The State of the Dennis Canon - an Introduction to Current Law

Two recent decisions by the courts in Missouri provide some of the best arguments and analysis to date for rejecting attempts by national churches, such as PCUSA and ECUSA, to impose trusts unilaterally on their respective parishes by following Justice Blackmun's gratuitous advice in Jones v. Wolf, 443 U.S. 595 (1979). I shall use these decisions as the basis for a series of posts on the current state of the law concerning ECUSA's Dennis Canon, since there have been a number of new decisions in recent years, and no opportunity thus far to survey them as a whole. (This post will constitute Part III of the series which I began here; Part II is at this link.)

Let us begin with some background. In his opinion for the majority in Jones v. Wolf, Justice Blackmun famously wrote (443 U.S. at 605-606; footnote omitted, emphasis added):

The dissent also argues that a rule of compulsory deference is necessary in order to protect the free exercise rights "of [443 U.S. 606] those who have formed the association and submitted themselves to its authority." Post, at 618. This argument assumes that the neutral-principles method would somehow frustrate the free-exercise rights of the members of a religious association. Nothing could be further from the truth. The neutral-principles approach cannot be said to "inhibit" the free exercise of religion, any more than do other neutral provisions of state law governing the manner in which churches own property, hire employees, or purchase goods. Under the neutral-principles approach, the outcome of a church property dispute is not foreordained. At any time before the dispute erupts, the parties can ensure, if they so desire, that the faction loyal to the hierarchical church will retain the church property. They can modify the deeds or the corporate charter to include a right of reversion or trust in favor of the general church. Alternatively, the constitution of the general church can be made to recite an express trust in favor of the denominational church. The burden involved in taking such steps will be minimal. And the civil courts will be bound to give effect to the result indicated by the parties, provided it is embodied in some legally cognizable form. 

In response to this judicial aside, or obiter dictum (something said in a judicial decision that is not part of the actual holding of the court in the given case), both the Episcopal Church (USA) and the Presbyterian Church made quick to adopt national rules which purported "to recite an express trust in favor of the denominational church" in all property held "by or for any parish" in that denomination.

The former church enacted its Dennis Canon as an "emergency measure" just a bare two months after the Jones decision was announced. (There are substantial questions as to whether proper procedures were followed in its enactment, but the secular courts have tended to brush those concerns aside.) General Convention happened handily to be scheduled to begin in Denver on September 11, 1979. The Rev. Canon Walter D. Dennis of New York was a former attorney who kept up with the legal news, read the Supreme Court's opinion, and decided that it would be a good idea for the Episcopal Church (USA) to follow Justice Blackmun's advice. So he had introduced through the House of Bishops (he was elected suffragan bishop of New York just three weeks after General Convention) the measure which eventually (after it became notorious) took his name. The language of this Canon (Sections 7.4 and 7.5 of Title I) states, in its entirety:

Sec. 4. 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 a part of, and subject to, this Church and its Constitution and Canons. 

Sec. 5. The several Dioceses may, at their election, further confirm the trust declared under the foregoing Section 4 by appropriate action, but no such action shall be necessary for the existence and validity of the trust.

The Presbyterian Church (USA) had formed from the union in 1983 of its northern and southern branches. The latter, which had been known as the Presbyterian Church in the United States ("PCUS"), had added a Dennis-Canon-like provision to its governing Book of Order in 1982. The northern branch ("UPCUSA"), however, did not have any such provision in its Book of Order. When the combined churches promulgated a new Book of Order following their union, they kept the trust provision of the southern branch, but they adopted an "opt-out" clause which allowed any presbytery not previously subject to the trust clause (i.e., the presbyteries who had previously belonged to UPCUSA) to send notice to PCUSA (within eight years of the union) that it elected not to be subject to the new Section G-8.0201, which provided:

All property held by or for a particular church, a presbytery, a synod, the General Assembly, or the Presbyterian Church (U.S.A.), whether legal title is lodged in a corporation, a trustee or trustees, or an unincorporated association, and whether the property is used in programs of a particular church or of a more inclusive governing body or retained for the production of income, is held in trust nevertheless for the use and benefit of the Presbyterian Church (U.S.A.).

Note the slight differences in the wording of the respective trust clauses. The ECUSA version declares simply that all property is "held in trust" for the national church and the parish's governing diocese, while the PCUSA provision adds that the property is "held in trust . . . for the use and benefit" of just the national church, and not of the governing presbytery or synod. (Local congregations, or "sessions", in PCUSA are grouped into regional presbyteries, which in turn form synods, which then come together in the General Assembly of the national Church.) And the Dennis Canon adds a qualification which is only implied in the PCUSA version: "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 a part of, and subject to, this Church and its Constitution and Canons." These differences will come to the fore in some of the cases to be discussed in this series of posts.

Perhaps the most unusual feature of both trust provisions is their attempt to engraft their trust on top of any already existing trust arrangements. Thus, the Dennis Canon claims to impose a trust on "[a]ll real and personal property held by or for the benefit of any Parish . . ." (emphasis added). And the Presbyterian version expressly asserts that its trust applies "whether legal title is lodged in . . . a trust or trustees . . ." (emphasis added).

One can only wonder how the trustees of a pre-existing trust are supposed to be (or become) subject to the authority of the national churches as well, so that in addition to holding the legal title in trust for the local congregation, they now have another trust beneficiary added to their responsibilities. As we shall see in our upcoming survey, this attempt at over-reaching has led to considerable confusion and unclear reasoning in the courts which try to reconcile the language with the law of trusts (and the ancient Statute of Uses -- a heritage from English law which, however, has not been adopted in every State).

For those who would like more background into the development of church trust law prior to Jones v. Wolf, I refer you to the two preceding posts here and here. They will give you a solid understanding for the survey of case law that will follow in the succeeding posts in this series. In brief, the Jones case legitimized an approach to resolving church property disputes in accordance with "neutral principles of [state] law", which gave the several States the freedom to apply their own principles of property law to cases involving churches and their denominations.

Nearly all such disputes revolve around a parish or congregation which, generally out of differences over doctrine, discipline or worship, decides to split off from one denomination to join another. For historical reasons explained in the earlier posts in this series, the courts tended to approach such disputes from a trust law point of view: most church property had been donated to the church, and so the question of which faction could continue to own the property following a dispute depended on the terms of the original donation -- if there were any such terms ascertainable.

Where there were no express terms, the courts (following English precedent) tried to imply them, and generally tried to discern which of the two factions was closer in doctrine and worship to the denomination as it was when the donor made his gift. But the U. S. Supreme Court in 1969 ruled out this approach, as tending to entangle the civil courts in questions of religious doctrine, which cannot be adjudicated by such courts consistently with the First Amendment of the United States Constitution.

In an effort to avoid such entanglement, earlier courts had declared that if a church was "hierarchical", meaning that it had a supreme adjudicatory which could decide all questions of doctrine, discipline, or worship in a manner binding on every congregation in the church, they would simply defer to the decisions of that highest adjudicatory body, and be guided and bound by it as well. Note, however, that this doctrine of "deference" had application only when principles of church doctrine, discipline, or worship were at stake -- that is, only in cases where the courts were conducting their inquiries into the differences between the tenets of the disputing groups based on the terms of an implied or express trust.

In matters involving the legal and equitable title to church property, however, principles of state law had broad application to all entities in a given State, whether secular or religious. Every such entity was bound to follow the same rules of law in creating, conveying and extinguishing interests in real and personal property. These were what the Supreme Court in Jones called the "neutral principles of law" which the civil courts were as free to apply in disputes between religious groups as they were in any other civil disputes.

In other words, under the "neutral principles" approach, the religious differences which may have brought about the dispute were irrelevant to the secular courts. They looked solely at the legal steps by which title had originally been acquired and subsequently held up until the time of the dispute. Then they made their decision based upon which party held the enforceable interest in the property, in accordance with standard principles of property and trust law.

Under these general principles of state law, there was one such uniform principle, adopted in every single State and stemming from the original version first enacted by the British Parliament in 1677, called the "Statute of Frauds", which required any interest in real property to be created only by a writing signed by the person(s) who owned the property at the time of the creation of the interest. Thus, one acquires title to one's house only by a written deed, signed by the previous owner(s) (and duly notarized and recorded, under other state law requirements). Land cannot be transfered validly by verbal agreement, or by words alone; there has to be a conveyance in writing. And to be other than a fraud or forgery, the writing has to bear the genuine signature of the person who owns the interest being conveyed, or the land out of which the interest is being created. 

Similarly, a trust in real property arises, under the Statute of Frauds, only when there is a writing duly signed by the owner of the property being placed into trust. By that instrument, the title to the real property is divided into two parts: the "legal" title is given to the person(s) named as trustee, and what is called the "equitable" title is given to the beneficiary(ies) -- the persons for whose benefit the property is held by the trustees. Under the civil law, the beneficiaries have the legal right to come into court to enforce the terms of the trust, and to obtain an order directing the trustee(s) to perform in accordance with what those terms say. It is for this reason that the Statute of Frauds require that the terms of the trust be spelled out in writing; otherwise, there would be endless disputes over what the settlor of the trust (the original owner who agreed to place the property in trust) intended.

As equitable owners of the property, the beneficiaries may use and enjoy the property to the fullest extent permitted by the trust document, but they cannot convey legal title to it, or encumber or alienate it in any way -- those powers may be exercised only by the holder of the legal title, the trustee (again, if so authorized by the trust document). The Dennis Canon, and PCUSA's trust clause in its Book of Order, create an analytical problem because it is precisely the beneficiaries of the trust they declare who are attempting to create the trust in the first place.


It is common sense (and common law) that they could do so only if they had the full consent of the property owner to act in the owner's place. So the cases which we will be looking at go through various steps of analysis to determine just how, and when, this consent was given -- and whether it was an express consent, or only implied from the actions or conduct of the owner. And it is precisely in this process -- the steps in which a court looks at what constitutes the express or implied consent of the owner for the beneficiary to create a trust, acting for the owner and in his place, but in favor of the beneficiary -- that the civil courts have once again become ensnared in the convolutions of so-called "hierarchical" churches.

Some courts find that, by their very nature, hierarchical churches are so constituted that their members have consented in advance to every act that could be done in their name, just by virtue of belonging to the church and being a part of it. And other courts require more evidence of consent to this particular step of placing the member's property into a trust. The degree to which evidence of intent is required, rather than simply presumed from the hierarchical structure alone, is what analytically divides the cases and determines their ultimate outcomes.

It is also what determines (or should determine) their value as precedents for other courts approaching the same question. For it should be obvious, from what has already been said, that for a court to call a church "hierarchical", and then hold that by virtue of that name every member agreed to be bound by whatever the national church body enacted, including the placing of its property into a binding trust from which there is no escape, except if the national church allow it -- for a court to do such a thing, I say, borders on the nature of a "legal fiction".

A legal fiction is something the law simply presumes is the case, without being troubled by any evidence to the contrary, which is then used to apply a rule (such as the Statute of Frauds) which was not originally intended to be applied in that way. Thus, the legal fiction of a "hierarchical church" is used to imply the existence of a writing signed by the property owner which is sufficient to satisfy the Statute of Frauds. It sounds crazy, but that is where we are in many of the cases at which we will be looking. And literally millions and millions of dollars' worth of property has changed hands as a result.

In the next post, we will begin by looking at the sane approach to these questions adopted of late by the courts in Missouri. Then we will go on to consider how well the decisions from other states measure up to the standards of the Missouri decisions.

Diocese of Virginia Is an Emperor without Clothes

Thanks to BabyBlue, we learn that the Episcopal Diocese of Virginia, barely a week after its Bishop held out the olive branch to the departed CANA parishes, used his other hand to hit them with a sucker punch: his attorneys have filed a motion with Judge Randy Bellows for an award of prejudgment interest. (You can read the text of the motion and supporting memorandum at the link to BabyBlue's post.)

"Prejudgment interest" means just what the name says -- it is interest on an amount made payable for a time period before any actual judgment is entered. (After a judgment is entered against a defendant for a sum of money, postjudgment interest begins to accrue on the amount of the judgment, and continues to accrue until the judgment is paid in full.)

How can interest accrue on an amount before it is awarded? Well, first of all, the amount has to be known and certain -- that is, the claim against the defendant has to be for a specific sum of money which is already known, or is readily ascertainable. For example, if I offer you $10,000 to paint my house, but then delay paying you after you have finished the job, so that you eventually are forced to sue and get a judgment against me for the $10,000, then you could ask the court to award (prejudgment) interest on the unpaid amount from the day you finished the job until the day the court entered judgment. (Once the judgment is entered, postjudgment interest takes over from there.)

Presumably the fact that an audit will fix the sums that were in each of the many bank and investment accounts as of the filing of the diocesan lawsuits in January 2007 means that the first criterion can be satisfied in this case.

The second criterion for an award of prejudgment interest is that the money debt was clearly owed all along -- that is, there existed no good reason at the time for withholding payment of it. And that is where the nitty-gritty of Judge Bellows' comprehensive 113-page opinion will come into play, and be crucial.

The Diocese's memorandum in support of its motion quotes Judge Bellows' words back at him:

In concluding that the CANA Congregations do not possess either contractual or proprietary interests in the property of the seven Episcopal Churches, the Court noted the “pervasive control” exercised by The Episcopal Church and the Diocese over the churches. Op. at 101. The Court emphasized the hierarchical structure of the Church and referenced “the undeniable fact that these seven churches *were part of a hierarchical denomination for decades and, in some cases for centuries” and that the congregations’ claims of autonomy and independence were “contradicted by the overwhelming body of evidence before this Court.” Op. at 101. The Court said that applying neutral principles of law, as established by United States and Virginia Supreme Court precedents, it is “clear - indeed, to this Court, it is overwhelmingly evident- that TEC and the Diocese have contractual and proprietary interests in the real and personal property of each of these seven churches.” Op. at 104. The Court stressed that “whi1e the CANA Congregations had an absolute right to depart from TEC and the Diocese, they had no right to take these seven Episcopal churches with them.” Id. (emphasis in original) Given the “compelling” evidence and “clear” law presented, the ultimate conclusion reached by the Court, while disappointing to the CANA Congregations, could not have come as any surprise; and they presumably segregated such sums and can readily turn the accounts over with the accrued interest. See Op. at 102, 104. Moreover, that the CANA Congregations may have believed there was a bona ñde dispute as to ownership of the real and personal property has no bearing on the decision whether to award pre­judgment interest. See Gill v. Rollins Protective Servs. Co., 836 F.2d 194 (4th Cir. 1987) (neither Code 8.01-382 nor Virginia case law makes an exception to the general discretionary rule on pre-judgment interest for bona fide legal disputes).

Thus, because it was always so "clear" and "compelling", according to Judge Bellows, that the property belonged to the Diocese from the moment it filed its lawsuits to recover them, the CANA parishes should have handed over all their bank accounts right then and there. And since they did not do so, they now must turn over all the interest which that money could have earned in the five years of litigation until the entry of the judgment, according to the Diocese. (The prejudgment rate in Virginia is six percent per year, unless there is a contract or agreement between the parties for a lesser rate. Thus if there were $3 million in all of the parish bank accounts in January 2007, then interest would accrue at $180,000 per year, and over five years, the total would come to $900,000.)

There is one immediately perceivable flaw in the Diocese's argument, and it also casts doubt on the legitimacy of Judge Bellows' characterization of the evidence as "compelling" and "clear." For at the time of his first ruling in this matter in 2008, which told the CANA congregations that they could keep their properties under the terms of Virginia's Division Statute (§ 57-9), it was then "clear" to Judge Bellows that the Diocese did not have any entitlement to the parish properties or bank accounts.

The only thing that changed the Judge's view was the Virginia Supreme Court's quixotical decision, two years later, to read the statute in such a way that it could never apply to that sacred category of religious institutions defined as "hierarchical" by the courts. From that date on, perhaps, it was now "clear" in Virginia that the Diocese would prevail -- or was it? At any rate, the point is that all of the evidence which the Diocese (leaning on Judge Bellows, to be sure) now characterizes as "compelling" did not amount to anything approaching that description in 2008, and could have become so only after June 2010.

But the principal point here is that with this motion, the Diocese has revealed its truly impecunious state, and hence its inability to maintain and operate all of the properties it has won in the judicial jackpot. Moving for an award of prejudgment interest in these unique circumstances -- secular lawsuits between thousands and thousands of Christians on each side, contrary to the tenets of the Christian religion -- is to rub salt into a gaping wound in the body of Christ. For the Diocese to resort to such a tactic with its Bishop's blessing, so soon after Bishop Johnston held out the possibility of working out arrangements to allow the CANA congregations to remain in their buildings, is a sign of desperation -- of seeking to wring from the congregations every last farthing which the Diocese could ostensibly claim.

And notice the inherent one-sidedness of any such award: it goes to the Diocese if it wins, but the congregations could have gotten nothing from the Diocese, had they been the victors, since they had possession of the funds all along. That is why prejudgment interest should be reserved for those cases in which there was literally no justification for withholding the payment due.

The move thus gives the lie to Bishop Johnston's brave words to his Diocesan council just one week ago, as quoted here earlier (H/T: BabyBlue again):

Nonetheless, we have reason to be more confident than ever that our properties will be returned. For nearly two years, we have considered and discussed such a positive outcome, and now we must move to put contingency plans in place. We will be fully prepared for any eventuality... I strongly believe that we will be able to do what it takes over the next months and years to be faithful to the Church’s mission with respect to each one of the properties involved. . . .

Yes, Bishop Johnston, certainly you are following those "contingency plans"; certainly you are "prepared for any eventuality." You just need the prejudgment interest to bolster the amounts you will have available to keep up these properties until you can turn them into more cash to pay back the line of credit you took out to finance the lawsuits; we see that. That is why you now really want to stick it to your fellow Christians, and make them atone with every last drop of their blood for the offense they gave the Diocese by having the temerity to seek what they thought were their rights under Virginia law at the time.

Like the fabled emperor, the Diocese of Virginia now stands bare and exposed, for all (and not just Christians) to see.

The Hubris of Spending Other People's Money

Budget discussions in ECUSA's Executive Council continued to be contentious today at the Maritime Center, as the various factions duking it out are beginning to realize how little control they have over the process. For the General Convention activists, it is all about losing sight of the "vision":

“Neither iteration – 19 percent asking or 15 percent asking – provides a new vision,” Katie Sherrod said in reporting the reaction of the Governance and Administration for Mission committee. “We need a vision for the future.”

(Note to Dr. [hon. causa] Sherrod: The vision is right there in front of you, but you are incapable of seeing it because it does not mesh with your view of the world. Meanwhile, facts on the ground are fast overtaking what little remains of the things over which you still have some discretion. Soon you will not have any choices left to discuss, let alone make.)

Laboring under a different form of blindness to the facts, some Council members complained that the numbers were dictating the structure, rather than the other way around:

“This was not a strategic exercise but this was a mathematical exercise,” council member Vycke McEwen said later in the morning while council further discussed the budgeting process. 

Council member Lee Allison Crawford reported that her colleagues at her table felt the church was “just beginning to understand the system we inherited from General Convention 2009 with the last round of cuts.” The reorganized Church Center “has had success” and to change the system again would be wrong, she said. 

“The structure has to be an authentic reflection of our values and so we really should change ministries with deliberation and care and reflection and not just by sweeping cuts in a spreadsheet,” she said.

Yet a third form of blindness manifested itself -- "If we don't like what we're being told are the facts, we don't have to believe that it's really happening":

While council heard much discussion the previous day about declining mainline denominational membership and financial struggles caused both by those membership declines and the current economy, council member Brian Cole said that his table colleagues questioned the assumed implications of that information.  

He said they wanted to challenge the rest of the council to consider “if we believe decline is inevitable and ongoing forever, or do we really believe we have good news to share.”  

Finally, a self-deluding syndrome appeared which is always the fatal sign of a disconnected legislative body -- that is, a body which has disconnected itself from the people who pay for the cost of their very existence in the first place. That syndrome arises from the legislators' firm conviction that they know better how to spend the people's money than the people themselves do:

Cole also echoed a theme of some council members who questioned what they said was an assumption that reducing the amount of money the denomination asks of its dioceses would actually result in increased spending on mission activities at that and the congregational level.  

“We really have to decide what is a fair contribution for the work we want to do at the churchwide level and realize we really can’t control what other people do with the money they keep either at the diocese or a parish,” he said. 

You have that right, Mr. Cole. Please do keep reminding those discussing the budget that it is not their money to spend in accordance with their own beliefs and priorities, but to spend only as responsible stewards on behalf of those who donated it. And if the national church and its member dioceses can think of little more than using their donors' hard-earned money to fund grandiose bureaucratic visions, or  wasteful, alienating litigation, perhaps they should consider not accepting it in the first place.

Meanwhile, as usual, the final decisions will get made by the small group at the top, all the while as the lesser privileged receive reassurances that their concerns are "being heard":

The Executive Committee will meet later in the day Jan. 28 “to respond to recommendations and observations we’ve heard,” Presiding Bishop Katharine Jefferts Schori told council at the end of that discussion. The committee will discuss the result of that meeting with the whole of council on Jan. 29, she added. 

“We’re trying to respond to what we are aware is some anxiety around this,” she said, adding that council had wanted to try a new process for crafting the 2013-2015 budget process and that the process began several months later than the process normally does.

So by tinkering with the process, they managed to leave themselves with still less time to consider the budget, and to create an atmosphere of confusion and disorder:

“That new initiative I think was creative and hopeful, and it has presented us with a reality that is very different than we’ve experienced in the past,” [Jefferts Schori] said. “It’s more chaotic, but I would also remind you that the Genesis story says there’s no creation in the absence of chaos.”

And I would respectfully remind the Presiding Bishop, and the rest of the Executive Council, that they are not "creators", but stewards. Chaos is not the hallmark of good stewardship, but of its opposite.

God save the Episcopal Church (USA) -- if it be God's will, and if not: well, then, let the cup at least pass from them with a minimum of further pain and destruction.


[UPDATE 01/29/2012: Another hallmark of good stewardship is openness and accountability, and after a good start (thanks in no small part to Executive Council member Lelanda Lee and her blow-by-blow accounts on Twitter), suddenly it is "business as usual" again. The Executive Council ended today by adopting a budget, but the statement it released at the close of the session does not say what budget it recommended to the Joint Standing Committee on Program, Budget and Finance! (The latter Committee begins meeting tomorrow at the same venue to shape the final version of the budget to be presented this July at General Convention.)

So we Episcopalians who donate, and have donated, all the funds they are now disposing of, will be kept in the dark until ENS's intrepid reporter, the Rev. Mary Frances Schjonberg, publishes her story about the final day of the meeting. And meanwhile, the Presiding Bishop and the President of the House of Deputies are engaged in a very public tiff over their channels of communication with the rest of the Church.

The Joint Committee's deliberations and changes to the budget will not be published until after General Convention, which means that the rank and file of pewsitters will have to remain ignorant until that Committee releases the budget at General Convention itself. Once they do send the budget to the floor, no doubt each House will allot the customary ten to fifteen minutes for its deliberation before adopting it as presented. And the Church will be launched on another of its triennia, with a formal -- but largely meaningless -- budget in place, which almost immediately the Executive Council will begin to modify yet again on the fly, in order to square with the facts on the ground.

Which facts, by then, will include more unilateral spending decisions by the Presiding Bishop and her Chancellor to launch yet more litigation -- regardless of budgetary constraints.

Isn't the "budgetary process" of the Episcopal Church (USA) one of the true marvels of twenty-first century corporate communication?  As I have earlier observed, the gargoyles of Notre Dame have nothing on the Episcopal Church when it comes to taking all kinds of elaborate measures to fend off demons and other ill-intended spirits who, its leaders fear, might interfere with its functioning. For the pewsters on the ground, however, there is nothing left but to contemplate the grand edifice that has been built with their money, and to admire the skills of its architects, who seemingly have left nothing to chance.]