including attorney fees), controversies and liabilities whether known or unknown, fixed or contingent, arising out of contract, tort or otherwise, in law or in equity, asserted by third parties (including but not limited to ACS participants) for damage to person or property, including but not limited to, consequential or incidental damages arising out of or related to: (a) ACS's failure to perform any and all of its obligations or liabilities under the Agreement or under any other agreement; (b) CF's use of the camp facility; (c) the negligent, willful or intentional acts/omissions of ACS or any of its agents, employees, invitees, or licensees; (d) the failure of ACS or any of its agents, employees, invitees or licensees to comply with all applicable federal, state and local laws, ordinances, statutes, regulations and rules, including but not limited to discrimination laws, the Americans with Disabilities Act (ADA) and environmental laws.

ACS claimed that horseback riding was not a "use" of the camp, but rather was a "service," and therefore the indemnification clause did not apply. The court disagreed, "The plain language of [the agreement] states that ACS agrees to indemnify and hold [the Girl Scouts] harmless from and against any and all claims … asserted by third parties for damage to person or property …. Giving the language [its] commonly understood meaning, we conclude that [it] contemplates indemnification by ACS for claims asserted by third parties, including its participants such as the decedent herein, for injuries to decedent's person which are related to ACS's use of the camp facility …. Horseback riding by ACS participants is within ACS's use of the camp facility. Therefore, the indemnification provision is applicable."

ACS also claimed that the indemnification clause was an attempt by the Girl Scouts to avoid liability for its own negligent acts, and was therefore unenforceable as against public policy. The court noted that "an agreement may exculpate a person from negligence only where the language doing so is clear and unambiguous." ACS insisted that the facility use agreement "does not contain clear and unambiguous language indemnifying the Girl Scouts for its own negligence." Again, the court disagreed. It noted that "exculpatory clauses" that seek to avoid liability for one's own negligence are not necessarily contrary to public policy so long as they are clear and unambiguous, and the parties have roughly the same bargaining power. The court concluded that the Girl Scouts and ABS were both "sophisticated long-standing corporations" equal in bargaining position, and therefore the indemnification clause was enforceable. The court conceded that the clause did not specifically mention "negligence," but it did identify "any and all" claims relating to ACS's use of the camp, whether the negligence was perpetrated by Girl Scouts or not.

The ACS argued that Kyle's accident was caused by the Girl Scouts' "willful and wanton misconduct," and so the indemnification clause did not apply. The court agreed that "one may not contractually relieve oneself for responsibility for acts constituting willful and wanton misconduct." It concluded that the evidence was not adequate to determine if the Girl Scouts engaged in such conduct, and so it sent the case back to the trial court for further consideration.


Application
. This case demonstrates the legal significance of indemnification clauses. Churches that use the property of another organization for recreational or any other use are sometimes asked to sign a facility use agreement, and church leaders are often surprised to learn that the church is responsible for any costs incurred by the facility owner during the church's use of its facility even if those costs are a result of the facility's own negligent acts. The court in this case acknowledged that indemnification clauses cannot relieve a facility owner of liability for its willful and wanton conduct. This is a common limitation recognized in many states. But, willful and wanton conduct is a difficult standard to prove, which means that in most cases a church will be called upon to pay any damages associated with injuries occurring during its use of another facility, even if those injuries were caused by the negligence of the facility owner. Weiner v. American Cancer Society, 2002 WL 1265575 (Ohio 2002).

Personal Injuries on Church Property or During Church Activities

The Michigan Supreme Court ruled that nonmembers who visit churches for noncommercial reasons are “licensees” to whom churches owe a minimal duty of care.

Key point 7-20.01 In most states, whether a church is liable for injuries occurring on its premises will depend on the whether the victim is an invitee, a licensee, or a trespasser. Churches, like any property owner, owe the highest degree of care to invitees, a lesser degree of care to licensees, and a very minimal degree of care to trespassers. As a result, it is more likely that churches will be liable for injuries to persons who meet the definition of an "invitee."

The Michigan Supreme Court ruled that nonmembers who visit churches for noncommercial reasons are "licensees" to whom churches owe a minimal duty of care making it less likely that churches will be liable for injuries occurring to such persons while on church premises. A woman ("Paula") was injured when she tripped over a concrete tire stop in a church's parking lot. She was visiting the church to attend a Bible study. Paula sued the church, alleging that it negligently placed the tire stops and failed to provide adequate lighting in the parking lot. A jury ruled in favor of the church on the ground that Paula was a "licensee" rather than an "invitee" and therefore the church owed her a minimal duty of care. The state supreme court accepted an appeal of the case "to determine the proper standard of care owed to individuals on church property for noncommercial purposes." The court began its opinion by noting that Michigan, like most states, recognizes three categories for persons who enter upon the land or premises of another: (1) trespasser, (2) licensee, or (3) invitee. Each of these categories corresponds to a different standard of care that is owed to those injured on the owner's premises. As a result, a landowner's duty to a visitor depends on that visitor's status. The court provided the following summary of the duty owed by a landowner to each category of visitor:

A "trespasser" is a person who enters upon another's land, without the landowner's consent. The landowner owes no duty to the trespasser except to refrain from injuring him by "willful and wanton" misconduct.

A "licensee" is a person who is privileged to enter the land of another by virtue of the possessor's consent. A landowner owes a licensee a duty only to warn the licensee of any hidden dangers the owner knows or has reason to know of, if the licensee does not know or have reason to know of the dangers involved. The landowner owes no duty of inspection or affirmative care to make the premises safe for the licensee's visit. Typically, social guests are licensees who assume the ordinary risks associated with their visit. The final category is invitees.

An "invitee" is "a person who enters upon the land of another upon an invitation which carries with it an implied representation, assurance, or understanding that reasonable care has been used to prepare the premises, and make [it] safe for [the invitee's] reception." The landowner has a duty of care, not only to warn the invitee of any known dangers, but the additional obligation to also make the premises safe, which requires the landowner to inspect the premises and, depending upon the circumstances, make any necessary repairs or warn of any discovered hazards. Thus, an invitee is entitled to the highest level of protection under premises liability law. A possessor of land is subject to liability for physical harm caused to his invitees by a condition on the land if the owner: (a) knows of, or by the exercise of reasonable care would discover, the condition and should realize that the condition involves an unreasonable risk of harm to such invitees; (b) should expect that invitees will not discover or realize the danger, or will fail to protect themselves against it; and (c) fails to exercise reasonable care to protect invitees against the danger.

The court concluded that persons who visit churches for noncommercial purposes should be regarded as licensees to whom a church owes a lower duty of care. It observed,

We conclude that the imposition of additional expense and effort by the landowner, requiring the landowner to inspect the premises and make them safe for visitors, must be directly tied to the owner's commercial business interests. It is the owner's desire to foster a commercial advantage by inviting persons to visit the premises that justifies imposition of a higher duty. In short, we conclude that the prospect of pecuniary gain is a sort of quid pro quo for the higher duty of care owed to invitees. Thus, we hold that the owner's reason for inviting persons onto the premises is the primary consideration when determining the visitor's status: In order to establish invitee status, a plaintiff must show that the premises were held open for a commercial purpose. With regard to church visitors, we [conclude] that such persons are licensees …. The solicitation of entirely voluntary donations by a nonprofit organization is plainly not a commercial activity. Accordingly, a church providing an opportunity for voluntary donations during a religious service that are in no way required to attend the service, i.e., passing a collection plate, does not transform one who attends the church service and elects to make a donation from a licensee into an invitee. Indeed, we imagine that many religious individuals would find it offensive to have their voluntary donations to a church regarded as part of a business or commercial transaction, rather than as a gift intended to aid in various religious good works.

Application. In many cases, a church's liability for injuries occurring on its premises will depend on the victim's status. It is far more likely that a church will be found liable if the victim is an invitee, since a church owes a much greater duty of care to invitees than to either licensees or trespassers. This case makes a strong case for treating visitors to churches as licensees rather than invitees. However, the court cautioned that many states have adopted section 332 of the Restatement of Torts (a respected, but nonbonding legal text), that defines "invitee" to include "a person who is invited to enter or remain on land as a member of the public for a purpose for which the land is held open to the public." The court acknowledged that this language "creates an invitee status that does not depend on a commercial purpose." However, the court declined to adopt this definition. Stitt v. Holland Abundant Life Fellowship, 614 N.W.2d 88 (Mich. 2000).

See also: Premises Liability

Churches as Historic Landmarks

Restriction of a church’s right to demolish a building may violate the First Amendment.

Key point. Restriction of a church's ability to demolish or renovate its sanctuary as a result of a local "landmarks" law may violate the church's first amendment right to freely exercise its religion.

A federal court in Maryland ruled that a church's first amendment right to the free exercise of religion was violated by a city "landmarks" ordinance that barred the church from demolishing an old chapel to construct a new facility. A Catholic church sought to replace its old chapel, which was in disrepair, with smaller, modern facilities, and to add gardens and a parking lot. Because the chapel was part of the city's historic district, the church could not demolish the chapel without first securing permission from a city "historic preservation commission." The church's application for permission was denied by the commission, and the church sued the city arguing that the commission's actions violated its constitutional right to the free exercise of religion. In particular, the church argued:

The Archdiocese of Baltimore and the [parish] have a religious obligation to place the spiritual needs of the faithful entrusted to their care above concern for the preservation of a dilapidated building …. Based on their religious beliefs regarding worship, ministry, education, association, and expression, [the parish] wishes to demolish [the chapel] …. Demolition … is the cornerstone of the parish's plans to improve worship … to increase accessibility to worship and other religious services for the handicapped, elderly and other parishioners, and to use its property as an expression of religious belief.

Church officials submitted affidavits asserting that (1) the chapel is "ecclesiastical property that must be administered in pursuit of the proper ends of the church"; (2) under church law "property may not be amassed for its own sake or to serve purely secular goals, but must be used to serve in meeting the spiritual needs of the people"; and (3) "the construction and renovation plans [of the parish] are motivated by our sincerely—held Catholic beliefs regarding worship, ministry, association, education, expression and church administration." Numerous parishioners also submitted affidavits explaining that the existing building failed to satisfy the needs of the congregation, and that the new construction was crucial to the spiritual growth of the parish.

The court concluded that this evidence demonstrated conclusively that the church's decision to demolish the chapel "involves the exercise of the Roman Catholic faith and implicates first amendment free exercise principles." The court conceded, however, that according to the Supreme Court's 1990 decision in the Smith case the church's first amendment rights would not be violated by a "neutral law of general applicability." It referred to a 1993 Supreme Court decision in which the Court observed:

a law burdening religious practice that is not neutral or not of general application must undergo the most rigorous of scrutiny. To satisfy the commands of the first amendment, a law restrictive of religious practice must advance interests of the highest order and must be narrowly tailored in pursuit of those interests. Church of the Lukumi Babalu Aye, Inc. v. City of Hialeah, 508 U.S. 520 (1993).

The city insisted that the landmarks ordinance was a neutral law of general applicability, and therefore was valid without the need for demonstrating a compelling government interest. The court disagreed. It emphasized the fact that the landmarks ordinance had a series of exemptions, making it "significantly different" from the "across—the—board" neutral law of general applicability addressed in the Smith case. Unlike the law in Smith , the landmarks ordinance "has in place a system of individual exemptions" demonstrating a "legislative judgment that the city's interest in historic preservation should, under certain circumstances, give way to other interests." The court then stressed that the Supreme Court in Smith

recognized that where the government enacts a system of exemptions, and thereby acknowledges that its interest in enforcement is not paramount, then the government "may not refuse to extend that system [of exemptions] to cases of religious hardship without compelling reason." Accordingly, the city's zoning regulation is not entitled to enforcement under the principles set forth in Smith. As a "law restrictive of religious practice," the [landmarks ordinance] must instead "advance interests of the highest order and be narrowly tailored in pursuit of those interests."

The court concluded that the city failed to demonstrate such a compelling government interest, and therefore its refusal to permit the church to demolish its chapel amounted to a violation of the first amendment.

What this means for churches

This case is important. As the Supreme Court observed in the Smith case, the constitutionality of a law that burdens religious practice depends to a large extent on the "neutrality" of the law with respect to religion. As a result, as the Supreme Court noted in Smith , "a law that is neutral and of general applicability need not be justified by a compelling governmental interest even if the law has an incidental effect of burdening a religious practice."

However, a law that burdens religious practice must be supported by a compelling government interest if it: (1) is not neutral toward religion; (2) is not of general applicability; or (3) contains exemptions that do not apply to religious practice. The city landmarks ordinance, by containing exemptions that did not cover religious institutions, could not adversely impact religious practice without a compelling government interest. This is an argument that apparently was not made in the Supreme Court's recent decision striking down the Religious Freedom Restoration Act (see the feature article in this issue). Keeler v. Mayor and City Council, 940 F. Supp. 879 (D. Md. 1996).

Related Topics:

Check Deed Before Renting Property

Some deeds contain restrictions prohibiting religious facilities.

Church Law and Tax 1997-09-01

Church Property

Key point. Churches should not rent or purchase property without carefully confirming that operation of a church will not violate any restrictions or covenants set forth in the deed to the property.

A Texas court ruled that a church was justified in abandoning a rented building upon learning that a restriction in the owner’s deed prohibited him from renting the property to a church. A development company developed a tract of property, and imposed various deed restrictions on sites that it sold. Those restrictions specified that the property was for the operation and maintenance of any lawful, commercial retail business or offices. Religious facilities were not approved for the location. An individual purchased a site and constructed a building which he later rented to a church, despite his knowledge of the restrictions in his deed. After signing the lease agreement on behalf of his church, the pastor testified that the owner said to him “by the way, now, I don’t know whether there was any truth to this matter, but I heard about the possibility that [the developer] may not allow a church here.” The pastor then asked what would happen if the developer found out about the church’s lease, and the owner stated, “you’ll have to depart; it’ll be broken.” A few months later, having learned that the church was operating on the premises, the developer informed the owner that he was in violation of the deed restriction because a church was on the premises. The letter stated that the owner had one month to correct the problem. The owner sent a copy of this letter to the church. The church responded by sending the owner a letter informing him that it was vacating the premises and enclosing a check with the notation “final payment, terminating our lease agreement,” written on it. The owner later sued the church for breaching the rental contract. A court ruled in favor of the church, concluding that it justifiably abandoned the property after receiving the letter from the developer informing the owner that the church’s lease violated the deed restrictions. The court ruled that its decision was not affected by (1) a letter from the owner to the church advising the church to remain on the premises because he had researched the issue and determined that the deed’s restrictions were not legally enforceable; and (2) the owner’s claim that the church had placed an earnest money deposit on another property and was looking for an excuse to abandon this lease.

Application. What is the significance of this case? Never rent or purchase property without first confirming that there are no legal restrictions on your intended use of the property for church purposes. Legal restrictions on the use of property can occur in a number of ways. These include restrictions in a deed to property that a church would like to buy or rent. Another common example is local zoning law. While the court in this case permitted the church to move out of the property without breaching its contract with the property owner, the church still had to endure the inconvenience of a move. Ruiz v. Hilley, 1996 WL 580940 (Tex. App. 1996). [ Property of Corporations, Zoning Law and Churches]

Related Topics:

Review Deed Before Conveying Property

Be familiar with restrictions in your church’s deed.

Key point. Some deeds to local church property contain restrictions on the conveyance of the property. In some cases, a violation of these restrictions may result in a reversion of the property to a state or national church agency.

An Arkansas court ruled that title to a church's property reverted to a national church when local church trustees attempted to convey the property without permission of the national church as required by a restriction in the deed to the property.

In 1973, a couple transferred real estate to the trustees of a Church of God congregation. The deed stated that the trustees could not "sell, convey or encumber" the real estate without the written consent of the national church. In 1993, the trustees conveyed the property by quitclaim deed to a second group of trustees acting on behalf of the local church, and a month later this group of trustees conveyed the property by quitclaim deed to themselves as trustees for an independent church.

This conveyance was made for the sole purpose of separating the congregation from the national church. The national church sued the trustees, claiming that their actions amounted to a breach of the restrictions in the church's original deed. The trustees conceded that the language of the original deed explicitly provided that the property could not be sold or reconveyed without written authorization from the national church.

The trustees also conceded that the national church never gave written consent to the local trustees to convey the property. However, the trustees insisted that (1) they had the right to secede from the national church because it had changed its doctrine on the exclusive nature of the Body of Christ; and (2) the Church of God is not a "hierarchical" church and as a result it could not prevent a local congregation from conveying its property. A trial court declared the two deeds to be void and ruled that the national church owned legal title to the church property. A state appeals court agreed with the trial court's ruling. It observed:

In the case at bar, it is undisputed that a deed was executed in 1973 which prohibited any conveyance of the subject property without written approval from [the national church]. Even if the [trial] court had found the church to be congregational, there would still be no material issue as to whether the property could be conveyed. This is because, by the plain language of the deed, the [trustees] were not authorized to make any conveyances inasmuch as they never obtained the necessary approval to do so.

The court disagreed with the trustees that the trial judge erred by not giving the following jury instruction:

An individual church is free to secede from any denomination if it elects to do so, but cannot take the church property with it where the effect of that action would be to devote the church property to doctrines fundamentally different from those to which the property was dedicated. Conversely, if it is the parent organization that has departed from the basic articles of faith, the local church has a right not only to secede, but also to retain the property.

The court concluded that "the proposed instruction was an incorrect statement of the law, and therefore should not have been given to the jury." It observed:

In Belin v. West, 864 S.W.2d 838 (1993), the Arkansas Supreme Court held that, if a civil court must resort to the interpretation of church doctrine, the court's exercise of jurisdiction in this regard is in violation of the first amendment. The court … quoted the United States Supreme Court as follows: "[T]he first amendment permits hierarchical religious organizations to establish their own rules and regulations for internal discipline and government, and to create tribunals for adjudicating disputes over these matters. When this choice is exercised and ecclesiastical tribunals are created to decide disputes over the government and direction of subordinate bodies, the Constitution requires that civil courts accept their decisions as binding upon them" (quoting from Serbian Orthodox Diocese v. Milivojevich, 426 U.S. 696 (1976)).

The proposed jury instruction in [this] case could only have been applicable if the jury found that the local church was under a hierarchical structure because the instruction refers to a parent organization. Had the jury made such a finding, the instruction would have been erroneous because the evidence clearly demonstrated that the Church of God, as a parent organization, established its own rules and regulations. Pursuant to Belin v. West, a civil court is without authority to interpret the doctrines of a hierarchical church which has its own rules for establishing internal discipline and government. Therefore, it was not for the jury to determine whether the parent organization had departed from its basic articles of faith …. In the case before us, the proposed instruction would have presented the jury with an incorrect statement of the law. Therefore, the trial court did not err in refusing the instruction.

The court also rejected the trustees' claim that the deed restriction was invalid on the basis of lack of consideration (that is, the national church gave nothing in exchange for the restrictions imposed on the local church) and a misrepresentation by the national church that the property would be subject to local church control. The court observed that the trustees "have no standing to assert that [the national church] failed to give consideration for the deed because [they] were not the ones who made the conveyance. Similarly, [their] misrepresentation argument fails because any representations made by [the national church] at the time of this conveyance were made to the conveyors of the property, not the [church trustees]."

What this means for churches

This case illustrates once again the importance of being familiar with restrictions contained in deeds. Before considering a sale or conveyance of church property, church leaders should carefully review all deeds to the property to confirm whether or not any restrictions exist. Conway v. Church of God of Prophesy, 1996 WL 617274 (Ark. App. 1996).

Related Topics:

Definition of “Church” for Zoning Purposes

Not all church-owned buildings qualify as a “church” under zoning law.

Church Law and Tax 1997-05-01

Zoning

Key point. The definition of a “church” for purposes of zoning laws may not include a church-owned building used for social events.

A North Carolina court ruled that a church-owned house used by a church for social events was not a “church” for purposes of a local zoning law. The zoning law permitted “churches” in a city’s historic district. A church owned a house in the historic district that was used for such purposes as bridge club, social gatherings, community functions, and occasional choir practices and religious instruction. The church planned to sell the home to an individual who wanted to use the home for a “bed and breakfast” establishment. The city informed the purchaser that such a use would not be permitted. The purchaser argued that the church’s use of the home was also a “nonconforming” use that was allowed by the city and that could be continued by future owners. A court agreed that the home, as used by the church, was “nonconforming” since it was not a church. The court noted that the term “church” is not defined in the zoning law. It continued:

The expression “church” ordinarily embraces three basic and related definitions: (1) a building set apart for public worship; (2) a place of worship of any religion; and (3) the organization of Christianity or of an association of Christians worshipping together.

The city zoning commission insisted that the third definition applied in this case-a church is an organization for religious purposes. The commission claimed that the term “church” cannot be limited to a building where religious services are held, but must also include any building owned and used by a church. The court rejected this sweeping definition:

[A]doption of “an organization for religious purposes” as the ordinance definition of a church would produce the unreasonable result that every building owned by a church or “organization for religious purposes” would qualify as a “church” for purposes of the ordinance. We are required to avoid interpretations that produce absurd or illogical results … and therefore reject [the commission’s] contention that [the home] constituted a “church” merely because it was owned by [a church] ….

[W]e believe the plain and ordinary meaning of “church” … to be “a building set apart for public worship.”

Application. The word “church” appears in a variety of local, state, and federal laws. In most cases, the term is not defined. This has forced the courts to come up with a definition. Predictably, attempts by the civil courts to define an ecclesiastical term have been somewhat clumsy and inconsistent. This case is useful because the court acknowledged at least three ways that the term “church” may be defined. This approach may be useful to other religious organizations wanting to be considered a “church” for purposes of other laws. Hayes v. Fowler, 473 S.E.2d 442 (N.C. App. 1996). [Zoning Law for Churches, Zoning Law and Churches]

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Church Property Dispute

Court rules that local congregation, not national church, has right to property.

Key point. The property of a local church affiliated with a hierarchical denomination may revert to the denomination if the church votes to disaffiliate.

A South Carolina court ruled that a national church retained title to the property of a local congregation that voted to disaffiliate from the parent organization. The local church conceded that the national church was hierarchical in nature, but it asserted that it never became a part of this structure but rather operated as an independent congregation. The court disagreed:

Since its inception as a missions church, the local congregation consistently sent delegates to the national church's annual convention and submitted annual reports to the national church. The national church contributed $5,000 to the local congregation to help construct the church building. The current minister of the local church was appointed by the bishop of the national body at its annual convention. Finally, by letter … the entire local congregation submitted its resignation from the national church, evidencing that the members of the local congregation considered themselves members of the national church.

The court concluded:

The law is well settled that when a church splits, the courts will not undertake to inquire into the ecclesiastical acts of the several parties, but will determine the property rights in favor of the party or division maintaining the church organization as it previously existed. When the entire congregation withdraws from the hierarchical church, the title to the church property remains in the church and does not follow the congregation. In this case, the title to the property at issue remained with the national church, and title is in the trustees, who are under a duty of loyalty to act solely in the best interest of the national church.

What this means for churches

This case illustrates an important point—while no court would dispute the authority of a local congregation to disaffiliate from a national church, many courts have ruled that such a congregation does not necessarily have the right to retain ownership of the church property. This is a complex legal question that should be thoroughly researched before any decision is made to withdraw from a national church organization. Fire Baptized Holiness Church of God of the Americas v. Greater Fuller Tabernacle Fire Baptized Holiness Church, 475 S.E.2d 767 (S.C. App. 1996).

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Disaffiliated Church’s Property Reverts to Denomination

A local church may lose the right to its property when it leaves its denomination.

Key point. A parachurch ministry may qualify for property tax exemption as a "house of public worship" though it is not formally affiliated with a church and does not have members.

Key point. Vacant land may be exempt from property taxation if it is primarily for religious purposes.

A Michigan court ruled that an 1,800-acre retreat owned by a parachurch ministry was exempt from property tax as a “house of public worship.” The Institute in Basic Life Principles is a religious organization founded by Rev. William Gothard in 1961. Its purpose is to "give clear instruction on how to apply God's basic principles of life as revealed it the Scriptures" through seminars, meetings, literature, and broadcasting. The Institute owns an 1,800-acre conference center that includes a lodge, a hotel with 90 rooms, an auditorium where worship services are conducted, a dining room for guests, and a gymnasium. The founder also uses the property to write religious materials for his seminars. A state tax agency determined that the entire property was subject to property tax, since it did not qualify for exemption under state law. Michigan law exempts:

Houses of public worship, with the land on which they stand, the furniture therein, and all rights in the pews, and any parsonage owned by the religious society of this state …. Houses of public worship include buildings or other facilities owned by a religious society and used predominantly for religious services or for teaching the religious truths and beliefs of the society.

The state tax agency determined that the Institute was not a religious society since it had no members and no "prescribed form of worship." Further, the agency concluded that the Institute's property did not qualify as a "house of public worship." The Institute appealed, and a state appeals court ruled that the entire property was entitled to exemption.

The court concluded that the term "religious society" includes any organization, such as the Institute, whose "predominant purpose and practice include teaching religious truths and beliefs." The court referred to the Institute's bylaws for proof that its purpose was to teach religious truths. It further noted that more than 2.5 million persons have attended seminars presented by the Institute. With regard to the Institute's lack of members, the court simply noted that state nonprofit corporation law did not require religious corporations to have members.

Finally, the court concluded that the property could be viewed as a "house of public worship," noting that "[a]lthough [the Institute] may not fall within the traditional definition of a religious society, that does not mean that it is not entitled to an exemption as a religious society under the house of public worship exemption."

The court refused to limit the property tax exemption to those portions of the 1,800 acres actually used for religious teaching and worship, since engaging in such an analysis "would unnecessarily intrude into the affairs of religious organizations." Instead, the court asked "whether the entire property was used in a manner consistent with the purposes of the owning institution."

This test "avoids undue entanglement in the province of religious entities, and more closely conforms with the requirement under the exemption statute that the property be used predominantly for reaching the religious truths of the society." The court noted that the Institute conducts religious seminars on the property and

provides its seminar attendees access to the lakes on the property and has paved seven miles of road for bicycling. The large areas of undeveloped land permit the participants to walk through the woods and think about what they have heard …. The record contains no evidence that the property was being used for purposes outside those enumerated in [the Institute's] bylaws. Because the [Institute] and its guests use the property in a manner consistent with [its] stated purposes, the property should be exempt from taxes.

What this means for churches

This case is important for the following reasons: (1) It contains a broad definition of "religious society" that will be useful to other parachurch ministries whose "religious" status is questioned by governmental agencies. (2) It contains a broad definition of "house of public worship" that will be useful to other parachurch ministries and churches when a tax assessor questions the exempt status of some or all of their property. (3) It will be useful to churches and other religious organizations that own undeveloped land in the event the tax-exempt status of the land is questioned.

According to this court, a tract of property should be viewed as a whole. The courts and tax assessors should not attempt to divide the property into those parcels that are used for religious purposes and those that are not. Any other result would impermissibly "entangle" the courts and tax assessors with questions of what is "religious". The proper question is whether the property as a whole is used for exempt purposes, and these purposes may include strolling or bicycling about on largely undeveloped property by persons who attend seminars in classrooms located on the property. Institute in Basic Life Principles, Inc. v. Watermeet Township, 551 N.W.2d 199 (Mich. App. 1996).

Related Topics:

Church Designated as “Historic Landmark”

Court rules that designation violates religious freedom.

Key Point. City ordinances that allow church buildings to be designated as historical "landmarks" may violate the constitutional guaranty of religious freedom.

The Washington Supreme Court ruled that a city's designation of a church as an "historic landmark" violated the church's constitutional right of religious freedom.

Many cities have enacted ordinances giving the city council the authority to designate buildings as landmarks. Such a designation may prohibit the landowner from modifying or selling the building. When these ordinances are applied to churches, a serious conflict with the constitutional guaranty of religious freedom can result.

This was the issue confronting the Washington Supreme Court in an important ruling. A Methodist church in downtown Seattle was erected in 1909. In 1985 the building was designated as a landmark by the city, and the church was informed that it was prohibited from making any alterations or significant changes to the church's interior or exterior without city approval, unless "such changes were necessitated by changes in the liturgy." Church leaders decided to demolish the building, sell the land for commercial development, and use the proceeds to build a smaller sanctuary on another site.

They noted that the congregation had diminished significantly in recent years due to the development of hospitals, highways, and commercial buildings in its immediate vicinity. The church asked a court to strike down the landmark ordinance on the ground that it violated the constitutional guaranty of religious freedom. A trial court ruled that the city could never designate the church building as a landmark, and the city appealed.

A state appeals court ruled that the city could designate the church as a landmark so long as it refrained from imposing any limitations on the use of the property while the church used it for primarily religious purposes. The appeals court permitted the church to demolish its sanctuary only if it replaced it with a new building devoted to religious use on the same property. The church appealed this ruling to the state supreme court, arguing that these limitations were unduly restrictive and that it had a constitutionally protected right to demolish the building and sell the land for commercial development.

The state supreme court agreed, noting that the landmark ordinance violated the church's constitutional rights of speech and religion and therefore it could be sustained only if it furthered a compelling governmental interest. No such interest existed, the court concluded. The court noted any attempt to delay implementation of the landmark regulations until the church ceased to use the property primarily for religious purposes did not help.

The court pointed out that the phrase "primarily for religious purposes" is ambiguous, and that it would entangle the courts in deciding what is "religious." For example, what if the church elected to use the property for a soup kitchen, homeless shelter, child care center, counseling center, or retreat? Are these activities religious? Should the city have the sole authority to make this decision, even if contrary to the church's position?

On the other hand, the court refused to hold that all landmark designations of churches are unconstitutional. It noted that some churches are not opposed to landmark status and some even desire it. Therefore, designation of a church as a landmark will be impermissible only if there is a demonstrated burden on the church's exercise of religion. In this case, the landmark designation severely burdened the church's exercise of religion because it prevented the church from selling its property and using the proceeds to advance its religious mission. First United Methodist Church v. Hearing Examiner, 916 P.2d 374 (Wash. 1996).

Taxation of Undeveloped Church Property

In some states, vacant church-owned land may not be exempt from property taxes.

Church Law and Tax 1997-03-01

Taxation-Church Property

Key point. Vacant, church—owned land that is acquired for future development is not exempt from property taxes in some states.

The Utah Supreme Court ruled that a parcel of vacant land purchased by a church was not exempt from property taxes despite the church’s use of the land for occasional worship services. The land was purchased as a site for a new church building. The church maintained the land but did not begin construction of a new church building. However, the church did use the property for religious purposes. For approximately two hours each year the church held religious services on the property. The church sought to have the land exempted from property taxes, but its application was denied on the ground that the church’s use of the property for religious purposes as insignificant and “insufficient to qualify the property for exemption.” The church appealed to the state supreme court. The supreme court noted that state law exempts from property taxes “property used exclusively for religious purposes.” It concluded that the land in question failed this test. It insisted that in order for land to be “used exclusively” for religious purposes it must be “actually used or committed to a use that is exclusively religious.” The church argued that the land was used exclusively for religious purposes even though it was used for religious services for only a few hours each year, since “for 8,758 hours out of the year the land is committed to no use at all.” The court disagreed, noting that “property held for future development is being used.” The court did concede that the property would be exempt once the church began construction since “construction of a church on church—owned property indicates that the property is irrevocably committed to a religious use, not simply held for future development.” Corporation of the Episcopal Church v. Utah State Tax Commission, 919 P.2d 556 (Utah 1996). [ State Property Taxes]

Woman Injured on Church Property Sues

The church allowed a choral guild to use its facilities rent-free.

Church Law and Tax 1997-03-01

Personal Injuries-on Church Property or During Church Activities

Key point. Churches are not necessarily liable for injuries suffered by persons who enter onto church premises as part of an outside group’s activities.

An Alabama court ruled that a church was not responsible for injuries suffered by a woman who was on church premises as part of a choral guild that used the church’s premises on a rent—free basis. The woman was injured when the metal risers on which she was standing collapsed. The choral guild’s director had obtained permission from the church to use its facilities for rehearsals. The woman sued the church, claiming that she was an “invitee” who was owed the highest duty of care, and that the church breached this duty by allowing the choral guild to use defective risers. A court disagreed. It defined an invitee as “one who enters the land of another, with the landowner’s consent, to bestow some material or commercial benefit upon the landowner.” The landowner owes an invitee a duty “to keep the premises in a reasonably safe condition and, if the premises are unsafe, to warn of hidden defects and dangers that are known to the landowner but that are hidden or unknown to the invitee.” On the other hand, a “licensee” is a person who “enters the land of another with the landowner’s consent or as the landowner’s guest, but without a business purpose.” A landowner owes a licensee a lower standard of care. It must “abstain from willfully or wantonly injuring the licensee and avoid negligently injuring the licensee after the landowner discovers a danger to the licensee.” Stated differently, “the licensee’s entrance on the land carries with it no right to expect the land to be made safe for his reception, but he must assume the risk of whatever may be encountered. Once he is there, the law only requires the landowner to refrain from wantonly, maliciously or intentionally injuring him; in other words, the landowner is not liable unless he does some act which goes beyond mere negligence.” The court concluded that the injured woman was a licensee rather than an invitee since she was on the church’s premises for the benefit of the choral guild. The court observed that “any benefit bestowed upon the church was merely incidental; the church received no payment from the guild for use of its facilities.” The court acknowledged that the metal risers had collapsed on one prior occasion when being used by the guild, and that this incident had been reported to the church. This did not make the church liable for the woman’s injuries, the court concluded, since the church had not breached the duty it owed to a licensee:

Although the risers had collapsed while being used by the guild [six months prior to the woman’s injuries] and the church was made aware of this, the risers had been used on at least three other occasions without incident before [the woman’s accident]. Further, the risers were assembled, tested for safety, and used by members of the guild after the [previous] incident. From these facts, one could not conclude that the risers posed a danger of which the church was aware, or that the church consciously did some act or omitted a duty that it knew would probably result in an injury. Davidson v. Highlands Church, 673 So.2d 765 (Ala. App. 1995). [Premises Liability]

Who Controls the Property of a Disaffiliated Church?

Court rules that a parent denomination retains control of a church’s property.

Key point. The property of a local church affiliated with a hierarchical denomination may revert to the denomination if the church votes to disaffiliate.

A Maryland court ruled that a parent denomination retained control of the property of a local congregation that voted to disaffiliate. The congregation of a church affiliated with the African Methodist Episcopal (AME) Church voted in 1993 to disaffiliate from the parent body as a result of what it perceived to be burdensome financial demands and a decline in moral conditions within the denomination.

Both the dissident congregation and the AME Church claimed the church's property, and a court was asked to determine the rights of the parties. The court ruled that the local congregation was entitled to retain its property. It based its conclusion on the fact that the church's deed did not contain a "reverter clause" transferring title back to the national church in the event of a disaffiliation.

The court further relied upon the AME Church Discipline (the national church's primary body of governing rules). This resource contained no provision for local church property being held in trust by the national church, and like the local church's deed, contained no reverter clause. The national church appealed, and an appeals court reversed the trial court's ruling and awarded the church's property to the national church.

The court acknowledged that the deed and the AME Church Discipline did not contain any trust provision or reverter clause. However, the court insisted that these omissions did not require that the seceding church retain its property. Quite to the contrary, "the absence of an explicit reverter upon withdrawal clause does not necessarily mean that the local church is entitled to retain control of its property."

Rather, a court must consider all relevant documents. The court concluded that two other documents clearly vested control of the property in the national church. The first document was the church's articles of incorporation, which specified that the "powers and authority of the trustees shall be in subjection to the discipline of said church."

The court concluded that the phrase "said church" had to refer to the national church since "there is simply no such thing as a local discipline of any AME congregation." The court concluded: "Based exclusively on the language in the [articles of incorporation] requiring that the trustees hold the property `in trust' for the AME Church, we hold that [the local church] was not entitled to retain control of the land after their departure from the AME Church." The court concluded that the local church trustees, on the basis of trust law, owed a duty of loyalty to the national church which precluded them from allowing the local congregation to retain control of the property following the congregation's withdrawal from the AME Church.

Rather, the local trustees had a duty to ensure that the property remained for the use and benefit of the membership of the AME Church….In other words, in light of the trustees' powers under…principles of trust law pursuant to the [articles of incorporation], we conclude that once the local members chose to discontinue fellowship with the AME Church, the trustees were without power to allow the departing members to retain control of the property because that was not for the benefit of the membership of the… AME Church…. Accordingly, although there may be no explicit reverter upon withdrawal provision in this case, we are satisfied that the trust provision in the [articles of incorporation] had the same effect.

The court rejected the local church's contention that "in order for a parent church to retain control of local church property there invariably must be an explicit reverter upon withdrawal provision." Board of Incorporators v. Mt. Olive African Methodist Episcopal Church, 672 A.2d 679 (Md. App. 1996).

Related Topics:

Disaffiliated Churches’ Property

When a church leaves its denomination, who keeps the property?

Key point. The property of a local church affiliated with a hierarchical denomination may revert to the denomination if the church votes to disaffiliate.

A South Carolina court ruled that a national church retained title to the property of a local church that voted to disaffiliate.

The national church was established in 1898 and has assisted in the establishment of several local churches. A local church purchased property in 1975 in the names of three trustees, and, with financial assistance from the national church, constructed a building on the property. A dispute developed between the national church and the local congregation which in 1994 culminated in the local congregation's formal resignation from the national church.

At the same time the trustees under the 1975 deed executed a document purporting to convey the property to the local congregation. After the local congregation's withdrawal, the national church served the local congregation with a notice stating that the national church owned the local church building and property, and ordering the local congregation members to vacate the premises. The members of the local congregation continued to use the property.

In January 1995, the national church brought a lawsuit alleging that pursuant to its Book of Discipline and the 1975 deed, it is the owner of the local church building and property. A trial court ruled that the national church owned the local congregation's property, and the case was appealed.

On appeal, the local congregation insisted that it had not been incorporated into the national church's hierarchical structure and that the 1994 deed purporting to convey the subject property to the local congregation was therefore void. The court disagreed.

[T]he trial court properly found the local congregation was a part of the national church's organizational structure. Without question, the national church is a hierarchical church, composed of bishops, ruling elders, and other officers, as well as trustees. Moreover, the local congregation has always operated as a part of the national church. Since its inception as a mission church, the local congregation consistently sent delegates to the national church's annual convention and submitted annual reports to the national church. The National Church contributed $5,000 to the local congregation to help construct the church building. The current minister of the local church was appointed by the Bishop of the national body at its annual convention. Finally, by letter dated November 16, 1994, the entire local congregation submitted its resignation from the national church, evidencing that the members of the local congregation considered themselves members of the national church. We find no error in the trial court's conclusion that the local congregation was an affiliate of the national church ….

The law is well settled that when a church splits, the courts will not undertake to inquire into the ecclesiastical acts of the several parties, but will determine the property rights in favor of the party or division maintaining the church organization as it previously existed. When the entire congregation withdraws from the hierarchical church, the title to the church property remains in the church and does not follow the congregation. In this case, the title to the property at issue remained with the national church, and title is in the trustees, who are under a duty of loyalty to act solely in the best interest of the national church.

The court also rejected the relevance of the local congregation's claim that the 1975 deed did not contain the language required by the national church's Book of Discipline:

The interpretation of the Discipline, and what it mandates, is a matter for the ecclesiastical tribunal of the national church, not the civil court. Absent fraud or collusion, the decisions of the proper church tribunals on matters purely ecclesiastical, although affecting civil rights, are accepted in litigation before the secular courts as conclusive because the parties in interest made them so by contract or otherwise …. While not inquiring into the wisdom or correctness of ecclesiastical decisions, the court will make sure that the civil right is in fact dependent upon an ecclesiastical matter; it will determine whether the ecclesiastical body had jurisdiction; it will look to see if the steps required by the religious society have been taken; and will inquire into any charges of fraud or collusion. It will go no further.

In this case, a civil right, the ownership of property, is dependent upon an ecclesiastical matter, the interpretation of the national church's rules as promulgated in its Discipline. Having found the local congregation was a part of the national church organization, and because the local congregation has abandoned its claims of fraud and misrepresentation, this court must accept as conclusive the decisions of the national church with regards to the subject property. Fire Baptized Holiness Church of God of the Americas v. Greater Fuller Tabernacle of Fire Baptized Holiness Church, 475 S.E.2d 767 (S.C. App. 1996).

Related Topics:

NY Church Property Law Legal

Court validates law requiring notice about sale, mortgage, or lease of church property.

Key point. A New York law requiring certain churches to notify the state attorney general prior to the sale, mortgage, or lease of their property is not unconstitutional.

A New York court upheld the validity of a state law imposing requirements on the sale, mortgage, or lease of church property .

New York law specifies that "a religious corporation shall not sell, mortgage or lease for a term exceeding five years any of its real property without applying for and obtaining leave of the court …." New York law also requires several "congregational" (and some hierarchical) churches to notify the state attorney general prior to the sale, mortgage, or lease of their property.

A hierarchical church obtained court approval of the sale of some of its property in 1987, although it failed to comply with the requirement that it notify the state attorney general of its intent to sell its property. The church later modified its sales contract on two occasions, but did not seek court approval in either case on the basis of its assumption that such approval was not necessary. A member of the church later challenged the validity of these actions on the ground that they violated the provisions summarized above. The church argued that court approval is not required unless the property sold by a church will be used for religious purposes, that it was not required to obtain court approval of a modification of a sales contract, and that the state law provision requiring notice to the attorney general prior to the sale, mortgage or lease of church property was unconstitutional.

A state court disagreed. First, it refused to limit the state law provisions to sales of church property in which the property would continue to be used for religious purposes. The court noted that had the legislature intended for the statute to be so construed it could easily have said so. Second, the court concluded that the state law provisions applied to the modification of real estate contracts since a modification is actually "a new agreement between the parties." Finally, the court rejected the church's claim that the state law provision requiring notice to the attorney general prior to the sale, mortgage or lease of church property was unconstitutional. The church argued that this requirement not only violated the first amendment's ban on the establishment of religion but also violated the first amendment's guaranty of religious freedom by involving the government in the internal decisions of churches.

In rejecting the church's "establishment clause" argument, the court applied the United States Supreme Court's three—part Lemon test for determining whether or not the New York law constituted an impermissible establishment of religion. Under this test, first announced in a 1971 decision (Lemon v. Kurtzman), a law or government practice challenged as an establishment of religion will be valid only if it satisfies the following three conditions—a secular purpose, a primary effect that neither advances nor inhibits religion, and no excessive entanglement between church and state.

The court concluded that all of these tests were met. First, the New York law had a secular purpose—"to insure that such [sales are] in the best interest of the corporation and its members and that the proceeds are properly disbursed." The court noted that the New York law was prompted by "several instances of questionable practices resulting in lawsuits to enjoin and set aside transfers of religious property within congregational—type religious churches." Second, the notice requirement did "nothing to convey any message whatsoever that could be construed to advance or inhibit any religion or religious belief." Third, the notice requirement did not result in an excessive entanglement between church and state since it was a mere "routine regulatory interaction" involving "no inquiries into religious doctrine … no detailed monitoring and close administrative contact between secular and religious bodies."

The church argued that the first amendment's ban on the establishment of religion has been interpreted by the Supreme Court to prohibit any law that discriminates among religious groups. It claimed that this was precisely what the New York notice requirement did by applying only to congregational churches and some hierarchical churches. The church pointed out that it was hierarchical in structure, but was not specifically exempted from the notice requirement while many other hierarchical churches were.

The court acknowledged that the New York law discriminated among religions by only requiring "congregational" churches, and some hierarchical churches, to notify the attorney general while exempting most hierarchical churches. However, it concluded that this discriminatory treatment did not violate the establishment clause since it was based on a compelling government interest ("protecting members of religious corporations by safeguarding the potentially substantial proceeds from sales of property, and ensuring that the proceeds are properly disbursed").

The court noted that the hierarchical churches that are exempted from the notice requirement are required to obtain the consent of their top executive officer before seeking court approval. It concluded that the notice requirement applied to those churches, whether congregational or hierarchical, whose structure "does not assure that its members have an opportunity to review the sale of real property." This conclusion is questionable and vulnerable to reversal on appeal, for the court was attempting (without a shred of supporting evidence) to distinguish between churches on the basis of whether their membership has an opportunity to review property transactions.

Finally, the court concluded that the notice requirement did not violate the first amendment guaranty of religious freedom. It noted that a violation of this guaranty requires proof that a law or government practice "burdens the adherent's practice of his or her religion by pressuring him or her to commit an act forbidden by the religion or by preventing him or her from engaging in conduct or having a religious experience which faith mandates." Such was not the case here, the court concluded. It further noted that "any inquiry by the attorney general involves only the terms of a real estate transaction; it involves no inquiry into religious beliefs nor does it involve the regulation or prohibition of conduct undertaken for religious reasons." Greek Orthodox Archdiocese v. Abrams, 618 N.Y.S.2d 504 (Sup. 1994).

The Hidden Threat of Reverter Clauses

Churches may lose property if they accidently trigger a reverter clause.

Key point: The deeds to some church property specify that the church shall remain in possession so long as the property is used for church purposes, and that if the property ever ceases to be so used it shall revert to the person who conveyed the property to the church. The effect of such deeds can come as an unpleasant surprise to church leaders.

Can a church lose its property if it ceases to use it for religious purposes? That was the issue before the Georgia Supreme Court in a recent case.

The court ruled that the property of a Baptist church "reverted" to the previous owner when the church moved to another location. In 1947 a landowner transferred property to a Baptist church with a deed that contained a "reverter clause." This clause specified that the church would own the property "only so long as said lot is used for church purposes, it being expressly provided that if said lot of land should ever cease to be used for such church purposes, then the title thereto … shall immediately revert to the [previous owner]."

The church constructed a building on the property and used it continually as its place of worship. In 1979 the majority of the church's membership voted to move to another location. A minority continued to worship at the original site, with the permission of the majority. Shortly after the majority of members vacated the property, the prior owner filed a lawsuit claiming that the majority's relocation triggered the reverter clause—meaning that neither the majority nor minority of church members had any further right to the property.

A trial court rejected the prior owner's claim, and the case was appealed to the state supreme court. The supreme court ruled that the reverter clause had been triggered by the majority's relocation, and that the prior owner was entitled to the property. It observed:

[T]he language of the reverter clause is clear that the property is to be used for the "sole use, benefit and enjoyment of [the church] and the members thereof, the same to be used as a place of divine worship by the congregation of said church," and that title reverts when the property is not used "for such church purposes." The use of the property by the minority which formed its own congregation … is not a permitted use of the property by [the majority] under the plain language of the reverter clause, even though that use is with the permission of the majority …. Accordingly, the property reverted to [the prior owner] in 1979 when it was no longer used by the majority for its church purposes.

What this means for churches

What is the significance of this case to your church? Consider this—many churches received title to their property by means of a deed containing a similar restriction. It is imperative for church leaders to be aware if such a condition exists. This can be easily determined by inspecting the deed to the church property.

While the language of these conditional deeds varies, it is common to condition a church's ownership of deeded property on continuous use of the property for religious purposes. Such a condition would mean that a church could not sell its property to a buyer who did not plan on using the property for religious purposes. Some of these conditional deeds are even more restrictive, conditioning a church's ownership on continued use of the property as a church of a specified religious denomination. Under such a clause, a church could not sell its property to a buyer other than another church of the same denomination.

In some cases (as in the Georgia case) a deed conditions a church's ownership on continued use of the property for religious purposes by the congregation that purchased the property. This is even more restrictive, for a church could not sell the property to anyone without triggering a reversion in favor of the previous owner. Obviously, this is a matter that must be taken very seriously.

Our recommendation—check the deed or deeds to your church property to determine if any conditions exist. If they do, it is possible in some cases to have them "released" by the previous owner (if he or she is willing to do so). Often this is done by having the previous owner execute a quitclaim deed. If the previous owner is no longer living (a fairly common circumstance) then the condition can be released only by all of the legal heirs of the deceased owner. This can be a very cumbersome process. First Rebecca Baptist Church v. Atlantic Cotton Mills, 440 S.E.2d 159 (Ga. 1994). 8B4, 9C1

Related Topics:

Are Churches Responsible for Injuries by Outside Groups on Its Property?

Yes, if church maintains control of premises, court rules.

Key point: A church can be responsible for injuries that occur on its premises while being used by an outside group, if it maintains "control" over the premises.

Can a charity be legally responsible for an injury occurring on its premises while being used by an outside group? That was the question addressed by a Louisiana court in a recent decision. A charity permitted an outside group to use its facility for a Christmas party. During the party, a woman suffered serious injuries when she fell on a slippery floor. As a result of her injuries the woman underwent surgery for a complete hip replacement. She later sued the charity, claiming that it was responsible for her injuries because it had retained control over the premises during the party. She claimed that the floor was unreasonably slippery, and this dangerous condition caused her to fall. One witness testified, "It was obvious that floor was slippery. It was just waxed or something. I mean it wasn't dirty. It was clean. Probably too clean."

The charity asked the court to dismiss the case, but its request was denied. On appeal, a state appeals court suggested that there was sufficient evidence that the charity retained control over its premises during the party to send the case to a jury. The court began its opinion by acknowledging that a property owner may be legally responsible for injuries that occur on its premises when they are under its custody or control. The court suggested that the charity had retained control over its premises during the Christmas party on the basis of the following factors: (1) the charity was responsible for setting up tables for the party; (2) the charity provided a custodian during the entire party; and (3) the charity was responsible for opening the premises at the beginning of the party and locking the premises at the conclusion of the party. The charity's custodian admitted that he had cleaned the floor prior to the party and that he was on duty and responsible for cleaning the floor during the party.

This case illustrates the legal risks that churches and other charities face when they allow outside groups to use their property. All too often a church inadvertently retains "control" over its facilities even when they are being used by an outside group. And, with control comes responsibility. Aufrichtig v. Progressive Men's Club, 634 So.2d 947 (La. App. 2 Cir. 1994).

See Also: Premises Liability

Disaffiliated Church Allowed to Retain Property

Although the denomination was hierarchical, court ruled that no trust was created.

Key point: A church affiliated with a hierarchical denomination may be able to retain its property if it disaffiliates from the parent denomination, despite a provision to the contrary in denominational bylaws.

A Massachusetts appeals court ruled that a local church could retain its property after disaffiliating from a parent denomination.

The members of a local church voted to amend the church's bylaws to remove all reference to a parent denomination. The executive board of the denomination asked a court to declare the congregational meeting illegal and to rule that all of the church's properties were subject to the control of the denomination.

A trial court ruled that while the denomination was hierarchical in terms of "internal administration, discipline, and matters of faith," it was congregational as far as the control and use of local church property. Accordingly, the court ruled that the congregational meeting was valid and that the local church was the sole owner of its properties. The denomination appealed, claiming that the church was not "congregational" with regard to the ownership of property, and that the church's bylaws were not legally amended.

A state appeals court rejected the denomination's claims and upheld the ruling of the trial court in favor of the local church. First, the court rejected the denomination's claim that the local church was congregational for purposes of property ownership. The court quoted from a Supreme Court ruling defining the terms congregational and hierarchical:

The courts, in answering this question have recognized two broad categories of church government. One is congregational, in which authority over questions of church doctrine, practice, and administration rests entirely in the local congregation or some body within it. In disputes over the control and use of the property of such a church, the civil courts enforce the authoritative resolution of the controversy within the local church itself. The second is hierarchical, in which the local church is but an integral and subordinate part of a larger church and is under the authority of the general church. Jones v. Wolf, 443 U.S. 595 (1979).

The court observed that "[c]ivil courts must accept as binding the decisions of the highest judicatories of a religious organization of hierarchical polity on matters of discipline, faith, internal organization or ecclesiastical rule, custom, or law." However, the court concluded that the denomination was congregational with respect to the ownership of local church property. The court conceded that denominational documents "provide considerable force" to the denomination's claim that it is hierarchical in terms of the control of local church property.

For example, among the matters coming within the jurisdiction of the denomination, according to denominational rules, are "[m]atters concerning church property." Denominational bylaws also specify that the "diocesan bishop, having the overall care of his diocese and its prosperity … supervises all church property in the diocese …." The court continued:

In assessing the [trial judge's] findings, the documents are but part of the evidence. When the testimony at trial is considered, the judge's finding that the parish is congregational in terms of the ownership and management of its property and is not subject to the [denomination] in such matters is not clearly erroneous. The parish, as the judge found, was always a separate legal entity and not a subdivision of any other entity. It had paid for the real estate and its other property with its own funds and always had held title in its own name.

The court also noted that there had been "considerable movement in and out of the [denomination] by individual parishes who took with them their own property without claim by the [denomination]." Based on this evidence, the court concluded that the trial court's finding that the local church was congregational as far as the control and use of its property was concerned was correct.

Next, the court addressed the denomination's claim that the church had not legally amended its bylaws. The denomination argued first that there was not a two-thirds vote as required by the bylaws, since two members were not permitted to vote. In rejecting this argument, court observed: "Under the bylaws … parish members who have failed for twelve months to pay their membership dues are excluded from parish membership. The [denomination's] claim that the vote lacked a two-thirds majority because two members were entitled, but not permitted, to vote is without merit as there was evidence that those two members had not paid dues for twelve months."

Next, the denomination argued that bishop had not approved the church's bylaw amendments as required by denominational rules. In rejecting this position, the court quoted from an earlier court ruling:

Such a regulation, putting it out of the power of the corporation to amend its constitution except with the approval of [a denominational official] is unreasonable and inconsistent with the legal right of control of the affairs of the corporation existing in its membership, and in such form it is utterly subversive of the right of control of a corporation which belongs to its members. Saltman v. Nesson, 88 N.E. 3 (1909).

The court acknowledged that "[t]he articles of organization establish the purposes and governance of a corporation … and where bylaws are in conflict with the articles, the bylaws being subordinate, the articles of organization control." However, the court insisted that the

original articles of organization gave no rights to the [denomination] and under [state nonprofit corporation law] the members were authorized to make any amendment … which they could have included in the original articles. Nothing precluded the … amendment which provided that "the bylaws of the corporation may be amended by a two-thirds vote of the members of the corporation without the consent or approval of any other person." Not only was the amendment authorized, but the original bylaw requiring approval by non-members of the corporation was, itself, of questionable validity.

Finally, the court rejected the church's claim that since the church is hierarchical in terms of internal administration, discipline, and matters of faith, the church's property is held in trust for the denomination. The court noted simply that this position "is refuted by the evidence" since the "original articles of organization did not mention the [denomination]" and "neither the documents nor the testimony suggests that a trust was created." Primate Synod v. Russian Orthodox Church Outside Russia, 617 N.E.2d 1031 (Mass. App. 1993).

Members Block Church’s Disposition of Assets

In some states, members may challenge a church board’s decision to dispose of assets.

Key point: Church members may have the right under state law to have a receiver appointed by a civil court to oversee the disposition of the church's assets.

A Georgia court ruled that church members could obtain a court order blocking a church's planned disposition of its assets, and appointing a receiver to oversee the church's property.

A church was organized in 1976 and at one time had as many as 80 members. By late 1989, membership had dwindled to 23 and the church's board of trustees (consisting of the pastor, the pastor's son-in-law, and a third person) decided to sell the church property to a commercial buyer for $725,000. From these proceeds the church paid off a first mortgage loan of $164,000, a second mortgage loan of $156,000 owed to the pastor, and closing costs of $75,000 ($29,000 of which was paid to the pastor who was a licensed real estate broker and who served as a broker in the sale).

The last church meeting occurred in 1990, at which time a majority of the members present approved as "retirement benefits" for the pastor a lump sum gift of $100,000 and transfer of the parsonage. The remaining proceeds of the sale were to be used for religious activities with the pastor having control of the funds.

Some of the church members brought a lawsuit against the pastor and the church in which they sought a court order dissolving the church corporation, the appointment of a receiver to take control of the church's assets, an injunction prohibiting the pastor or church from disposing of church assets, and proper disposition of those assets.

A trial court appointed a receiver over some of the church's assets and forbade the pastor from disposing of the assets in his control. The pastor later sued one of the members who brought the lawsuit, claiming that he had defamed him by referring to him as "Jim Bakker on a smaller scale." A jury later awarded the members who brought the lawsuit $56,000 of the $156,000 mortgage debt paid to the pastor, the full $29,000 real estate commission paid to the pastor, and the remaining church funds of $200,000.

However, the pastor was awarded the parsonage and the $100,000 retirement gift, but the pastor's defamation suit was dismissed. The pastor appealed this ruling to a state appeals court, claiming that (1) the trial court's exercise of jurisdiction over this dispute was prohibited by the first amendment's guaranty of religious freedom; (2) the members who brought the lawsuit lacked "standing" to do so since they did not represent a majority of the church's members; and (3) the first amendment prohibits the appointment of a receiver over church assets.

The appeals court rejected all of these claims. In rejecting the pastor's claim that civil court resolution of this dispute violated the first amendment, the court quoted from a 1969 decision of the United States Supreme Court:

[T]he first amendment severely circumscribes the role that civil courts may play in resolving church property disputes. 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. Presbyterian Church in the United States v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440 (1969).

The court concluded that the trial court's exercise of jurisdiction over this dispute was permissible since "the property dispute here was capable of resolution by reference to neutral principles of law … without infringing upon any first amendment values." Next, the court rejected the pastor's claim that the members who brought the lawsuit lacked "standing" to do so. It observed:

Courts are reluctant to [intervene] in questions affecting the management of the temporalities of a church; but when property is devoted to a specific doctrine or purpose, the courts will prevent it from being diverted from the trust …. [I]f the majority of the church depart from its organization and doctrines, they do not represent the church, and such majority cannot divest the church property from the trust to which it has been devoted. Accordingly, under the circumstances presented by the [this] case, particularly where the resolution of the property dispute strictly followed neutral principles of law, the [members who brought the lawsuit] had standing in this action alleging a diversion of the church property from the purpose for which the church and its assets had been devoted.

In rejecting the pastor's contention that the first amendment prohibits a civil court from appointing a receiver over church assets, the court observed:

Under [state] law the superior court has full power to liquidate the assets and affairs of a nonprofit corporation when it is established that the acts of the directors or those in control of the corporation are illegal or fraudulent, the assets are being misapplied or wasted, or where the corporation is unable to carry out its purposes. [State law] authorizes the superior court to issue injunctions or appoint a receiver as needed to preserve the corporate assets. Inasmuch as the church chose to incorporate under the Georgia Nonprofit Corporation Code, and appointment of a receiver is authorized under those codified neutral principles of law regarding liquidation of nonprofit corporations, we reject the contention that the first amendment prohibited the involuntary receivership in this case.

This case illustrates some of the legal remedies that are available to church members in some states who want to challenge decisions of the church board to dispose of church assets. Crocker v. Stevens, 435 S.E.2d 690 (Ga. App. 1993).

Related Topics:

“Just Compensation” for Condemned Property

Churches are entitled to compensation for condemned property.

Church Law and Tax 1994-03-01 Recent Developments

Eminent Domain

Key point: While church property can be taken by a city pursuant to “condemnation” (eminent domain), a church is entitled to “just compensation” for any property that is taken.

The Montana Supreme Court was asked to determine if a trial court properly computed the amount of money to be paid to a church whose property was taken by condemnation. A city condemned 0.31 acres of a church’s parking lot to facilitate the construction of a sewer main. The city offered to pay the church $25,000 for the property, but the church determined (on the basis of an appraisal) that $58,000 would be a reasonable settlement. After a jury trial the church was awarded $14,500 for the parcel taken and $2,500 for damages to its remaining property, for a total award of $17,000. The church appealed this decision to the state supreme court on three grounds. First, it argued that the trial court erred in not allowing the church to present evidence to the jury about the “cost to cure” method of valuing the condemned property. This method would require the city to compensate the church for the cost of additional property purchased by the church to replace the condemned property. The supreme court rejected the church’s position: “[J]ust compensation for a public taking of private land is to be computed as: fair market value of land taken plus value of remainder before taking minus value of remainder after taking. The cost to cure method is an alternative method of compensation. The [trial court] was under no obligation to allow discussion or testimony of such a method.” Second, the church argued that the trial court had erred in not allowing church representatives to testify regarding the value of the condemned property. The supreme court also rejected this position: “The history of the church from its beginnings until the present, and its plans for the future, are irrelevant in determining the actual damage as of the valuation date. The [trial court] did not err in limiting the testimony of the property owner.” Finally, the church argued that the trial court erred in refusing to inform the jury that the city had determined that the parking requirements for the church were 272 spaces. The supreme court agreed with the church. The court observed:

[T]he church was entitled to damages for the fair market value of that property which was taken by the city’s condemnation. However, it was also entitled to damages for the depreciation to its remaining property which resulted from the taking. The property taken was the church’s parking lot. In order to evaluate the depreciation to the church’s remaining property, the jury had to know what is parking requirements were and whether those requirements could be satisfied on the remaining property. Prior to trial, the parties entered tin the following stipulation: “Parking requirements under city’s zoning ordinance for the subject property are 272 spaces.”

Based upon its reliance on that stipulation, the church offered proof that it would have to either purchase additional property at a cost of about $50,000, or make alterations to its remaining property at a cost of $26,350, in order to satisfy the city’s parking requirement and receive a certificate of occupancy after completing the building improvements that were then under way ….

Apparently uncertain about what the future parking requirements would be, the jury awarded damages for the depreciation of the church’s remaining property in the amount of $2,500. This was one-tenth of the minimum amount which the testimony established would be necessary to comply with what the city had previously agreed would be the church’s parking requirements. The church had a right to rely on the stipulation when preparing for trial and putting on proof of its damages. We hold that the [trial court] erred by not instructing the jury that the city had agreed that 272 parking spaces were required and that failure to do so prejudiced the [church].

The supreme court reversed the jury’s verdict of $17,000 and sent the case back to the trial court for further consideration with the understanding that the jury would be instructed that the church would need 272 parking spaces after the condemnation. Great Falls v. Temple Baptist Church, Inc., 859 P.2d 1015 (Mont. 1993).

See Also: Eminent Domain

Related Topics:

Members Sue to Dissolve Church

Their lawsuit was dismissed.

Key point: In some states church members have the authority to dissolve the church corporation if the church is unable to carry out its purposes due to internal dissension. However, members who have left the church or no longer meet the church bylaws' definition of "members" will not have the authority to do so.

An Illinois appeals court dismissed a lawsuit brought by members of a church seeking to dissolve their church and have a receiver appointed to liquidate church assets.

A schism occurred in a Baptist church over the retention of the pastor. Problems worsened due to disagreements over the pastor's plan to use church funds to build a school. Some members opposed placing a mortgage on the debt-free church building to raise construction funds. When efforts to remove the pastor and those deacons who supported him failed, some of the disgruntled members filed a lawsuit in civil court seeking an order dissolving the church and transferring its assets to a receiver for distribution to another nonprofit organization.

Illinois law permits a voting member or director to "involuntarily dissolve" a nonprofit corporation that is unable to carry out its purposes. The disgruntled members claimed that this procedure was available since the church was unable to carry out its purpose of conducting religious worship because of the controversy.

The pastor and those who supported him opposed this action on the grounds that the members who brought the lawsuit were not voting member of the church and the lawsuit was not a matter that could be resolved by the civil courts. The pastor and his supporters pointed out that the church bylaws defined a voting member as one who contributed at least $15 each month to the support of the church and that none of the members who brought the lawsuit satisfied this condition.

A trial court agreed to dissolve the church and turn over its assets to a receiver for distribution to another nonprofit organization. It acknowledged that these individuals did not satisfy the church's definition of voting members, but it concluded that this did not matter since the church bylaws contained no procedure for terminating a person's membership.

The court concluded that both sides of the dispute failed to operate the nonprofit corporation according to its charter and bylaws and thus the corporate status of the church had been abandoned. The pastor and his supporters appealed this ruling and a state appeals court reversed the trial court's decision.

The appeals court began its opinion by emphasizing that one must have "standing" to bring a lawsuit. Standing refers to some real interest or right in the subject matter of a lawsuit. The court concluded that the disgruntled members who filed the lawsuit lacked standing since they did not satisfy the church's definition of membership.

The court observed: "None [of these members] were currently making their $15 a month donations to the church as provided in the bylaws …. We are aware of the hostile atmosphere which undoubtedly prevailed against these [persons] at [the church]; however, this does not dissuade us from finding that [they] had relinquished their memberships at [the church] and were, at best, inactive or nonvoting members as of the filing of their [lawsuit]. As such, [they] could not bring an action for involuntary judicial dissolution …."

The court noted that even if the former members had standing to sue, they could not prevail since the civil courts lack jurisdiction to determine whether or not the church "could carry out its purposes since the court's decision of that issue [would violate] the first amendment's prohibition against civil courts' involvement in religious matters. The courts' authority to resolve disputes is narrowly circumscribed by the first amendment's guaranty that the right to the free exercise of religion will not be abridged. With the exception of certain types of property disputes, Illinois courts have generally refused to decide cases that require a judicial interpretation of religious doctrine or church law …. [T]he underlying dispute, who will be the pastor at [the church], is an ecclesiastical matter which is not within the court's purview." Hines v. Turley, 615 N.E.2d 1251 (Ill. App. 1993).

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