• Key point 7-03.3. Most courts apply the “neutral principles of law” rule in resolving disputes over the ownership and control of property in “hierarchical” churches. Under this rule, the civil courts apply neutral principles of law, involving no inquiry into church doctrine, in resolving church property disputes. Generally, this means applying neutral legal principles to nondoctrinal language in any one or more of the following documents: (1) deeds to church property; (2) a church’s corporate charter; (3) a state law addressing the resolution of church property disputes; (4) church bylaws; or (5) a parent denomination’s bylaws.
A New York court ruled that the property of a church that voted to disaffiliate from a parent denomination belonged to the denomination rather than the local church. In 1990 a schism occurred within an Episcopal church over the refusal of the diocese to ordain a deacon to the priesthood. This dispute eventually led to the disaffiliation of the church from the diocese. Thereafter, the church advised the Episcopal bishop that it no longer recognized his ecclesiastical jurisdiction over their parish. The diocese responded by asking the church to convey title to all real estate and personal property in the possession and control of the church to the diocese. The church refused to comply with such request. The diocese then asked a court to impose a trust on the property in favor of the diocese, and to order the congregation to turn over the property to the diocese. The diocese’s trust theory was based upon an amendment to national canons enacted at the 1979 General Convention of the Protestant Episcopal Church. These provisions declare that all real and personal property held by local churches is held in trust for the benefit of the national Protestant Episcopal Church and the diocese in which the church is located. This amendment to the national canons was adopted in response to a 1979 decision of the United States Supreme Court in which the Court ruled that the constitution of a hierarchical church can be crafted to recite an express trust in its favor concerning the ownership and control of local church property. A trial court ruled in favor of the diocese, and the church appealed.
A state appeals court noted that New York has adopted the so-called “neutral principles of law” rule to resolving disputes over the ownership of church property. Under this rule the courts focus on “the language of the deeds, the terms of the local church charter, the state statutes governing the holding of church property, and the provisions in the constitution of the general church concerning the ownership and control of church property,” taking special care to examine each of these documents in secular terms and not relying on religious precepts to determine whether the parties intended a particular result. The court added that the civil courts, in applying the neutral principles of law rule, “should also take special care not to become involved in internal religious disputes or implicate secular interests in matters of purely ecclesiastical or religious concerns such as church governance or polity.” The court continued:
In our view, although the controversy at hand was borne out of a schism between church officials regarding the ecclesiastical denial of a request to ordain a deacon to the priesthood of the Protestant Episcopal Church, the resolution of this property dispute can still be achieved through neutral principles of law without resort to judicial intrusion into matters of religious doctrine.
The court then analyzed various documents to determine if the dispute could be resolved on the basis of neutral principles of law. The court’s analysis is summarized below:
Deeds to the church property
The court found no language in the deeds to the church property indicating that title was to be held in trust for the Protestant Episcopal Church. Further, none of the deeds contained a forfeiture or reverter clause in favor of the diocese.
The church’s corporate charter
The court noted that while the church’s certificate of incorporation “expressly acknowledges [the church’s] affiliation with the Protestant Episcopal Church and the diocese, nothing in its certificate of incorporation indicates how church property is to be owned.”
State Law
The court noted that the New York Religious Corporations Law requires approval by the bishop and standing committee of the diocese to which a local church is affiliated before the trustees of the church can sell, mortgage, or lease its property. Other provisions of the Religious Corporations Law concerning the administration and operation of the Protestant Episcopal Church are silent as to the ownership of property between the parish and its diocese.
Constitution of the Protestant Episcopal Church
The court pointed out that the national canons of the Protestant Episcopal Church were amended in 1979 to reflect an express trust provision as follows:
Section 4. All real and personal property held by or for the benefit of any Parish, Mission or Congregation is held in trust for this Church and the Diocese thereof in which Parish, Mission or Congregation is located. 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 so long as the particular Parish, Mission or Congregation remains a part of, and subject to, this Church and its Constitution and Canons.
Section 5. The several Dioceses may, at their election, further confirm the trust declared under the foregoing Section 4 by appropriate action, but no such action shall be necessary for the existence and validity of the trust.
A national church official stated, in a sworn affidavit, that the purpose of this amendment was to impose a trust in favor of the national Protestant Episcopal Church and the dioceses of which each local church is a member. The court rejected the church’s claim that this amendment could not be applied retroactively:
Although this express trust provision was absent from the national canons at the time [the church] acquired [its property], retroactive application of such trust provisions would not, as [the church] contends, extinguish the real property rights of every local church or parish throughout New York, so long as a court finds that the trust provisions were declaratory of existing church policy. In our view, the record supports the conclusion that the … amendment expressly codifies a trust relationship which has implicitly existed between the local parishes and their dioceses throughout the history of the Protestant Episcopal Church. By accepting the principles of the Protestant Episcopal Church and the Diocese, [the church was] subject to their canons, rules and practices. [The church], for example, had to obtain approval of the Bishop and the Standing Committee prior to alienating or encumbering real property as required by canon 7, sections 2 and 3. These provisions not only indicate that local church property was to be held for the benefit of the Protestant Episcopal Church and its dioceses, but they demonstrate the established customs of said church. Indeed, these provisions do not implicate issues of church governance but relate directly to control of church property ….
In this case, the [evidence] establishes the parish’s membership in the Protestant Episcopal Church and its acceptance of the hierarchical church’s principles and policies including that church property was to be held solely for the overall mission and benefit of the national church and its dioceses. Notably, throughout [the church’s] existence, the wardens and vestry of [the church] not only sought permission of the Bishop and the Standing Committee to convey property held by the parish and for debt refinancing, but the members of [the church] actively participated in numerous [denominational] activities, such as presenting annual reports to the Diocese regarding its financial condition and attending the annual convention of the Diocese, signifying its solidarity with the Protestant Episcopal Church. Although “[t]he mere fact of [defendants’] association with the [Protestant Episcopal Church and its dioceses] does not by itself support a finding that an implied trust was created,” the record shows that throughout [the church’s] existence the parish conducted its affairs in accordance with the constitution and canons of the Protestant Episcopal Church and was an integral member of its polity.
In our view, there is sufficient evidence of an intent to create an implied trust to hold church property in favor of the Protestant Episcopal Church and its dioceses based upon [the church’s] actions in conformity with the tenets and canons of the Protestant Episcopal Church and the national church’s more recent establishment of an express trust. Accordingly, an express trust and an implied trust exist for the benefit of [the diocese] with respect to the real and personal property held by [the church]. Consequently, upon [the church’s] schism from the Protestant Episcopal Church and the Diocese, [it] forfeited the property in its possession to [the diocese] under the provisions of [the canons] of the Protestant Episcopal Church.
Application. Most courts have adopted the “neutral principles of law” rule to resolving church property disputes. This case represents an excellent illustration of the application of that rule to such a dispute. Trustees of the Diocese of Albany v. Trinity Episcopal Church, 684 N.Y.S.2d 76 (Sup. Ct. 1999). State Court Rulings Regarding Church Property Disputes
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