YMCA Ordered to Pay “Future Mental Anguish Damages”

Organization held liable for negligent selection for a worker’s molestation of a camper.


Key Point 10-04. A church may be liable on the basis of negligent selection for a worker's molestation of a minor if the church was negligent in the selection of the worker. Negligence means a failure to exercise reasonable care, and so negligent selection refers to a failure to exercise reasonable care in the selection of the worker. Liability based on negligent selection may be imposed upon a church for the acts of employees and volunteers.

The Texas Supreme Court upheld a jury award of $500,000 for mental suffering in a case involving the sexual molestation of a minor by a counselor at a YMCA summer camp. A 9-year-old boy (the "victim") was sexually molested by his counselor while attending a YMCA summer camp. The counselor was arrested and later confessed to sexually inappropriate conduct with a number of the young campers, including the victim. He claimed that the abuse occurred while both he and victim were fully dressed. The victim did not reveal the incident to his parents, who learned about it as a result of the counselor's confession.

The victim's parents sued the YMCA for negligently hiring, retention, and supervising the perpetrator. The jury found that the abuse caused the child serious mental injury and awarded "future" mental anguish damages of $500,000. The state supreme court affirmed this verdict, rejecting the YMCA's claim that there was insufficient evidence of future mental anguish. The court acknowledged that the victim testified that he had placed the incident "in a vault" in his mind. An expert witness testified that the victim's reference to putting the incident "in a vault" meant that he was using denial as a temporary coping mechanism, which is a common response to childhood sexual abuse. Other expert witnesses testified to other short and long-term effects that sexual abuse has on child victims, including poor performance in school.

One expert witness testified that trauma the victim experienced would not simply disappear but would have to be processed in some manner when he was ready, which may not happen for many years. In many cases where the victim "in-capsulates" the incident in a vault, as the victim had done, there is an "enormous reaction" when that vault opens later in life. The evidence further showed that, while the victim appeared to be functioning well, "children who have been sexually abused are often not diagnosed with depression or anxiety until they are adults in their thirties, forties, and fifties."

The court concluded: "We have recognized the consensus among experts that child victims of sexual abuse frequently repress and suppress memories and emotions associated with the event until their adult years." Adams v. YMCA of San Antonio, 265 S.W.3d 915 (Tex. 2008).

This Recent Development first appeared in Church Law & Tax Report, July/August 2009.

Woman Sues Pastor for Divulging Confidential Information

Court rules that the First Amendment prevents it from resolving case.

Key Point 6-10.1 According to the majority view, the civil courts will not resolve disputes challenging a church's discipline of a member since the first amendment guaranty of religious freedom prevents them from deciding who are members in good standing of a church.

The Texas Supreme Court ruled that the First Amendment guaranty of religious liberty prevented it from resolving a dismissed church member's claim that her pastor committed "professional negligence" by using information she shared with him in confidence as the basis for disciplining her.

A church endeavored to operate according to biblical principles and practices as described in the church's constitution and statement of faith. The church required all membership applicants to affirm their willingness to abide by the church's constitution, which contains the following disciplinary policy:

We believe that one of the primary responsibilities of the church is to maintain the purity of the Body. We are directed by God to be holy. In recognition of the importance of this obligation, the elders will biblically and lovingly utilize every appropriate means to restore members who find themselves in patterns of serious misconduct. When efforts at restoration fail, the elders will apply the Biblical teaching on church discipline, which could include revocation of membership, along with an appropriate announcement made to the membership (Matthew 18:15-17; 1 Corinthians 5:1-5; Galatians 6:1, Galatians 6:2; 2 Thessalonians 3:6).

The church's constitution provided that, if a member engaged in conduct that "violates Biblical standards, or which is detrimental to the ministry, unity, peace or purity of the church," and the member is unrepentant, "the elders will follow our Lord's instructions from Matthew 18:15-20," which states: "If your brother sins, go and show him his fault in private; if he listens to you, you have won your brother. But if he does not listen to you, take one or two more with you, so that by the mouth of two or three witnesses every fact may be confirmed. If he refuses to listen to them, tell it to the church; and if he refuses to listen even to the church, let him be to you as a Gentile and a tax collector."

If a member remained unrepentant and chose not to resign, the constitution instructed the church elders to revoke the person's membership and announce his or her removal to the congregation. The church's stated goal is "to encourage repentance and restoration of fellowship with the Lord and His people."

A woman (the plaintiff) became a member of the church. In applying for membership, she signed an application in which she expressed her agreement with the church's beliefs and affirmed her willingness to abide by the church constitution.

The plaintiff separated from her husband, and thereafter the couple participated in a series of weekly counseling sessions at the home of their pastor, who was also a licensed professional counselor. The plaintiff alleged that the Bible was not discussed in these sessions and she considered them to be a professional counseling relationship with the pastor in his role as a licensed professional counselor.

The plaintiff later informed the pastor that she had decided to divorce her husband, and that she had engaged in an extramarital sexual relationship. When the pastor informed her that her extramarital sexual relationship would trigger the church's disciplinary process, she informed him that she was resigning her membership.

A few days later the pastor and church elders wrote a letter to the church membership concerning the plaintiff. The letter explained to the congregation that the plaintiff intended to divorce her husband, there was no biblical basis for the divorce, she had engaged in a "biblically inappropriate" relationship with another man, and she had rejected efforts to bring her to repentance and reconciliation.

Describing the disciplinary process as one of "tough love," the letter encouraged the congregation to "break fellowship" with her in order to obtain her repentance and restoration to the church body. The letter admonished the congregation to treat the matter as a "members-only issue, not to be shared with those outside the congregation."

The plaintiff sued the pastor, church, and church elders alleging defamation, professional negligence, breach of fiduciary duty, and emotional distress. The professional negligence claim was based on the pastor's breach of an alleged "secular duty" to refrain from disclosing confidential information shared with him during counseling sessions.

The church defendants claimed that the plaintiff's claims all arose in the context of a church disciplinary matter which the First Amendment placed beyond the jurisdiction of the civil courts. A trial court agreed with the church defendants, and dismissed the lawsuit. The plaintiff appealed, but only with respect to her claims against the pastor. A state appeals court affirmed the dismissal of all of the plaintiff's claims except for her professional negligence claim which the court concluded could be resolved without violating the First Amendment. The pastor appealed to the Texas Supreme Court.

The church autonomy doctrine

The court began its opinion by acknowledging that "when a pastor who holds a professional counseling license engages in marital counseling with a parishioner, the line between the secular and the religious may be difficult to draw."

The court noted that "while it might be theoretically true that a court could decide whether the pastor breached a secular duty of confidentiality without having to resolve a theological question, that doesn't answer whether its doing so would unconstitutionally impede the church's authority to manage its own affairs.

Churches have a fundamental right to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine." The court stressed that "it is a core tenet of First Amendment jurisprudence that, in resolving civil claims, courts must be careful not to intrude upon internal matters of church governance. It quoted from a landmark decision of the United States Supreme Court:

The right to organize voluntary religious associations to assist in the expression and dissemination of any religious doctrine and to create tribunals for the decision of controverted questions of faith within the association, and for the ecclesiastical government of all the individual members, congregations, and officers within the general association, is unquestioned. All who unite themselves to such a body do so with an implied consent to this government, and are bound to submit to it.

But it would be a vain consent and would lead to the total subversion of such religious bodies, if any one aggrieved by one of their decisions could appeal to the secular courts and have them reversed. It is of the essence of these religious unions, and of their right to establish tribunals for the decision of questions arising among themselves, that those decisions should be binding in all cases of ecclesiastical cognizance, subject only to such appeals as the organism itself provides for. Watson v. Jones, 80 U.S. (13 Wall.) 679 (1872).

As a result, "the autonomy of a church in managing its affairs and deciding matters of church discipline … or the conformity of the members of the church to the standard of morals required of them" has long been afforded broad constitutional protection."

The neutral principles exception

The court acknowledged that the United States Supreme Court has recognized a narrow exception to the church autonomy doctrine when "neutral principles of law" may be used to resolve disputes over ownership of church property. The plaintiff asked the court to apply the neutral principles exception to her professional negligence claim, claiming that it could be resolved under neutral legal principles without resorting to or infringing upon religious doctrine.

Specifically, she asserted that the primary focus of her complaint was not the letter the church sent to the congregation or the church's disciplinary process. Rather, it was the pastor's disclosure to the church elders of confidential information he obtained during the marital counseling sessions, which she claimed constituted a breach of professional counseling standards. The court was not persuaded that her claim could be resolved without implicating religious considerations:

It is true that the plaintiff pins the pastor's liability … on his breach of a secular duty by disclosing confidential information to the church elders. However, this disclosure cannot be isolated from the church-disciplinary process in which it occurred, nor can [it be resolved] without examining what effect the imposition of damages would have on the inherently religious function of church discipline.

Subjecting the pastor to liability for engaging in the disciplinary process that the church requires would clearly have a chilling effect on churches' ability to discipline members and deprive churches of their right to construe and administer church laws …. In sum, while the elements of the plaintiff's professional negligence claim can be defined by neutral principles without regard to religion, the application of those principles to impose civil liability on the pastor would impinge upon the church's ability to manage its internal affairs and hinder adherence to the church disciplinary process that its constitution requires.

The court concluded

The secular confidentiality interest the plaintiff's professional negligence claim advances fails to override the strong constitutional presumption that favors preserving the church's interest in managing its affairs. She voluntarily became a member of the church body and agreed to abide by the church constitution; indeed, she expressed that she did so willingly. That constitution outlined the disciplinary process that would be followed if a member engaged in conduct that the church considered inappropriate. The pastor … assumed an obligation to the plaintiff and to the congregation to follow the church's constitution. Although the plaintiff contends pastoral counseling is not at issue because she did not receive marital counseling from the pastor in his capacity as a member of the clergy, the publication about which she complains was made in the course of the church disciplinary process and communicated by the pastor pursuant to the requirements of that process.

Even if the pastor's dual roles as secular counselor and pastor could be distinguished, which is doubtful, he could not adhere to the standards of one without violating the requirements of the other. Any civil liability that might attach for his violation of a secular duty of confidentiality in this context would in effect impose a fine for his decision to follow the religious disciplinary procedures that his role as pastor required and have a concomitant chilling effect on churches' autonomy to manage their own affairs. The result would be interference by the civil courts in the relationship among the church, its pastor, and the church members, which the First Amendment prohibits.

Resignation from church membership

The plaintiff claimed that her resignation from the church after she revealed confidences to the pastor "precluded any argument that he was performing a pastoral function in disseminating confidential information to the church."

The court disagreed. It noted that the church's constitution required the discipline of members to follow the procedure laid down in Matthew 18:1-35. According to this procedure, if a member sins and does not heed the counsel of church leaders, then the matter must be "told to the church." The court concluded that the church's decision to proceed with the formal discipline of the plaintiff following her resignation "was based on its interpretation of Matthew 18:15-20, an inherently ecclesiastical matter. We hold that court interference with that decision through imposition of liability in this case would impinge upon matters of church governance in violation of the First Amendment."

What this means for churches

What is the relevance of the Texas Supreme Court's decision to other churches? Obviously, the court's decision is binding only upon churches in the state of Texas. Nevertheless, the case represents one of the most extensive discussions of church discipline by any court, and as a result may be given special consideration (and no doubt be followed) by the courts of other states. For this reason, the case merits serious study by church leaders in every state. With these factors in mind, consider the following:

  • This is one of the few courts to address the question of whether a minister can be liable for divulging confidential information. The court concluded that a pastor was not liable for divulging confidential information to his congregation regarding a member's confession of marital infidelity since the disclosure occurred in the context of administering discipline pursuant to the church's constitution.
  • The most significant church discipline ruling up until now has been a 1989 decision of the Oklahoma Supreme Court. Guinn v. Church of Christ, 775 P.2d 766 (Okla. 1989). In the Guinn case, the court reached the following conclusions: (1) The discipline of church members (i.e., persons who have not withdrawn from membership) is a constitutionally protected right of churches. (2) Discipline of persons who have withdrawn their church membership is not a constitutionally protected activity, and a church that engages in such conduct can be sued under existing theories of tort law. (3) Church members have a constitutional right to withdraw from church membership unless they have waived that right. (4) Statements by church leaders to church members concerning the discipline of current members are conditionally privileged—meaning that the disciplined member cannot successfully sue the church for making such disclosures unless the church acted maliciously (i.e., it either knew that the disclosures were false or made them with a reckless disregard as to their truthfulness).

It is important to note that the Texas Supreme Court deviated in two significant ways from the Guinn ruling: First, the court rejected the conclusion that the discipline of persons who have resigned their church membership is not a constitutionally protected activity, and a church that engages in such conduct can be sued under existing theories of tort law. The court stressed that the church's decision to proceed with the discipline of the plaintiff following her resignation "was based on its interpretation of Matthew 18:15-20, an inherently ecclesiastical matter," and that "court interference with that decision through imposition of liability would impinge upon matters of church governance in violation of the First Amendment."

Second, the Guinn court noted that a "qualified" or "conditional" privilege protects churches from liability for disclosing confidential information to members, but it concluded that this privilege does not apply to disclosures made to non-members. The Texas Supreme Court ignored this issue. It simply noted that the church sent a letter "to the congregation," without any indication if the recipients included both members and nonmembers. Perhaps the court concluded that its ruling did not require a discussion of the qualified privilege. That is, since the church's disclosure of the plaintiff's marital infidelity was constitutionally protected, it didn't matter to whom the disclosure was communicated. Westbrook v. Penley, 231 S.W.3d 389 (Tex. 2007).

Lawsuits by Dismissed Clergy

A Texas court ruled that it was barred by the First Amendment from resolving a lawsuit brought against a church by a dismissed youth director.

Church Law & Tax Report

Lawsuits by Dismissed Clergy

A Texas court ruled that it was barred by the First Amendment from resolving a lawsuit brought against a church by a dismissed youth director.

Key point 2-04.1. Most courts have concluded that they are barred by the First Amendment guarantees of religious freedom and non-establishment of religion from resolving challenges by dismissed clergy to the legal validity of their dismissals.

* A Texas court ruled that it was barred by the First Amendment from resolving a lawsuit brought against a church by a dismissed youth director. Randy was employed as a church’s Director of Youth Ministries. In that position, he was responsible for “the administration and organizing of recreational events for the youth, such as camping outings and other social gatherings; he coordinated the transportation, oversaw the logistics, and served as a chaperone.” He also “managed the budget for the youth program, recruited adult and youth participants, registered the attendees at events, collected participation fees from attendees, and performed fundraising duties.”

Another associate pastor at Randy’s church had a conversation with a pastor of the church where Randy had previously been employed concerning Randy’s continued employment. The pastor of Randy’s former church recounted allegations that Randy had upset congregation members by dating certain women and by putting his arm around girls at church. He also described a rumor that Randy had used internet pornography as being “unsolicited, anecdotal, and unsubstantiated.”

After this conversation, the associate pastor at Randy’s church shared these rumors with another pastor who met with the Staff Parish Relations Committee (“SPRC”) and recommended that Randy be terminated from his position as Director of Youth Ministries. In a subsequent letter to two concerned members of the congregation, the SPRC chairwoman wrote: “Please know that this committee and your pastors share your concern for the youth program. A search for a new youth director will begin after the first of the year. Before any action was taken, the pastors discussed the situation with the District Superintendent and sought the backing of the SPRC, which unanimously voted to accept the recommendation to support the decision. I can assure you that we approached this decision prayerfully and in the best interests of the church.”

Randy claimed that the SPRC chairwoman told a member of the congregation who asked about his termination that, “It is really bad,” “We had to get him out before something happened at our church,” and that “Randy knows why he was fired” and “he wouldn’t want anyone else to know.”

Randy sued the church, claiming it was liable for defamation and interference with an employment contract. A trial court dismissed the lawsuit on First Amendment grounds, and Randy appealed.

A state appeals court began its opinion by summarizing two important principles rooted in the First Amendment guaranty of religious freedom. The ecclesiastical abstention doctrine prevents secular courts from reviewing many types of disputes that would require an analysis of “theological controversy, church discipline, ecclesiastical government, or the conformity of the members of the church to the standard of morals required.” In cases relying on the ecclesiastical abstention doctrine, courts consider the substance and nature of a plaintiff’s claims to determine whether the First Amendment prevents civil court jurisdiction. The second, and more narrow, principle is the so-called ministerial exception which prevents the civil courts from resolving employment disputes between a church and its ministers. If the employee is a minister, then the ministerial exception applies, “preventing secular review of the employment decision without further question as to whether the claims are ecclesiastical in nature.” The reason for this special rule for employment decisions about ministers is because:

The relationship between an organized church and its ministers is its lifeblood. The minister is the chief instrument by which the church seeks to fulfill its purpose. Matters touching this relationship must necessarily be recognized as of prime ecclesiastical concern …. [Inquiry into a church’s decision regarding the] employment relationship existing between a church and its minister would result in an encroachment by the state into an area of religious freedom which it is forbidden to enter by the principles of the free exercise clause of the First Amendment. McClure v. Salvation Army, 460 F.2d 553 (5th Cir.1972).

In summary, if Randy’s position was ministerial, “then, pursuant to the ministerial exception, his claims for defamation and interference are not subject to secular review.”

The court concluded that an employee’s position will be considered “ministerial” if his or her “primary duties consist of teaching, spreading the faith, church governance, supervision of a religious order, or supervision or participation in religious ritual and worship” or if the “position is important to the spiritual and pastoral mission of the church.” In deciding if an employee’s primary duties are ministerial in nature, the court referred to the following three factors: (1) “whether employment decisions regarding the position at issue are made largely on religious criteria,” (2) “whether the plaintiff was qualified and authorized to perform the ceremonies of the church,” and (3) “probably most important whether plaintiff engaged in activities traditionally considered ecclesiastical or religious.” Starkman v. Evans, 198 F.3d 173 (5th Cir. 1999). The Starkman court held that it is “sufficient” to deem an employee’s function “ministerial” if only the third prong is satisfied (choir director was a minister because religious music “constitutes a form of prayer that is an integral part of worship”).

The court noted that Randy’s position as Director of Youth Ministries included many administrative duties, such as coordinating the transportation, logistics, and other travel arrangements for youth outings and gatherings. Also, the court pointed out that he was not ordained, and, as Director of Youth Ministries, did not participate in worship services or ceremonies, had no responsibility for the music or liturgy, did not assist with the confirmation of youth, and was not required to teach religious classes or have religious training. On the other hand, the court noted:

Randy was responsible for “organizing” these events, meaning that he made decisions on behalf of the church about what activities the members of its youth ministry would participate in. The purpose of a church organizing a youth-group retreat is to bring people together in fellowship, often coupled with religious worship or reflection. Even if he was not teaching the doctrine himself, he testified that he was actively participating as a chaperone. Organizing and chaperoning these events for the youth ministry are activities that furthered the church’s mission, which went beyond purely secular tasks such as booking a chartered bus, collecting payments from the participants, or reserving cabins for a retreat. Furthermore, he “managed the budget for the youth program.” Had he been responsible merely for accounting, this function might be viewed as solely secular because he would not have any discretion over the use of church funds. But, as the director of the program who “managed” the budget, he was authorized to decide how the church’s money was best used in furtherance of ministering to its youth. Because he was responsible for deciding what activities the church’s youth group would participate in and how the program’s money would be spent, he was “answerable to the religious authorities for providing, in a myriad of ways not reducible to a listing of tasks, ‘spiritual leadership in and for the [youth ministry].'”

Notably, Randy’s affidavit also states that he “performed fund-raising duties” and “recruited participants” for the program. There is no question that asking people to give their time and money to support activities of the youth ministry is a function that is “important to the spiritual and pastoral mission of the church,” especially in light of the fact that he was also responsible for deciding how to use that money and how to organize those events. In fulfilling these duties, he would be directly communicating the mission of the program to individuals and encouraging them to participate either financially or physically.

Thus … it is apparent that he was acting both as the “voice” of the youth ministry and serving as a “primary agent” of the church. Determining whose voice speaks for the church is per se a religious matter, and determining who will serve as a “primary agent by which a church seeks to fulfill its purpose” is precisely the type of ecclesiastical decision that the First Amendment intends to protect. Considering the Starkman “primary duties” test, then, (1) the church’s employment decision regarding Randy’s position would be based largely on religious criteria, and (2) his organizing of—as well as his budgeting, fund-raising, and recruiting participants for—youth ministry activities are things “traditionally considered [to serve an] ecclesiastical or religious” purpose. Accordingly we hold that, as Director of the Youth Ministry Randy functioned in a ministerial capacity.

The court rejected Randy’s argument that some of his defamation claims could be addressed because they were based on statements made about him by church officers after he was dismissed. In particular, the chairwoman of the SPRC allegedly told members that “it is really bad” and “we had to get him out before something happened at our church.” Although such statements “do not, on their face, implicate religious doctrine, a determination of the truth or falsity of these statements would require an inquiry into the church’s reasons for terminating Randy from his position as the Director of Youth Ministries,” and this is “precisely the type of inquiry protected from secular review by the ecclesiastic abstention doctrine.”

Application. This case is important for two reasons. First, it applies the ministerial exception to a youth pastor who was not ordained, and who “did not participate in worship services or ceremonies, had no responsibility for the music or liturgy, did not assist with the confirmation of youth, and was not required to teach religious classes or have religious training.” The court concluded that Randy was nonetheless a “minister” for purposes of the ministerial exception because (1) he was actively involved in organizing and chaperoning events for the youth ministry that furthered the church’s mission and “went beyond purely secular tasks”; (2) he was authorized to decide how the church’s money was best used in furtherance of ministering to its youth; (3) he performed fundraising duties and recruited participants for the youth program; (4) he acted both as the “voice” of the youth ministry and served as a “primary agent” of the church.

Second, the court concluded that the ministerial exception barred resolution of defamation claims arising from post-termination statements if “a determination of the truth or falsity of these statements would require an inquiry into the church’s reasons for terminating [the minister] from his position,” since this is “precisely the type of inquiry protected from secular review by the ecclesiastic abstention doctrine.” Patton v. Jones, 212 S.W.3d 541 (Tex. App. 2006).

Church Property – Part 2

A Texas court ruled that a church had to be evicted from its property because its use of the property for religious purposes violated a “restrictive covenant” in a prior deed.

Key point 7-13. A restrictive covenant is a restriction on the use of property. Such restrictions often are noted in deeds to property, but they may appear in other documents as well. Such restrictions apply to a church's use of its property.

* A Texas court ruled that a church had to be evicted from its property because its use of the property for religious purposes violated a "restrictive covenant" in a prior deed. An oil company owned and operated an oil pipeline terminal that served as a bulk fuel storage facility. Adjacent property owners complained about soil and groundwater contamination, and sued the oil company for damages. A settlement of these claims was reached that imposed on the oil company a duty to clean up the property and monitor the success of its efforts. The settlement agreement also required the creation of a "restrictive covenant" in the title to the property. The covenant stated that the property "shall be used for commercial/light industrial purposes only." The oil company eventually sold the property to a commercial company, which later sold the property to a church. The sale to the church involved a warranty deed that was "subject to any and all restrictions, encumbrances, easements, covenants and conditions" on the property.

Following its purchase of the property the church converted an existing building into a sanctuary where worship services were conducted four times each week. The oil company later learned of the church's purchase and use of the property, and it informed the church in writing that its use of the property for religious purposes violated the restrictive covenant in the deed. The oil company later asked a court to issue an order prohibiting the church from using the property "for church services or activities related to the church or anything else other than commercial or light industrial purposes." The court did so, and the church appealed. A state appeals court concluded:

The church is organized primarily for religious purposes. All other activity on the property is conducted for the purposes of supporting the church's religious mission. Church services may constitute only seventeen percent of the time the property is used for activities; however, they form the fundamental core of the church's use of the property. The issue we must address here is not, of course, whether these sorts of religious activities on property are generally permissible or desirable, but whether the church's use of the property is a distinct or substantial breach of the restrictive covenant's requirement that the property be used solely for "commercial/light industrial" purposes. Our resolution of this issue must rest not on any personal views regarding religious activities but on Texas law. Applying these principles, we conclude that the church's use of the property for church purposes is a distinct or substantial breach of the terms of the restrictive covenant.

The court rejected the church's argument that enforcing the restrictive covenant violated its right of religious freedom under the state constitution. It noted that the courts have "routinely rejected the notion that a neutral, otherwise valid restrictive covenant violates constitutional religious freedom protections if applied against a church." It cited an earlier case in which a church built a sanctuary and education building on property that was subject to a restrictive covenant prohibiting any structure except a single-family dwelling. Ireland v. Bible Baptist Church, 480 S.W.2d 467 (Tex. App. 1972). In ordering the church to demolish its buildings, a court rejected the church's claim that doing so would violate the constitutional guaranty of religious freedom.

The court acknowledged that restrictive covenants might be ignored if they "applied only to Baptist churches while permitting those of other denominations." But, because the covenant in this case "applied equally to the religious activities of all denominations and faiths," it was presumably valid.


Application
. Many churches have purchased property that contains one or more restrictive covenants that restrict a church's lawful use of its property. If church leaders are not aware of the existence of a covenant, they may inadvertently violate it. As this case demonstrates, this can compel the church to limit or even cease use of the property. Here are some points to note: (1) Carefully inspect the proposed deed to any property you are acquiring by purchase or gift. Does it contain one or more restrictive covenants that could hinder the church's use of the property? If so, this issue must be resolved before title to the property is transferred to the church. (2) Check out prior deeds in the "chain of title" of property prior to purchase, since restrictive covenants may be imposed in a prior deed. Such covenants "run with the land" because each subsequent deed, like the deed in this case, recites that it is "subject to any and all restrictions, encumbrances, easements, covenants and conditions" on the property. (3) Check out the deed to your current property to see if it contains one or more restrictive covenants. Do the same with prior deeds in the chain of title. A title company or real estate attorney can perform this task for you. Cornerstone Church Corporation v. Pizza Property Partners 160 S.W.3d 657 (Tex. App. 2005)

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

A Texas court ruled that a church was not liable for injuries suffered by a teenager who broke his neck during a youth activity.

Key point 10-11. A church may be legally responsible on the basis of negligent supervision for injuries resulting from a failure to exercise adequate supervision of its programs and activities.
Negligence as a Basis for Liability

A Texas court ruled that a church was not liable, on the basis of negligent supervision, for injuries suffered by a teenager who broke his neck during a youth activity. A church's youth pastor (Pastor Kevin) organized a back-to-school activity for the church's teenagers, which included a game of "capture the flag." During this game, played in a church member's hay pasture, a 15-year-old boy (the victim) broke his neck while trying to take the flag from two other teenage boys who were holding onto the flag and carrying it toward their team's base. The victim's parents sued the church, claiming that it had been negligent in supervising Pastor Kevin and that its negligence caused the injury. The trial court ruled that the church had not been negligent, and the victim's parents appealed.

A state appeals court agreed with the trial court that the church was not negligent. It referred to the senior pastor's testimony, in which he recounted how he had carefully checked the references for Pastor Kevin and the training he had received in preparation to be a church youth minister. Pastor Kevin had been instructed on providing recreational activities for teenagers during his seminary education. Part of this training focused on providing a safe environment for church youth activities. During the three years while Pastor Kevin was youth minister for the church, he continued his training to improve his performance as a youth minister. The senior pastor asserted that Pastor Kevin had done an outstanding job as youth minister for the church, and explained that he regularly supervised games and other recreational activities for the church's teenagers. Even the victim's parents conceded during their testimony that Pastor Kevin had been a good youth minister for the church. All of the other witnesses at trial testified to the good job that Pastor Kevin did in handling all of his responsibilities as a youth minister. No one offered an opposing view, or suggested that the church was negligent in its supervision of Pastor Kevin.

The court concluded that there was no evidence suggesting that the church had negligently supervised Pastor Kevin, and therefore the lawsuit had to be dismissed. Lynch v. Pruitt Baptist Church, 2005 WL 736998 (Tex. App. 2005).

Child Abuse Reporting

A Texas court ruled that the clergy-penitent privilege did not prevent a minister from testifying against a church member in a child molestation prosecution.

Key point 3-08.08. Clergy who are mandatory reporters of child abuse are excused from a duty to report in many states if they learn of the abuse in the course of a conversation covered by the clergy-penitent privilege. Some state child abuse reporting laws do not contain this exception.

A Texas court ruled that the clergy-penitent privilege did not prevent a minister from testifying against a church member in a child molestation prosecution.

A 10-year-old girl claimed that her stepfather (the defendant) had sexually molested her. Following this incident, the defendant and his wife conferred with an elder of their church. The defendant's wife also reported the incident to the police, and the defendant was charged with indecency with a child. At trial, the defendant claimed that statements he made to a church elder were privileged communications to a member of the clergy under a Texas law which states that "a person has a privilege to refuse to disclose and to prevent another from disclosing a confidential communication by the person to the clergyman in his professional character as a spiritual adviser."

A jury convicted the defendant of indecency with a child and imposed a sentence of 5 years in prison. The defendant appealed his conviction on the ground that the trial court improperly admitted the testimony of the elder in violation of the clergy-penitent privilege.

The appeals court conceded that "a person has a privilege to refuse to disclose and to prevent another from disclosing a confidential communication by the person to a member of the clergy in the member's professional character as spiritual adviser." However, "in a proceeding regarding the abuse or neglect of a child, evidence may not be excluded on the ground of privileged communication except in the case of communications between an attorney and client."

The court concluded that "because this case involved abuse of a child, we conclude the trial court was correct in overruling defendant's objection that [the elder's] testimony involved privileged matters." It also pointed out that "the Texas legislature has determined that any communication involving the abuse or neglect of a child will not be afforded protection under any circumstances other than the attorney-client privilege," and "as a result, there is no privilege protecting communications with a clergyman in his professional capacity as a spiritual adviser regarding the abuse or neglect of a child."

Application . Several states, like Texas, have laws that make ministers mandatory child abuse reporters even with respect to information disclosed to them in the course of a confidential communication subject to the clergy-penitent privilege, and that allow such information to be admissible in court proceedings. Almendarez v. State, 153 S.W.3d 727 (Tex. App. 2005).

Church Records

A Texas court ruled that the first amendment did not bar the civil courts from enforcing the rights of church members to inspect the records of an incorporated church.


Key point 6-03.1. Church members generally have no right to inspect church records unless such a right is conferred by state nonprofit corporation law, a church's charter or bylaws, state securities law (if the church has issued securities), or a subpoena. Church records enjoy no privilege against disclosure, with the exception of documents that are protected by the clergy-penitent privilege under state law.

A Texas court ruled that the first amendment did not bar the civil courts from enforcing the rights of church members to inspect the records of an incorporated church.

A church member (Tim) made a written request through his attorney to examine and copy some of his church's financial records. Tim made the request pursuant to the Texas Nonprofit Corporation Act, which contains the following provision regarding the authority of members to inspect corporate records:

Each corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its members, board of directors, and committees having any authority of the board of directors and shall keep at its registered office or principal office in this State a record of the names and addresses of its members entitled to vote.

A member of a corporation, on written demand stating the purpose of the demand, has the right to examine and copy, in person or by agent, accountant, or attorney, at any reasonable time, for any proper purpose, the books and records of the corporation relevant to that purpose, at the expense of the member.

Initially, the church agreed Tim could examine and copy the requested records; however, prior to the date he was to inspect the records, the church's pastor sent Tim a letter advising him that the church could not comply with his request.

Tim filed a lawsuit against the church, alleging a violation of the Nonprofit Corporation Act. The church asked the court to dismiss the lawsuit on the basis of the "ecclesiastical abstention doctrine" which bars the courts from intervening in internal church disputes involving governance issues. The trial court granted the church's request and dismissed the lawsuit. Tim promptly appealed.

A state appeals court began its opinion by explaining the ecclesiastical abstention doctrine:

Under the ecclesiastical abstention doctrine, civil courts may not intrude into the church's governance of religious or ecclesiastical matters, such as theological controversy, church discipline, ecclesiastical government, or the conformity of members to standards of morality. In addition, courts should not involve themselves in matters relating to the hiring, firing, discipline, or administration of clergy. The relationships between an organized church and its ministers are considered a church's "lifeblood" and matters involving those relationships are recognized as "of prime ecclesiastical concern." Nevertheless, acknowledging that churches, their congregations, and hierarchy exist and function within the civil community, they can be as amenable to rules governing civil, contract, or property rights as any other societal entity. Therefore, a state may adopt an approach, including neutral principles of law, for resolving church disputes that do not involve consideration of doctrinal matters. Under such an approach, a court may interpret church documents in purely secular terms without relying on religious precepts in resolving the conflict. If an issue cannot be determined without resolving a religious controversy, a court must defer to the resolution of the doctrinal issue by the authoritative ecclesiastical body. Often, however, the difficulty arises in determining whether a particular dispute is "ecclesiastical" or simply a civil law controversy in which church officials happen to be involved. To resolve the question, courts must look to the "substance and effect of a plaintiff's complaint to determine its ecclesiastical implication, not its emblemata."

In the trial court, Tim sought an order declaring and enforcing the parties' rights under the Nonprofit Corporation Act. Tim argued that as a nonprofit corporation incorporated under the Act, the church was required to maintain books and to make them available to its members. The church insisted that the disclosure of its financial records was a matter of internal ecclesiastical governance, reasoning that because the pastor decides when disclosure is appropriate, it is an ecclesiastical matter.

The court concluded that Tim's request to inspect church records, pursuant to the Nonprofit Corporation Act under which the church was incorporated, "did not involve any religious doctrine or precept. Resolution of the dispute does not require that we intervene in the hiring, firing, discipline, or administration of the church's clergy, nor that we address the conformity of members to the church's standards of morality, or any other matters traditionally held to involve religious doctrine. Further, we are not being called upon to interpret any church constitution, bylaws, or other governing documents. In fact, there are no documents in the record indicating how or by whom the church is governed. Moreover, we are not asked to decide matters relating to the hierarchical or congregational nature of the church."

The court noted that courts in other states had reached a similar conclusion that the first amendment does not bar the civil courts from enforcing the rights of church members to inspect church records if such a right is granted by the state nonprofit corporation law under which the church is incorporated. It specifically referenced two cases. In the first case, the Louisiana Supreme Court ruled that "the underlying first amendment principles, which protect against entanglement of civil courts in questions of religious doctrine, polity, or practice, are not offended by the judicial enforcement of a statute requiring a church, as a non-profit corporation, to keep at its registered office, corporate records for examination by its voting members." Bourgeoise v. Landrum, 396 So.2d 1275 (La. 1981). In the second case, a New York court concluded that a church's first amendment rights were not violated by inspection of its records because the questions involved were not concerned with internal ecclesiastical or religious issues, but only secular ones. Watson v. Christie, 732 N.Y.S.2d 405 (2001).

The Texas court agreed with the conclusions reached by the Louisiana and New York courts in similar cases. It concluded, "By incorporating under the Act, the church has become amenable to the provisions of that statute. The trial court was merely called upon to uphold the plain language of the Act and ensure Tim was allowed access to the church's books and records in accordance with the statute. This judicial function does not jeopardize the ability of religious organizations to establish religious doctrine or develop their internal rules and regulations, nor does it implicate secular interests in purely ecclesiastical matters; therefore, first amendment principles are not offended. We find Tim's request to review the church's records merely requires the trial court to enforce a neutral principle of law."

The court conceded that "a dispute may arise regarding the church's finances should Tim be allowed access to its records," however, "the issue now before us cannot be resolved based upon what may happen. The trial court dismissed Tim's claims for lack of jurisdiction relying upon the ecclesiastical abstention doctrine. Because under these circumstances the court is not required to involve itself with any religious doctrine or principles, we conclude the trial court erred in dismissing Tim's lawsuit on the basis that it lacked jurisdiction."

What this means for churches

This case illustrates a very important point. Church leaders often wrestle with the question of whether or not to honor requests by members to inspect various kinds of corporate records. In most states, members of churches that are incorporated under the state nonprofit corporation law have a legal right to inspect specified corporate records for a "proper purpose." This case illustrates that this requirement is not a mere technicality that is disregarded by the courts. Members demanding to inspect church records have the burden of establishing a proper purpose for their request. Obviously, deciding whether or not a member has met this burden can be a difficult question in some cases. A local attorney should be consulted if there is any doubt.

Lacy v. Bassett, 132 S.W.3d 119 (Tex. App. 14th Dist. 2004).

Church Building Superintendent Sent to Prison for Theft

Churches are not immune from occupational fraud.

Background

The Association of Certified Fraud Examiners (ACFE) estimates the "occupational fraud" costs employers close to 400 billion in 2019. What is occupational fraud? Any use by employees of their job for "personal enrichment through the deliberate misuse or misapplication of the employing organization's resources." This definition covers a range of activities, including "payroll fraud," theft, fraudulent invoices, overstated and fictitious business expenses, multiple reimbursements of the same expenses, and overstated wages.

Nonprofits, like churches, are not immune from occupational fraud. Quite to the contrary, the ACFE 2020 report stated, “Nonprofit organizations have fewer anti-fraud controls in place, leaving them more vulnerable to fraud.” The report pointed out that the top three weakness for nonprofits were lack of internal controls, lack of management review, and override existing internal controls. Add to that the tendency for churches to feel that oversight shows a lack of trust and you’ve got a setup for potential theft. Such assumptions can be dangerous, as a recent case illustrates.

Suspicious activity

For more than a decade, a man ("Ken") was employed as the building superintendent for a large church. Ken supervised the church's custodial staff and was responsible for overseeing the cleaning, maintenance, and repair of church property. Ken was responsible for approving employee time sheets and vendor invoices. Each week, he would fill out the payroll sheet with the number of hours worked by each employee, sign and approve the hours, and submit the sheets to the church bookkeeper for payment. The bookkeeper would generate the checks based on the number of hours listed on the payroll sheets, obtain signatures on the checks from the church treasurer, and leave the signed checks for Ken to distribute. Ken was also responsible for approving vendor invoices and submitting them to the bookkeeper for payment. The bookkeeper mailed some of these checks to the vendors directly, but held approximately 95 percent of the checks for Ken to pick up and distribute himself.

The bookkeeper first began handling the church payroll in 1993. At that time, she did not recognize two names on the payroll list, even though she had worked 50 to 60 hours a week at the church for nearly four years, and knew the other employees listed on the payroll. Payroll sheets indicated these two individuals were full-time employees who had earned overtime in addition to their weekly wages. She questioned Ken about these two employees. He said they were his brother-in-law and stepson who worked "at night and on the weekends." The bookkeeper did not question Ken again, but, after the initial confrontation, one of these two "employees" began emptying the bookkeeper's office trash can every evening. This employee was paid $150 a month in cash for working only a few hours each week. Over the course of several years, 355 payroll checks were issued to this employee, and each contained a forged endorsement.

Two other church members discovered that several payroll checks had been issued to them by the church, even though they had only worked a few hours on a couple of occasions, and their signatures had been forged on each check. One of the members discovered that the church had issued 23 payroll checks in his name in a total amount of nearly $20,000, and that his signature had been forged on each one. The total amount of Ken's fraud was staggering, although the exact amount will never be known.

Appeals court: “evidence overwhelmingly supports the verdict”

The church began investigating Ken. During that investigation, an associate pastor searched Ken's office and desk, and found blank invoice forms, letterhead created from a vendor's business card, and 1099-MISC tax forms that had not been delivered to the appropriate vendors. Ken was arrested and charged with various crimes. Following the arrest, the church hired an attorney to prepare an insurance claim for the church based on the losses caused by Ken's thefts. The church ultimately received a $250,000 insurance settlement, the entire value of the policy.

Ken was convicted of theft and sentenced to 16 years in prison. He appealed his conviction on the ground that the evidence was not sufficient to support a conviction. A state appeals court disagreed:

The evidence overwhelmingly supports the verdict. Ken did not testify and presented no evidence to contradict the state's evidence. The evidence showed that Ken, as building superintendent, was responsible for approving all time sheets and vendor invoices. He falsified these time sheets and invoices, cashed checks made out to employees who did not work at the church for the amount of hours indicated on the time sheets, and kept the money for himself. The jury heard the evidence, examined the exhibits, and reasonably concluded that Ken had indeed falsified church records, cashed checks derived from those false records, and kept the money for himself.

The court noted that three persons had testified that payroll checks had been issued in their names, and that their signatures on those checks had been forged. Moreover, the testimony of the bank tellers supported the testimony of these "employees" that they did not receive money from those checks because Ken came into the bank alone when he cashed them, and his signature was on each check.

The court rejected Ken's argument that a 16-year prison sentence was excessive: "The evidence showed that Ken had deceived and defrauded the church for years, and during the course of that fraud helped his friends and family by hiring them to do work at the church. The evidence also showed that Ken received sexual favors in return for paying false invoices. This evidence supports the jury's assessment of sixteen years confinement."

What this means for churches

Ken's scheme was to have his church issue payroll checks to "fictitious employees." This is one category of "occupational fraud," since Ken was using his job for his "personal enrichment through the deliberate misuse or misapplication of the employing organization's resources." Here are some points for church treasurers to consider.

1. Risk to churches

As noted above, churches are not immune from occupational fraud. In fact, they are at a greater risk because many have implemented no "internal controls" to minimize the risk of fraud, and most have employees who know each other very well and consider accounting controls to be intrusive and unnecessary. This environment can lead to fraudulent activity.

2. Other types of occupational fraud

Issuing checks to fictitious employees is but one example of occupational fraud. Another example is for an employee to have the employer issue checks based on fraudulent invoices, as Ken did.

3. Difficulty of detection

Occupational fraud usually is carefully planned, and is very hard to detect. The most common basis for detecting fraud is a tip from another employee.

4. Criminal prosecution

Occupational fraud, of whatever category, constitutes a crime under state and possibly federal law. There is a common belief that employers will not prosecute employees for fraud. While the employee may be fired, the employer will not attempt to have the employee prosecuted. But the ACFE report shows that nearly 60 percent of all employers turn cases of occupational fraud over to law enforcement. How are such cases resolved? Fifty-six percent pleaded guilty/no contest, 23 percent were convicted at trial, and only 2 percent were acquitted. While these statistics apply to employers generally, and not churches, they are relevant to church leaders in making informed decisions on handling cases of occupational fraud.

5. Insurance

Occupational fraud is a risk that is not covered by conventional property or liability insurance policies. Check with your insurance agent to discuss adding this as an endorsement to your existing policy. This coverage is sometimes called "fidelity" insurance. It covers various forms of criminal behavior by employees, including embezzlement, forgery, dishonesty theft, computer fraud, and similar acts. Church leaders should be aware that insurers may vigorously pursue legal remedies against employees who obtain funds or assets through fraud or embezzlement. So, the fact that your church decides to "forgive" an employee who embezzles church funds will not end the employee's potential troubles. Far from it. In addition, the IRS will relentlessly pursue employees who embezzle funds, since few of them report their ill-gotten gains as taxable income on their tax return!

6. Bank liability

If the church in this case had not carried insurance to cover employee fraud, could it have recovered its losses from the bank that accepted the payroll checks for deposit over the signatures that Ken forged? The answer is no. The Uniform Commercial Code (UCC) governs checks and other negotiable instruments in every state except Louisiana. Section 3-405 of the UCC contains the so-called "padded payroll" rule. This rules assumes that employers are negligent whenever an employee cashes checks to fictitious employees, and so they (rather than the bank) must bear the loss. In rare cases, an employer may be able to recover if it can prove that the bank was negligent. But this is a difficult task that is rarely successful.

7. CPA audits

If a church has an annual audit by a CPA firm, will this eliminate the risk of occupational fraud? While an audit can reduce the risk, it will not eliminate it. Employees who engage in fraud go to great lengths to conceal it, and this makes if difficult if not impossible for auditors to discover it. However, an audit will result in recommendations by your CPA firm regarding "internal control" procedures that will help to reduce the risk of fraud.

8. Risk management

What steps can your church take to reduce the risk of payroll fraud and other forms of occupational fraud? Consider the following:

  • Before hiring an employee, contact the persons' former employers for a reference. Also, consider criminal records checks and credit checks.
  • Be sure that no one is placed on your payroll without authorization. Have the preparation of payroll and the actual paying of employees handled by different persons.
  • Examine all invoices and supporting data before signing checks. Make sure that all merchandise was actually authorized and received, and that the price was reasonable. In many false purchase schemes, the embezzler neglects to make up receiving forms or other records purporting to show receipt of merchandise. Cancel all invoices at the time you sign the check to prevent double payment.
  • Examine paychecks for Social Security or income tax withholdings. Payroll checks issued to fictitious employees usually do not include these withholdings, and so this is often your best evidence of payroll fraud.
  • "Direct deposit" wages into employees' bank accounts.
  • Periodically hand deliver payroll checks to employees, and require personal identification. If you have any paychecks that were not delivered, retain them until the employees return to work and then personally deliver them.
  • Monitor budget variances in your payroll expenses. Negative variances may be in indication of payroll fraud.

Johnson v. State, 2001 WL 748175 (Tex. App. 2002)

Child Abuse Reporting

A Texas court ruled that a pastor was legally required to report to civil authorities the confession of a counselee that he had molested his three children.

Key point 4-08. Every state has a child abuse reporting law that requires persons designated as mandatory reporters to report known or reasonably suspected incidents of child abuse. Ministers are mandatory reporters in many states. Some states exempt ministers from reporting child abuse if they learned of the abuse in the course of a conversation protected by the clergy-penitent privilege. Ministers may face criminal and civil liability for failing to report child abuse.

A Texas court ruled that a pastor was legally required to report to civil authorities the confession of a counselee that he had molested his three children, and rejected the counselee's claim that the confession should not have been used in court since it was protected by the clergy-penitent privilege.

A young girl called a Methodist church and disclosed that she and her brother and sister were being sexually molested by their father ("Carl"). Three days later, Carl called the church and made an appointment to talk with the pastor. When he arrived at the church, the senior pastor told him that his daughter had informed him that she (and her sister and brother) had been sexually molested by him. The pastor told Carl that he had called Child Protective Services (CPS) and reported the assaults. The pastor also told Carl that they were going to notify the police. Carl told the pastor, an elder in the church, and a business administrator that he did "not remember doing any such thing." Carl was charged with several counts of child molestation. He claimed that he had gone to the church to talk about marital problems, but was confronted by the pastor, elder, and administrator who repeatedly exhorted him to confess to the allegations of child abuse. After nearly an hour, Carl claimed that he "broke down" and said, "Yeah, I did it." He insisted that he said this to the church officials "to get them off my back." He testified that the church elder had accused him of being demon possessed, and that all three church officials informed him that God could not forgive him until he confessed and that he would be given a "lighter sentence" if he confessed.

Carl was convicted of molesting each of the three children, and was sentenced to 75 years in prison for each child. He appealed, insisting that the trial court erred by allowing the prosecution to inform the jury about his confession to the church officials. He claimed that the confession was privileged, and that it had resulted from deceptive promises of leniency and spiritual cleansing.

The Texas clergy-penitent privilege (Rule 505 of the Texas Rules of Evidence) provides, "A person has a privilege to refuse to disclose and to prevent another from disclosing a confidential communication by the person to the clergyman in his professional character as a spiritual adviser." The state asserted that the clergy-communication privilege cannot be used to exclude any evidence obtained in these child abuse cases, citing sections 261.101 and 261.202 of the Texas Family Code. Section 261.101 states, "A person having cause to believe that a child's physical or mental health or welfare has been adversely affected by abuse or neglect by any person shall immediately make a report as provided by this subchapter …. The requirement to report under this section applies without exception to an individual whose personal communications may otherwise be privileged, including … a member of the clergy." Section 261.202 provides, "In a proceeding regarding the abuse or neglect of a child, evidence may not be excluded on the ground of privileged communication except in the case of communications between an attorney and client."

The court concluded that these provisions "create an exception" to the clergy-penitent privilege. It observed,

Sections 261.101 and 261.202 create an exception to [the clergy-penitent privilege]. Statutory interpretation requires that we seek to effectuate the collective intent or purpose of the legislators who enacted the legislation. To that end, we must focus our attention on the statute's text and attempt to discern the fair, objective meaning of that text at the time of its enactment …. The exceptions to the privilege in the Family Code are clear and unambiguous. We hold that section 261.202 clearly makes an exception to [the clergy-penitent privilege] in this case …. We hold that the trial court did not err in denying Carl's claim of clergy-communication privilege because section 261.202 excepts the privilege in child abuse cases such as this.

The court also referred to a legal treatise which concluded, "First, the Family Code explicitly provides that a claim of privilege, other than the attorney-client privilege, may not be interposed in proceedings regarding the abuse or neglect of a child. An Attorney General Opinion resolves the seeming conflict between the Family Code and [the clergy-penitent privilege] in favor of the Family Code [citing Op. Tex. Atty. Gen. No. JM-342 (1985)]. Since the rules of evidence are subordinate to legislative enactments, the Attorney General's interpretation is doubtlessly correct." S. Goode, Texas Practice: A Guide to the Texas Rules of Evidence: Civil and Criminal § 505.1(2d ed. 1993).

The court also rejected Carl's argument that his "confession" to the church officials should not have been used since it was obtained through "deception." Specifically, he claimed that the church elder told him that if he confessed, he would "probably just have only five years instead of fifteen years" and his confession would "cleanse him." Carl insisted that these deceptive promises induced him to involuntarily confess. The court did not agree. It noted that the elder's advice regarding the likely prison sentence was not a "promise," but rather was "attempted legal advice by a layman, which turned out to be incorrect." Further, the elder's advice about "cleansing" was "not of the type likely to make Carl believe that his condition would be bettered by making a confession, even a false confession." Bordman v. State, 56 S.W.3d 63 (Tex. App. 2001).

Confidential and Privileged Communications

A Texas court ruled that statements made by a church member to his pastor when confronted by the pastor about allegations of inappropriate behavior with children were not protected against disclosure in court.

Key point 3-07.4. In order for the clergy-penitent privilege to apply there must be a communication that is made to a minister acting in a professional capacity as a spiritual adviser.

The Clergy—Penitent Privilege

A Texas court ruled that statements made by a church member to his pastor when confronted by the pastor about allegations of inappropriate behavior with children were not protected against disclosure in court by the clergy-penitent privilege.

A church member ("Jerry") became involved in various activities with church members and their children. The pastor confronted Jerry about a complaint that he had kissed a minor girl. A short time later, the pastor confronted Jerry with another complaint that he was involved in "inappropriate behavior" with a church member's ten year old daughter. After the second incident, Jerry was told that he no longer had a leadership position with the church and was not welcome there. A few months later, Jerry was charged with two counts of child molestation. He was later convicted and sentenced to a prison term of 40 years as a habitual offender.

Jerry appealed his conviction, claiming that the trial court erred in allowing the pastor to testify. Jerry asserted that his conversations with the pastor were protected by the clergy-penitent privilege and should not have been disclosed in court. The Texas clergy-penitent privilege provides that "a person has a privilege to refuse to disclose and to prevent another from disclosing a confidential communication by the person to a member of the clergy in the member's professional character as a spiritual advisor."

The court noted that "under the express language of the rule, the privilege only extends to communications addressed to a clergyman in his professional capacity as a spiritual advisor, not to every private communication made to a clergy member. Thus, statements made during a disciplinary/administrative meeting are not communications made for the purpose of obtaining spiritual guidance or consolation and do not fall under the privilege."

The court noted that the pastor initiated the meetings with Jerry; told Jerry the specific purpose of the meetings was to confront him about the allegations of his inappropriate behavior with children; the pastor did not indicate that the meetings were held for spiritual guidance; and, Jerry "did not present evidence that he made statements at the meetings with a reasonable expectation of confidentiality to a member of a clergy acting in his or her professional or spiritual capacity." Therefore, "the initial meetings were administrative in nature and not privileged, and the pastor "did not communicate with Jerry in his professional character as a spiritual adviser."

Maldonado v. State, 59 S.W.3d 251(Tex. App. 2001).

Recent Developments in Texas Regarding Clergy Removal

A Texas court ruled that it lacked the authority to intervene in a local church dispute involving the retention of a pastor.

Church Law and Tax1999-09-01

Clergy-Removal

Key point. The civil courts are prohibited by the first amendment guaranty of religious freedom from intervening in ecclesiastical disputes, including those involving the retention or dismissal of clergy.

A Texas court ruled that it lacked the authority to intervene in a local church dispute involving the retention of a pastor. A church congregation held a meeting to determine whether the pastor should be retained. While the meeting was convened in violation of the church bylaws, it was with consent of the pastor who attended. During this vote, a physical altercation occurred between factions who supported and opposed the pastor. In the end, the congregation voted to retain him, although many viewed this vote as “tainted” because of the violence that occurred. A second vote occurred a few weeks later on the steps of the church. In that vote, the pastor was removed by a vote of 87 to 1. A group of members filed a lawsuit, asking a court to order the pastor to vacate his office. They also asked the court to order an accounting of all church funds, and to forbid the pastor or his agents from using the church checking account. The court ordered a third election. It outlined the policies and procedures that were to be followed in conducting the vote, based on the church’s bylaws. The court also called for “constables” to gather and count the votes.

Before the third election was held, a state appeals court reviewed the trial court’s decision. The court began its opinion by observing that “it is without dispute that the first amendment prohibits civil courts from intruding into the church’s governance of religious or ecclesiastical matters, such as theological controversy, church discipline, ecclesiastical government, or the conformity of members to standards of morality.” However, the courts do have authority to review matters involving “civil, contract, or property rights” even though they stem from a church controversy. Further, “neutral principles of law must be applied to decide such matters so that courts do not violate the constitutional prohibition against government-established religion. If the conflict cannot be resolved solely by the application of neutral principles of law, we must defer to the decision made by the highest authority of the church from which the question or controversy arises.” The court noted that the difficulty “lies in determining whether a particular dispute is ecclesiastical or simply a civil law controversy in which church officials happen to be involved.” It concluded:

The relationships between an organized church and its ministers is its lifeblood. The minister is the primary agent by which a church seeks to fulfill its purpose. Matters concerning this relationship must be recognized as of prime ecclesiastical concern. As a result, we must conclude that the issue of a pastor’s ouster is ecclesiastical in nature. Courts may not attempt to right wrongs related to the hiring, firing, discipline, or administration of clergy. While such wrongs may exist and be severe, and although the administration of the church may be inadequate to provide a remedy, the preservation of the free exercise of religion is deemed so important a principle it overshadows the inequities which may result from its liberal application. Consequently, the trial court was limited to a review of the facts to determine whether it had jurisdiction to proceed. Those facts demonstrate that it did not. Accordingly, the only proper action for the trial court was to dismiss the case. While we are cognizant that dismissal leaves the congregation of the … church without a judicial determination of whether they have properly removed [the pastor], such action is proper because it leaves the decision of who will lead the congregation with the congregation.

Application. This case illustrates the reluctance most courts have to resolving internal church disputes, including those involving the retention of ministers. Of course the down side to such decisions is that they may validate, through inaction, congregational decisions that are arbitrary or in violation of the church bylaws. As a result, some courts have been more willing to engage in limited review of such cases, at least if they can do so without any inquiry into church doctrine or polity. Dean v. Alford, 994 S.W.2d 392 (Tex. App. 1999). [Termination, Church Business Meetings, Judicial Resolution of Church Disputes]

Legal Development in Texas Regarding Church Records

The Texas Supreme Court ruled that a state nonprofit corporation law that granted a limited right to inspect corporate records did not mandate the disclosure of donor records.

Key point. Many nonprofit corporation laws give members the legal right to inspect certain corporate records. These laws generally do not give members the right to inspect donor records.

The Texas Supreme Court ruled that a state nonprofit corporation law that granted a limited right to inspect corporate records did not mandate the disclosure of donor records. While the case did not involve a religious charity, the court's conclusions are of direct relevance to any church incorporated under a comparable law.

The Texas Nonprofit Corporation Act specifies that nonprofit corporation "shall maintain current true and accurate financial records with full and correct entries made with respect to all financial transactions of the corporation." It further specifies that "[a]ll records, books, and annual reports of the financial activity of the corporation shall be kept at the registered office or principal office of the corporation … and shall be available to the public for inspection and copying there during normal business hours."

Based on these provisions, a group of persons demanded that a charity turn over documents revealing the identities of all donors and the amounts of donors' annual contributions. The charity resisted this request, claiming that the inspection right provided under the nonprofit corporation law did not refer to inspection or disclosure of donor lists, and that even if it did, such a provision would violate the first amendment freedom of association.

The persons demanding the donor lists insisted that once the charity incorporated under the nonprofit corporation law, it "waived" any objection (constitutional or otherwise) to disclosure of financial records, including donor lists.

The state supreme court ruled that the right of inspection did not extend to donor lists. It noted that "the statute does not expressly require that contributors' identities be made available to the public." And, it found that the intent of the legislature in enacting the inspection right "was not to force nonprofit corporations to identify the exact sources of their income; rather, it was to expose the nature of the expenditures of that money once received from the public and to make nonprofit organizations accountable to their contributors for those expenditures."

As a result, the statute "can be upheld as constitutional when interpreted as not requiring disclosure of contributors' names." On the other hand, if the statute were construed to grant access to donor lists, then "it would violate the first amendment [right of association] in some circumstances, thus rendering it unconstitutional."

The court concluded that the phrase "financial records" does not include "the names of contributors or members."


Application.
Many church leaders have wondered if members have a legal right to access donor information. This case suggests that any church incorporated under the Texas nonprofit corporation law (or a comparable statute in another state) is not required to turn over any records identifying either the names of donors, or the amounts of donors' contributions.

The fact that this decision represents a ruling by the Texas Supreme Court will give it greater weight in other states. In re Bacala, 982 S.W.2d 371 (Tex. 1998).

See also Church Records

Recent Developments in Texas Regarding Bankruptcy

A Texas state court ruled that the recently enacted Religious Freedom and Charitable Donation Protection Act of 1998 prevented a creditor from recovering contributions made by a bankrupt debtor to his church.

Church Law and Tax 1999-05-01

Bankruptcy

Key point. The Religious Freedom and Charitable Donation Protection Act of 1998 prevents creditors or bankruptcy courts from recovering contributions made by bankrupt debtors to their church, so long as the contributions were not fraudulent and did not exceed 15 percent of the debtor’s annual income (or a higher percentage, if the debtor regularly gave more).

A Texas state court ruled that the recently enacted Religious Freedom and Charitable Donation Protection Act of 1998 prevented a creditor from recovering contributions made by a bankrupt debtor to his church. A former partner (the “debtor”) was sued by other partners following the dissolution of a partnership, and a court ordered him to pay several thousand dollars in damages. The debtor d a bankruptcy trustee was appointed. The trustee later informed the debtor’s church that the debtor’s contributions to the church during the previous four years were “fraudulent transfers” because the debtor was insolvent at the time and did not receive a “reasonably equivalent value” in exchange for his contributions. The trial court agreed and ordered the church to turn over $23,428 in contributions. The church appealed this order, claiming that (1) the Religious Liberty and Charitable Donation Protection Act of 1998 prohibited the bankruptcy court from recovering any of the debtor’s charitable contributions; and (2) the Religious Freedom Restoration Act and the first amendment guaranty of religious freedom prevented the bankruptcy court from recovering the debtor’s contributions.

The appeals court began its opinion by noting that the Religious Liberty and Charitable Donation Protection Act of 1998, passed unanimously in both houses of Congress and signed by President Clinton in June of 1998, controlled the outcome of this case. This legislation was intended to cover “the exact type of charitable contributions which the trial court avoided in favor of the creditor.” The court continued:

The Act amends the bankruptcy code to eliminate claims to recover charitable contributions under federal and state law. Prior to the Act, trustees were given the right to avoid transfers made or incurred within one year before the date of the filing of bankruptcy. However, the new Act modifies this so that “[a] transfer of a charitable contribution to a qualified religious or charitable entity or organization shall not be considered to be … [voidable] if the amount of that contribution does not exceed 15% of the gross annual income of the debtor for the year in which the transfer of the contribution was made.” Congress expressly preempted federal and state law by stating: “Any [pending or subsequent] claim by any person to recover a transferred contribution described [above] under Federal or State law in a Federal or State court shall be preempted by the commencement of the case.”

The court concluded that the contributions made by the debtor were directly covered by the Act, since they comprised only 10 percent of his annual income. The court conceded that the debtor’s bankruptcy case arose prior to the time the Act became law, but it insisted that the Act still applied since the bankruptcy case was still pending at the time it became law.

A creditor insisted that a state “fraudulent transfer” law allowed the recovery of “fraudulent transfers” made by debtors during the previous four years, and that this law was not affected by the federal Act. The court disagreed, noting that “a state law is preempted and without effect if it conflicts with federal law.” It further noted that the act specifies that it applies to all cases pending on or after the date of enactment of this Act. As a result, the Act preempted conflicting state law, even though a case was filed before the Act became law-so long as the case was still pending at that time. The court concluded: “[The creditor] seeks the exact type of relief that Congress and the President contemplated and anticipated when enacting this legislation into law. Therefore, we hold that the new Act not only expressly preempts [the creditor’s] claims with respect to any of its claims under federal law, but also impliedly preempts any of its claims under [state law] to the extent that it conflicts or stands as an obstacle to the accomplishment and execution of Congress’s new legislation by allowing a creditor to [recover] a qualifying charitable transfer to a religious organization consisting of less than 15% of the debtor’s annual income.”

Application. This case is important for the following three reasons. First, it is perhaps the first case to apply the recently enacted Religious Freedom and Charitable Donation Protection Act. Second, the court clarified that the Act preempts any state law that would provide creditors with broader rights. A creditor cannot evade the plain intent of the Act by pointing to a state law as a basis for recovering a debtor’s contributions to a church. Third, the court noted that the Act applies not only to future cases, but also to any case pending at the time the Act became law (in June of 1998). Cedar Bayou Baptist Church v. Gregory-Edwards, Inc., 1999 WL 47452 (Tex. App. 1999).

Recent Developments in Texas Regarding Church Property

A Texas court ruled that the members of a church that voted to dissolve could sue their pastor for fraud in connection with the disposition of the church’s property.

Church Law and Tax1999-03-01

Church Property

Key point. Federal tax law requires that church charters or bylaws contain a “dissolution clause” specifying the name of an exempt organization to which the church’s property will be distributed in the event of a dissolution.

Key point. Upon dissolution, a church cannot distribute its property to its pastor or members.

A Texas court ruled that the members of a church that voted to dissolve could sue their pastor for fraud in connection with the disposition of the church’s property. A church hired a new pastor in 1973. The church’s membership soon increased to 166, but over the years slowly declined to between ten and twenty members. In 1992 the church members decided to sell the sanctuary. A few months later another church offered to purchase the property for $90,000, and the church called a membership meeting to discuss this offer. The members voted to accept this offer. They also voted to use the proceeds to pay off the church’s debts, and then distribute any balance to various religious organizations. The pastor was directed to sell the parsonage, and distribute the proceeds to worthy causes. The pastor assured the members that he would prepare a financial statement detailing the final distribution of the church’s assets within a week. In fact, no church funds were distributed to any of the charitable organizations. The pastor sold the parsonage to his daughter and son-in-law for $10. He did not prepare the promised financial statement until nearly a year later. The statement reflects that $73,233 in net proceeds remained after the sale of the sanctuary, and that the pastor disbursed most of this amount to himself as a “gift” ($59,022) and as “past due salary” ($7,255). These disbursements were used by the pastor to purchase a new home for himself.

Former members of the church later sued the pastor for fraud in connection with his distribution of the proceeds from the sale of the church and parsonage. A trial court ruled in favor or the members, and ordered the pastor to pay $126,000 in actual damages, plus $100,000 in punitive damages, with these amounts to be distributed to various religious organizations after the payment of legal fees and other expenses. The jury based the $126,000 figure on $66,000 retained by the pastor from the sale of the sanctuary; $55,000 from the sale of the parsonage (with a market value of that amount) to his daughter for $10; and $5,000 retained by the pastor from the sale of the church van. The pastor appealed, claiming that the former members of the dissolved church had no “standing” to file this lawsuit; that the first amendment guaranty of religious freedom prevented the civil courts from resolving the lawsuit; and, that the former members had not proven fraud. An appeals court rejected all three defenses, and affirmed the trial court’s ruling in favor of the former members.

“Standing” to Sue

The court concluded that the former members of a dissolved, unincorporated church had the legal authority to bring this lawsuit. It noted that “although an association may sue in its own name, individual members may also bring suit on behalf of the association,” and that “some members may sue on behalf of the members of an unincorporated association under the doctrine of virtual representation.”

The First Amendment

The court acknowledged that the first amendment “ordinarily prohibits civil courts from concerning themselves with ecclesiastical questions and controversies.” However, it insisted that the civil courts “do have jurisdiction to review matters involving civil, contract, or property rights even though they stem from a church controversy,” so long as they can do so using neutral principles of law. Further, “when church proceedings are tainted by fraud, judicial review is appropriate.” The court observed:

[C]an a man … by chicanery, deceit, and fraud, divert the property of a church organization to a purpose entirely foreign to the purposes of the organization, for [his] own selfish benefit … ? Neither the law nor public policy will sustain such a rule. Fraud vitiates all transactions and, if [some action is taken] for a fraudulent purpose to carry out a fraudulent scheme, the [action] is a void act, and of no force of effect whatever. Equity will compel fair dealing, disregarding all forms and subterfuges, and looking only to the substance of things.

Evidence of Fraud

The court defined fraud as (1) a material representation; (2) that is false; (3) that is made with the knowledge that it is false or that is made recklessly without any knowledge of its truth; (4) with the intent that others act upon the representation; (5) a person does act in reliance upon the representation; and (6) is injured as a result. The court concluded that the pastor’s actions met this definition. He materially represented to the church that he would distribute the proceeds from the sale of the sanctuary to other charities. The pastor knew this statement to be false, the court concluded, since he had already decided to buy a new home with the proceeds from the sale. The court based this conclusion on evidence that the pastor had been actively looking for a new home, though his church income was too low to afford one. The court also concluded that the pastor intended that the church members act upon his misrepresentation, since he was able to retain the proceeds from the sale of the sanctuary on the basis of his assurance that he would distribute the proceeds to other charities after paying the church’s debts. The church’s members acted in reliance on the pastor’s misrepresentation, to their detriment. The court reached the same conclusion with respect to the pastor’s sale of the parsonage to his daughter for $10. The church allowed him to sell the parsonage, based on his representation that he would distribute the proceeds to other charities.

Constructive Trust

The court imposed a “constructive trust” upon the home the pastor purchased for himself, as well as the parsonage that he sold to his daughter. A constructive trust may be imposed by a court whenever it is established that one person holds property which in equity and good conscience should be held by another. A constructive trust may arise as a result of several factors, including fraud. The effect is that the apparent owners no longer own “their” property. Rather, the property is held by them in trust for the victims of their fraud. The court in this case named the former members as trustees, and instructed them to sell the two properties in a commercially reasonable manner and then distribute the proceeds, less expenses, to various charities.

Application. This case illustrates the basic principle that church property cannot be distributed to individual members or clergy following a vote to dissolve the church. Any church contemplating dissolution should review the dissolution clause in its corporate charter or bylaws. This clause will identify the charity that receives the church’s property in the event of a dissolution. As this case demonstrates, a failure to comply with this clause can result in significant legal problems. Libhart v. Copeland, 949 S.W.2d 783 (Tex. App. 1997). [Diversion of Church Funds, Federal Income Taxation of Churches]

Related Topics:

Recent Developments in Texas Regarding Sexual Misconduct by Clergy and Church Workers

┬áIn an important case that should be studied by church leaders everywhere, a Texas court ruled that (1) a church was not liable for a music director’s acts of child molestation since the statute of limitations had expired; (2) ministers who are mandatory child abuse reporters under state law cannot be sued by child abuse victims on account of their failure to report; and (3) ministers need not report child abuse if the victim no longer is a minor.

Church Law and Tax1998-05-01

Sexual Misconduct by Clergy and Church Workers

Key point. Minors who are sexually molested by church workers may not sue their church after the statute of limitations has expired. Generally, the statute of limitations begins to run on a minor’s 18th birthday. In some states the statute of limitations does not begin to run until an adult survivor of child sexual molestation “discovers” that he or she has experienced physical or emotional suffering as a result of the molestation. Other states do not recognize this so—called “discovery rule.”

Key point. In some states clergy who fail to report an incident of child abuse cannot be sued by the victim for failing to report.

Key point. In some states the child abuse reporting law does not require that persons report an incident of child abuse if the victim is no longer a minor.

In an important case that should be studied by church leaders everywhere, a Texas court ruled that (1) a church was not liable for a music director’s acts of child molestation since the statute of limitations had expired; (2) ministers who are mandatory child abuse reporters under state law cannot be sued by child abuse victims on account of their failure to report; and (3) ministers need not report child abuse if the victim no longer is a minor. A 12—year—old boy was sexually molested by the children’s music director at his church. At first, the victim told no one. However, over the next few years the victim told 5 pastors in his church about the molestation. Although pastors are “mandatory reporters” of child abuse under Texas law, none of them reported the allegations to civil authorities or to the victim’s parents. The victim experienced severe emotional problems when he became an adult, and he went to a professional counselor. When he was 20 he was hospitalized for severe depression and anxiety attacks. A psychiatrist later diagnosed the victim as suffering from severe post traumatic stress disorder. The victim sued his church when he was 23 years old. He claimed that the church was responsible for his injuries because of its “inadequate response” to his “cries for help,” and because of the failure by the 5 pastors to report the abuse to civil authorities.

Statute of limitations

The statute of limitations requires that persons file lawsuits within the period of time prescribed by statute. In Texas, the statute of limitations for personal injuries is two years. Since the statute does not begin to “run” for minors until their 18th birthday, the victim had until his 20th birthday to file his lawsuit. As noted above, he did not do so until he was 23. However, he insisted that the court should apply the so—called “discovery rule.” Under this rule the statute of limitations would not begin to run until the victim discovered that his injuries were caused by the incident of molestation. A state appeals court conceded that in rare cases the discovery rule may be applied-if the wrongful act and resulting injury are “inherently undiscoverable.” The court disagreed that this rule applied to this case. It pointed out that the victim’s injuries were not inherently discoverable. Quite to the contrary, he “was acutely aware of the sexual molestation incident involving [the music director]. In fact [he] reported the assault within three years after it occurred and continued to report it during the next several years, In addition, he was aware of the inaction of church officials following these reports. There is no question that [he] had discovered the wrongful acts.”

The court refused to apply the discovery rule “to those cases in which the [victim] is fully aware of the act and the injury but has failed to make the causal connection between the two.”

Liability for failing to report

The most important aspect of this case to church leaders was the court’s conclusion that the church was not liable for the victim’s injuries on account of the 5 pastors’ failure to comply with the state child abuse reporting law. Every state has a child abuse reporting law that lists those persons (“mandatory reporters”) who are legally required to report known or reasonably suspected incidents of child abuse to designated state agencies. A mandatory reporter’s failure to report child abuse can result in criminal penalties. The 5 pastors in this case were mandatory reporters under Texas law, and the victim claimed that their failure to report his allegations of abuse made them and the church legally responsible for his injuries. The court disagreed, noting that the state child abuse reporting law is a criminal statute and that “nothing in the statute indicates that it was intended to create a private cause of action.”

Reporting abuse when the victim no longer is a minor

The court addressed a question that has created untold confusion for ministers-should an incident of child abuse be reported if the alleged victim is no longer a minor? Let’s illustrate this problem with an example. Assume that during a counseling session a pastor learns that a 25—year—old woman was sexually or physically abused when she was a young child. If the pastor is a mandatory child abuse reporter under state law must the abuse be reported? The court in this case said no. It observed:

The [child abuse reporting] statute only creates a duty to report the abuse or neglect of a child. Thus, the church’s duty to report the molestation of [the victim] no longer existed as of the day he turned eighteen. Otherwise, application of this statute would have unintended results. [For example] if a sixty year old woman reveals to her minister that she was abused as a child some fifty years ago, this minister could be either prosecuted or sued for failing to report the abuse to the proper authorities. We decline to adopt [the interpretation] that this statute was intended to apply to an instance of past childhood abuse when the victim has attained the age of majority and is no longer in need of this statutory protection.

Legal effect of baptism

The victim made the novel claim that his baptism in the church gave rise to a “contractual relationship” between himself and the church, and that this “contract” imposed upon the church a duty to engage in a “healing ministerial resolution” of this dispute. The court rejected this basis for liability, noting that it had never before been recognized by any other court.

Application. This case will be a useful precedent for churches to cite when they are sued for incidents of child abuse occurring many years ago. Even more importantly, the case demonstrates that a failure by ministers to report child abuse will not necessarily result in civil liability-even for ministers who are mandatory reporters. Finally, the court addressed the important question of whether ministers should report incidents of child abuse when the victims are now adults. The court concluded that the purpose of the child abuse reporting statute (protecting minors from abuse) is not served when the victim is now an adult. As a result, there is no need to report the abuse. This is an important clarification for pastors, since it is not uncommon for them to receive information indicating that an adult was abused as a minor. Of course, a decision by a Texas appeals court is not binding in any other state. But this is one of the few cases to address this issue and so it may be given greater weight in other jurisdictions. For now, ministers and other church leaders should “play it safe” and seek the guidance of an attorney or representative of the state agency that receives child abuse reports when they learn that an adult was molested as a child. Refer them to this case or article for guidance. Marshall v. First Baptist Church, 949 S.W.2d 504 (Tex. App. 1997). [Failure to Report Child Abuse, Seduction of Counselees and Church Members, Negligence as a Basis for Liability]

Recent Developments in Texas Regarding Child Abuse

A Texas court ruled that a 23-year-old male who was molested by a church music director when he was a minor was barred by a 2-year statute of limitations from suing his church, and that the church could not be sued as a result of the failure of 5 pastors to report the alleged abuse to civil authorities.

Church Law and Tax1998-03-01

Child Abuse

Key point. Minors who are sexually molested by church workers may not sue their church after the statute of limitations has expired. Generally, the statute of limitations begins to run on a minor’s 18th birthday. In some states the statute of limitations does not begin to run until an adult survivor of child sexual molestation “discovers” that he or she has experienced physical or emotional suffering as a result of the molestation. Other states do not recognize this so—called “discovery rule.”

Key point. Persons who are mandatory reporters of child abuse under state law may be criminally prosecuted for failure to report known or reasonably suspected incidents of abuse. However, they may not be subject to liability in a civil lawsuit seeking money damages.

A Texas court ruled that a 23—year—old male who was molested by a church music director when he was a minor was barred by a 2—year statute of limitations from suing his church, and that the church could not be sued as a result of the failure of 5 pastors to report the alleged abuse to civil authorities. A 12—year—old boy (the “victim”) was allegedly sexually molested by the director of children’s music at his church. At first, the victim told no one of the incident. However, a few years later he told 5 different pastors of his church about the alleged sexual assault. The pastors did not notify law enforcement officials, the Texas Department of Human Services, or the victim’s parents. Over the years the victim suffered some emotional problems, which he claimed were the direct result of the molestation and the inadequate response by the church’s pastors. When he was 19 years old, the victim’s psychological problems became severe, and he began receiving counseling. The counselor learned of the allegations of sexual abuse and the pastors’ failure to respond to them. A short time later the victim was hospitalized for depression and anxiety attacks. A psychiatrist diagnosed the victim as suffering from chronic and severe post traumatic stress disorder. When he was 23 years of age, the victim sued his church alleging that it was liable for a “continuing course of conduct” which included not only the sexual assault but also the rejection by church officials of his cries for help. A trial court dismissed the lawsuit on the ground that the victim had failed to file his lawsuit within the 2—year statute of limitations period mandated by state law. The court noted that under the applicable statute of limitations the victim had to bring a lawsuit no later than 2 years after the date his cause of action accrued. The court noted that in general a cause of action “accrues” when a wrongful act causes a legal injury, even if the injury is not “discovered” until later. However, the statute of limitations does not begin to “run” for a person who was a minor at the time of an injury until his or her 18th birthday. Since the victim in this case was a minor when the injuries occurred, he had until his 20th birthday to file a lawsuit. And, since he did not file his lawsuit until he was 23 years old, his claims were barred by the statute of limitations.

The victim appealed, arguing that the trial court should have applied the “discovery rule.” The discovery rule applies in limited situations “where the wrongful act and resulting injury are inherently undiscoverable at the time they occurred but may be objectively verified.” In such cases, the statute of limitations does not begin to run until the victim “knows, or in the exercise of reasonable diligence should know, of the wrongful act and injury.” The victim in this case argued that he was not aware until he was at least 22 years of age that his psychological problems were related to the actions of the pastors who failed to report his claims of abuse, and therefore his lawsuit was permitted under the discovery rule. The appeals court disagreed. It noted that the discovery rule does not apply unless “the alleged wrongful act and resulting injury were inherently undiscoverable at the time they occurred.” The court did not believe that this requirement was met in this case:

Whether or not [the victim] made the complicated connection between the church’s conduct and his psychological condition is of no moment because neither the wrongful acts nor the injuries asserted in this case are inherently undiscoverable. In fact, both had rather obvious manifestations long before the limitations period expired. Moreover [the victim] does not argue that he was unaware of the wrongful acts. In addition, he does not contend he was unaware of the psychological and emotional injuries which resulted from those acts. Because [he] was clearly aware of both the wrongful acts and the injury in this case, the [discovery rule does not apply].

The court also rejected the victim’s argument that “public policy” supported the application of the discovery rule to this case: “The discovery rule is limited in application by the inherent undiscoverability element. We will not expand it to include those cases in which the [victim] is fully aware of the act and the injury but has failed to make the causal connection between the two.”

Lastly, and perhaps most importantly, the court addressed the victim’s argument that the church’s conduct constituted a “continuing tort”. Specifically, the victim alleged that because the church failed to report his abuse to the proper authorities, it violated the state’s child abuse reporting law. The victim insisted that each day church officials failed to report the abuse constituted “a new wrongful act,” initiating a new limitations period. Again, the court disagreed. It noted that the state child abuse reporting statute is “punishable by criminal penalties,” and that “nothing in the statute indicates that it was intended to create a private cause of action.” Further, even if the statute did create a private cause of action, such an action would not be available in this case:

The statute only creates a duty to report the abuse or neglect of a child. Thus, the church’s duty to report the molestation of [the victim] no longer existed as of the day he turned eighteen …. Otherwise, application of this statute would have unintended results. Under [the victim’s] argument, if a sixty year old woman reveals to her minister that she was abused as a child some fifty years ago, this minister could be either prosecuted or sued for failing to report the abuse to the proper authorities. We decline to adopt [this] interpretation that this statute was intended to apply to an instance of past childhood abuse when the victim has attained the age of majority and is no longer in need of this statutory protection.

Application. The most important aspect of this case to church leaders is the court’s conclusion that a church cannot be liable in a civil lawsuit for failing to comply with a child abuse reporting law. If the victim’s allegations in this case are true, then at least 5 members of the church’s pastoral staff were aware of the victim’s claims that he had been molested by the children’s music director. For whatever reason, they chose not to report these allegations to civil authorities as required by state law. Many pastors have found themselves in a similar situation. They receive reports of child molestation, and they are mandatory reporters of child abuse under applicable state law, but they decide not to report it. While such a decision exposes a pastor or other church leader to potential criminal liability under state law (if he or she is a mandatory reporter of child abuse under the statute), it may not expose the person or the church to civil liability in a lawsuit seeking money damages. That was the conclusion of this court, and while it is of no direct relevance outside the state of Texas, it at least can be cited as existing precedent. The court’s conclusion should be stressed again-the child abuse reporting statute only creates a duty to report the abuse of a child. As a result, the church’s duty to report the molestation of the victim no longer existed as of the day he turned eighteen.

The other aspect of this case that should be noted is the court’s refusal to apply the “discovery rule”. Most courts have reached a similar conclusion, and have refused to allow adults to sue for acts of child molestation-especially if they were adolescents at the time of the molestation. It is very difficult for such persons to convince a court that they were previously unaware of the wrongful acts or of their own injuries. Marshall v. First Baptist Church, 949 S.W.2d 504 (Tex. App. 1997). [Failure to Report Child Abuse, Negligence as a Basis for Liability—Defenses]

Church Treasurers As Fiduciaries

Understanding the legal responsibilities a church treasurer has.

Starnes v. State, 929 S.W.2d 135 (Tex. App. 1996)

Background. Perhaps you have heard the word "fiduciary." It is important for you to be familiar with this word, since as a church treasurer it applies to you. A court addressed the meaning of this term in a recent case. A volunteer was asked by a charity to collect and deposit the proceeds of a fund-raising activity. The charity later discovered that the volunteer had collected $26,000 that was not accounted for. When confronted, he disclosed that he lost the funds through a poor investment. His intentions were good—he was trying to make even more money for the charity. His good intentions did not prevent him from being found guilty of embezzlement. He appealed his conviction, claiming that he could not be guilty of embezzlement since he was not a "fiduciary."

What the court said. The court ruled that the volunteer was a fiduciary. It defined a fiduciary as a person who "acts in a fiduciary capacity," and defined a fiduciary capacity as one "relating to or involving a confidence or trust." The volunteer's obligation to collect and deposit the money from the fund-raising activity "fits both the legal and lay definition of a fiduciary function." It observed:

The relationship between [the volunteer and charity] was based on confidence and trust. [The charity] justifiably placed confidence in [the volunteer], that he would act with a high degree of good faith and honesty in handling the [charity's] money. [His] position necessitated that he act with a high degree of honesty and good faith in handling the [charity's] money. Such a relationship contains all the elements of a fiduciary relationship.

The court concluded that the volunteer was performing a fiduciary function when he collected the funds from the fund-raising event.

What this means for churches

Most church treasurers are authorized to collect and deposit funds on behalf of their church. As a result, they are "fiduciaries" who perform fiduciary functions. What is the legal significance of this status? It imposes on church treasurers various fiduciary duties in the performance of their duties on behalf of the church. These duties were designed to insure that fiduciaries are held to a very high standard of fidelity and integrity in the performance of their duties. Among other things, these duties require fiduciaries to use a high level of care in the performance of their duties, and to avoid transactions and dealings that may be viewed as self-serving.


Key point. A church treasurer is a fiduciary. And, as a fiduciary, you are held to a "higher standard."

Recent Developments in Texas Regarding Employment Practices

A federal court in Texas ruled that a church could collect court costs that it paid in successfully defending itself in a lawsuit.

Church Law and Tax1998-01-01

Employment Practices

Key point. A church that successfully defends a lawsuit may be entitled to collect court costs from the losing party.

A federal court in Texas ruled that a church could collect court costs that it paid in successfully defending itself in a lawsuit. The lawsuit was brought by two women who entered into sexual relationships with their pastor during marital counseling. The women later sued their church, claiming that it was responsible for the emotional damages they had suffered as a result of negligent hiring, negligent supervision, and emotional distress. A court ruled in favor of the church, and the church’s attorney promptly asked the court to compel the women to pay the church’s court costs. The court agreed, on the basis of Rule 54 of the Federal Rules of Civil Procedure which specifies that “costs other than attorneys’ fees shall be allowed as [a matter] of course to the prevailing party.” While the court did not compel the women to pay the church’s attorneys’ fees, it did compel them to pay all court costs, which were considerable.

Application. Churches that are successful in defending themselves in a lawsuit often are so relieved to have been vindicated that they give little if any thought to the possibility of collecting court costs against the party who sued them and forced them to endure months if not years of litigation. As this case illustrates, the prevailing party in a federal lawsuit is entitled to have the losing party pay its court costs, and a similar rule exists in many states. This is a point that should be considered in the euphoria that accompanies a court victory. Sanders v. Baucum, 929 F. Supp. 1028 (N.D. Tex. 1996). [ Negligence as a Basis for Liability—Defenses]

Insuring Against Embezzlement

Make sure your church completely understands its coverage policy before the worst happens.

Bethany Christian Church v. Preferred Risk Mutual Insurance Company, 942 F. Supp. 330 (S. D. Tex. 1996)

Background. A church purchased an insurance policy in 1994. This policy covered various situations including employee dishonesty, and was effective for 1994 with a coverage limit of $50,000 per occurrence. During this period of time an employee embezzled $51,000 in church funds. During the two previous years while the church was covered by a different insurance company, the same employee embezzled $1,500 and $30,000. During these three separate policy periods the employee embezzled $82,500 from the church through altered and unauthorized checks. A summary of the thefts and insurance coverage during the three policy periods follows:

DATE INSURER LOSS LIMIT

1992 Company A $1,500 $50,000
1993 Company A $30,000 $50,000
1994 Company B $51,000 $50,000

The Church discovered the theft in November of 1994, and immediately informed its insurance company ("Company B"). The church furnished Company B with proof of loss, and asked to be paid the $50,000 limit under its insurance policy.

Company B informed the church that it would pay only $18,500 for the losses. It claimed that the series of thefts by the same employee from 1992 through 1994 amounted to one "occurrence" under the insurance policy, and therefore the total liability of both insurance companies could be no more than $50,000 for all three years. It agreed to pay $18,500—the amount of embezzled funds remaining after Company A paid the losses for 1992 and 1993.

The church sued Company B, claiming that it was legally responsible to pay the full coverage ($50,000) under its policy. It claimed that a series of acts resulting in a loss constitutes "multiple occurrences," allowing the insured to recover separately under each policy in effect during the various losses. Since the church was insured for $50,000 in 1994, it could recover this full amount since $51,000 was embezzled in that year.

The court's ruling. The court noted that the resolution of this case depended on the definition of the term "occurrence". If all of the acts of embezzlement were a single occurrence under the insurance policies, then both companies would be responsible to pay a maximum combined amount of $50,000. On the other hand, if the acts of embezzlement represented three separate occurrences in each policy period, then the church was entitled to recover the full amount of the loss for 1992 and 1993, and the policy limits ($50,000) for 1994. The court noted that the insurance policies defined an occurrence as "all loss caused by or involving one or more 'employees,' whether the result of a single act or series of acts." The court concluded that a series of acts did constitute one occurrence for the purposes of determining the policy limits under an insurance policy for employee theft. It observed:

[T]his court rejects the church's contention that it is entitled to separate recoveries on each of the three policies that were in effect during the thefts …. [T]he church misinterprets the terms of the insurance contract, particularly the term occurrence. The thefts committed by the church's employee are a series of acts, which, as defined in [Company B's] policy, constitute one occurrence. Although separate insurance companies provided coverage to the church, in all of the coverage periods during which [the employee] converted funds from the church, the policies of both [companies] clearly described an occurrence as a series of acts resulting in loss. This court determines that the series of thefts … at issue herein are a single occurrence under the three identical policy definitions of occurrence in the insurance industry's standard Employee Dishonesty Coverage Form. The church may only recover from all its insurers, a combined total of $50,000, the policy limit in effect at the time the loss was discovered. Where a single occurrence triggers coverage by more than one policy, the highest policy limit in effect during the coverage period is the applicable policy limit.

The court also rejected the church's argument that the three insurance policies should be "stacked" or combined. It observed: "The church was covered by three non overlapping policies with identical $50,000 policy limits. The theft occurrence triggered coverage by all three policies. This court … determines that the policy limits of the three applicable policies cannot be stacked. The church's total recovery for [the employee's] thefts is therefore, limited to $50,000."

What this means for churches

Is your church insured against employee theft or dishonesty? Many churches are not. Such coverage is available at a modest cost. If your church does not carry this type of insurance, be sure to talk with your church insurance agent about availability and cost. As this case illustrates, embezzlement may occur over more than one year. If so, a court may conclude (as this one did) that the "series" of embezzlements constitutes a single "occurrence," entitling the church to recover only the highest policy limit in effect during the years the loss occurred. Ask your insurance agent or church attorney if this is true in your state.


Tip. Ask your insurance agent the following questions: (1) Does our church insurance policy cover employee thefts and dishonesty? (2) If so, what is the coverage amount? (3) Is the coverage amount adequate for our church? If not, how much would additional coverage cost? (4) If our church is not insured against employee theft or dishonesty, what would the cost be for different levels of coverage? (5) Would a series of acts of embezzlement, occurring over more than one year, be a single "occurrence" or separate occurrences under our employee dishonesty policy?

Defamation and “Qualified Privilege”

Claims made to others concerning a matter of common interest generally are protected.

Church Law and Tax 1997-09-01

Libel and Slander

Key point. Statements made to others concerning a matter of common interest generally are protected by a “qualified privilege,” meaning that they cannot be defamatory unless made with malice. Statements are made with legal malice if they are made with a knowledge that they are false, or with a reckless disregard as to their truth or falsity.

A Texas court ruled that a church was not liable for defaming a former secretary as a result of statements made to church members claiming that she had misappropriated church funds. A church operated a private school. Its minister of education, who also served as principal of the school, resigned after admitting that he misappropriated church funds, destroyed church records, forged signatures, and committed other criminal acts. He later pleaded guilty to criminal charges for his admitted conduct in misappropriating school funds. He informed the church that a woman who served as a secretary at the school participated in the misappropriations. After an audit confirmed the principal’s accusations the church asked the secretary to resign. The church published: (1) a letter to its members claiming that the secretary misappropriated school funds; (2) a letter to the school children’s parents claiming that the secretary deposited tuition funds into the wrong accounts and later used the funds for her personal benefit; destroyed checks, financial records, and bank records; forged signatures; covered up these indiscretions; received seventy dollars extra per pay period for nearly two years as well as other undocumented “reimbursements”; and (3) a report to the church members reporting the secretary’s resignation and claiming that she deposited tuition funds into the wrong account and then used the funds to support programs and individuals outside of and over the budget adopted by the congregation. At a meeting of church members, church officials orally accused the secretary of depositing tuition funds into the wrong account and then using the funds for her personal benefit or for other people or projects as she and the principal saw fit; destroying checks, bank records, and financial records; forging signatures; and covering up many of these indiscretions. The secretary later sued the church and the individual members of the church audit committee, claiming that the church’s actions defamed her, placed her in a false light, and inflicted emotional distress. A trial court dismissed the lawsuit, and the secretary appealed. A state appeals court agreed with the trial court’s decision. Its analysis of the secretary’s three claims is summarized below.

defamation

The court noted that a statement is defamatory if it is “published” or communicated (orally or in print) to third persons, and “tends to harm the reputation of another so as to lower him in the estimation of the community or to deter third persons from associating or dealing with him, or if it tends to expose him to public hatred, contempt, or ridicule.” However, the court pointed out that some words that otherwise might be defamatory may be “legally excused.” This includes the defense of qualified privilege. The court defined this exception to defamation as follows:

A privilege will be granted to statements that occur under circumstances wherein any one of several persons having a common interest in a particular subject matter may reasonably believe that facts exist that another, sharing that common interest, is entitled to know. A qualified privilege attaches to bona fide communications, oral or written, upon any subject in which the author or the public has an interest or with respect to which the author has a duty to perform to another owing a corresponding duty. This privilege is termed conditional or qualified because a person availing himself of it must use it in a lawful manner and for a lawful purpose. The effect of the privilege is to justify the communication when it is made without actual malice. Thus, when a statement is privileged, Texas law requires a showing of actual malice to overcome that privilege. Actual malice means with knowledge that the statement was false or with reckless disregard of whether it was false. Reckless disregard requires proof that a false defamatory statement was made with a high degree of awareness of its probable falsity. Generally, when publication is made under circumstances creating a qualified privilege, the plaintiff has the burden to prove malice …. Malice exists when the evidence shows that the speaker entertained serious doubts as to the truth of his statements.

The court concluded that the evidence “conclusively showed” that the church acted without malice and in good faith, and therefore was protected by the qualified privilege. It observed:

All of the members of [the church] have a common interest in the church’s use of their financial contributions to the church; thus, the members have a common interest in information about those funds. The members who made the statements in question reasonably believed that the misappropriation took place and that the board, the members, and the parents shared a common interest in the use of the funds and information about those funds. [The church] reasonably believed that these people were entitled to know of the misappropriation. [It] had a duty to perform for the board, the members, and the parents. [It] made the communications without actual malice. [The principal] confessed his and [the secretary’s] involvement, and [he] later pleaded guilty to criminal charges. [The church’s] audit confirmed all of [his] statements. [The secretary] never swore under oath in an affidavit in opposition to summary judgment that the statements were lies. [She] kept the misappropriated funds in a shoe box in her closet and returned the funds when accused. [The principal] testified that the statements were true. [The secretary] admits receiving personal benefit from the misappropriation of funds. [She] admits she destroyed records. [The church] neither entertained serious doubts as to the truth of the statements nor made these statements with a high degree of awareness of their probable falsity. The communications appeared accurate, [the church] reasonably believed [the principal], and church members and parents who received information had an interest in the funds and information about the funds.

false light

The court also rejected the secretary’s claim that the church invaded her privacy by placing her in a “false light.” It noted that the Texas Supreme Court “recently held that the claim of false light invasion of privacy does not exist in Texas, even though several Texas courts of appeals and several federal courts interpreting Texas law previously recognized this claim.”

emotional distress

The court rejected the secretary’s claim that the church’s actions amounted to an intentional infliction of emotional distress. The court noted that the elements of an intentional infliction of emotional distress claim are (1) the defendant acted intentionally or recklessly; (2) the conduct was extreme and outrageous; (3) the actions of the defendant caused the victim emotional distress; and (4) the emotional distress suffered by the victim was severe. The court stressed that liability should be found “only when the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.” The court conceded that the church depicted the secretary as a “thief,” but concluded that this statement was not “sufficiently outrageous” to demonstrate an intentional infliction of emotional distress.

Application. This case illustrates the limited but important protection that is granted to churches in many states when sharing matters of common interest with church members. In many states, such comments cannot be defamatory unless made with malice. As this case illustrates, this is a difficult standard to meet. However, it is important to note that the privilege does not extent to communications made to nonmembers, or to matters that in fact are not of “common interest” to members. Churches can lose the protection of the qualified privilege by making statements during church services that are attended by members and nonmembers alike. To repeat, the law provides substantial protection to churches when sharing information of common interest to members. But, this protection does not apply when the communication is directed to nonmembers having no legitimate interest in the content of the communication. Hanssen v. Our Redeemer Lutheran Church, 938 S.W.2d 85 (Tex. App. 1997). [ Defamation, Invasion of Privacy]

Related Topics:
ajax-loader-largecaret-downcloseHamburger Menuicon_amazonApple PodcastsBio Iconicon_cards_grid_caretChild Abuse Reporting Laws by State IconChurchSalary Iconicon_facebookGoogle Podcastsicon_instagramLegal Library IconLegal Library Iconicon_linkedinLock IconMegaphone IconOnline Learning IconPodcast IconRecent Legal Developments IconRecommended Reading IconRSS IconSubmiticon_select-arrowSpotify IconAlaska State MapAlabama State MapArkansas State MapArizona State MapCalifornia State MapColorado State MapConnecticut State MapWashington DC State MapDelaware State MapFederal MapFlorida State MapGeorgia State MapHawaii State MapIowa State MapIdaho State MapIllinois State MapIndiana State MapKansas State MapKentucky State MapLouisiana State MapMassachusetts State MapMaryland State MapMaine State MapMichigan State MapMinnesota State MapMissouri State MapMississippi State MapMontana State MapMulti State MapNorth Carolina State MapNorth Dakota State MapNebraska State MapNew Hampshire State MapNew Jersey State MapNew Mexico IconNevada State MapNew York State MapOhio State MapOklahoma State MapOregon State MapPennsylvania State MapRhode Island State MapSouth Carolina State MapSouth Dakota State MapTennessee State MapTexas State MapUtah State MapVirginia State MapVermont State MapWashington State MapWisconsin State MapWest Virginia State MapWyoming State IconShopping Cart IconTax Calendar Iconicon_twitteryoutubepauseplay
caret-downclosefacebook-squarehamburgerinstagram-squarelinkedin-squarepauseplaytwitter-square