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Powers of a Local Church

§ 6.13

It often is necessary to determine the nature and extent of a church's powers, for a church's actions may be subject to challenge if they exceed the church's authority. As has been noted elsewhere,[423] See § 6-01, supra. unincorporated churches possess only such authority as is granted to them by state law. Many states have enacted legislation enabling unincorporated churches to sue and be sued and to hold property in the name of trustees. But without any specific delegation of authority from the state, an unincorporated church has no legal powers and must act in the name of its members.[424] Jacobs v. St. Mark's Baptist Church, 415 So.2d 253 (La. App. 1982).

In many states a church may incorporate under either a general nonprofit corporation law or a religious corporation law. State nonprofit corporation law ordinarily confers several specific powers upon organizations that incorporate. To illustrate, section 5 of the Model Nonprofit Corporation Act states that a corporation has the authority:

  1. to exist perpetually;
  2. to sue and be sued;
  3. to acquire or dispose of property;
  4. to lend money to its employees other than its officers and directors;
  5. to make contracts, incur liabilities, borrow money, and issue notes and bonds;
  6. to lend money;
  7. to elect or appoint officers and directors; (8) to adopt bylaws not inconsistent with the articles of incorporation;
  8. to indemnify directors or officers against expenses incurred in connection with lawsuits arising because of the performance of their duties (but there is no indemnification if the director or officer is found to have been guilty of negligence or other misconduct);
  9. to establish pension plans;
  10. to cease its corporate activities; and
  11. to have and exercise all powers necessary or convenient to accomplish any of the purposes for which the corporation is organized.

Some courts have recognized that statutes governing religious corporations reflect a public policy of granting religious organizations wide latitude in the conduct of their affairs, both spiritual and temporal.[425] Hopewell Baptist Church v. Gary, 266 A.2d 593 (N.J. 1970), aff'd, 270 A.2d 409 (N.J. 1970).

It is important to recognize that corporations derive their existence and powers from the state. It follows that corporations are without authority to do any act not expressly authorized by statute or implied from a power specifically granted.[426] Succession of Fisher, 103 So.2d 276 (La. 1958); Babcock Memorial Presbyterian Church v. Presbytery of Baltimore, 464 A.2d 1008 (Md. App. 1983); Old Folks Mission Center v. McTizic, 631 S.W.2d 433 (Tenn. 1981).

Some states place restrictions on the power of religious corporations to own property. These restrictions include limitations on the number of acres a religious corporation may own, limitations on the total dollar value of the property a religious corporation may own, limiting the property a religious corporation may own to only such property as is reasonably necessary for the corporation's purposes, and limiting the kinds of property that a religious corporation may own.

Some states limit the power of religious corporations to sell or encumber property. For example, some states limit the power of churches to sell property without court approval,[427] Application of Church of St. Francis De Sales, 442 N.Y.S.2d 741 (1981) (applying section 12 of the New York Religious Corporations Law). or without a specified percentage of voter approval.[428] MODEL NONPROFIT CORPORATION ACT § 44 (requiring approval of a two-thirds majority for a sale of all or substantially all of the property of a corporation). A number of states limit the power of religious corporations to receive testamentary gifts. These restrictions generally fall into two categories: statutes limiting the amount of property that a religious organization may receive under a will, and statutes invalidating any testamentary gift to a religious organization if the will was executed within a prescribed time before the grantor's death.[429] GA. CODE § 53-2-10; MISS. CODE ANN. § 91-5-31. For example, some states prohibit certain testamentary gifts to a church if the will is executed within 90 days before the grantor's death.[430] OHIO REV. CODE § 2107.06. A few states invalidate certain testamentary gifts that exceed a specified portion of the total value of the grantor's estate. The subject of state limitations on testamentary gifts to charity is discussed in detail elsewhere.[431] See § 9-03, infra.

The powers of churches affiliated with religious hierarchies often are restricted or regulated by the parent ecclesiastical body. For example, the local churches of some denominations possess either limited authority or no authority to purchase or sell property, incur obligations, elect officers, or adopt bylaws.[432] Babcock Memorial Presbyterian Church v. Presbytery of Baltimore, 464 A.2d 1008 (Md. App. 1983).

In addition to conferring specific, express powers upon charitable corporations, state nonprofit corporation laws typically contain a provision granting to incorporated charities the power to have and exercise all powers necessary or convenient to effect any or all of the purposes for which the organization is organized. Such a provision enables a church corporation to list in its charter various powers not specifically delegated by state corporation law. Therefore, in determining whether a church is empowered to take a particular action, the church charter must be reviewed in addition to the statute under which the church was incorporated. It is important to note, however, that a church may not include a power in its charter that would contravene law or public policy.[433] See generally FLETCHER CYC. CORP. § 2477 (perm. ed. 2008). Molasky Enterprises, Inc. v. Carps, Inc., 615 S.W.2d 83, 86-87 (Mo. 1981) ("The powers and existence of a corporation are derived from the state creating it. It functions under its charter which is a contract between it and the state in which it is organized. The statutory laws of the state applicable to it enter into and become a part of its articles of incorporation."). It is a well-settled rule of law that religious corporations, like business corporations, also possess implied authority to take all actions that are reasonably necessary in order to accomplish those powers expressly granted by charter or statute.[434] Synod of Chesapeake, Inc. v. City of Newark, 254 A.2d 611, 613-614 (Del. 1969) ("Any contemporary church group, to be worth its salt, must necessarily perform nonreligious functions. … Accordingly, such activities may not be banned as unrelated to church ritual."); Sales v. Southern Trust Co., 185 S.W.2d 623 (Tenn. 1945).

In summary, in determining whether a church corporation possesses the authority to take a particular action, the following analysis should be employed:

  1. Review the statute under which the church was incorporated to determine if the power was expressly granted.
  2. Review the church's charter to see if the power was expressly granted.
  3. If the proposed church action is not expressly authorized by either statute or the church's charter, determine whether the church possesses implied authority to perform the act. Generally, a church possesses implied authority to take any action reasonably necessary to carry out the powers expressly granted by charter or state corporation law.
  4. A corporation is never authorized to perform an act that is prohibited by law or public policy.

The courts generally have held that a corporation's bylaws cannot confer powers upon the corporation that are not granted by statute or charter, although the bylaws may regulate the manner in which a corporation's powers are exercised.[435] FLETCHER CYC. CORP. § 2494 (perm. ed. 2008). It is often said that corporations lack the authority to perform any act that is illegal, contrary to public policy, or that would constitute a public nuisance. Thus, it has been held that a church has no authority to exercise powers, even those expressly granted, in such a way as to cause a disturbance of the peace.[436] See § 7-09, infra.

Since most church corporations are incorporated under statutes expressly limiting them to nonprofit or religious purposes, churches generally have no authority to engage in substantial commercial enterprises for profit. An act performed by a church corporation in excess of its express and implied powers is referred to as ultra vires. Considerable confusion surrounds the legal status of ultra vires actions. A majority of states permit ultra vires acts of a corporation to be challenged in only the following three situations:

  1. A proceeding by a member or director against the corporation seeking an injunction prohibiting the corporation from doing an unauthorized act.
  2. A proceeding by the corporation against the officers or directors of the corporation for exceeding their authority.
  3. A proceeding by the state to dissolve the corporation or to enjoin the corporation from performing unauthorized acts.

If the ultra vires act was a contract that has already been executed, it is generally held that the parties to the contract are entitled to compensation for the loss or damages sustained by them as a result of a judicial determination setting aside or prohibiting the performance of the contract.[437] See generally FLETCHER CYC. CORP. ch. 40 (perm. ed. 2008); Free For All Missionary Baptist Church, Inc. v. Southeastern Beverage & Ice Equipment Co., Inc., 218 S.E.2d 169 (Ga. 1975).

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