Changing Signature Authority on Church Bank Accounts

Compliance with the church constitution is essential.

Background. A dispute arose in a church over the tenure of its pastor. The church board held an emergency meeting, at which the pastor was removed and a new pastor was appointed. The board also modified its bank resolution by removing the dismissed pastor’s name as an authorized signature and requiring that only those checks and withdrawals having the approval of the new pastor be honored.

The bank asked a court to determine who was authorized to control the church’s bank accounts. It sought to protect itself against multiple liability in the event that it honored checks written by both the former and current pastor of the church. The court ruled that the board’s actions were lawful, and concluded that only those checks and withdrawals having the approval of the current pastor should be authorized by the bank. The former pastor appealed.

The court’s decision. A state appeals court reversed the ruling of the trial court. It concluded that the board’s action in changing the bank resolution was invalid because it was not done in compliance with the church’s constitution. The court quoted the following language in the church’s constitution:

Any legislation passed by the board shall be presented to the [pastor] for his approval and signature. If the legislation or any part of it fails to meet his approval, it is his privilege to veto the same and send it back to the board, along with his reasons for the veto. The legislation must then be revoted upon by the full board, and must be passed by a two-thirds majority before it can become law.

The court concluded that the board’s action was legally invalid because it did not comply with this procedure. The court observed: “The evidence indisputably shows that the board failed to follow the procedural requirements of the church constitution when it transacted its business because no legislation was ever presented to [the former pastor] for his approval and signature.”

The board’s minutes revealed that the board “repassed” its resolution modifying the bank resolution by more than a two-thirds vote because it anticipated that the former pastor would veto their action. The court noted that “no exceptions in the constitution have been cited which would authorize the board to deviate from the binding written legislative procedures required by the church’s constitution.” The court concluded:

Although the board properly acted within its authority to initiate the emergency session and had the apparent authority to act in furtherance of the affairs of the corporation, the board failed to adhere to the requisite legislative procedures in the conduct of business. Therefore, the actions at issue here, taken in violation of the express legislative procedures required by the church’s constitution were not legally enacted.

The court stressed that it could resolve this dispute since “the sole issue is not of a religious nature but is secular—whether the board … duly complied with the provisions of [the church constitution].” The court insisted that its decision did “not call for the resolution of any ecclesiastical or theological dispute.”

Relevance to church treasurers. All churches periodically change their bank resolution which designates those persons who are legally authorized to sign checks or make withdrawals from church accounts. This case illustrates an important legal principle—any changes in a church’s bank resolution must be done in compliance with the church’s governing document (constitution, bylaws, etc.) to be legally valid. Failure to comply with the governing document can lead to confusion and legal complications, since this may invalidate the proposed change in authorized signatures—meaning that the previous signatories remain valid and the new ones are not. First Born Church of the Living God v. Bank South, 472 S.E.2d 469 (Ga. App. 1996).

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
Related Topics:

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold 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. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

ajax-loader-largecaret-downcloseHamburger Menuicon_amazonApple PodcastsBio Iconicon_cards_grid_caretChild Abuse Reporting Laws by State IconChurchSalary Iconicon_facebookGoogle Podcastsicon_instagramLegal Library IconLegal Library Iconicon_linkedinLock IconMegaphone IconOnline Learning IconPodcast IconRecent Legal Developments IconRecommended Reading IconRSS IconSubmiticon_select-arrowSpotify IconAlaska State MapAlabama State MapArkansas State MapArizona State MapCalifornia State MapColorado State MapConnecticut State MapWashington DC State MapDelaware State MapFederal MapFlorida State MapGeorgia State MapHawaii State MapIowa State MapIdaho State MapIllinois State MapIndiana State MapKansas State MapKentucky State MapLouisiana State MapMassachusetts State MapMaryland State MapMaine State MapMichigan State MapMinnesota State MapMissouri State MapMississippi State MapMontana State MapMulti State MapNorth Carolina State MapNorth Dakota State MapNebraska State MapNew Hampshire State MapNew Jersey State MapNew Mexico IconNevada State MapNew York State MapOhio State MapOklahoma State MapOregon State MapPennsylvania State MapRhode Island State MapSouth Carolina State MapSouth Dakota State MapTennessee State MapTexas State MapUtah State MapVirginia State MapVermont State MapWashington State MapWisconsin State MapWest Virginia State MapWyoming State IconShopping Cart IconTax Calendar Iconicon_twitteryoutubepauseplay