When a local church or other house of worship leaves a denomination for theological or other reasons, who or what keeps its real property and other assets? Given the ever-shifting lines of the American religious landscape, this is unfortunately a perennial question – for religious organizations and sometimes for the courts, too. In recent years, the U.S. Supreme Court has repeatedly resisted efforts to address property rights battles between the Episcopal denomination and breakaway local churches. A newly filed petition arising from a South Carolina court ruling against a local church may present just the right Supreme Court opportunity to resolve lower federal and state courts’ conflicts about how best to balance First Amendment rights among denominations and their local churches. (Protestant Episcopal Church in the Diocese of South Carolina, et al., vs. The Episcopal Church, et al., filed Feb. 9, 2018.)
Background: Church Ownership, Generally
Ownership of church real property varies widely, depending on faith tradition and ecclesiology. Independent churches generally hold title to their real property, or title may be held in trust or a property holding company exclusively for the benefit of the church. Title to the real properties of other, so-called “multi-site churches” is often held by the parent church or a consolidated property holding company. In the case of denominational churches, the ownership of title varies by denomination. In the Presbyterian Church of America, (PCA), for example, title to real property is held exclusively by the local church or related entity. On the other hand, in denominations like the Presbyterian Church, United States of America (PCUSA), title to a local church’s properties gets more legally complicated. In such denominations, title to church properties may be held by a national or regional governing body, or title may be held by the local church, subject to a “trust clause” in the denomination’s Book of Church Order, or other constitutional document. A trust clause provides that the denomination may assert a claim to the property of the congregation in the event of a congregational split, dissolution, or disassociation from the denomination. This last type of ownership is the subject of this case’s dispute.
The Facts – Diocese Leaves Denomination, Local Churches Seek Ownership
The facts of the case are largely undisputed. Thirty-six local Episcopal churches in South Carolina hold property titled in the local churches’ name, and the deeds to the church property do not reference a trust in favor of the national Episcopal Church. The property was purchased, cared for, and possessed by the local churches. The national Episcopal Church claims ownership based upon its “Dennis Canon” issued in 1979, which states that “All real and personal property held by or for the benefit of any Parish, Mission or Congregation is held in trust for this Church and the Diocese thereof in which such Parish, Mission or Congregation is located. The existence of this trust, however, shall in no way limit the power and authority of the Parish, Mission, or Congregation otherwise existing over such property so long as the particular Parish, Mission or Congregation remains part of, and subject to this Church and its Constitution and Canons.”
In 1987, the Protestant Episcopal Church in the Diocese of South Carolina (the “Diocese”) enacted its own version of the Dennis Canon reiterating that parishes hold their property in trust for the Diocese and the national Episcopal Church. While the trial court found that the churches had not been members of the national Episcopal Church or the Episcopal Church in South Carolina, the Diocese acceded to the constitution and canons of the national church in 1841. The national church claims that the parishes acceded either to the local or national version of the Dennis Canon.
The Diocese withdrew its affiliation, rescinded its Dennis Cannon, and issued quitclaim deeds to the local churches – effectively relinquishing any property interests. The local churches then brought suit to request confirmation that they owned the properties on which they worshipped. The Trustees of the Protestant Episcopal Church in South Carolina (the “Trustees”), which held property for the use of the Diocese, also disassociated with the national church and amended its bylaws to reflect its change in corporate governance.
The South Carolina trial court determined that the local churches owned the property. On appeal, however, the South Carolina Supreme Court reversed and decided in favor of the national Episcopal church. Twenty-nine of the local churches appealed, as well as the Diocese and the Trustees.
Understanding Legal Issues – How Should Courts Determine Ownership?
1. The Issue – How to Apply “Neutral Principles of Law” and the First Amendment
The key issue whether the legal doctrine of neutral principles of law requires courts to recognize a “trust” in favor of the national church even if the alleged trust does not comply with established state trust law. Using neutral principles of law, a court may generally intervene in a church dispute to resolve issues that do not hinge on matters of theology. Such approach however is sharply bounded by the First Amendment – a court may not infringe on a church’s free exercise of its religious beliefs. Those two legal concepts – the application of neutral principles of law and the free exercise of religion – are very much in tension here.
2. Strict vs. “Hybrid” Legal Interpretation
Courts are divided over this religious and legal tension, primarily due to differing interpretations of the U.S. Supreme Court’s 1979 Jones v. Wolf ruling. The Court in that case held that a property dispute between a national church and local congregations is to be decided by applying the same, well-established “neutral principles” of state trust and property law that would apply in a property dispute between secular parties. One faction of the country has applied what is known as the “strict” interpretation of the Jones case in determining that the national church has established a trust, and thereby successfully claims ownership of disputed property, only if the alleged trust satisfies state trust law. This position was espoused by the local church, the diocese petitioners, and the trustees’ corporation in the pending case. It was also the South Carolina Supreme Court’s prior position in All Saints Parish Waccamaw v. Protestant Episcopal Church in the Diocese of South Carolina, 685 S.E.2d 163 (S.C. 2009), as well as the trial court in the present case.
The opposing position, which has been adopted by many jurisdictions, the National Episcopal church and the South Carolina Supreme Court in this case, is considered the “hybrid” interpretation of the Jones case. This approach maintains that both the neutral principles of law and the First Amendment require that a trust be recognized in favor of a national church if the church claims property ownership in its constitution, or by virtue of a canon. According to the hybrid application of Jones, the national church owns the property even if the church has not complied with the particular state trust law in which the property is located. Requiring a national church to comply with state trust law arguably places a constitutionally impermissible burden on the national church. The local churches, the diocese, and the trustees’ corporation, to the contrary, argue that the First Amendment is violated when a deference exists which favors a national church over a local church. In fact, these parties assert that this case would not be before the Court if the litigants were secular entities; the case, if litigated at all, would have long ago been decided based on neutral principles of state trust law.
3. State(s) of Confusion
As a result of divergent judicial interpretations, the country’s courts are deeply divided. Seven state supreme courts – Alaska, Arkansas, Indiana, New Hampshire, Oregon, Pennsylvania, and Texas - and the federal Eighth Circuit Court have held that the local church retains ownership of the property unless a trust in favor of the national church is established under applicable state law. However, eight other state supreme courts – in California, Connecticut, Georgia, Kentucky, New York, Tennessee, and Virginia - have held that the national church can rightfully claim ownership if it has declared ownership rights in its constitution or canons. Not only does the deep division exist between courts in different jurisdictions, but cases at the state level have also been closely decided. The South Carolina Supreme Court case was a 3-2 decision. Indeed, individual judges appear to be sharply divided about the proper application of Jones as well. Contradictory verdicts are being issued in cases with like circumstances, based on the same legal precedent. This widespread division certainly provides a strong impetus for seeking clarification from our country’s highest court.
Will the Supreme Court Provide Clarity?
The Petitioners’ request for Supreme Court clarification underscores the significant tension between First Amendment considerations and application of the neutral principles as espoused by the Supreme Court in Jones. Thus far, two amicus briefs have been filed, both supporting the Petitioners’ position that local churches should be left alone with their property rights intact. First, a group of 18 law professors who teach constitutional law, property law, and First Amendment law have expressed serious concern about judicial enforcement of trusts in internal church documents that don’t satisfy state trust law, as well as First Amendment protections for local churches. Second, the Falls Anglican Church supports the Petitioners’ request, asserting that a resulting judicial clarification will reduce litigation and will relieve burden placed on congregations, dioceses, and denominations. Like the professors, the Anglican Church argues that the Supreme Court could avoid Establishment Clause concerns raised by the South Carolina ruling, by not allowing lower courts to enforce canons or other edicts unilaterally issued by denominations. The Falls Anglican Church has a potential stake in the South Carolina case’s outcome, as its own petition for certiorari was rejected in 2014 – with the resulting loss of church property to the Episcopal denomination. Other churches that are considering whether and when to leave a denomination may similarly face enormous consequences from a high court ruling on church property rights.
Should the Court accept the case and follow strict interpretation of Jones, local churches’ ownership claims to their real property will be significantly strengthened in many cases. But if the Court goes the other way, or refuses to accept the case, local churches – at least in states like South Carolina - will need to be much more circumspect because of their reduced First Amendment freedoms vis a vis their denominations. Given the widespread confusion and division swirling around this issue, the outcome of the pending case is much needed, highly anticipated, and ripe for resolution.