• Key point 7-04. Churches and denominational agencies can avoid church property disputes by adopting appropriate nondoctrinal language in deeds, trusts, local church bylaws, or denominational bylaws.
Internal Property Dispute Resolution Procedures
* A Pennsylvania court ruled that a denomination owned the property of a dissident church as a result of a trust provision in the denomination’s governing documents. A church consisting of 65 to 85 active adult members was incorporated in 1846 as part of the Episcopal Church in the United States (national church). Because of theological differences the church board (“vestrymen”) submitted a proposal to the membership to separate the church from the diocese and national church through a merger with a new foundation that they had created solely for this purpose. The diocese responded by declaring itself to be trustee of the church’s property and ordered removal of the church board. A trial court was asked to determine lawful ownership of the church property, and it concluded that the following trust provision in the national church’s canons vested title in the national church:
All real and personal property held by or for the benefit of any Parish, Mission or congregation is held in trust for this [National] Church and the Diocese thereof in which such Parish, Mission or Congregation is located. The existence of this trust, however, shall in no way limit the power and authority of the Parish, Mission, or Congregation otherwise existing over such property as long as the particular Parish, Mission or Congregation remains a part of, and subject to, this Church and its Constitution and Canons. Canon I.7.4.
The congregation appealed, claiming that it never formally accepted the national church’s canon pertaining to local church property. While it agreed to comply with the national church’s canons at the time of its affiliation, this “did not bind it to later-enacted canons of which it had no notice at the time of accession.” The appeals court disagreed, noting that the church “waited twenty years after the adoption of the [church property] canon to take action inconsistent with it.”
The court also found that the vestrymen had acted in bad faith and breached their fiduciary duties as directors by attempting to merge the church’s property with a foundation they had created solely for the purpose of separating from the national church. The court noted that the state nonprofit corporation law specifies that a director of a nonprofit corporation “stands in a fiduciary relation to the corporation and must perform his or her duties in good faith and in the best interests of the corporation, and the director shall be entitled to rely in good faith on the information, opinions, reports or statements prepared or presented by counsel.” The church claimed that the members of the vestry believed they had the right to disaffiliate, and they sought and followed the advice of counsel, who identified the merger as the best option and who advised that a merger would not involve amendment of articles of incorporation subject to diocesan approval. They rejected counsel’s suggestion, however, of bringing a quiet title action as such action against fellow Christians would not be consistent with scripture. The court concluded that the vestrymen acted to promote their own interest, but even had their purpose been proper, their method of acting was a violation of their fiduciary duty. In particular, their rejection of their own attorney’s advice to resolve the title questions by filing a “quiet title” action in civil court, and instead pursuing a merger with the foundation, was done in bad faith. In re Church of St. James the Less, 833 A.2d 319 (Pa. Common. 2003).
© Copyright 2004 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 c0604
