Key point 6-01.01. Unincorporated associations have no legal existence and as a result cannot sue or be sued, hold title to property, or enter into contracts. Some states have modified or eliminated some or all of these limitations.
Traditionally, unincorporated associations had no legal existence. This had many important consequences. First, an association could not own or transfer property in its own name; second, an association could not enter into contracts or other legal obligations; and third, an association could not sue or be sued.
The inability to sue or be sued had many important ramifications. It meant, for example, that a church association could not sue its members. If a church member’s negligence caused fire damage to a church building, neither the church nor the church’s insurance company could sue the member.4 Employers Mutual Casualty Co. v. Griffin, 266 S.E.2d 18 (N.C. 1980).It also meant that a church association could not be sued by its members. In one case, a church member who was injured because of the negligence of her church was denied recovery against the church on the ground that a member of an unincorporated church is engaged in a joint enterprise and may not recover from the church any damages sustained through the wrongful conduct of another member.5 Goard v. Branscom, 189 S.E.2d 667 (N.C. 1972), cert. denied, 191 S.E.2d 354 (1972).
- A Pennsylvania court ruled that a member of an unincorporated church cannot sue the church for injuries sustained on church property.6 Zehner v. Wilkinson Memorial United Methodist Church, 581 A.2d 1388 (Pa. Super. 1990). See also Crocker v. Barr, 367 S.E.2d 471 (S.C. App. 1988) (“a member of a voluntary unincorporated association … cannot maintain an action in tort against the association for injuries suffered by the member because of the negligence of fellow members”).A church member was injured when she slipped and fell while leaving Christmas services. She sued her church, alleging that the church board had been negligent in failing to provide adequate lighting, handrails, and stripes on the stairs where the accident occurred. In dismissing the lawsuit, The court observed: “The members of an unincorporated association are engaged in a joint enterprise, and the negligence of each member in the prosecution of that enterprise is imputable to each and every other member, so that the member who has suffered damages through the tortious conduct of another member of the association may not recover from the association for such damages.” The court concluded: “[The victim] was a member of the association and thus any negligence of her fellow members is imputed to her and she cannot recover in tort. … [The victim] was a member of the church, an unincorporated association, at all times material to this case. As a member of the association … the decision not to place a handrail, lights, and stripes on the stairway is attributed to her. She cannot recover in tort because any negligence of the board is attributable to her.
Such rulings may leave members of unincorporated churches without a legal remedy for injuries sustained because of the negligence of other members. This certainly is a matter that should be considered seriously by any church wishing to remain unincorporated. Such churches should apprise their members that if they are injured during any church activity because of the actions of another member, they may have no legal right to compensation or damages from the church or other members—even if the church maintains liability insurance that otherwise would be available.
The traditional legal disabilities associated with unincorporated status, particularly the potential personal liability of every member for the acts of other members in the course of the association’s activities (discussed below), made the unincorporated association form of organization undesirable for churches and other charities. Many states have enacted laws that remove some or all of these traditional disabilities. To illustrate, several states have enacted the Uniform Unincorporated Nonprofit Association Act, and others are considering it.7 At the time of publication, the Act had been enacted by Arkansas, the District of Columbia, Iowa, Kentucky, Nevada, and Pennsylvania.The purpose of the Act was described as follows:
At common law an unincorporated association, whether nonprofit or for-profit, was not a separate legal entity. It was an aggregate of individuals. … This approach obviously created problems. A gift of property to an unincorporated association failed because no legal entity existed to receive it. … Proceedings by or against an unincorporated association presented similar problems. If it were not a legal entity, each of the members needed to be joined as party plaintiffs or defendants. … Unincorporated associations, not being legal entities, could not be liable in tort, contract, or otherwise for conduct taken in their names. On the other hand, their members could be. … The unincorporated nonprofit association is now governed by a hodgepodge of common law and state statutes governing some of their legal aspects. No state appears to have addressed the issues in a comprehensive, integrated, and internally consistent manner. This Act deals with a limited number of the major issues relating to unincorporated nonprofit associations in an integrated and consistent manner.
One of the most important features of the Act is its treatment of the personal liability of members. The Act provides that members of an unincorporated association are not liable for the contracts of the association or for the wrongs of other members (or of the association itself), assuming that they did not participate personally. The key provision specifies:
A nonprofit association is a legal entity separate from its members for the purposes of determining and enforcing rights, duties, and liabilities in contract and tort. … A person is not liable for a breach of a nonprofit association’s contract merely because the person is a member, is authorized to participate in the management of the affairs of the nonprofit association, or is a person considered to be a member by the nonprofit association. A person is not liable for a tortious act or omission for which a nonprofit association is liable merely because the person is a member, is authorized to participate in the management of the affairs of the nonprofit association, or is a person considered as a member by the nonprofit association. A tortious act or omission of a member or other person for which a nonprofit association is liable is not imputed to a person merely because the person is a member of the nonprofit association, is authorized to participate in the management of the affairs of the nonprofit association, or is a person considered as a member by the nonprofit association.8 UNIFORM UNINCORPORATED NONPROFIT ASSOCIATION ACT § 6 (1996).
The Act also clarifies that individual members can “assert a claim against the nonprofit association.” In other words, members of an unincorporated church are not barred from suing the church for injuries they sustain as a result of the church’s negligence.
But, unless state law provides otherwise, unincorporated associations remain incapable of suing or being sued, holding or transferring title to property, and entering into contracts and other legal obligations. In those states where some or all of the traditional legal disabilities persist, an association generally may act only through its membership.9 See, e.g., Trinity Pentecostal Church v. Terry, 660 S.W.2d 449 (Mo. App. 1983) (unincorporated religious association was “without capacity to hold and pass title to real estate under Missouri law”).
- A federal court in the District of Columbia dismissed a discrimination lawsuit that had been brought against a Catholic church and school on the ground that they were unincorporated entities that could not be sued.
- A Georgia court ruled that a member of an unincorporated church could sue his church for injuries he sustained while participating in a construction project, and that the church could be liable for the member’s injuries on the basis of its negligent hiring of an incompetent construction foreman. The church argued that members of an unincorporated church cannot sue their church under any circumstances. The court disagreed. It noted that the state legislature had enacted a law specifying that unincorporated associations may be sued “in any cause of action,” and this meant that members of an unincorporated association are not barred from suing the association. The court also noted that the same statute provided that individual members of unincorporated associations cannot be personally liable for the association’s liabilities unless they personally participated in the act that led to the liability.10 Piney Grove Baptist Church v. Goss, 565 S.E.2d 569 (Ga. App. 2002).
- The Indiana Supreme Court ruled that members of an unincorporated church can sue their church for injuries they suffer on church property or in the course of church activities.11 Hanson v. Saint Luke’s United Methodist Church, 704 N.E.2d 1020 (Ind. 1998).The court conceded that under the traditional rule a member of an unincorporated association may not sue the association itself for injuries suffered as a result of the acts of the association or its members. However, the court concluded that the traditional rule had to be abolished, and that members should be allowed “to bring tort actions against the unincorporated associations of which they are part.” It listed the following considerations to justify its decision: “(1) it is inherently unfair to require an injured member, who is one of a number of equally faultless members, to bear a loss incurred as a result of the association’s activities; (2) there is no reason to limit the availability of the insurance that associations can, and presumably often do, obtain to avoid unexpected liabilities of the members as a result of exposure to third party claims.” The court cautioned that an injured member’s right to sue his or her unincorporated church was subject to some important limits. Most importantly, “while a member may now sue an unincorporated association in tort, she may only reach the association’s assets. If she wishes to reach the assets of any individual, she must name that individual as a party and prove that individual’s fault, as always. As a result, individual members, including officers and trustees, may not be held vicariously liable for a judgment against the association.”
- The South Carolina Supreme Court ruled that a church member could sue his unincorporated church for injuries sustained while repairing the church sound system. The member volunteered to enter the church attic to repair the sound system. While in the attic, he fell through the ceiling and landed on a concrete floor some ten feet below. The victim sued his church, alleging that its negligence was the cause of his injuries. The supreme court ruled that the injured member could sue the church, even though it was unincorporated. 12 Crocker v. Barr, 409 S.E.2d 368 (S.C. 1992).
- The Texas Supreme Court ruled that a member of an unincorporated church could sue the church for injuries she sustained when she slipped and fell on a wet linoleum floor. The court acknowledged that the longstanding rule in Texas had been that the members of an unincorporated church could not sue the church for injuries inflicted by fellow church members. It noted that this historic rule was based on the notion that the members of unincorporated churches are engaged in a “joint venture” and that the negligence of one is imputed to all the others, including a fellow member who is injured by the negligence. The court repudiated this rule, noting that it had been abandoned by most other states. The court concluded: “Why should a church member be precluded from suing an association in tort when a paid workman would be allowed to maintain an action for the very same injury … ? We are unable to discern a defensible reply to this query. Consequently, we hold that a member of an unincorporated charitable association is not precluded from bringing a negligence action against the association solely because of the individual’s membership in the association. Any assets of the unincorporated charitable association, held either by the association or in trust by a member of the association, may be reached in satisfaction of a judgment against the association.” 13 Cox v. Thee Evergreen Church, 836 S.W.2d 167 (Tex. 1992). A dissenting justice noted that “a majority of jurisdictions follow the rule that a member of an unincorporated association injured due to the tortious conduct of another member cannot sue the association. … The court may have wrongly implied that the rule exempting unincorporated associations from liability is a waning doctrine. In fact, most jurisdictions still adhere to it.”
Many churches are unincorporated. This may be due to one or more of several factors, including the following: (1) the church never incorporated; (2) the church incorporated, but its corporate status “lapsed” due to noncompliance with legal requirements (such as filing an annual report with the secretary of state); (3) the church’s corporate charter listed its “duration” as a specific number of years rather than the more common “perpetual,” and the term expired; (4) the church incorporated, but later decided to change its legal status to that of an unincorporated association; or (5) the church is located in a state where churches are not permitted to incorporate (or were not permitted to do so in the past).
Whatever the reason for unincorporated status, an unincorporated church’s leaders should know whether their state has adopted the Uniform Nonprofit Unincorporated Association Act, since this will have a direct bearing on the liability of leaders and members alike for (1) contracts executed by other members on behalf of the church, and (2) personal injuries inflicted by other members in the course of church activities. Unfortunately, few states have implemented the Act.