Clergy – Part 1

Personal Liability

Church Law and Tax 1990-07-01 Recent Developments

Clergy – Personal Liability

A North Carolina appeals court ruled that a woman could sue two ministers who assumed her home mortgage for $1,000 and then sold her home for an $18,000 profit. The woman had owned a home worth about $32,000 on which there was a mortgage debt of $12,000. Due to financial difficulties, she became two months behind in her monthly mortgage payments. She turned to her pastor, in whom she had trust and confidence, for counsel and advice. The pastor assured the woman that he could “help her,” and a few days later he and another minister told her that they would “assume the mortgage” on her home and pay her $1,000 if she deeded her home to them. Trusting the ministers to treat her fairly, she deeded her home to them and was paid $1,000. A few months later, the ministers sold the home for $32,000, thereby making a profit of $19,000 ($32,000 sales proceeds less the $12,000 mortgage and less the $1,000 cash payment to assume the loan). The woman sued the ministers some four years later, alleging that their actions amounted to a breach of their fiduciary duties and unjust enrichment. A trial court dismissed the lawsuit, and the woman appealed. The appealed court reversed the trial court, and ordered the case to proceed to trial. With respect to the “breach of fiduciary duty” claim, the appeals court observed: “When a fiduciary relationship exists between parties to a transaction, equity raises a presumption of fraud when the superior party obtains an inordinate benefit as a result of it …. That such a relationship existed between [the woman] and the [ministers] is sufficiently alleged. For under our law a fiduciary relationship can be found to exist anytime one person reposes a special confidence in another, in which event the one trusted is bound to act in good faith and with due regard to the interests of the other.” With respect to the “unjust enrichment” claim, the court observed: “Unjust enrichment is a legal term characterizing the result or effect of … property or benefits received under such circumstances as to give rise to a legal or equitable obligation to account therefor. It is a general principle … that one person should not be permitted unjustly to enrich himself at the expense of another.” In summary, the appeals court concluded that the woman had sufficiently alleged both a breach of fiduciary duty, and unjust enrichment, and accordingly it ordered the case to proceed to trial. Adams v. Moore, 385 S.E.2d 799 (N.C. App. 1989).

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