State Court Rulings Regarding Church Property Disputes

By Richard R. Hammar, J.D., LL.M., CPA

© Copyright 1991, 1998 by Church Law & Tax Report.  All rights reserved.  This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided 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. Church Law & Tax Report, PO Box 1098, Matthews, NC 28106. Reference Code: m21

How have state courts resolved church property disputes since Jones? A few courts have repudiated the neutral principles approach approved by the United States Supreme Court in Jones, and have adopted a rule of compulsory deference by the courts to the determinations of ecclesiastical commissions or judicatories in church property disputes, whether or not religious doctrine is implicated.¹ However, a majority of courts have either adopted the principle of Jones that the compulsory deference rule is limited to issues of “religious doctrine or polity,”² or have applied a neutral principles approach to the resolution of church property disputes involving hierarchical churches.³ A few courts continue to adhere to the “implied trust” doctrine that was repudiated by the Supreme Court in Hull.⁴ Such cases illustrate that diversity will characterize states' solutions to these intractable problems. Some of the leading cases representing the major views expressed by the state courts are summarized below.

A few states have adopted the compulsory deference rule in resolving church property disputes involving hierarchical churches. To illustrate, the Iowa Supreme Court ruled that the property of a local Presbyterian church that attempted to disaffiliate from the United Presbyterian Church in the United States of America (UPCUSA) belonged to the denomination.¹ It based its decision on the compulsory deference rule (a church judicatory determined that the denomination owned the property), but it also noted that the same result would occur under an application of the neutral principles of law approach. The court observed: “When its provisions are construed together, the Book of Order gives UPCUSA exclusive ultimate control of the uses and disposition of local property. Local church property decisions are subject to general church approval, and the general church may take over local church government, as it did in this case, when it disagrees with the local church handling of church affairs.”

A Michigan state appeals court applied the compulsory deference rule to a church property dispute involving an hierarchical denomination (the Protestant Episcopal Church in the United States of America, or simply the “PECUSA”).²  The court quoted with approval the following observation of the state supreme court:

In the freedom of conscience and the right to worship allowed in this country, the defendants and members of this church undoubtedly possessed the right to withdraw from it, with or without reason. But they could not take with them, for their own purposes, or transfer to any other religious body, the property dedicated to and conveyed for the worship of God under the discipline of this religious association; nor could they prevent its use by those who choose to remain in the church, and who represent the regular church organization. If complainants maintain the allegations of their bill—that they represent the regularly organized body of the church, and are its regular appointees—they are entitled to the relief prayed.

Similarly, the court quoted with approval from another state supreme court ruling:

It is the well--established law of this state . . . that while members of a church undoubtedly possess the legal right to withdraw from it, with or without reason, they may not, in doing so, take with them, for their own purposes, or transfer to any other religious body, property previously conveyed to, or dedicated to the use of, the religious denomination from which they are withdrawing or one of its member churches, but such property must remain for the use and benefit of adherents to that denomination of those who represent it. Under these decisions . . . although the majority faction within a hierarchical church may secede, it may not take property with it. To the extent that language in these decisions appears to sanction use of the departure--from--doctrine test they are, of course, no longer authoritative. The trial court in this case, although referring to these decisions, made no inquiry into or determination regarding which faction adhered to the tenets of faith and practice existing at the time of the affiliation by the local church. Religious doctrine and practice played no part in the decision.³

In another dispute involving ownership of church property, a West Virginia appeals court awarded the assets of a schismatic congregation to a national denomination.⁴  A local congregation that had been affiliated with the Original Glorious Church of God in Christ (the “national church”) seceded from the national church, and established a new church. The church's trustees attempted to convey the church's assets to the new organization. This conveyance was challenged by the national church, which asserted that the church's assets belonged to it. It cited a provision in the national church's constitution dictating that “no church group desiring to leave this body shall have any legal claim on church property if the property in question was purchased and paid for with general funds or if general funds were in any way used in the purchase thereof.” Since the national church produced a copy of a check in the amount of $300 that it had issued to the local church in 1964 to assist with church construction, the court concluded that the church's assets belonged to the national church and that the attempted conveyance by the local trustees was void.

This conclusion was reinforced by a state law specifying that “when an individual church has become extinct, or has dissolved, a suit may be instituted by the religious body that by the laws of the denomination to which such individual church belongs, has the charge or custody of the property, or in which it may be vested by the laws of the church.” The court further noted that with respect to hierarchical churches (such as the Original Glorious Church of God in Christ), the civil courts “should respect, and where appropriate enforce, the final adjudications of the highest church tribunals, provided that such adjudications are not procured by fraud or collusion. If a church has a hierarchical structure and its leaders have addressed a doctrinal or administrative dispute, the civil courts do not intervene, absent fraud or collusion.” Since the national church had addressed the issue of property disputes in its constitution (quoted above), the civil courts were bound to defer to that document and award the local congregation's assets to the national church. Finally, the court noted that title must be vested in the trustees of the national church, since under West Virginia law churches and religious denominations cannot incorporate or hold title to property in the name of the organization.

b. Neutral Principles of Law

The vast majority of state courts have adopted the neutral principles approach in resolving church property disputes involving hierarchical churches. The cases validate the Supreme Court's pronouncement in Jones that “[u]nder the neutral principles approach, the outcome of a church property dispute is not foreordained.”⁵ Both local churches and denominations have been awarded title to schismatic church property by courts applying the neutral principles approach. Representative cases are summarized below.

(1) Title Awarded to Local Churches

A number of courts, applying the neutral principles of law approach, have awarded property to local churches that have disaffiliated from a denomination. To illustrate, the New York Court of Appeals (the highest level state court in the state) adopted the neutral principles approach in a dispute involving ownership of property owned by a church that disaffiliated from a the United Presbyterian Church in the United States of America (UPCUSA), and awarded the church's property to the local church.⁶ The court reasoned that there was no neutral principle of law vesting title in the denomination. The court rejected the denomination's argument that “it is presumed that the local church intended to dedicate the property to the purposes of the larger body by voluntarily merging itself with it.” The court criticized the “compulsory deference” rule, since this rule

assumes that the local church has relinquished control to the hierarchical body in all cases, thereby frustrating the actual intent of the local church in some cases. Such a practice, it is said, discourages local churches from associating with a hierarchical church for purposes of religious worship out of fear of losing their property and the indirect result of discouraging such an association may constitute a violation of the free exercise clause. Additionally, by supporting the hierarchical polity over other forms and permitting local churches to lose control over their property, the deference rule may indeed constitute a judicial establishment of religion . . . .⁷

A Pennsylvania state appeals court ruled that a dissident church was entitled to retain its property following its disaffiliation from the Russian Orthodox Church because of a proposed revision by the Orthodox Church in its calendar.⁸

The court held that an award of a local church's assets to a parent denomination is possible only if the denomination can demonstrate “(1) an actual transfer of property from the congregation to the hierarchical church body, or (2) clear and unambiguous documentary evidence or conduct on the part of the congregation evincing an intent to create a trust in favor of the hierarchical church body.” The court observed that the denomination could not satisfy the first test, since the local congregation “never relinquished its right to possession or legal title to the church property.” On the contrary, the church's original affiliation with the Orthodox Church was accompanied by a letter expressing its intent to retain ownership and control of its property. As to the second requirement, the court observed, after reviewing the church's charter, constitution, bylaws, and the bylaws of the Orthodox Church, that none of these documents contained any “clear and unambiguous” language creating a trust in favor of the Orthodox Church. The court also rejected the denomination's claim that its “hierarchical structure” compelled an award in its favor, since “regardless of the form of government of the church in question, we must examine the relevant deeds, contracts, or other evidence to determine ownership of the disputed property.”

The Kentucky Supreme Court rejected the claim of the Protestant Episcopal Church in the United States of America (PECUSA) to the property of a local church that voted unanimously to disaffiliate from the parent body.⁹ The church voted to disaffiliate from the PECUSA because of disagreement with certain denominational policies, and a dispute arose between the church and PECUSA regarding ownership of the church's property. The court emphasized that (a) the congregation's withdrawal from the PECUSA “was unequivocal, and there was no dissenting faction,” (b) the “church property was acquired exclusively by the efforts of the local congregation,” (c) through the years title to the property was held by the church trustees and later by the church when it incorporated, and (d) the church “freely engaged in transactions such as purchase, encumbrance, and sale of its real property without any involvement by PECUSA.” Such evidence, observed the court, created an “appearance of absolute ownership” in the local church. However, the PECUSA maintained that certain denominational documents imposed a trust on the local church's property in favor the national church, and that in any event the civil courts were required to defer to the conclusions of a hierarchical denomination such as the PECUSA (under the so--called “compulsory deference rule”).

Both of these contentions were rejected by the court. As to the documents, the court concluded that (a) they were ambiguous, and accordingly could not create a trust in the absence of a “reversionary clause” in favor of the PECUSA, and (b) the PECUSA had never previously regarded the documents as having any legal effect. The court refused to adopt the “compulsory deference rule,” choosing instead the “neutral principles of law” approach to resolving church property disputes. Under this approach, the court concluded that the local church and not the PECUSA was the rightful owner of the property in question since nondoctrinal language in the church's charter and deed clearly vested title in the local church. The court concluded:

It should be remembered that [the church] acquired the property with no assistance from PECUSA; that the property was managed and maintained exclusively by the church; that the church improved and added to its property; and that PECUSA deliberately avoided acquisition of title or entanglement with the property to ensure that it would not be subject to civil liability. The record is clear that PECUSA's relationship with the church was exclusively ecclesiastical and the church was at all times in control of its temporal affairs.¹⁰

Two dissenting justices argued that a document executed by the church 81 years earlier did create a trust in favor of the PECUSA. They observed that the church “enjoyed the benefits of membership in PECUSA for many long years—its members were confirmed by the bishop . . . its clergy participated in a PECUSA pension plan, PECUSA insured the church, and the church regularly asked for and received help and advice from the bishop . . . . Because of disagreement with national church policy, the church cannot now repudiate a legal document executed 81 years ago.”

The Missouri Supreme Court adopted the neutral principles approach and awarded church property to a schismatic church that disaffiliated from an hierarchical denomination (the United Presbyterian Church in the United States of America, or “UPCUSA”).¹¹ The court observed that title to the church property was in the name of the local church, and nothing in the church or denominational bylaws or discipline provided any express trust in favor of the denomination.

An Illinois state appeals court awarded ownership of church property to a local church that had disaffiliated from the American--Bulgarian Eastern Orthodox Church. The appeals court chose to apply the “neutral principles” approach and accordingly concluded that it was not compelled to rule in favor of the national church.¹²

A North Carolina appeals court ruled that title to a local church's property belonged to the pastor and a group that supported him, and not to a group of trustees who were loyal to a parent denomination.¹³ The trustees alleged that for many years the church had recognized the authority of the Church of God denomination; that the pastor and his followers had refused to comply with the teachings or authority of the Church of God, and had not made required financial contributions to the denomination; that the pastor and his followers “seized” the church property and “converted it to their own personal use;” and, that in 1988, the state overseer of the Church of God intervened and appointed them as the “successor trustees” of the church and transferred title of all church properties to them.

The pastor and his followers maintained that the church had been organized many years before its affiliation with the Church of God; that it had received no denominational assistance in constructing its sanctuary; and, that the church membership had voted to disaffiliate from the denomination at a duly called business meeting in 1988, at which time the church's property was conveyed to the successor church.

A trial court agreed with the trustees, and ordered the pastor and his followers to vacate the property. This ruling was appealed, and a state appeals court ruled in favor of the pastor and his followers. The court observed:

[O]ur review of the evidence indicates that [the pastor and his followers] have possessed and used the church property for many years, during a significant portion of which time [the pastor] served the church as its pastor and occupied the parsonage. This evidence does not indicate that [the pastor and his followers] have seized the church property or converted it to their own use as alleged in the complaint. Rather, the evidence tends to show that [they] are continuing in conditions of occupancy and use which have existed over a substantial period of time and that greater harm shall inure to [them] rather than [the successor trustees] as a result of the issuance of a preliminary injunction.¹⁴

(2) Title Awarded to Denominations

A number of courts that have applied the neutral principles approach have awarded the properties of a dissident church to a parent denomination. To illustrate, the Alabama Supreme Court ruled that a national denomination owned the property of a local church that voted to disaffiliate from the denomination, since: (a) the deed to the local church property vested title in the denomination, and (b) denominational rules specified that

[i]f any members of the [denomination] leave or cease to be members of the [denomination], irrespective of the amount or number thereof, the fact that they leave or cease to be a member of the [denomination] shall not, in any manner, affect the property of the said church, and said party or parties or persons leaving the congregation or membership of the [denomination], in any manner, cannot and shall not take any property of the [denomination], in any manner, and all church property, irrespective, whether acquired by the local congregation, local church or otherwise, is the property of the [denomination].¹⁵

The Colorado Supreme Court reached the same result in a significant ruling.¹⁶ A local church affiliated with the Protestant Episcopal Church in the United States of America (PECUSA) voted (197 to 79) to disaffiliate when the denomination approved the ordination of women. The majority also voted to amend the church's charter to delete all provisions recognizing the authority of PECUSA. Soon after the vote to disaffiliate, a PECUSA bishop met with the minority of church members still loyal to PECUSA and formally recognized this body as representing the church. When the secessionist majority refused to honor demands to surrender possession of church property to PECUSA, the loyal minority filed a lawsuit requesting a court to determine which faction owned the church property. A trial court awarded the local church's property to the minority loyal to PECUSA, but a state appeals court reversed this ruling and awarded the property to the majority. The state supreme court ruled in favor of the minority, on the basis of the neutral principles approach.

The court announced the following approach to resolving church property disputes under the neutral principles approach in the context of hierarchical churches:

[F]irst . . . whether the instruments of conveyance, church documents and other relevant evidence establish that the general church has rights of ownership or control over the disputed church property by reason of a trust, a reverter clause, or some other basis. If, after applying neutral principles of law, such rights of ownership or control are determined to be vested in the general church, there will be no need to assess how property of the local church is controlled. If, on the other hand, such an analysis results in a determination that ownership or control of the disputed property is vested in the local church, it then may be necessary to determine how control over that property is to be exercised. . . . However, we decline to adopt a presumptive rule of majority representation, or any other artificial presumption or rule, that must be applied in every case in which determination of control over property of a local church becomes necessary. Rather, we look for guidance to well--established principles of statutory and common law traditionally applied to determine who has legal control over any particular corporation or voluntary association and how freely or extensively that control can be exercised. We note, as one example, that a presumptive rule of majority representation would not be consistent with various provisions of the Colorado Nonprofit Corporation Act, such as the requirement . . . that the articles of incorporation may be amended only when the proposed amendments receive at least two--thirds of the votes that corporation members are entitled to cast. A simple majority vote would not be legally sufficient.¹⁷

Applying this approach, the court concluded that the minority of church members loyal to PECUSA was entitled to the church's property under the neutral principles of law approach. The court acknowledged that title to the church property was vested in the local congregation; that the deeds contained no reference to PECUSA and no language suggesting that the property was held by the local church in trust for the national denomination; and that PECUSA did not provide any financial assistance to the local church in purchasing the property. Nevertheless, the court concluded that “an intent on the part of the local church corporation to dedicate its property irrevocably to the purposes of PECUSA was expressed unambiguously in the combination of the [church's] articles of incorporation, the local church bylaws, and the canons of the general church . . . .” The court noted that the local church's articles of incorporation stated that the church was organized “to administer the temporalities of the Protestant Episcopal Church in the parish,” and that the church “does hereby expressly accede to all the provisions of the constitution and canons adopted by the General Convention of the Protestant Episcopal Church in the United States of America, and to all of the provisions of the constitution and canons of the Diocese of Colorado.” These provisions, observed the court, “strongly indicate that the local church property was to be held for the benefit of the general church . . . . There are no provisions in the articles implicitly or explicitly expressing an intent to the contrary.”

The court also found relevant the fact that both the majority and minority factions agreed that “the rectors and vestry of [the church] have acknowledged their status as a local unit within the Protestant Episcopal Church and have accepted the benefits of that affiliation for more than 40 years.” Both factions also agreed that the church has “assumed an active role in diocesan affairs.”

The church's bylaws contained the following provision, which the court found relevant: “The church and parish accede to the constitution and canons of the Protestant Episcopal Church in the United States of America, and the ecclesiastical authority and canons of the diocese of Colorado. The parish shall have control of its own local affairs but nothing shall be done which conflicts with the canons of the church, either general or diocesan.”

The court observed that “an exercise of unbridled control over church property by the local church corporation would conflict with several provisions in the PECUSA and diocesan canons.”  For example, PECUSA canons (a) require local churches to obtain diocesan approval before encumbering or conveying property, (b) require local church properties to be adequately insured, and (c) prescribe parish boundaries. The diocesan canons contained similar provisions, and some additional ones suggesting diocesan control over local church property.

All of this evidence convinced the court that there was a “unity of purpose on the part of the parish and of the general church reflecting the intent that property held by the parish would be dedicated to and utilized for the advancement of the work of PECUSA. These provisions foreclose the possibility of the withdrawal of property from the parish simply because a majority of the members of the parish decide to end their association with PECUSA. We hold that the facts . . . establish that a trust has been imposed upon the real and personal property of the [local church] for the use of the general church.”

The Louisiana Supreme Court adopted the neutral principles of law approach, but ruled that the property of a local church that disaffiliated from the African Methodist Episcopal Church belonged to the denomination (A.M.E. Church).¹⁸ The court relied on provisions in the denomination's discipline requiring (a) denominational approval of transfers of local church property, and (b) reversion of title in “abandoned” or “disbanded” churches to the denomination. The court observed:

Applying the neutral principles which are evoked by our examination of the documents in purely secular terms, we concluded that it was the intention of the parties . . . that [the church property] not be alienated without A.M.E.'s consent, and will be considered abandoned to A.M.E. upon [the church's] disbanding as an A.M.E. society. Accordingly, because of [the local church's] disaffiliation without a prior valid transfer of [its property], A.M.E. has become vested with the exclusive right to control its use and to compel the transfer of title if necessary.¹⁹

The Alabama Supreme Court was asked to decide whether a local church or a parent denomination owned the church's property following its disaffiliation from the denomination.²⁰ A local church had been affiliated with the African Methodist Episcopal Zion Church in America since 1908. In 1985, a majority of the church's membership voted to disaffiliate with the parent denomination. The denomination wrote the church a letter acknowledging the disaffiliation, and requesting all dissident members to vacate the premises. Dissident members refused to vacate the property, and the denomination filed a lawsuit seeking to have itself declared the owner of the church's property. In support of its claim, the denomination quoted a provision contained (since 1884) in its Book of Discipline that pertained to local church property: “In trust, that said premises shall be used, kept, maintained, and disposed of as a place of divine worship for the use of the ministry and membership of the African Methodist Episcopal Zion Church in America, subject to the discipline, usage and ministerial appointments of said church as from time to time authorized and declared by the General Conference of said church.”

A trial court awarded the church property to the local church, finding that the church was not in a hierarchical relationship with the denomination with respect to property matters. The denomination appealed to the state supreme court, which found the trial court's determination to be “reversible error” and ruled in favor of the denomination. The court began its opinion by acknowledging that “the civil courts cannot adjudicate disputes concerning spiritual or ecclesiastical matters, but, nevertheless, can resolve disputes concerning property rights.” In resolving church property disputes, the courts of Alabama apply “neutral principles of law”—meaning nondoctrinal language in deeds, charters, and the constitutions and bylaws of both the local church and the parent denomination. The court surveyed the close ties that had existed between the local church and parent denomination in the 77 years of affiliation, and noted that since 1884 every prospective member of a church affiliated with the denomination had agreed to be “cheerfully governed” by the denomination's Book of Discipline. In light of such evidence, the supreme court concluded:

[The church] has been a member of [the denomination] for three--quarters of a century, by an association that both the national denomination and the local church acknowledge. For the entire time, the [Book of Discipline] provided that the [church's] property be held for the [denomination] by the local church. Individuals who have been members of the [church] the longest acknowledge that, for as long as they can remember, everyone who became a member of [the church] promised to abide by the rules and regulations of the . . . denomination. [The church] cannot now sever the relationship between [the denomination] and itself and unilaterally declare that obligations incumbent upon itself because of three--quarters of a century of association do not exist. [The church's] choice to join [the denomination] means it is obligated to obey all the rules and regulations its members promised to uphold, not just the rules and regulations they prefer; at least in regard to property disputes, the [denomination's Book of Discipline] binds [the local church].²¹

A Texas state appeals court resolved a church property dispute in which a denomination and a local church both claimed title to the church's property.²² The church was established in 1970, and in the same year was affiliated with the Evangelical Assemblies denomination.  Pursuant to the Evangelical Assemblies' constitution, the church paid for its property but title was vested in the name of the denomination.  In 1983, a majority of the church's members voted to disassociate the church from the denomination, whereupon a lawsuit was commenced to determine legal ownership of church property. The court concluded that the Evangelical Assemblies was “in every respect” a hierarchical church organization, and accordingly, “as the parent church, Evangelical Assemblies owns and is entitled to possession of the property under the mutually binding constitution.”

A Missouri court ruled that the property of a dissident church belonged to a national church body with which it was affiliated.²³ The local church opposed a 1984 resolution of the national church which permitted the ordination of women into the priesthood. After efforts to work out their differences failed, the national church attempted in install a new minister. When the congregation overwhelmingly voted to retain their original minister, the national church had the locks to the church property changed, barricades erected, and notices posted to keep people off the property. The congregation proceeded to have keys made to the new locks, removed the barricades, and held services on the premises. The national church then sought and obtained a court order banning the minister “and those acting in concert with him” from entering onto church property and from in any way disrupting the worship services conducted on the property. The congregation appealed this order, and a Missouri appeals court ruled in favor of the national church. With regard to the ownership of the church property, the court observed that

Missouri courts have adopted the neutral principles approach as the exclusive method for the resolution of church property disputes. Under this approach, the court must refrain from resolving the dispute on the basis of religious doctrine and must rely instead on general principles of state property and trust law to resolve a church property dispute. The court may consider who holds record title, the language of deeds, any relevant state statutes, and both local and general church documents that provide guidance or instruction on the ownership of church property. The court must, however, in scrutinizing religious documents do so in secular terms, rather than relying on religious precepts or concepts.²⁴

Under this test, the court concluded that the national church owned the property, since the deed to the property created an express trust in favor of the national church, as did relevant documents of the national church. Further, such provisions did not require any inquiries into religious doctrine. The congregation also claimed that the national church could not obtain judicial relief since it had failed to “exhaust” or pursue available ecclesiastical remedies. The court rejected this argument, since “questions of whether or not the [national church] had exhausted its remedies within the church and whether or not church procedures were followed are ecclesiastical in nature and require interpretation of authority within the church as well as interpretation of church practice and policy. Under the neutral principles approach such matters were irrelevant toward resolving the underlying property dispute.” For similar reasons, the court rejected the congregation's argument that the national church had deviated from established ecclesiastical procedures. Finally, the court rejected the congregation's arguments that it was entitled to the property in question on the basis of a “constructive trust” or “purchase money resulting trust.” Generally, when one pays the purchase price for land and has legal title vested in another, a presumption arises that the latter holds the property under a “resulting trust” in favor of the other party. Since the local congregation paid for its property, but had title vested in the national church, it argued that the national church held the title subject to a resulting trust in favor of the local congregation. In rejecting this argument, the court emphasized that “the burden of proof to establish a resulting trust is an extraordinary one” that the local congregation failed to satisfy. The court concluded that the local church originally had intended to make a gift of the property to the national church. The court also upheld the trial court's injunction barring the minister and his supporters from entering onto church property, or from interfering in anyway with church services.

Supreme Court Rulings Regarding Church Property Disputes

Internal Property Dispute Resolution Procedures