Governing Well

Most churches, whether incorporated or unincorporated, have a governing document that addresses several issues of governance and administration. While the name for this document varies from church to church, it often is called bylaws, and it is this name that will be used in this article as a matter of convenience. There are several legal issues that are associated with church bylaws. This article will address 15 of them.

What are bylaws?

What are church bylaws? The Model Nonprofit Corporations Act (3rd ed. 2008), which has been adopted by several states, defines bylaws as “the code or codes of rules (other than the articles of incorporation) adopted for the regulation and governance of the internal affairs of the nonprofit corporation, regardless of the name or names used to refer to those rules.”

One court defined bylaws as follows:

The bylaws of a corporation are the rules of law for its government. The term “bylaw” may be further defined according to its function, which is to prescribe the rights and duties of the members with reference to the internal government of the corporation, the management of its affairs, and the rights and duties existing among the members. Bylaws are self-imposed rules, resulting from an agreement or contract between the corporation and its members to conduct the corporate business in a particular way. Until repealed, bylaws are the continuing rule for the government of the corporation and its officers. Schraft v. Leis, 686 P.2d 865 (Kan. 1984).

Because bylaws contain rules for internal governance and administration, they are indispensable for both incorporated and unincorporated churches.

Know your current version

In many churches, the bylaws were adopted long ago, and have been amended numerous times over the years. As a result, there may be various “editions” in circulation. Often, these editions are undated, and this can make it difficult if not impossible to identify the current one. This can create confusion.

Example A church conducts an annual business meeting at which 15 percent of the members are present. Some members question whether a quorum exists. Church staff scour the church office, looking for a copy of the church’s bylaws. Two editions are found. One defines a quorum as 20 percent of the church’s membership, and the second defines a quorum as 10 percent of the church’s membership. Neither edition is dated, and no one knows which of these editions is more recent, or even if either of them represents the current edition. What steps can church leaders take to identify the current version of the church bylaws?

Here are two common procedures that can be very effective in identifying the current edition of a church’s bylaws:

• Identify copies of the church bylaws with a numeric designation. To illustrate, a church identifies its current bylaws as “version 1.0.” During the church’s membership meeting in 2010, two amendments are made to the bylaws. Following the meeting, the revised bylaws are printed, and designated as “version 1.1.”
• Identify copies of the church bylaws by date. For example, designate the current bylaws “Current as of [date].”

In either case, be sure that all printed copies of the bylaws bear the appropriate designation, and dispose of undesignated versions.

The United States Supreme Court has observed that “all who unite themselves to [a church] do so with an implied consent to its government, and are bound to submit to it.” Watson v. Jones, 80 U.S. 679 (1871). A church’s “government” generally is defined in its charter, constitution, bylaws, resolutions, and practice.

Constitution and bylaws?

Some churches have both a constitution and bylaws. This was a common practice a century ago, and it persists to this day. But there is little justification for a church to have both a constitution and bylaws unless the constitution is made superior to the bylaws either by express provision or by a more restrictive amendment procedure.

To illustrate, some churches have (1) a constitution that can only be amended by providing members with advance notice of the proposed amendment prior to a membership meeting, and by a two-thirds vote of the membership at the meeting; and (2) bylaws that can be amended at a membership meeting, without prior notice to the members, and by a simple majority vote. The church places provisions of greatest importance in the constitution, such as church doctrine and the purchase or sale of church assets, since these can be changed only through a more deliberative process involving advance notice and a super-majority vote. Routine provisions are assigned to the bylaws.

Churches that have both a constitution and bylaws typically address many of the same issues in both documents. Over time, this often leads to conflicts, since amendments in one document may not be made to similar provisions in the other.

Example A church’s constitution and bylaws address many of the same issues. At a membership meeting the members approve an amendment to the bylaws pertaining to the size of the church board. However, the members failed to amend a corresponding provision in the church’s constitution. The provisions in these two documents are now in conflict.

Identifying a single body of rules as the “constitution and bylaws” without any attempt to distinguish between the two is a common but inappropriate practice.

What matters should be addressed in a church’s bylaws?

The Model Nonprofit Corporations Act (3rd ed. 2008), which has been adopted by several states, states that “the bylaws of a nonprofit corporation may contain any provision for managing the activities and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation.” The following subjects generally pertain to “managing the activities and regulating the affairs of” a church, and are commonly included in a church’s bylaws:

• Qualifications, selection, and expulsion of members.
• Time and place of annual business meetings.
• The calling of special business meetings.
• Notice for annual and special meetings.
• Quorums at meetings of the membership and church board.
• Voting rights and requirements.
• Selection, tenure, and removal of officers and directors.
• Filing of vacancies on the church board.
• Responsibilities of directors and officers.
• The procedure for amending bylaws.
• The procedure and voting requirements for purchases and conveyances of church property.
• The designation of standing committees (such as audit committee, an investment committee, and an insurance committee).

Tip The drafting of church bylaws is a complex task that should not be attempted without the assistance of an attorney. Knowing what to include, and exclude, from your bylaws are important tasks that require legal knowledge and experience.

Frequently omitted provisions

There are a number of potentially helpful provisions that are often omitted from church bylaws. These include the following:

• An arbitration or mediation provision requiring specified disputes to be resolved through mediation or binding arbitration.
• Choice of parliamentary law to govern membership meetings. Many church leaders assume that Robert’s Rules of Order Newly Revised governs church business meetings. But this is not the case. There are dozens of competing models of parliamentary procedure, and a church should formally select the model that will be applied. If your church intends to use Robert’s Rules of Order Newly Revised, then your bylaws should say so.
• If your church bylaws contain a provision addressing the discipline of members who violate your standards of membership, they should clarify that members who have been charged with conduct in violation of the standards of membership waive their right to resign from membership in the church. Without such a provision, members can preempt a church’s disciplinary procedure by simply informing their pastor that they are resigning as members (see “The Guinn Case” sidebar).
• A clause specifying how contracts and other legal documents are to be approved.
• Who has the authority to sign church checks? It is a basic tenet of internal control that two persons sign checks, and a church’s bylaws should specify which two officers have this authority.
• “Bonding” of officers and employees who handle church funds.
• An annual audit by independent certified public accountants. There are compelling reasons why a church should consider having an annual audit. Most importantly, an audit promotes an environment of accountability in which opportunities for embezzlement (and therefore the risk of embezzlement) are reduced. And, the CPAs who conduct the audit will provide the church leadership with a “management letter” that points out weaknesses and inefficiencies in the church’s accounting and financial procedures.This information can be invaluable to church leaders. Smaller churches that cannot afford a full audit may want to consider two other options: (1) Hire a CPA to conduct a review, which is a simpler and less expensive procedure. If the review detects irregularities, a full audit may be considered worth the price. (2) Create an internal audit committee if there are accountants or business leaders within the church who have the ability to review accounting procedures and practices and look for weaknesses. These people often are very familiar with sound internal control policies, and will quickly correct weaknesses in the church’s financial operations.
• An indemnification clause providing for the indemnification of officers and directors who are sued as a result of actions or decisions made in the course of performing their duties on behalf of the church.
• Specification of the church’s fiscal year.
• “Staggered voting” of directors (a portion of the board is elected each year to ensure year-to-year continuity of leadership).
• The bylaws should specify if the church board can act without conducting a formal meeting. To illustrate, section 8.21 of the Model nonprofit Corporation Bylaws, which has been adopted by several states, specifies that “except to the extent that the articles of incorporation or bylaws require that action by the board of directors be taken at a meeting, action required or permitted to be taken by the board of directors may be taken without a meeting if each director signs a consent in the form of a record describing the action to be taken and delivers it to the nonprofit corporation. … A consent signed under this section has the effect of action taken at a meeting of the board of directors and may be described as such in any document.”
• The bylaws should authorize the church board to conduct meetings by telephone, or allow the “attendance” of an otherwise absent director through telephone connection, if desired.
• The bylaws should specify if absentee voting is permitted at membership meetings. Absentee voting is not ordinarily permitted unless expressly authorized by an organization’s bylaws. Robert’s Rules of Order Newly Revised, specifies: “It is a fundamental principle of parliamentary law that the right to vote is limited to the members of an organization who are actually present at the time the vote is taken in a legal meeting. Exceptions to this rule must be expressly stated in the bylaws …. An organization should never adopt a bylaw permitting a question to be decided by a voting procedure in which the votes of persons who attend a meeting are counted together with ballots mailed in by absentees, since in practice such a procedure is likely to be unfair.”
• The bylaws should specify if proxy voting is permitted at membership meetings.
• Who is authorized to have custody of the minutes of church membership and board meetings?
• Who is authorized to have custody of the church’s financial records? These documents are church records, and ordinarily should not be entrusted to the treasurer’s personal possession.
• Most state nonprofit corporation laws give members a right to inspect specified corporate records at a proper time and for a proper purpose. Usually, these laws provide that this authority to inspect corporate records exists unless limited or abolished by the corporate bylaws. To illustrate, the Revised Model Nonprofit Corporation Act, which has been enacted by several states, gives members a right to inspect the minutes of board meetings if the member’s demand is made in good faith and for a proper purpose; the member describes with “reasonable particularity” the purpose and the records the member desires to inspect; and the records are directly connected with this purpose. The Act specifies that a church’s articles of incorporation or bylaws “may limit or It is a basic tenet of internal control that two persons sign checks, and a church’s bylaws should specify which two officers have this authority. abolish the right of a member under this section to inspect and copy any corporate record.”
• Clarify the meaning of all voting requirements specified in the bylaws. For example, a church’s bylaws may call for a “two-thirds vote” for certain actions. This can have various meanings, including a vote that is precisely two-thirds of the membership; at least two-thirds of the total voting membership, regardless of how many come to a business meeting; or, at least two-thirds of the members present at a duly called meeting at which a quorum is present. This kind of ambiguity has caused countless internal church disputes.
• Suspension of removal of board members who miss a specified number of board meetings. Board members owe various “fiduciary duties” to their church, and one of these is the duty to exercise “due care” in the performance of their responsibilities. Board members who miss most board meetings eventually will be in violation of this duty, and some churches have chosen to address this issue in their bylaws with a provision calling for the suspension or removal of such persons. The fiduciary duty of due care goes to the very heart of the status of a board member.
• In 2008 the IRS ruled that a nonprofit corporation did not qualify as a taxexempt church, in part because its governing document did not have a conflict of interest policy. The IRS noted that to qualify for exemption, an organization must be operated for public rather than private purposes, and “the organization has the burden of demonstrating this by showing that it is not operated for the benefit of private individuals, such as its creator and his family.” The IRS concluded: “You have not adopted bylaws or provided specific information about the governance of your organization, nor have you adopted a conflict of interest policy …. The structure of your organization indicates that it can be used to benefit private individuals, such as [the founder] and his family, and you lack safeguards that would help to prevent such use.” IRS Letter Ruling 200830028. This ruling is significant because of the importance the IRS assigned to a conflict of interest policy despite the fact that neither the tax code nor regulations specifically require that a church have such a policy. The IRS concluded that the lack of a conflict of interest policy tends to show that a family- governed entity is operated for private rather than public interests and is therefore ineligible for exemption. While this concern will not directly apply to most churches, it is a point worth considering with the attorney who drafts or reviews your church’s bylaws.
• It is common for church board members to resign their position when they relocate or become incapacitated. However, church bylaws usually do not address when and how such resignations will occur. This is an important and frequently overlooked issue, since board members generally remain liable for the actions of the board until their resignation is effective. If the timing of a resignation is ambiguous, then this can create lingering exposure to liability. To avoid this, a church’s bylaws should clarify precisely how and when a board member’s resignation will be effective.

The Guinn Case

In 1989, the Oklahoma Supreme Court issued a ruling that remains the definitive analysis on the discipline of church members. Guinn v. Church of Christ, 775 P.2d 766 (Okla. 1989). The court reached the following conclusions:

• The discipline of church members (i.e., persons who have not withdrawn from membership) is a constitutionally protected right of churches.
• Discipline of persons who have effectively withdrawn their church membership is not a constitutionally protected activity, and churches that engage in such conduct can be sued under existing theories of tort law.
• The constitutional right of a church member to withdraw from church membership is protected by the First Amendment guaranty of religious freedom unless a member has waived that right. A church wishing to restrict the right of disciplined members to withdraw must obtain a voluntary and knowing waiver by present and prospective members of their constitutional right to withdraw. How can this be done? One approach would be for a church to adopt a provision in its bylaws preventing members from withdrawing if they are currently being disciplined by the church. Obviously, the disciplinary procedure must be carefully specified in the church bylaws so there is no doubt whether the disciplinary process has been initiated with respect to a member. Most courts have held that members are “on notice” of all of the provisions in the church bylaws, and consent to be bound by them when they become members. As a result, the act of becoming a member of a church with such a provision in its bylaws may well constitute an effective waiver of a member’s right to withdraw (if the disciplinary process has begun).

What should not be included in a church’s bylaws?

Bylaws are adopted “to prescribe the rights and duties of the members with reference to the internal government of the corporation, the management of its affairs, and the rights and duties existing among the members. Bylaws are self-imposed rules, resulting from an agreement or contract between the corporation and its members to conduct the corporate business in a particular way. Until repealed, bylaws are the continuing rule for the government of the corporation and its officers.” Schraft v. Leis, 686 P.2d 865 (Kan. 1984).

This definition suggests that matters not related to the internal governance and administration of a church are more appropriately addressed elsewhere, such as in resolutions or policies. One of the reasons for addressing some lis in resolutions and policies is that they can be amended more easily than waiting for the next annual business meeting to amend the bylaws.

One of the reasons for addressing some items in resolutions and policies is that they can be amended more easily than waiting for the next annual business meeting to amend the bylaws.

Examples of items that are not directly related to internal governance and administration, and that often are addressed in resolutions and policies, include:

• Personnel policies for church employees, addressing such lis as compensation, benefits, religious preferences, discipline and terminations, sexual harassment, and employment standards.These matters are best addressed in a written policy.
• Rules for the selection and supervision of volunteers who will work with minors are best addressed in a written policy.
• Some churches that define marriage as a union between a man and a woman have amended their bylaws to include a statement to this effect. In many cases, this is unnecessary, since the church’s position on marriage can be established through other provisions in its bylaws (i.e., a provision making the Bible the final authority on all matters of doctrine and conduct), and through its established practice.
• The bylaws of an incorporated church need not include lis that are required to be included in the articles of incorporation (see below).

Distinguished from articles of incorporation

The application for incorporation that is filed with the secretary of state generally is called the articles of incorporation or articles of agreement. This document, when approved and certified by the appropriate government official, is commonly referred to as the corporate charter.

Church charters typically set forth the following information:

• corporate name
• corporate address
• period of duration
• purposes of the corporation
• names and addresses of incorporators and directors

In addition, the income tax regulations require that the assets of a church pass to another tax-exempt organization upon its dissolution. The IRS has stated that the following paragraph will satisfy this requirement if contained in a church corporation’s articles of incorporation:

Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes.

Most churches prefer to specify the religious organization to which their assets will be distributed in the event of dissolution rather than leaving this determination to a judge’s discretion. There is no assurance, under the suggested IRS language, that a dissolved church’s assets would even go to another religious organization. For example, a judge could transfer a dissolved church’s assets to a city or state government, or to a non-religious charitable organization, under the IRS language. Of course, churches wishing to designate a religious organization in their dissolution clauses should condition the distribution upon that organization’s existence and tax-exempt status at the time of the distribution.

The IRS Internal Revenue Manual and IRS Publication 557 both require that an appropriate dissolution clause appear in a church’s articles of incorporation. However, the IRS has conceded that no dissolution clause is required if state law requires that the assets of a dissolved church corporation (or other charitable corporation) be distributed to another tax-exempt organization. The instructions to IRS Form 1023 (Application for Recognition of Exemption) state that “if you are a corporation formed in the following states, then you do not need a specific provision in your articles of incorporation providing for the distribution of assets upon dissolution: Arkansas, California, Louisiana, Massachusetts, Minnesota, Missouri, Ohio, Oklahoma.”

The IRS also suggests that the following two paragraphs be placed in a church corporation’s articles of incorporation:

Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code.

No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Third hereof. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under section 501(c) (3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by a corporation, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code.

(If reference to federal law in articles of incorporation imposes a limitation that is invalid in your state, you may wish to substitute the following for the last sentence of the preceding paragraph: “Notwithstanding any other provision of these articles, this corporation shall not, except to an insubstantial degree, engage in any activities or exercise any powers that are not in furtherance of the purposes of this corporation.”)

Key point. Some churches define their exempt purposes to include charity and education in addition to religion, believing that this will accommodate a greater diversity of ministries. However, note that such an expansion of corporate purposes may also jeopardize various exemptions that are available to “religious” organizations. Church leaders should discuss this important issue with an attorney.

“A bylaw is a permanent rule of action of the conduct of the corporate affairs; a resolution ordinarily applies only to a single act of the corporation.” Brown v. National Loan & Investment Company, 139 S.W.2d 364 (Tex. App. 1940).

“A resolution is not a bylaw; it is an informal enactment of a temporary nature providing for the disposition of certain administrative business of the corporation. In contrast, bylaws are the laws adopted by the corporation for the regulation of its actions and the rights and duties of its members.” Brennan v. Minneapolis Society for Blind, Inc., 282 N.W.2d 515 (Minn. 1979).

Table 1: Provisions commonly found in governing documents

CharterConstitutionBylawsResolutions

Name Address Duration Purposes Names and addresses of initial board members Dissolution clause

[many churches only use bylaws, and not bylaws plus a constitution; this column assumes that a church has both documents] • doctrinal tenets (and any other matter whose amendment is subject to a greater voting requirement)

qualifications, selection, and discipline of members time and place of annual business meetings calling of special business meetings notice for annual and special meetings quorum voting rights selection, tenure, and removal of officers and directors filling of vacancies responsibilities of directors and officers method of amending bylaws purchase and conveyance of property adoption of a specific body of parliamentary procedure a clause requiring disputes between church members, or between a member and the church itself, to be resolved through mediation or arbitration a clause specifying how contracts and other legal documents are to be approved and signed signature authority on checks “bonding” of officers and employees who handle church funds an annual audit by independent certified public accountants an indemnification clause specification of the church’s fiscal year “staggered voting” of directors (a portion of the board is elected each year-to ensure year-to-year continuity of leadership)

housing allowances for clergy accountable business expense reimbursement arrangement clergy compensation package

Distinguished from resolutions

Corporate resolutions are not bylaws. A resolution is an informal and temporary enactment for disposing of a particular li of business. Bylaws are rules of general applicability. For example, a minister’s housing allowance generally is designated by the church board in a resolution. Similarly, a church’s business expense reimbursement policy or medical insurance reimbursement plan ordinarily appears in resolutions of the church board.

Ambiguous terminology

Church bylaws often contain ambiguous language, and this can result in both confusion and internal disputes. It is essential for church bylaws to be reviewed periodically by the board, or a special committee, to identify ambiguities and propose modifications. Will the civil courts interfere in a church dispute over the meaning of ambiguous bylaw provisions? Generally, the civil courts have been willing to do so if no interpretation of doctrine is required.

Case Study Blanton v. Hahn, 763 P.2d 522 (Ariz. App. 1988) An Arizona court agreed to interpret a clause in a church’s bylaws specifying that “a pastor may be terminated by the church congregation … but only if … the vote equals or exceeds three-fourths of the voting members present.”

A church voted to oust its pastor at a duly called meeting by a vote of 18 of the 26 members present (the remaining 8 members did not vote). The pastor refused to acknowledge that the vote resulted in his dismissal, since less than “three-fourths of the voting members present” had voted to dismiss him (18 is only 70 percent of 26). Several disgruntled members of the congregation disagreed with this interpretation, and petitioned a court for a ruling recognizing that the congregational vote had resulted in the dismissal of the pastor.

The members argued that the phrase “three-fourths of the voting members present” should be interpreted to mean three-fourths of the individuals who actually cast votes at the business meeting rather than three-fourths of all members actually present and eligible to vote. Since all 18 of the persons who actually voted at the meeting voted to dismiss the pastor, 100 percent of the votes were cast in favor of dismissal. A state appeals court ruled that the pastor had not been lawfully dismissed in the meeting in question.

The court relied on Robert’s Rules of Order, which had been adopted by the church (in its bylaws) as the governing body of parliamentary procedure, as support for its conclusion that the phrase “three-fourths of the voting members present” means three-fourths “of the individuals present and eligible to vote.” Accordingly, the pastor had not been dismissed by the congregational vote since less than three-fourths of the members present and eligible to vote had voted to dismiss him.

Case Study Holmstrom v. Sir, 590 N.W.2d 538 (Iowa 1999) The Iowa Supreme Court suggested that it was barred by the First Amendment guaranty of religious freedom from resolving a dispute involving the interpretation of church bylaws. A group of church members filed a lawsuit claiming that the pastor and other members had violated the church bylaws in several ways, including the following:

(1) Placed some members on “probation” when no such status was recognized by the bylaws;

(2) terminated longtime members without cause;

(3) allowed the minister and his wife to take money from the church treasury and funds for their own personal and private use;

(4) appointed members to leadership positions illegally;

(5) refused to honor a proper request for a meeting of the congregation called for the purpose of exploring the relationship of the church and its minister;

(6) leased church property to private individuals;

(7) disposed of property belonging to the church to private individuals;

(8) eliminated church committees;

(9) held illegal meetings;

(10) violated church spending limits.

The pastor’s attorney filed a motion to dismiss the case, arguing that the First Amendment guaranty of religious freedom prevents the civil courts from resolving such disputes. The trial court agreed, and dismissed the lawsuit. The disgruntled members appealed. The state supreme court began its ruling by noting that “civil courts are precluded by the First Amendment from deciding doctrinal issues,” including “membership in a church organization or church discipline,” and that “the courts have no jurisdiction over, and no concern with, purely ecclesiastical questions and controversies, including membership in a church organization, but they do have jurisdiction as to civil, contract, and property rights which are involved in or arise from a church controversy.”

Case Study Cherry Valley Church of Christ v. Foster, 2002 WL 10545 (Tex. App. 2002)

A Texas court ruled that it could not resolve an internal church dispute on the basis of the church’s constitution and bylaws since the critical provisions in these documents could not be applied without the court delving into church doctrine and governance. The case involved the question of “who has the right to select and remove the trustee-directors and the minister.” Both sides relied on the church’s articles of incorporation in support of their position. The court noted that “ordinarily, we would construe the articles of incorporation of a Texas nonprofit corporation according to the body of neutral legal principles that governs Texas corporations generally. If we could do so without running afoul of constitutional constraints, we would also apply those principles to construe the articles of incorporation of a nonprofit corporation organized for religious or spiritual purposes.” However, it concluded that it could not apply neutral legal principles in construing articles of incorporation or bylaws of the church, since both documents used the phrase “custom and practices of the church.” Such language, the court concluded, “removed any dispute regarding the selection of its directors from the purview of the judicial system. Interpreting this phrase would require the court to examine the historical, administrative, and ecclesiastical affairs of a religious organization and decide the outcome of the issue based on its determination of what are the customs and practices of the church …. Our deciding the central issue here would require us to interpret religious law and usage. Not only is that issue ambiguous, its resolution would require the state, through the judicial system, to determine issues of internal church governance. We may not delve into those issues.”

Case Study Organization for Preserving the Constitution of Zion Lutheran Church v. Mason, 743 P.2d 848 (Wash. App. 1987)

A church’s constitution provided that “the candidate receiving the majority of all votes cast shall, upon unanimous approval, be declared elected.” The church convened a congregational meeting to vote on a pastoral candidate, and the candidate received a majority of the votes cast (but not “unanimous approval”). The candidate was subsequently employed, and a group of dissidents filed a lawsuit asking a civil court to enforce the church’s constitutional requirement of “unanimous approval.” While noting that the First Amendment prohibits a court “from entangling itself in matters of church doctrine or practice,” a Washington state court concluded that it could resolve controversies, such as this one, involving the interpretation “of an ambiguous provision in what amounts to a contract between the members of the congregation, dealing with a purely procedural question” and involving “no ecclesiastical or doctrinal issues.” The court also noted that it found no “dispute resolution process” within the denomination to which it could defer.

Reconciling conflicting provisions

Occasionally, conflicts develop among provisions in a corporation’s charter, constitution, bylaws, and resolutions. The general rule is that provisions in a corporate charter take precedence over conflicting provisions in a corporation’s constitution, bylaws, or resolutions.

Case Study Scotts African Union Methodist Protestant Church v. Conference of African Union First Colored Methodist Protestant Church, 98 F.3d 78 (3rd Cir. 1996)

A federal appeals court ruled that a local church’s articles of incorporation took priority over a conflicting provision in a denominational “Book of Discipline” which the court viewed as the “functional equivalent” of the local church’s bylaws. In 1991 the African Union Methodist Protestant Church (the “national church”) adopted a “church property” resolution specifying that “the title to all property, now owned or hereafter acquired by an incorporated local church … shall be held by or conveyed to the corporate body in its corporate name, in trust for the use and benefit of such local church and of the African Union Methodist Protestant Church.” The property resolution was incorporated into the national church’s governing Book of Discipline. At the same 1991 meeting of the national church, another resolution was adopted authorizing pastors “to sign official documents pertaining to the individual local church.” On the basis of these resolutions, the national church directed a number of pastors to sign a quitclaim deed transferring title to their church’s property to the national church. One church, whose property was deeded to the national church by its pastor pursuant to such a directive, voted unanimously to secede from the national church and then challenged the legality of the transfer in court. A federal appeals court ruled that the pastor’s attempt to deed his church’s property to the national church had to be invalidated. It based this conclusion on a provision in the local church’s articles of incorporation that permitted conveyances of church property only upon a vote of at least two-thirds of the church’s members. The court noted that this provision conflicted with the national church’s “property resolutions” that were incorporated into its Book of Discipline. However, the court concluded that the Book of Discipline “functioned” as the local church’s bylaws, and it concluded that whenever there is a conflict between a church’s articles of incorporation and its bylaws, the articles of incorporation prevail. As a result, the pastor was bound by the requirement in the articles of incorporation rather than the Book of Discipline since “provisions of a corporation’s charter or articles of incorporation enjoy priority over contradictory or inconsistent bylaws.”

Case Study Morris v. Richard Clark Missionary Baptist Church, 177 P.2d 811 (Cal. 1947)

A church charter provided for seven trustees and the church’s bylaws called for nine. A California court ruled that the charter provision took priority over the provision in the church bylaws.

Case Study New Mount Moriah Missionary Baptist Church, Inc. v. Dinkins, 708 So.2d 972 (Fla. App. 1998)

A Florida court ruled that a church board properly removed a pastor without a congregational vote, since this was the procedure specified in the church’s articles of incorporation. A church’s board of deacons voted to terminate their pastor’s employment pursuant to the following provision in the church’s articles of incorporation: “With respect to the hiring of a … pastor … the sole responsibility for both hiring and firing said individuals shall rest with the deacons, as more fully set out in the bylaws of this not for profit corporation.” The bylaws contained a similar provision. However, when several members of the congregation objected to the board’s decision, the board decided to submit the question of the pastor’s removal to the church membership at a specially called business meeting. The membership voted to retain the pastor. The board ignored this vote, and attempted to enforce its previous decision to remove the pastor by seeking a court order. The pastor, on the other hand, argued that the board had “amended” the bylaws when it permitted the membership vote, and therefore the vote was valid and the pastor was retained. A state appeals court agreed with the board that the pastor had been properly removed. It noted that the state nonprofit corporation law requires that any new bylaws must be consistent with the articles of incorporation. As a result, the pastor’s argument that the board “amended” the bylaws by calling a meeting of the membership to vote on the pastor’s retention had to be rejected, since such an “amendment” would be in direct violation of the articles of incorporation which allow a pastor to be removed only by the board.

Case Study Nevada Classified School Employees Association v. Quaglia, 177 P.3d 509 (Nev. 2008)

The Nevada Supreme Court ruled that a corporation’s bylaws are void to the extent that they are inconsistent with its articles of incorporation.

Case Study Leeds v. Harrison, 87 A.2d 713, 720 (N.J. 1952)

A New Jersey court ruled that “religious and quasi-religious societies may adopt a constitution and bylaws for the regulation of their affairs, if conformable and subordinate to the charter and not repugnant to the law of the land ….”

If the constitution is separate and distinct from the bylaws and is of superior force and effect either by expressly saying so or by reason of a more difficult amendment procedure, then provisions in a corporation’s constitution take precedence over conflicting provisions in the bylaws. To illustrate, where a church constitution specified that a pastor was to be elected by a majority vote of the church membership and the bylaws called for a two thirds vote, the constitution was held to control. Pelzer v. Lewis, 269 A.2d 902 (Pa. 1970).

Resolutions are inferior to, and may not contradict, provisions in a corporation’s charter, constitution, and bylaws. Incorporated churches are free to adopt bylaws addressing issues of internal administration, and these bylaws generally take precedence over conflicting provisions in state nonprofit corporation law. In other words, state nonprofit corporation law may be viewed in most cases as a “gap filler”-filling gaps in a church’s bylaws. For example, if an incorporated church’s bylaws do not address how vacancies on the board are to be filled, or do not define a quorum, the nonprofit corporation law will “fill the gaps.”

Case Study First Born Church of the Living God, Inc. v. Hill, 481 S.E.2d 221 (Ga. 1997)

The Georgia Supreme Court ruled that a provision in the state nonprofit corporation law mandating annual membership meetings did not take priority over a provision in a church’s bylaws calling for membership meetings once every four years. The members of a church filed a lawsuit in civil court seeking to compel their church to conduct an annual membership meeting. The members relied upon a provision in the state nonprofit corporation law specifying that a nonprofit corporation “shall hold a meeting of members annually at a time stated in or fixed in accordance with the bylaws.” The church’s bylaws called for a membership meeting once every four years. The state supreme court ruled that state nonprofit corporation law did not override the church’s own bylaws and therefore the church was required to conduct meetings only once every four years. The court observed that the state nonprofit corporation law itself specifies that if any of its provisions is inconsistent with religious doctrine governing a nonprofit corporation’s affairs on the same subject, “the religious doctrine shall control to the extent required by the Constitution of the United States or the Constitution of this state or both.” As a result, the issue “is whether the frequency with which the church’s membership meets is a matter of religious doctrine having constitutional precedence over inconsistent statutory provisions of [the nonprofit corporation law].” The court noted that the church in this case was “hierarchical” in nature, and that the members had very limited authority to direct church affairs. It concluded: “An annual meeting as contemplated by [the nonprofit corporation law] would be totally inconsistent with the church’s fundamental religious freedom, as a hierarchical religious body, to determine its own governmental rules and regulations. Members have no legal right to wrest the governing of the church from [church officials] by obtaining court-ordered annual meetings conducted in accordance with [nonprofit corporation law].”

Rules of construction

Several courts have ruled that bylaws are to be construed according to the same rules that apply to contracts. A leading treatise on contract law summarizes the rules of construction as follows:

Words of corporate bylaws are to be interpreted in their ordinary, popular sense …. A bylaw will be construed in harmony with the charter if it is reasonably possible to do so. Additionally, a bylaw will be interpreted to avoid conflicts among its provisions. In the interpretation of bylaw provisions, courts must give effect to the intent of the parties as revealed by the language of the bylaws and the circumstances surrounding their creation and adoption. The intent of the [drafters] in enacting particular bylaw amendments is instructive in determining whether any ambiguity exists. A construction that will render a bylaw just and equal in its operation will be adopted in preference to one that will have a contrary effect. Another principle of construction adopted by some courts is that no provision of a bylaw should unnecessarily be rendered meaningless or superfluous. The rules used to interpret statutes, contracts, and other written instruments are applicable when construing corporate bylaws ….

If a bylaw is unambiguous in its language, a court will not interpret it or search for the parties’ intent behind the bylaw. But where there exist reasonable and contradictory interpretations of a bylaw provision, its interpretation is a question or fact for the jury, reviewable by a court for clear error. A bylaw is not made ambiguous merely because parties disagree on its proper construction; in order to be ambiguous the bylaw must be reasonably susceptible of different constructions or interpretations. However, ambiguity may be found when the bylaw is read together with another corporate document. The contract is to be construed against the party who drafted it when the surrounding circumstances do not clarify the ambiguity.

Ambiguous or obscure provisions should be construed to make them harmonize with the general intent of the bylaws as a whole, and to promote the business welfare of the corporation. … In determining the rights of a member of a corporation under its bylaws, portions dealing with the same subject must also be construed. If it can be ascertained, the design and intent of the framers of the bylaw must prevail, and where a particular bylaw was adopted to meet a specific situation, the purpose for which it was adopted is pertinent in determining the proper construction to be given it. Fletcher, Cyclopedia of the Law of Corporations § 4195.

Case Study Kansas Heart Hospital, L.L.C. v. Idbeis, 184 P.3d 866 (Kan. 2008)

The Kansas Supreme Court ruled that the bylaws of a corporation are self-imposed rules, resulting from an agreement or contract between the corporation and its members to conduct the corporate business in a particular way. As a result, corporate instruments such as charters and bylaws are interpreted in the same manner as other contracts. Where the parties have created an unambiguous written statement of their contract, the language of that contract will control, not as subjectively understood by either party but as understood by a hypothetical reasonable third party. Additionally, even if a word has two or more meanings, a document is ambiguous only if an examination of the entire document leaves a genuine uncertainty as to which of the two meanings was intended by the parties. Finally, bylaws of a corporation are presumed to be valid, and the courts will construe the bylaws in a manner consistent with the law rather than strike down the bylaws.

Table 2 Priority among Governing documents in Congregational Churches

DocumentOrder of priority

Charter	The highest order of priority Takes priority over all other sources of authority except the charter, assuming that it is made superior to the bylaws either by express provision or by a greater voting requirement to amend
Constitution	The second highest order of priority Its provisions take priority over any other source of authority Start with the charter when attempting to resolve a question of administration; if it doesn’t address the matter, then proceed on to the next order of priority until an answer is found
Bylaws	The third highest order of priority Takes priority over all other sources of authority except the charter and constitution (assuming the constitution is made superior to the bylaws)
Parliamentary law	The fourth highest order of priority (assuming that a specificbody of parliamentary law has been adopted) Takes priority over all other sources of authority if specifically adopted in the church bylaws, except the charter, constitution,and bylaws
State nonprofit corporation law	The fifth highest order of priority Its provisions generally apply only if the church has not provided otherwise in its charter, constitution, or bylaws (including rules of parliamentary law adopted by the bylaws) State nonprofit corporation laws ordinarily make a few provisions mandatory despite a bylaw or charter provision to the contrary
Resolutions	The sixth highest order of priority Resolutions can provide guidance in the event that the charter, constitution, bylaws, parliamentary law, and applicable state nonprofit corporation law do not address an issue
Established custom	The seventh highest order of priority Only applies if the custom is established by long and consistent use It can provide guidance on questions for which an established custom exists, and no higher source of authority applies
Majority rule	The last order of priority; the only basis for resolving issues not addressed in any other manner

Amendment procedures

Most bylaws provide for their own amendment, and it is important for church leaders to be familiar with this procedure to ensure that amendments are handled correctly. Consider the following points:

• Some church bylaws permit amendments to occur at any membership meeting, without advance notice to members.
• Some church bylaws require that members be notified a specified number of days in advance of a membership meeting at which a bylaw amendment will be considered. If advance notice is required, then a failure to comply with this requirement will jeopardize the legal validity of any amendments that occur, no matter how many members support the amendments.
• In some cases, church leaders decide not to wait until the next annual business meeting to present a proposed bylaw amendment to the congregation, and a special business meeting is called. However, note that state nonprofit corporation law generally requires that the notice provided to members of the date, time, and place of a special business meeting also state the purpose for which the meeting is being called. If the notice to members fails to specify that an amendment to the bylaws will be considered, including the text of the proposed amendment that will be presented during the meeting, then the legal validity of such an amendment will be jeopardized.
• Some church bylaws require a super majority (i.e., greater than a simple majority) to amend certain provisions. For example, an amendment to church doctrine, or to the requirements for the sale or acquisition of church property, often require a two-thirds or even a three-fourths vote. Church leaders must be familiar with the voting requirement that will apply to any proposed bylaw amendment.

Is it time to rewrite our bylaws?

Do church bylaws ever need to be rewritten? That depends on several factors, including the following:

• How old are the bylaws? The older they are, the more likely they are in need of a legal review, and possibly revisions or a new and updated document.
• Who drafted the bylaws? If the bylaws were drafted by one or more attorneys with experience in corporate governance, ideally involving churches or other nonprofit organization, there is less need to rewrite the bylaws. On the other hand, many churches have bylaws that were drafted by a committee of laypersons with little if any specialized knowledge in corporate governance. In such a case, there may be a greater need for revisions or a new document.
• Some church bylaws are mandated by the denomination with which they are affiliated, and the church has little if any authority to make any changes. Church leaders should be familiar with any such limitations.

Do we need to file our bylaws with the state?

Unincorporated churches generally are not required to file bylaws with the state. But there may be exceptions, depending on state law. For example, an unincorporated church may need to submit a copy of its bylaws to a state agency to demonstrate entitlement to a property or sales tax exemption or a preferential zoning classification. In many states, incorporated churches are not required to file their bylaws with the state corporations commission as part of the incorporation process. Check with your state’s corporations commission to be sure. As is the case with unincorporated churches, an incorporated church may need to submit a copy of its bylaws to a state agency for various reasons, such as to demonstrate entitlement to a property or sales tax exemption or a preferential zoning classification.

The application of denominational governing documents.

In many denominations, affiliated churches are limited in their ability to compose or revise their bylaws. In some cases, the church’s bylaws are entirely prescribed by the denomination’s governing document. In others, the church is free to compose its own bylaws, but must include terms mandated by the denomination’s governing document. As one court noted, “For religious nonprofit corporations, bylaws may partly be prescribed by, and may be an important tie to, a related superior or affiliated religious organization.” New v. Kroeger, 84 Cal.Rptr.3d 464 (Cal. App. 2008).