Check Deed Before Renting Property

Some deeds contain restrictions prohibiting religious facilities.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Church Property

Church Law and Tax 1997-09-01

Church Property

Richard R. Hammar, J.D., LL.M., CPA

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

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

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

© Copyright 1997, 1998 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m21 c0597

Legal Developments

Priest Sues Bishop and Diocese for Defamation

Courts generally refuse to interfere with churches’ decisions regarding a minister’s status.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Defamation

Church Law and Tax 1997-07-01

Libel and Slander

Richard R. Hammar, J.D., LL.M., CPA

• Key point. Statements made by church officials regarding a ministers status are an internal church concern that generally are free from civil liability, and this includes claims that the statements were defamatory.

A Texas court ruled that a bishop and diocese could not be liable on the basis of defamation for statements made about a priests status within the church. A priest had a history of conflict with his diocese culminating in his association with a dissident Catholic sect. A parishioner asked the priests bishop about the priests standing in the Catholic Church, and was informed that “he is not in good standing with his diocese and does not enjoy the [authority] to function as a priest in [this] or any other diocese.” The bishop advised another person that the priest was excommunicated, and not in good standing, and “says mass to a small number of people, including elderly women who have been deceived by him.” The bishop later sent a memorandum to “all pastors” advising them to refrain from advertising or encouraging a mass being offered by the priest who was described as an “excommunicated priest who has left the Catholic Church.” The priest sued the bishop and diocese, claiming that these communications were defamatory. A state appeals court disagreed. The court observed that the first amendment “forbids the government from interfering with the right of hierarchical religious bodies to establish their own internal rules and regulations.” As a result the civil courts cannot “intrude into the churchs governance or religious or ecclesiastical matters, such as theological controversy, church discipline, ecclesiastical government, or the conformity of members to standards of morality.” Furthermore, the court noted:

[C]ourts will not attempt to right wrongs related to the hiring, firing, discipline or administration of clergy. Although such wrongs may exist and may 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.

The court conceded that churches “exist and function within the civil community” and as a result they are “as amenable as other social entities to rules governing property rights, torts, and criminal conduct.” The difficulty “comes in determining whether a particular dispute is ecclesiastical or simply a civil law controversy in which church officials happen to be involved.” The priest insisted that the dispute in this case was not ecclesiastical. Rather, it involved a question whose resolution did not involve ecclesiastical considerations-whether or not he had been excommunicated. The court disagreed:

[The priests] claims arise from his divestiture of priestly authority; thus, his [legal] claims are inseparable from the privileged aura of ecclesiastical exemption. [The bishops] administrative duties include informing members of the Catholic Church of the status of its clergy. We believe that statements made by a bishop in carrying out his administrative duties concerning an excommunication made before, during or after an excommunication, are all part of an ecclesiastical transaction-the divestiture of priestly authority.

The court acknowledged that “there may be circumstances where a bishop or other church authority makes statements which overstep the bounds of [his or her] administrative duties.” For example, “when statements are made by a church authority which are clearly intended to defame or inflict emotional distress, the authority has overstepped the bounds of his administrative duties and the statements may fall outside ecclesiastical protection.” This was not true in this case, however, since the bishops statements all related to the priests standing in the Catholic Church.

Application. This case illustrates the well—established rule that the civil courts will not interfere with decisions made by churches or denominational agencies concerning the status of ministers. As another court has observed: “However a suit may be labeled, once a court is called upon to probe into a religious body’s selection and retention of clergymen, the first amendment [guaranty of religious freedom] is implicated …. 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.” Tran v. Fiorenza, 934 S.W.2d 740 (Tex. App. 1996). [ Termination, Defamation, Judicial Resolution of Church Disputes]

Legal Developments

Police Officer Sues Protesters at Abortion Clinic

Members of an unincorporated association are not necessarily responsible for fellow members’ misconduct.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas

Church Law and Tax 1997-07-01

Unincorporated Churches

Richard R. Hammar, J.D., LL.M., CPA

• Key point. Members of an unincorporated association are not necessarily responsible for the misconduct of other members, unless they participated in or ratified those actions.

The Texas Supreme Court ruled that the members of an unincorporated association are not necessarily responsible for the misconduct of their fellow members. A police officer was injured while attempting to carry away a protester at an abortion clinic. He later sued twelve other persons who were engaged in the protest. A trial court dismissed the lawsuit and the police officer appealed. A state appeals court ruled that the protesters could be liable for the injuries caused by the protester who was being moved. It based this conclusion on the basis of the principle that members of an unincorporated association are liable “for the negligence of other members or the negligence of the association itself.” The state supreme court disagreed with this conclusion, noting that “even if the demonstrators constituted an unincorporated association, we have never held that they are automatically liable for the actions of other members of the association.” The court further noted that “imposing liability on individuals on the sole basis that a member of the group to which they belong has committed a [wrong] in the pursuit of the groups goals would pose serious threats to the right of free association.” The court concluded: “We believe that the liability of members of a group should be analyzed in terms of the specific actions undertaken, authorized or ratified by those members. Therefore, regardless of whether there was an unincorporated association here, we reject the lower court’s intimation that the existence of such an association might alone form the basis for imposing tort liability on all members for the acts of some.”

Application. This case will be of immense value to members of unincorporated churches who are sued as a result of the misconduct of another member. The Texas Supreme Court rejected the traditional rule that members of an unincorporated association are liable for the acts of other members in the course of the associations activities. Members of unincorporated churches who are sued for the acts of other members should inform their attorney of this important case. While it is binding only in the state of Texas, it will be persuasive in other states. Of course, other courts may continue to follow the traditional rule, which has been applied in many other cases in recent years. Also, note that the Texas Supreme Court did not grant members of unincorporated associations absolute immunity from personal liability. The court noted that members can be personally liable on the basis of “specific actions undertaken, authorized or ratified.” What does this mean? Members always may be personally liable for their own acts, or for the acts of others that they authorize or ratify. This exception raises questions that the court did not address. For example, could it be argued that the members of an unincorporated church are personally liable for another members acts of child molestation because they failed to adopt procedures for screening workers? This is certainly a possibility. It remains to be seen how broadly or narrowly this exception is construed. Juhl v. Airington, 936 S.W.2d 640 (Tex. 1996). [ Unincorporated Associations]

Legal Developments

Youth Minister Sentenced to 52 Years for Molestation

Put safeguards in place to protect children.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas

Church Law and Tax 1997-03-01

Sexual Misconduct by Clergy and Church Workers

Richard R. Hammar, J.D., LL.M., CPA

• Key point. Sexual contact with minors can result in lengthy prison sentences.

A Texas court upheld a youth minister’s sentence of 52 years in a state prison for one incident of molesting an adolescent boy. A mother approached her church’s youth minister and asked if he could visit her 11—year—old son who was having behavioral and emotional problems. The youth minister agreed to help the boy and visited with him on several occasions over the next few months. The youth minister eventually asked the mother if she would allow her son to spend the night at his apartment. The mother agreed after the youth minister assured her that other children would be present. In fact, the boy was the only child who came to the apartment. During that evening the youth minister sexually molested the boy. The boy reported the incident a year later to a counselor, and the counselor immediately informed the authorities. The youth minister was found guilty by a jury of aggravated sexual assault and sentenced to 52 years in a state prison. The minister appealed his conviction on a number of grounds, including the allegedly inappropriate closing statements of the prosecuting attorney during the trial. The prosecuting attorney made the following remarks:

How long will you tolerate that boy having to live with his manhood being stolen …. How long will this be tolerated? What kind of unnatural sexual attraction was going on out there? What kind of a person is sexually attracted to an 11—year—old boy? And what kind of person leads this lady to believe that other boys were going to be there and then they’re not? What kind of a person gets him to spend the night? And what did [the minister] do to stops unnatural, perverted, sexual attraction? Nothing. When did he do something? When he got caught. When did he get counseling? When he got caught. And so the question is, how much child abuse will you tolerate? How long will you tolerate 11—year—old boys being molested? How long will you tolerate 11—year—old boys’ lives being ruined?

A state appeals court ruled that these remarks were appropriate, and it upheld the minister’s conviction. What is the significance of this case to other ministers and churches? First, it demonstrates the potentially devastating consequences to persons who molest children. Not only did the minister lose his position, but he may spend most if not all of the rest of his life in prison for a singe act of molestation. Second, the case illustrates the importance of establishing boundaries or limits on the activities of church workers. This tragic incident might have been avoided had the minister’s employing church adopted a policy prohibiting children, whether individually or in a group, from spending the night at the unmarried youth minister’s home. Many incidents of molestation have occurred in the homes or apartments of youth workers. Churches should adopt policies prohibiting youth workers (ministers or laypersons) from inviting minors over to their homes-unless strict safeguards are present, such as the presence of other adults. Such policies not only protect minors from acts of molestation, but they also protect the church from legal liability and protect youth workers from false accusations. Hoffman v. State, 922 S.W.2d 663 (Tex. App. 1996). [ Negligent Supervision]

Legal Developments

Texas Statute Imposes Liability on Some Ministers and Churches

Focus is on cases of sexual misconduct.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Sexual Misconduct by Clergy, Lay Employees, and Volunteers

Summary. The Texas legislature has enacted a statute that imposes criminal liability on some ministers who engage in sexual contact with counselees. The statute also imposes potential liability on a minister's employing church.

The Texas legislature has enacted a statute that provides for the criminal liability of some ministers who engage in sexual misconduct with counselees. The statute also provides for employer liability under certain conditions. Here is a summary of the statute's key points:

Application to ministers

The law provides that a mental health services provider is liable to a patient or former patient of the mental health services provider for damages for sexual exploitation if the patient or former patient suffers, directly or indirectly, a physical, mental, or emotional injury caused by, resulting from, or arising out of:

(1) sexual contact between the patient or former patient and the mental health services provider;

(2) sexual exploitation of the patient or former patient by the mental health services provider; or

(3) therapeutic deception of the patient or former patient by the mental health services provider."

Many of these terms are defined by the statute as follows:

Mental health service provider. This term is defined to include a "member of the clergy" who engages in "assessment, diagnosis, treatment, or counseling in a professional relationship to assist an individual."

Key point. The statute adds that "mental health services, as defined by this section, provided by a member of the clergy does not include religious, moral, and spiritual counseling, teaching, and instruction." This presumably means that a minister is subject to liability under the statute, but only if he or she is engaged in non—religious or purely secular counseling, teaching, and instruction.

Sexual contact. The statute defines sexual contact to include requests for sexual contact.

Sexual exploitation. The statute defines sexual exploitation as a pattern, practice, or scheme of conduct, which may include sexual contact, that can reasonably be construed as being for the purposes of sexual arousal or gratification or sexual abuse of any person. The statute defines therapeutic deception as a representation by a mental health services provider that sexual contact with, or sexual exploitation by, the mental health services provider is consistent with, or a part of, a patient's or former patient's treatment.

Employer liability

The statute specifies that the employer of a mental health services provider "is liable to a patient or former patient of the mental health services provider for damages if the patient or former patient is injured" by sexual contact, sexual exploitation, or therapeutic deception, but only if the employer falls within one of the following categories:

The employer fails to make inquiries of an employer or former employer, whose name and address have been disclosed to the employer and who employed the mental health services provider as a mental health services provider within the five years before the date of disclosure, concerning the possible occurrence of sexual exploitation by the mental health services provider of patients or former patients of the mental health services provider.

The employer knows or has reason to know that the mental health services provider engaged in the sexual exploitation of the patient or former patient and the employer failed to: (A) report the suspected sexual exploitation [as noted later]; or (B) take necessary action to prevent or stop the sexual exploitation by the mental health services provider."

An employer or former employer of a mental health services provider is liable to a patient or former patient of the mental health services provider for damages if the patient or former patient is injured by sexual contact, sexual exploitation, or therapeutic deception, but only if the employer (1) knows of the occurrence of the sexual exploitation by the mental health services provider of the patient or former patient; (2) receives a specific request by an employer or prospective employer of the mental health services provider, engaged in the business of providing mental health services, concerning the possible existence or nature of sexual exploitation by the mental health services provider; and (3) fails to disclose the occurrence of the sexual exploitation.

Application of employer liability provision to churches

The statute specifies:

If a mental health professional who sexually exploits a patient or former patient is a member of the clergy and the sexual exploitation occurs when the professional is acting as a member of the clergy, liability if any under this section is limited to the church, congregation, or parish in which the member of the clergy carried out the clergy member's pastoral duties: (1) at the time the sexual exploitation occurs, if the liability is based on a violation of Subsection (a); or (2) at the time of the previous occurrence of sexual exploitation, if the liability is based on a violation of Subsection (b).

Nothing in [the previous paragraph] shall prevent the extension of liability under this section beyond the local church, congregation, or parish where the current or previous sexual exploitation occurred … if the patient proves that officers or employees of the religious denomination in question at the regional, state, or national level: (1) knew or should have known of the occurrences of sexual exploitation by the mental health services provider; (2) received reports of such occurrences and failed to take necessary action to prevent or stop such sexual exploitation by the mental health services provider and that such failure was a proximate and actual cause of the damages; or (3) knew or should have known of the mental health professional's propensity to engage in sexual exploitation.

Damages

The statute authorizes victims who prevail in a lawsuit to "recover actual damages, including damages for mental anguish even if an injury other than mental anguish is not shown." Victims also may recover "exemplary damages and reasonable attorney fees."

Defenses

The statute has the following provisions on defenses available to mental health services providers and their employers:

(a) It is not a defense … that the sexual exploitation of the patient or former patient occurred: (1) with the consent of the patient or former patient; (2) outside the therapy or treatment sessions of the patient or former patient; or (3) off the premises regularly used by the mental health services provider for the therapy or treatment sessions of the patient or former patient.

(b) It is a defense to [a lawsuit brought by a former patient] that the person was not emotionally dependent on the mental health services provider when the sexual exploitation began and the mental health services provider terminated mental health services with the patient more than two years before the date the sexual exploitation began.

(c) A person is considered not emotionally dependent for purposes of this chapter if the nature of the patient's or former patient's emotional condition and the nature of the treatment provided by the mental health services provider are not such that the mental health services provider knows or has reason to believe that the patient or former patient is unable to withhold consent to the sexual exploitation.

Duty to report

The statute contains a section that imposes a new reporting obligation. Here is what it says:

(a) If a mental health services provider or the employer of a mental health services provider has reasonable cause to suspect that a patient has been the victim of sexual exploitation by a mental health services provider during the course of treatment, or if a patient alleges sexual exploitation by a mental health services provider during the course of treatment, the mental health services provider or the employer shall report the alleged conduct not later than the 30th day after the date the person became aware of the conduct or the allegations to: (1) the prosecuting attorney in the county in which the alleged sexual exploitation occurred; and (2) any state licensing board that has responsibility for the mental health services provider's licensing.

(b) Before making a report under this section, the reporter shall inform the alleged victim of the reporter's duty to report and shall determine if the alleged victim wants to remain anonymous.

(c) A report under this section need contain only the information needed to: (1) identify the reporter; (2) identify the alleged victim, unless the alleged victim has requested anonymity; and (3) express suspicion that sexual exploitation has occurred.

(d) Information in a report is privileged information and is for the exclusive use of the prosecuting attorney or state licensing board that receives the information. A person who receives privileged information may not disclose the information except to the extent that disclosure is consistent with the authorized purposes for which the person first obtained the information. The identity of an alleged victim of sexual exploitation by a mental health services provider may not be disclosed by the reporter, or by a person who has received or has access to a report or record, unless the alleged victim has consented to the disclosure in writing.

(e) A person who intentionally violates Subsection (a) or (d) is subject to disciplinary action by that person's appropriate licensing board and also commits an offense. An offense under this subsection is a Class C misdemeanor.

The statute does provide reporters with immunity from civil or criminal liability for filing a report in good faith.

Application to ministers and churches

What is the relevance of this new statute to ministers and churches? Unfortunately, it is too early to say. It will take time for this statute to be interpreted and applied by the courts. For now, consider the following:

A Texas statute. The statute was enacted by the Texas legislature, and has no effect in any other state. However, it is possible that other states will enact similar legislation.

Application to ministers. The statute defines the term "mental health services provider" to include a member of the clergy. However, the statute goes on to clarify that the term "mental health service," when provided by a member of the clergy, does not include "religious, moral, or spiritual counseling, teaching, and instruction." This apparently means that clergy who engage in pastoral counseling of a religious nature are not engaged in "mental health services" and accordingly are not a "mental health services provider" with respect to such counseling. This means that such a minister cannot be liable under the statute as a result of sexual misconduct. Of course, the minister may be liable on the basis of other theories of liability, including assault and battery, emotional distress, breach of fiduciary duty, and negligence. Presumably, the statute will apply only to those ministers who engage in counseling that is both secular and amoral.

Key point. The courts will need to address the difficult distinction between "religious" and "secular" counseling. Perhaps even more difficult will be the distinction between "moral" and "amoral" counseling. The statute does not apply to ministers who engage in counseling that is either religious or moral.

Key point. It is possible that ministers who are licensed by the State of Texas as counselors or psychologists will more easily be exposed to liability under the statute, since it is more likely that they will be viewed by a civil court as having engaged in counseling that is not religious, moral, or spiritual. The risk of such a conclusion can be reduced through appropriately worded brochures and other literature provided to counselees, affirming the religious, moral, and spiritual nature of the counseling services.

Key point. The Texas statute has not been interpreted by the courts. Ministers and churches in Texas should consult with a local attorney for advice concerning the specific meaning of the statute and its application to particular situations.

Application to churches. Local churches that employ either ministers who engage in counseling of a purely secular and amoral nature, or non—minister counselors, are subject to possible legal liability for injuries resulting from the counselor's acts of sexual contact, sexual exploitation, or therapeutic deception—if one or more of the conditions summarized above is met.

Application to religious denominations. Liability for the sexual misconduct of a minister engaged in secular and amoral counseling, or non—minister counselors, cannot be imputed to a regional, state, or national religious denomination unless a victim can prove that the denomination:

(1) knew or should have known of the occurrences of sexual exploitation by the mental health services provider;

(2) received reports of such occurrences and failed to take necessary action to prevent or stop such sexual exploitation by the mental health services provider and that such failure was a proximate and actual cause of the damages; or

(3) knew or should have known of the mental health professional's propensity to engage in sexual exploitation.

Churches that use non—minister counselors. Some churches employ counselors who are not ministers. The Texas statute is much more likely to apply to such persons, and to churches that employ them, since they will not benefit from the exception that applies to ministers engaged in "religious, moral, and spiritual" counseling and instruction. Such churches should recognize that employing such a counselor will elevate their legal risk.

Reporting. The statute imposes a legal duty upon employers who are informed by a counselee of sexual misconduct by a "mental health service" provider to report such misconduct to the local prosecuting attorney and any state licensing board with which the mental health service provider is licensed. The contents of a report are summarized above.

Key point. The reporting requirement only applies to employers that are informed of sexual misconduct by a an employee who is a mental health service provider. As noted above, ministers who engage in counseling are not mental health service providers with respect to their religious, moral, and spiritual counseling.

Consent. The statute stipulates that the consent of a counselee is not a defense to the liability of a mental health service provider or his or her employer.

Legal Developments

Termination of Seminary Professors

Court rules that professor cannot sue for wrongful dismissal.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas

Church Law and Tax 1994-05-01 Recent Developments

Clergy – Removal

Richard R. Hammar, J.D., LL.M., CPA

• Key point: A seminary’s decision to terminate a professor is an internal ecclesiastical decision that is not reviewable by a civil court even if the seminary allegedly did not follow its bylaws.

• A Texas appeals court ruled that a former professor at a Baptist seminary could not sue the seminary for wrongful termination. The trustees of Southwestern Baptist Theological Seminary voted to dismiss a professor of preaching and communication for (1) a lifestyle that was not consistent with the example expected of faculty members; (2) being “a poor example of churchmanship”; (3) poor quality of work; (4) insubordination; and (5) willful distortions of the truth in reporting seminary matters. The former professor sued the seminary for wrongful termination. A trial court dismissed the lawsuit on the ground that it was an ecclesiastical dispute over which the civil courts have no jurisdiction, and the professor appealed. On appeal, the former professor argued that the seminary was not a “church” entitled to first amendment protection; the dispute did not involve only ecclesiastical matters; and the seminary violated its own bylaws in reaching its decision. A state appeals court rejected the professor’s appeal and upheld the trial court’s dismissal of the case. The court began by noting that it was irrelevant whether or not the seminary was itself a “church,” since “the key inquiry under the first amendment is whether a religious organization is making an ecclesiastical decision.” The court concluded that the seminary “is a religious organization entitled to protection under the first amendment.” The court also rejected the professor’s claim that the dispute did not involve purely ecclesiastical considerations. It observed that according to the seminary faculty manual and bylaws professors are subject to dismissal for a number of reasons including failing to be an active and faithful member of a Baptist church, failing to subscribe to the seminary’s articles of faith, or for moral delinquency. The court continued: “The uncontroverted evidence demonstrates the seminary makes employment decisions regarding faculty members largely upon religious criteria. This is consistent with the seminary’s primary purpose of providing `theological education for men and women preparing for Christian ministry.’ Additionally … there is no course taught at the seminary that has a strictly secular purpose and [the terminated professor] was a professor of preaching and communication. We hold the matter of [his] employment was clearly one of ecclesiastical concern, and could not be resolved without reference to the spiritual meaning of the requirements and guidelines set forth in the faculty manual.”

The court also rejected the professor’s claim that the seminary violated its own bylaws in dismissing him:

[T]he seminary has guidelines regarding resolution of disputes with faculty members, and the board of trustees is the adjudicating tribunal. Where religious organizations establish such guidelines and have tribunals for adjudicating disputes over these matters, the Constitution requires that civil courts accept their decisions as binding upon them. In [1976] the Supreme Court held that the inquiry into whether the church laws and procedures had been complied with violated the first amendment. In so holding, the Court stated: “[I]t is the essence of religious faith that ecclesiastical decisions are reached and are to be accepted as matters of faith whether or not rational or measurable by objective criteria. Constitutional concepts of due process, involving secular notions of fundamental fairness or impermissible objectives, are therefore hardly relevant to such matters of ecclesiastical cognizance.” Serbian Eastern Orthodox Diocese v. Milivojevich, 426 U.S. 696 (1976). Civil courts are bound to accept the decisions of the highest judicatories of a religious organization of hierarchical polity on matters of discipline, faith, internal organization, or ecclesiastical rule, custom, or law.

The court acknowledged that Southern Baptists “have a congregational form of church government as opposed to a hierarchical system of church government.” However, “the same rule is applicable to congregational systems, in that civil courts, with reference to the determination of matters that are ecclesiastical in nature, are to give deference to those officers in which are vested the authority to make such a determination.” In this case, those officers were the seminary trustees.

Finally, the court rejected the professor’s argument that a civil court could resolve his wrongful dismissal lawsuit by applying “neutral principles of law.” It referred again to the Supreme Court’s decision in the Milivojevich case (quoted above) in which the Court announced that civil courts cannot use the “guise” of the neutral principles approach to delve into ecclesiastical disputes. Accordingly, a civil court cannot “delve into issues concerning whether [the professor’s] employment was terminated in accordance with [neutral principles of law].” Patterson v. Southwestern Baptist Theological Seminary, 858 S.W.2d 602 (Tex. App. Forth Worth 1993).

Written Communications and the Clergy-Penitent Privilege

In some cases, a letter written to a minister may be protected.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Confidential and Privileged Communications

Church Law and Tax 1994-01-01 Recent Developments

Confidential and Privileged Communications

Richard R. Hammar, J.D., LL.M., CPA

• Key point: In some cases, a letter written to a minister may be covered by the “clergy-penitent privilege” and accordingly immune from involuntary disclosure in a court of law.

• A Texas appeals court suggested that letters written to clergy may be protected by the clergy-penitent privilege if they otherwise qualify. A woman was prosecuted for the murder of her husband. A jury rejected her alibi defense that she was with her pastor at the time of the murder. The prosecution, in rebutting the woman’s alibi defense, introduced into evidence two letters written by the woman to her pastor in which she urged him to testify that she was with him at the time of the murder. The letters warned the pastor that if he did not agree to testify that she had been with him at the time of the murder, she would “be forced” to disclose “the full truth” about their “personal relationship.” The pastor, who denied any inappropriate relationship with the woman, took the letters to the police. He later testified in court that the woman had not been with him at the time of the murder. The woman was convicted of murder, and sentenced to 75 years in prison. She appealed her conviction, in part on the ground that the letters she wrote to the pastor were protected by the clergy-penitent privilege and should not have been introduced into evidence at her trial. A state appeals court rejected this claim, and affirmed the conviction. The court observed:

The privilege in Texas … need not be penitential in order to qualify for protection. Nevertheless, not every private conversation with or letter to a member of the clergy is privileged. The privilege extends only to communications that are addressed to a clergyman in his professional capacity. The [trial court] found that the [woman’s] letters were not written to the pastor in his professional character as a spiritual adviser. There is nothing in either letter than can remotely be characterized as a request for spiritual guidance or consolation. The letters were nothing more than open threats to destroy the pastor’s reputation if he did not provide [her] with an alibi, and could as easily have been addressed to any other man with whom [she] had or could claim to have had a “personal relationship.”

In summary, the court concluded that letters to a minister may be privileged if they are written to the minister in his or her professional capacity as a spiritual adviser. Of course, not every letter to a minister will fall into this category, and this certainly was true in this case. This case will be useful precedent to clergy seeking to resist disclosure of confidential letters received in their capacity as spiritual advisers. Easley v. State, 837 S.W.2d 854 (Tex. App. 1992).

Legal Developments

Church Parking Lots Tax Exempt

Decision made even though lots were rented to other businesses for majority of week.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Taxation - Church Property

Key point: In some states, church-owned parking lots will be exempt from property taxation under a state law exempting properties used primarily for religious worship.

In an important ruling, the Texas Supreme Court concluded that a church's parking lots were exempt from property taxation, despite the fact that they were rented for most of the week to a neighboring business.

An inner-city church owned two parking lots (consisting of 407 parking spaces) that it leased to a neighboring business from 7:30 a.m. to 5:00 p.m., Monday through Friday. The church received annual rent of $111,000 from the lease of its parking lots. A local tax assessor determined that the parking lots were not exempt from property taxes since they were rented to a neighboring business, and the church appealed this decision in court.

A trial court concluded that the lots were exempt, but a state appeals court disagreed. The church appealed the case to the state supreme court, which agreed with the trial court that the lots were exempt. The court began its opinion by quoting the Texas property tax exemption statute, which exempts "property that is owned by the religious organization, is used primarily as a place of regular religious worship, and is reasonably necessary for engaging in religious worship."

The statute further specifies that if church property satisfies this test, its use "for occasional secular purposes other than religious worship does not result in loss of the exemption if the primary use of the property is for religious worship and all income from the other use is devoted exclusively to the maintenance and development of the property as a place of religious worship."

The court concluded that the church's parking lots were exempt under this statute. It noted that "for purposes of the tax exemption, a place of religious worship includes not only the sanctuary, but also those grounds and structures surrounding the sanctuary which are necessary for the use and enjoyment of the church. Thus, a parking lot may qualify as a place of religious worship." In concluding that the parking lots in this case satisfied the requirements for exemption, the court observed:

In ascertaining whether there is any evidence that the parking lots were primarily used for religious purposes, we look beyond a mere mathematical calculation of the number of hours the church and its members physically occupied the parking lots versus the number of hours [the company that rented the lots] physically occupied the parking lots. While the "actual use" of the property is an important factor in determining primary use, it is not the sole consideration. Instead, the use of the church property must be examined qualitatively. Thus, the primary use of church parking lots may not be determined by simply adding up the number of hours that church members actually park their cars on the lots.

The court noted that the parking lots were purchased by the church to provide adequate parking for church members attending church activities. The lots were regularly used by church members attending worship services on Sunday mornings and on Sunday and Wednesday evenings. They were also used by members attending special events and activities at the church. This evidence convinced the court that the lots were "used primarily for religious purposes."

This ruling will be of enormous assistance to churches facing a challenge to the exempt status of their parking lots (and some other kinds of property). The Texas Supreme Court insisted that the exemption of church property must be analyzed both quantitatively and qualitatively. That is, the test for exemption is not a "mere mathematical calculation" of the number of hours that a church and its members physically occupy the parking lots or other church property.

While such an analysis is important, it is not the sole tests for evaluating the exempt status of church property. The courts also must consider the "qualitative" use of the property. That is, how significant is the use of the property in terms of the church's mission? Clearly, most churches could not exist without parking lots, and therefore such lots are entitled to exemption even though they may be used only a few hours each week by church members. The Texas Supreme Court reasoned that this conclusion is not affected by the fact that a church rents its parking lots to a neighboring business during the week when the lots are not used for church purposes. First Baptist Church v. Bexar County, 833 S.W.2d 108 (Tex. 1992).

Legal Developments

Member Sues Unincorporated Church for Injuries

This issue was addressed in a recent case.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Personal Injuries on Church Property or During Church Activities

Church Law and Tax 1992-09-01 Recent Developments

Unincorporated Churches

Richard R. Hammar, J.D., LL.M., CPA

• Can a member of an unincorporated church sue the church for injuries received on church property? That was the issue addressed by the Texas Supreme Court in a recent case. A member of a Congregational church was taking her minor son to a church child-care program. As she entered the educational building (on the church premises), she slipped and fell, resulting in injuries to her back. She later sued the church, alleging that her injury was caused by the church’s negligence. Specifically, she alleged that the church had been negligent in permitting the tile floor in the educational building to become slippery from moisture, and in failing to warn her of the dangerous condition. The victim had been a member of the church for 4 years, and she was on the church’s administrative board. At the time of the accident, the church was unincorporated (it incorporated a few years after the accident). A trial court dismissed the lawsuit against the church, concluding that an unincorporated church could not be sued by one of its own members. It further ruled that the church could not be liable for the injuries on the ground that it incorporated after the accident. The victim appealed this decision. A state appeals court agreed with the trial court’s decision, and the victim appealed the case to the Texas Supreme Court. In a significant opinion, the court ruled that a member of an unincorporated church who is injured because of the negligence of other members can sue the church for money damages. The court acknowledged that the longstanding rule in Texas had been that the members of an unincorporated church could not sue the church for injuries inflicted by fellow church members. It noted that this historic rule was based on the notion that the members of unincorporated churches are engaged in a “joint venture” and that the negligence of one is imputed to all the others, including a fellow member who is injured by the negligence. The court repudiated this rule, noting that it had been abandoned by most other states. The court concluded: “Why should a church member be precluded from suing an association in tort when a paid workman would be allowed to maintain an action for the very same injury … ? We are unable to discern a defensible reply to this query. Consequently, we hold that a member of an unincorporated charitable association is not precluded from bringing a negligence action against the association solely because of the individual’s membership in the association. Any assets of the unincorporated charitable association, held either by the association or in trust by a member of the association, may be reached in satisfaction of a judgment against the association.” The court avoided the issue of the personal liability of individual members of unincorporated churches for the negligence or misconduct of other members. It simply noted that this lawsuit had not named any individual church members as defendants and accordingly there was no need to address this broader issue. It did mention, however, that “protection is afforded by the simple act of incorporation.” In other words, members of unincorporated churches can eliminate any question as to their personal liability for the deeds of fellow church members simply by ensuring that their church is incorporated. Two members of the court issued a concurring opinion predicting that the court’s decision could lead to greater personal liability for the members of unincorporated churches. Why? Because “by abolishing imputed negligence and creating liability between members the liability of individual members could be increased.” The two concurring justices expressed their view that the members of an unincorporated church should not be personally liable for the actions of other members without active participation in those actions. Finally, a dissenting justice warned that the court’s decision “greatly expands the potential personal liability for the hundreds of thousands of volunteers across this state that selflessly give of their time in [charitable] activities.” The dissenting justice also effectively refuted the court’s observation that most states have abolished the historic rule that the members of unincorporated churches cannot be personally liable for the conduct of their fellow members. In fact, “a majority of jurisdictions follow the rule that a member of an unincorporated association injured due to the tortious conduct of another member cannot sue the association …. The court may have wrongly implied that the rule exempting unincorporated associations from liability is a waning doctrine. In fact, most jurisdictions still adhere to it.” The dissenting justice concluded: “The unfortunate but unavoidable result of today’s decision is that some churches across this state will discontinue a wide range of beneficial services currently rendered for their members’ benefit, frequently free of charge, so as to limit their liability. This is but one of the many disruptive and deleterious effects that today’s result may inflict upon Texas’ volunteer community, all of which the Court apparently ignored in its zeal to abolish the imputed negligence doctrine.” Cox v. Thee Evergreen Church, 1992 WL 148116 (Tex. 1992).

Disaffiliation and Congregational Splits

Which faction keeps the church building when a congregation splits?

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Church Property

Which faction in a local church is entitled to the church’s property following an attempted disaffiliation from a hierarchical denomination?

That was the issue before a Texas appeals court in an important ruling.

A church, a disgraced pastor, and a power struggle

In 1959, a Texas congregation affiliated with the United Pentecostal Church (UPC).

As a condition of affiliation, the church was required to adopt the UPC denominational articles of faith and constitution. The church also adopted recommended bylaws for local churches, and in 1970 incorporated under state nonprofit corporation law.

In 1982, the church elected a new minister. Seven years later, following allegations of immoral behavior, the minister resigned the pulpit.

Almost immediately, he had second thoughts.

Encouraged by his supporters, he launched a campaign to regain his former position. Among other things, he claimed that he never really had resigned since his resignation had never been formally “accepted” by the church.

Pastor tries an end-around on district heirarchy

The church’s bylaws specified various procedures for the selection of a new pastor following a resignation. Much of the authority previously vested in the local pastor transfers to the UPC district superintendent for the district in which the church is located.

The bylaws specified that the district superintendent must convene and preside over any church meeting at which a pastor is to be selected or any other business is to be transacted.

The district superintendent and the church board must recommend a candidate for pastor, who must receive a majority vote of the local members.

Because of the pending allegations of immoral conduct against the former minister, neither the district superintendent nor the church board would recommend that he resume his duties as pastor of the church.

Frustrated by the district superintendent’s refusal to call a meeting to reinstate him, and believing that a majority of the church members would back him, the former pastor began to hold services and meetings with the members.

This violated the constitution of the UPC which requires any resigning pastor to sever all connections with a former church.

Pastor turns to Texas nonprofit law

Unable to regain his former position under the church’s existing bylaws, the pastor announced his intention to hold a church business meeting at which the congregation would consider disaffiliating from the UPC denomination.

As authority for this action, the former pastor relied on a section in the Texas nonprofit corporation law permitting 10% of the members of a corporation to call a special meeting.

At the meeting, the members voted to remove the current board, install a new board, and reinstate the former pastor.

The district superintendent attended the meeting, and pronounced it invalid on the ground that it violated UPC and local church bylaws.

Specifically, the superintendent pointed out that these documents require that the superintendent preside over any church business meeting if a church is without a pastor, and further require that a minister must have the recommendation of the superintendent to be eligible for election as pastor.

UPC appeals to courts

A trial court agreed that all of the actions taken by the members during their meeting were invalid. It prohibited the former pastor from using the church’s property or its funds, and from interfering with church services or meetings. The former pastor appealed.

A state appeals court agreed with the trial court’s decision, and ruled in favor of the UPC. It began its opinion by noting that the church was a hierarchical church since it had (1) affiliated with the UPC; (2) adopted the UPC articles of faith and bylaws; (3) submitted to the authority of the UPC in certain matters of local government (including the selection of a new minister when a former minister resigns); and (4) relied on the authority of the UPC in ordaining and disciplining clergy.

The court then observed:

[Texas] courts have consistently followed the deference rule in deciding hierarchical church property disputes since the Texas Supreme Court adopted the rule …. The deference rule imputes to members ‘implied consent’ to the governing bylaws of their church. Persons who unite themselves to a hierarchical church organization do so with ‘implied consent’ that church bylaws will govern … .

There was no doubt, the court concluded, that the membership meeting at which the board was deposed and the former pastor reinstated violated UPC bylaws and accordingly such action were void under the “deference rule.”

The court also rejected the former pastor’s claim that church members have a legal right, under state nonprofit corporation law, to remove directors.

It observed:

We do not deny that [the church] has rights under the Texas Nonprofit Corporation Act, but we affirm the trial court’s determination that the church affiliated with a hierarchical church organization. In a conflict between the general procedures outlined in the Texas Nonprofit Corporation Act and the specific procedures contained in the church bylaws, we must defer to the church bylaws. The trial court properly found that the members could not invoke the Texas Nonprofit Corporation Act to remove the board … .

The court concluded that the trial court had acted properly in awarding possession of the church’s property to the current board:

Where a congregation of a hierarchical church has split, those members who renounce their allegiance to the church lose any rights in the property involved and remain loyal to the church. It is a simple question of identity.

What this means for churches

Consider the following:

The court gave a fairly liberal definition of the term hierarchical. This is important, given the court’s reliance on the “deference rule.”
The case illustrates that Texas follows the “deference rule” in resolving church property disputes. The deference rule “imputes to members ‘implied consent’ to the governing bylaws of their church. Persons who unite themselves to a hierarchical church organization do so with ‘implied consent’ that church bylaws will govern.” This approach tends to favor denominations in disputes over control of a dissident local church’s property.
The following observation in the court’s decision clearly favors denominations in disputes over control of local church property: “Where a congregation of a hierarchical church has split, those members who renounce their allegiance to the church lose any rights in the property involved and remain loyal to the church. It is a simple question of identity.”
The ruling illustrates that a church’s bylaws generally take priority over provisions in a state’s nonprofit corporation law.
The case illustrates that a minister’s resignation may be valid even if not “accepted” formally by the church. The court rejected the former pastor’s claim that his “resignation” was ineffective (since it had never been accepted by the church). It pointed out that the pastor had received the 30 days’ compensation that is paid to ministers who resign, and, that he had at no time (following his resignation) served as the church’s duly authorized minister. Green v. Westgate Apostolic Church, 808 S.W.2d 547 (Tex. App. 1991).

Legal Developments

Lawsuits Against Unincorporated Churches

Can a member of an unincorporated church sue her church?

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Personal Injuries on Church Property or During Church Activities

Church Law and Tax 1991-09-01 Recent Developments

Unincorporated Churches

Richard R. Hammar, J.D., LL.M., CPA

• Can a member of an unincorporated church sue the church for injuries received on church property? That was the issue before a Texas appeals court. A member of a Congregational church was taking her minor son to a church child-care program. As she entered the educational building (on the church premises), she slipped and fell, resulting in injuries to her back. She later sued the church, alleging that her injury was caused by the church’s negligence. Specifically, she alleged that the church had been negligent in permitting the tile floor in the educational building to become slippery from moisture, and in failing to warn her of the dangerous condition. The victim had been a member of the church for 4 years, and she was on the church’s administrative board. At the time of the accident, the church was unincorporated (it incorporated a few years following the accident). A trial court dismissed the lawsuit against the church. It concluded that an unincorporated church could not be sued by one of its own members. It further ruled that the church could not be liable for the injuries on the ground that it incorporated after the accident. The victim appealed this decision. A state appeals court agreed with the trial court’s decision. The court acknowledged that Rule 28 of the Texas Rules of Civil Procedure permits unincorporated associations to be sued directly, but it concluded that this rule did not permit members of an unincorporated church to sue the church on the basis of injuries caused by the negligence of fellow church members or agents. The court observed:

[T]he law prohibits a member of an unincorporated association from bringing a cause of action for negligence against the association. It has been held that the members of an unincorporated association are coprincipals, and generally, such an association cannot be held liable to one of its members for the wrongful act of another member or agent of the association. The rationale for this rule is that the injured member and the association are regarded as coprincipals, and the tortfeasor [i.e., the person causing the injury] as their common agent. Consequently, the wrongful conduct of the agent is imputed to the plaintiff for purposes of his action against the association …. In this case, [the victim] has alleged that, as a direct result of the negligence or gross negligence of the pastor and employees of the church, she was injured. In other words, she alleges that the church, in its operation of the day care center, failed to provide a reasonable standard of care. Based on such allegations, we find any negligence alleged against fellow members and agents of the association are imputed [to the victim], thus leaving her in the untenable position of attempting to sue herself. Therefore, we hold that the trial court did not err in determining that [she] lacked standing to bring suit against the church because she was a member.

The court rejected the victim’s claim that the church could be sued because it incorporated after the accident. It noted that a “successor corporation” is liable only for the lawful debts and obligations of the former organization. And, since the former unincorporated church was not liable for the victim’s injuries, then there was no liability for the successor church corporation to assume. Cox v. Thee Evergreen Church, 804 S.W.2d 190 (Tex. App. 1991).

Unincorporated Associations

See also the feature article in this newsletter entitled The Personal Liability of the Members of an Unincorporated Church for the Church’s Liabilities.

© Copyright 1991, 1998 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m77 m86 m58 c0591

Legal Developments

Tax Exemption of Church Parking Lots

The court concluded that if a church rents its parking lot, and cannot prove that the lot is used primarily for religious purposes, then the exemption is lost.

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Church Property

Are church parking lots exempt from property taxes?

Not if they are leased to a commercial business during the week, said a Texas state appeals court. A Baptist church leased two of its parking lots to a neighboring real estate company. The lease provided that the company could use 407 of the 447 parking spaces on the two lots from 7:30 AM to 5:00 PM Monday through Friday. The church reserved 40 parking spaces for its own use during the week, and also reserved the right to use the lots after 5:00 PM each week day and all day on Saturday and Sunday.

The lease specified that the company, and not the church, was responsible for upkeep and maintenance of both lots. The company paid a rental fee of $275 per parking space per year, for a total annual rental fee on all 407 leased spaces of $111,925. The church applied for a property tax exemption on the two parking lots, but its application was denied by the county tax commission. The church appealed, and a trial court agreed with the church that the parking lots were exempt. The tax commission appealed, and a state appeals court denied the exemption.

The appeals court began its opinion by noting that Texas law exempts real property that satisfies three conditions: (1) it is owned by a religious organization, (2) it is used primarily as a place of regular religious worship, and (3) it is reasonably necessary for engaging in religious worship. The court acknowledged that a church-owned parking lot could be exempt from tax under this law, since a parking lot "may qualify as a place of religious worship" if it is owned by a church and is reasonably necessary to accommodate religious worship in the church sanctuary.

The church argued that the parking lots satisfied all three conditions. In support of its position, it noted that: (1) the lots were used on Sunday mornings and evenings, and Wednesday evenings, by church members attending religious services at the church; (2) it had exclusive use of the lots for a majority of the week (i.e., after 5:00 PM Monday through Friday, and all of Saturday and Sunday); and (3) it needed the lots as a "buffer against encroachment and as assurance of adequate room for growth." Generating rental income was a secondary or incidental purpose. The court rejected the church's arguments. It emphasized that the critical question "is the actual use of the property, not the church's primary reason for owning it or the amount of theoretical access the church enjoys." The court observed:

When the overall, day-to-day use of the property is considered, it is clear that the property is used almost entirely by [the real estate company]. The church does not contend that its right to access from 5:00 PM through the night until 7:30 AM constitutes evidence of primary religious use. The fact that [the company] leaves the lots empty for fourteen and one-half hours each night and gives the congregation the right to enter at night and on weekends does not mean that the lots are being used primarily for a religious purpose. Nor is primary religious use proved by evidence that from the church's viewpoint the lots are kept because it is necessary for a downtown church to have parking. Evidence that the church acquired the land and retains it for member parking and for future growth does not constitute evidence that it is used primarily for religious purposes.

The court emphasized that "the issue before us is not whether the church is entitled to own property for parking and future growth, or whether it can lease its property on these or any other terms …. No one questions that the church is entitled to own and lease property. The sole issue before this court is whether such property remains tax exempt when there is no proof that it is used primarily for religious purposes." To summarize, the court did not dispute that a church parking lot is exempt from tax. Rather, it concluded that if a church rents its parking lot, and cannot prove that the lot is used primarily for religious purposes, then the exemption is lost. Bexar County Appraisal Review Board v. First Baptist Church, 800 S.W.2d 892 (Tex. App. 1990).

Legal Developments

Taxation

Sales

Richard R. Hammar, Attorney, CPA

Bio

State: New York

Church Law and Tax 1989-11-01 Recent Developments

Taxation – Sales

Richard R. Hammar, J.D., LL.M., CPA

• The United States Supreme Court ruled that a Texas law exempting religious periodicals from state sales tax violated the first amendment’s “nonestablishment of religion” clause. From 1984 until 1987, Texas law imposed a sales tax upon all periodicals except those “published or distributed by a religious faith and that consist wholly of writings sacred to a religious faith.” This law was challenged by a secular publisher, and the United States Supreme Court agreed that the Texas law violated the first amendment. The Court’s ruling is significant, since it probed the meaning of the first amendment’s language prohibiting the establishment of a religion. The Court noted that the first amendment nonestablishment of religion clause “prohibits, at the very least, legislation that constitutes an endorsement of one or another set of religious beliefs or of religion generally.” It observed that the “core notion” underlying the first amendment is that the government “may not place its prestige, coercive authority, or resources behind a single religious faith or behind religious faith n general, compelling nonadherents to support the practices or proselytizing of favored religious organizations and conveying the message that those who do not contribute gladly are less than full members of the community.” The Court was quick to add that government policies that are designed to implement a broad secular purpose are not invalid merely because they incidentally benefit religion. For example, the Court noted that it had previously upheld a New York property tax exemption law because it exempted a wide variety of charitable organizations including churches. The Court concluded: “Every tax exemption constitutes a subsidy that affects nonqualifying taxpayers, forcing them to become indirect and vicarious donors. Insofar as that subsidy is conferred upon a wide array of nonsectarian groups as well as religious organizations in pursuit of some legitimate secular end, the fact that religious groups benefit incidentally” does not [violate the first amendment]. However, when government directs a subsidy exclusively to religious organizations … and that either burdens nonbeneficiaries markedly or cannot reasonably be seen as removing a significant state-imposed deterrent to the free exercise of religion, as Texas has done, it provides unjustifiable awards of assistance to religious organizations and cannot but convey a message of endorsement to slighted members of the community. This is particularly true where, as here, the subsidy is targeted at writings that promulgate the teachings of religious faith. It is difficult to view Texas’ narrow exemption as anything but state sponsorship of religious belief ….” The Court emphasized that if Texas chose to grant a tax exemption to “all groups that contributed to the community’s cultural, intellectual, and moral betterment, then the exemption for religious publications could be retained.” The Court specifically ruled that a statute exempting organizations created for “religious, educational, or charitable purposes” from the payment of state sales tax would be a “model” exemption statute. Texas Monthly, Inc. v. Bullock, 109 S. Ct. 890 (1989).

© Copyright 1989, 1998 by Church Law & Tax Report. All rights reserved. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m72 m47 c0689

Legal Developments

Clergy – Part 3

Removal

Richard R. Hammar, Attorney, CPA

Bio

State: Texas

Church Law and Tax 1989-07-01 Recent Developments

Clergy – Removal

Richard R. Hammar, J.D., LL.M., CPA

• What authority does a civil court have to intervene in a church controversy regarding the ouster of a pastor? A Texas state appeals court recently addressed this issue. In January of 1988, four members of a local Baptist church sought a court order enforcing the church’s ouster of its pastor. A trial court ordered another church meeting to vote on the pastor because of controversy surrounding the eligibility of certain members who had voted in the original election. The court ordered two church members to assist him in determining which members were eligible to vote. Following the second election, the court issued a permanent injunction prohibiting the pastor from acting as pastor, interfering with the normal workings of the church, going onto or near church property, withdrawing funds from church accounts, spending church funds, or engaging in any act “calculated to embarrass, harass, or injure” the congregation. The pastor also was ordered to vacate the church parsonage, return all church keys, and render an accounting of all church funds collected while he was pastor of the church. A few months later, the pastor was jailed for “contempt of court” on account of his violation of the court order. The pastor filed a lawsuit (a habeas corpus proceeding) alleging that his imprisonment was illegal. Specifically, he argued that (1) the trial court’s order finding the pastor to be in “contempt of court” was void because it failed to specify what actions of the pastor violated the order; (2) the trial court lacked jurisdiction or legal authority to interfere in church affairs; and (3) the trial court improperly usurped church authority in violation of the constitutional guaranty of religious freedom. A state appeals court agreed with the pastor that the trial court had erred in failing to specifically describe the conduct of the pastor that violated its previous order. The court acknowledged that failure to abide by a court order constitutes contempt of court and warrants imprisonment. However, it emphasized that a judicial finding of contempt of court must be accompanied by a clear statement of the conduct that violated the order. Otherwise, the individual will not “know what steps are required to purge himself so as to be released from jail.” The court rejected, however, the pastor’s claim that the trial court lacked authority to interfere in church affairs. It noted that the civil courts have jurisdiction over church disputes if a “property or contract right” is involved. The court concluded that this standard was satisfied by the fact that “an election was held which resulted in [the pastor’s discharge], that he has refused to accept the termination, that he has since interfered with church services and will continue to do so … and will dissipate funds and property owned by the church unless he is restrained from doing so.” Finally, the court rejected the pastor’s claim that the trial court’s intervention violated the constitutional guaranty of religious freedom. It noted that “the vote of a majority of the members of a Baptist church is generally binding in any matter touching the church government or affairs,” and that “rules and regulations, including election procedures, made by church functionaries or by long usage will be enforced by the civil courts if not in conflict with some civil law bearing upon the subject of such rules and regulations.” It concluded that the trial court had “sought to act in accord with church rules and regulations as dictated by long established custom and usage” and accordingly did “not usurp church authority.” It quoted with approval the following comment made by the trial judge: “The judge of this court personally considers the Bible to be the highest authority in existence. And that Bible very clearly teaches that there should be no division among Christians. But we have here a division in the church. What this court has diligently tried to do is honor your procedure in trying to arrive at a conclusion to this problem. It was my understanding, and I don’t think it was ever disputed, that the majority of this congregation who were in good financial standing with the congregation would have the right to vote in any church matters. Yes, we had some dispute as to who were those members. Therefore, this court felt it had to make a determination, based upon your policies, as to who should vote.” Ex parte McClain, 762 S.W.2d 238 (Tex. App. 1988).

Legal Developments

Officers, Directors, and Trustees

Church Law and Tax 1989-01-01 Recent Developments Officers, Directors, and Trustees Richard R. Hammar, J.D.,

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Church Property, Criminal Liability, Fiduciary Duty, Officers, Directors, and Trustees

Church Law and Tax 1989-01-01 Recent Developments

Officers, Directors, and Trustees

Richard R. Hammar, J.D., LL.M., CPA

• A Texas appeals court decision addressed the issue of a church trustee’s alleged criminal liability for misapplication of church funds. Here are the facts. In 1973, a donor conveyed a tract of land to a church by delivering to three church trustees a deed to the property. A sanctuary was constructed on the property. By 1978, church attendance had declined significantly and weekly services had been cancelled. The three trustees discussed selling the property, and agreed that the property and building were “not theirs personally” but rather “were the Lord’s and they should be the work of the Lord’s.” However, no action was taken. In 1981, one of the trustees sold the property for $100,000 to a third party by signing his own name and forging one of the other trustee’s signatures on a deed. The trustee placed the sales proceeds in a church account, and within two months spent almost the entire balance on personal purchases. He was prosecuted for violating a Texas law prohibiting trustees from knowingly “misapplying” property held in a “fiduciary” capacity. A jury convicted the trustee of misapplication of funds and felony theft, but the appeals court overturned the convictions. The court reasoned that the trustee could not be guilty of either misapplication of funds or theft since “at the time of the misapplication the church had ceased all of its regular functions of work and worship for approximately three years … and was not in existence as a matter of law.” Since the church did not exist, the trustee could not be convicted for misapplication or theft of its assets. A dissenting judge denounced the court’s handling of the case, noting that under Texas law (1) a trustee has “a solid duty of loyalty and fidelity,” and “must make a strict accounting of the properties of the trust”; (2) a trustee cannot by himself sell any property held in trust for his own benefit; and (3) the attorney general must be notified if trust property is distributed contrary to the purposes of a trust. The dissenter also challenged the court’s conclusion that the church had ceased to exist, since the trustee’s own actions “prove the contrary.” Specifically, the trustee executed the forged deed in the name of the church, deposited the proceeds in a church account, and paid for all of his personal purchases with church checks. Another important consideration missed by both the majority and the dissenter is the fact that section 501(c)(3) of the Internal Revenue Code requires that the assets of churches and other exempt organizations be distributed upon dissolution (i.e., termination) to another organization exempt from federal income taxation under section 501(c)(3) of the Code. Section 501(c)(3) specifies that a church’s charter must contain a dissolution clause that satisfies this requirement. Had the church in the Texas case complied with this requirement, the unfortunate and unjust result may well have been avoided. Martinez v. State, 753 S.W.2d 165 (Tex. App. 1988).

Legal Developments

Court Ruled Church’s Property Belonged to the Parent Denomination Because of Nondoctrinal, Controlling Language in Both the Local Church’s Deed and in the Denomination’s Bylaws

A Texas state appeals court resolved a church property dispute in which a denomination and

Richard R. Hammar, Attorney, CPA

Bio

State: Texas
Categories: Charters, Constitutions, and Bylaws, Church Property

A Texas state appeals court resolved a church property dispute in which a denomination and a local church both claimed title to the church's property.

The church was established in 1970, and in the same year was affiliated with the Evangelical Assemblies denomination. Pursuant to the Evangelical Assemblies' constitution, the church paid for its property but title was vested in the name of the denomination. In 1983, a majority of the church's members voted to disassociate the church from the denomination, whereupon a lawsuit was commenced to determine legal ownership of church property. The appeals court held that the result in such a case depends upon whether the church and denomination are "hierarchical" or "congregational" in polity.

The court noted that Texas decisions had established the following factors which indicate that a particular church is "hierarchical" in nature: (1) affiliation with a parent church; (2) an ascending order of ecclesiastical judicatories in which the government of the local church is subject to review and control by higher authorities; (3) subjugation of the local church to the jurisdiction of a parent church or to a constitution promulgated by a parent church; (4) a charter from the parent church governing the ownership of local church property and specifying ownership of local church property; (5) the repository of legal title; and (6) the licensing or ordination of local ministers by the parent church.

Application of these factors led to the conclusion that the Evangelical Assemblies was "in every respect" a hierarchical church organization, and accordingly, "as the parent church, Evangelical Assemblies owns and is entitled to possession of the property under the mutually binding constitution." The Texas court reached the correct result, but for the wrong reason.

A determination of whether a church or denomination is congregational or hierarchical in nature is not required unless the court chooses to apply the "compulsory deference" rule, under which the courts are compelled to defer to the rulings of denominational agencies within a hierarchical denomination. Texas, like most states, has rejected the compulsory deference rule in church property disputes in favor of the "neutral principles of law" approach under which the civil courts determine the ownership of contested church property through nondoctrinal language in controlling legal documents (e.g., the local church's deed, or the bylaws of either the local church or parent denomination).

Obviously, under a proper application of the neutral principles approach, title to the church's property belonged to the Evangelical Assemblies—because of nondoctrinal, controlling language in both the local church's deed and in the denomination's bylaws. Templo Ebenezer, Inc. v. Evangelical Assemblies, Inc., 752 S.W.2d 197 (Tex. App. 1988).

Legal Developments

Court Ruled Church-Operated Nursing Home Was Exempt from Property Taxation

Can a church-operated nursing home be exempt from property taxation? Yes, concluded a Texas appeals

Richard R. Hammar, Attorney, CPA

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State: Texas
Categories: Church Property, Tax Exemption

Can a church-operated nursing home be exempt from property taxation? Yes, concluded a Texas appeals court.

The nursing facility, which was operated by a Christian Science church as part of its religious and charitable purposes, admitted persons without regard to their religious faith. However, all patients had to agree to rely entirely upon the Christian Science method of healing (the sole method practiced at the facility), and all were expected and encouraged to study Christian Science literature.

The facility charged a fee for its services, but did not turn away patients unable to pay. Its total operating revenue generally was well below its operating expenses. Such facts, concluded the court, clearly established the facility's exemption under a state law exempting from property taxation any facility organized exclusively for religious or charitable purposes that was engaged exclusively in providing support or housing to elderly persons without regard to their ability to pay.

The court rejected the state's contention that the facility's discrimination against non-Christian Scientists prevented its property from being exempt from taxation: "As long as a nursing home provides care to persons who would otherwise become burdens upon the state, it meets the requirement that its services benefit the general public, regardless of the religious motivations of its operators." Dallas County Appraisal District v. The Leaves, Inc., 742 S.W.2d 424 (Tex. App. 1987)

Legal Developments

Court Rules on Right of Students to Meet on School Property for Prayer, Bible Study, and Evangelism

A question of continuing controversy is the constitutional right of public high school students to

Richard R. Hammar, Attorney, CPA

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State: Federal
Categories: Freedom of Religion, Schools

A question of continuing controversy is the constitutional right of public high school students to meet on school property during non-instructional hours for prayer, Bible study, and evangelism.

This important question was addressed in a recent federal district court ruling in Texas. A group of students, that originally had met on school property for collective prayer and Bible study, became much more evangelistic in its mission. The group's leader preached loudly (sometimes using a bullhorn) to attract the attention of other students, and group members distributed tracts to other students urging them to dedicate their lives to Jesus Christ.

The school administration prohibited the group from conducting further meetings on school property, and the group sued the school district for an alleged violation of the constitutional guaranty of religious freedom.

The court concluded that: (1) The use of bullhorns and loud preaching was not protected by the constitutional guaranty of religious freedom since "the students' right of expression must be balanced against the school's countervailing interest in protecting the privacy of unwilling student listeners." (2) Students have a "limited free exercise right" to engage in "small, informal meetings, centered on communication between group members and not disrupting the comings and goings of other students by proselytizing," since such meetings are "appropriate to the nature of the forum." However, this limited right is superseded by the first amendment's nonestablishment of religion clause and accordingly a school can constitutionally prohibit any religious meetings on school property. The court rejected the contention that it was impermissibly "inhibiting" the exercise of religion, since students were free to meet on nearby private property. (3) Individual students cannot be denied the right to "discuss religion and pray discreetly with others." (4) Large, organized religious meetings enjoy no constitutional protection and can be prohibited since they are "inconsistent with the intended use of school property."

Finally, the court acknowledged that its ruling was inconsistent with Equal Access Act enacted by Congress in 1985. The Equal Access Act generally permits public high school students to meet on school property during non-instructional hours for religious purposes if the school permits other groups to use school facilities for meetings.

The court concluded that the Equal Access Act is unconstitutional and therefore invalid. This ruling will doubtless be appealed to the fifth circuit court of appeals—a court that ruled in 1982 that the first amendment's nonestablishment of religion clause prohibits organized meetings on public high school property. For now, the constitutionality of the Equal Access Act is in doubt in the fifth federal circuit (consisting of the states of Alabama, Florida, Georgia, Louisiana, Mississippi, Texas).

Source: CLTR, March/April 1988

Legal Developments

State Free to Select the Subjects of Taxation and to Grant Exemptions

A Texas appeals court rejected a claim that a state law exempting religious periodicals from

Richard R. Hammar, Attorney, CPA

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State: Texas
Categories: Tax Exemption

A Texas appeals court rejected a claim that a state law exempting religious periodicals from the sales tax on magazines unconstitutionally discriminated against non-exempt periodicals.

The court observed that "it is inherent in the exercise of the power to tax that a state be free to select the subjects of taxation and to grant exemptions. Equal protection does not impose on a state any rigid equality of taxation. Inequalities which result from singling out one particular class for taxation or exemption infringe on no constitutional limitations." Bullock v. Texas Monthly, Inc., 731 S.W.2d 160 (Tex. App. 1987).

Legal Developments

Tax-Exempt Organizations Engaged in an Unrelated Trade or Business Not Reporting to the IRS

Representative J.J. Pickle (Democrat, Texas), chairman of the House Ways and Means Subcommittee on Oversight,

Richard R. Hammar, Attorney, CPA

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State: Texas
Categories: Tax Exemption

Representative J.J. Pickle (Democrat, Texas), chairman of the House Ways and Means Subcommittee on Oversight, has announced plans to conduct hearings later this year on the subject of television evangelists.

Representative Pickle's subcommittee recently concluded hearings on the unrelated business activities of tax-exempt organizations. Concern was expressed over the unfair competition that universities and certain health facilities allegedly pose to taxable entities. IRS records reveal that fewer than 3% of all tax-exempt organizations report unrelated business income to the IRS (on Form 990-T).

Many believe that there are several tax-exempt organizations engaged in an unrelated trade or business that are not reporting their activities to the IRS as required by law. Any legislative change in this area will probably await the results of an IRS technical compliance audit of 3,000 tax-exempt organizations.

Source: Church Law & Tax Report 1987