Church Property – Part 2

The Arkansas Supreme Court ruled that a local church maintained ownership of its property following its disaffiliation from a parent denomination.

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.

State Court Rulings Regarding Church Property Disputes

* The Arkansas Supreme Court ruled that a local church maintained ownership of its property following its disaffiliation from a parent denomination since it had acquired title prior to the effective date of an amendment in the national church's governing document imposing a trust in its favor over the property of all affiliated churches. A church was organized in 1949 as a member of the National Cumberland Presbyterian Church ("national church"), a hierarchical church that is governed in Arkansas by a state agency (the "state church"). The national church has a written constitution contained in the Confession of Faith. The local church purchased property and constructed a sanctuary without any financial assistance from either the national or state church. However, title to this property (tract A) was vested in the state church by the previous owner. In 1968, the state church executed a deed conveying the property to the local church. The deed did not contain any trust language or reverter clause in favor of either the national church or state church. In 1968 the church purchased additional property (tract B) with its own funds, without any assistance from the national church or state church. Title to this property was vested in the local church. It purchased another tract (tract C) in 1977, again without any financial assistance and with title vested in its own name.

At the time of the conveyances of tracts A and B, the national church constitution contained the following language: "We further recommend that the following additional provisions be adopted regarding the legal steps to be taken by presbyteries for the protection, transfer, or sale of church property: (1) Church property should be deeded to the trustees of the local presbytery for the benefit and use of the local church, which local trustees will be in complete charge so long as the church remains organized." This language is also found in the Cumberland Presbyterian Digest of 1975, the church law in effect at the time of the 1977 conveyance of tract C.

In 1979, the United States Supreme Court determined that civil courts faced with issues of ownership of church property could properly apply "neutral principles of law" in resolving disputes as to the ownership of church property. Jones v. Wolf, 443 U.S. 595 (1979). Following the Jones case, the national church adopted in 1984 an amendment to its constitution to replace the constitutional language endorsing the principle of local ownership of church property. The 1984 amendment provides,

The Cumberland Presbyterian Church is a connectional church and all lower judicatories of the church to-wit: synod, presbytery, and the particular churches are parts of that body and therefore all property held by or for a particular church, a presbytery, a synod, the General Assembly, or the Cumberland Presbyterian Church, whether legal title is lodged in a corporation, a trustee, or trustees, or an unincorporated association, and whether the property is used in programs of the particular church or of a more inclusive judicatory or retained for the production of income, and whether or not the deed to the property so states, is held in trust nevertheless for the use and benefit of the Cumberland Presbyterian Church.

The local Arkansas church was aware of the 1984 constitutional amendment because it sent a delegate to the national meeting where the amendment was approved. The delegate voted "no" to the amendment. In 1995, the local church submitted a formal, written notice that indicated its intent to withdraw from the state church. The local, 20-member congregation unanimously agreed to the withdrawal. The state church appointed a commission, pursuant to the church constitution, that recommended the dissolution of the church and a merger with a nearby Cumberland Presbyterian Church for those members who wished to remain affiliated with the national church.

Members of the local church refused to vacate their property or surrender the church records. The state church filed a lawsuit seeking to establish its rights to the property pursuant to the 1984 amendment to its constitution.

The Arkansas Supreme Court began its opinion by noting that in the Jones case the United States Supreme Court had ruled that civil courts may resolve church property disputes not involving issues of "religious doctrine or polity" by applying "neutral principles of law." Under the "neutral principles" approach, the courts determine the property owner of disputed church property by examining nondoctrinal language in deeds, local church charters and bylaws, denominational bylaws, and state statutes governing the holding of church property. The Arkansas Supreme Court officially adopted the neutral-principles approach for resolving church property disputes in that state. The court then applied this approach to the facts of this case:

In our application of the neutral-principles approach, we must refrain from resolving the dispute on the basis of "religious doctrine and practice" and must rely "exclusively on objective, well-established concepts of trust and property law …." Any documents, such as the church constitution, pertinent to the dispute, must be scrutinized in purely secular terms. If these documents "incorporate religious concepts in the provisions relating to the ownership of property" and if the interpretation of those instruments requires the resolution of a religious matter, then we "must defer to the resolution of the doctrinal issues by the authoritative ecclesiastical body …."

The court first examined the deeds to the church property, and concluded that they clearly vested title in the local church without any trust or reversionary interest in favor of the state or national church. Further, the court pointed out that the national and state churches "did not contribute to the acquisition of the property." The court then noted that neither party had referenced any provision in the local church's charter or bylaws that addressed the ownership of property. It further noted that no state statute addressed the ownership of church property. Next, the court considered the national church's constitution that was in effect at the time of the conveyances, and found no provision that created a trust in favor of the national church.

The court rejected the national church's argument that the 1984 constitutional amendment imposed a trust in its favor on the property of all local churches. It pointed out that all of the church's property had been acquired prior to the 1984 amendment, and noted that the national church cited no cases "that allow a grantor to impose a trust upon property previously conveyed without the retention of a trust …. We have long held that parties to a conveyance have a right to rely upon the law as it was at that time."

Application. The court correctly noted that most church property disputes are resolved on the basis of neutral principles of law contained in deeds, local church charters and bylaws, and denominational bylaws. So long as a civil court can resolve such a dispute by referring to neutral provisions in these documents, without any inquiry into doctrine or polity, it may do so. It is worth observing that the United States Supreme Court has noted that one of the principal advantages of the neutral principles of law approach to resolving church property disputes is that it permits religious organizations to "order their affairs" in advance of a property dispute through "appropriate reversionary clauses and trust provisions" that could reflect the intentions of a church and its members. Many churches and denominational agencies have done so. Several examples are cited in section 7-04 of Richard Hammar's book, Pastor, Church & Law (3rd ed. 2000). It should be noted that three of the Arkansas Supreme Court justices dissented from the court's decision. They noted that the local church had continued to operate as a member of the denomination for several years after the 1984 amendment, and therefore the amendment should have been applied to the facts of this case. Arkansas Presbytery of the Cumberland Presbyterian Church v. Hudson, 40 S.W.3d 301 (Ark. 2001).

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