Friday, March 26, 2010

On the Proper Application of "Neutral Principles"

The Hon. Carl Heldt, Judge of the Vanderburgh Circuit Court in Indiana, gives his colleagues on the bench an object lesson in how to decide a church property case through the application of "neutral principles of law". (H/T: Layman Online blog. The decision is downloadable as a .pdf of 29 pages from this link.) The case involves units of the Presbyterian Church (USA), but it has lessons for Episcopal Churches who find themselves in disputes over property that involve the Dennis Canon. For that reason, and because the opinion is instructive even to non-lawyers, I shall quote from and analyze it in this post.

First, let us set the scene. The Olivet Presbyterian Church in Evansville, Indiana traces its origin to a congregation first organized in 1900. In 1968, it moved to its present property, which it purchased with donations made by its congregation. The Presbyterian Church (USA) had not yet formed as of that time, but the parties stipulated in court that neither it nor its predecessor entity in Indiana, the United Presbyterian Church (USA), had at any time contributed any money to the purchase or the maintenance of the property.

In 2006, 98% of the parishioners of the Olivet Presbyterian Church voted to realign with the Evangelical Presbyterian Church, and petitioned the regional presbytery (the plaintiff "Ohio Valley Presbytery") for permission to withdraw from that body. The Presbytery granted permission, but provided that Olivet would have to hand over all its property, bank accounts and other assets to the Presbytery. It asserted that a clause in the PC(USA)'s "Book of Order" (akin to ECUSA's Constitution) imposed a trust for the benefit of PC(USA) on all property belonging to a Presbyterian Church (USA) parish. The parish's real property was appraised for $1 million in 2008.

Do you see the parallels here? Both the Presbyterian "Book of Order" and ECUSA's Dennis Canon attempt to impose on their respective parishes' properties a trust provision which is triggered when a parish elects to leave the church. However, unlike the PC(USA), very few Episcopal Church dioceses have provisions in their respective constitutions which spell out procedures for parishes which wish to leave the diocese. In the PC(USA), these procedures are also laid out in the "Book of Order."

When Olivet politely refused to deed over its property, the Ohio Valley Presbytery ("POV") and the regional Synod of Lincoln Trails of the Presbyterian Church (USA) filed suit against Olivet and the Evangelical Presbyterian Church in the Circuit Court of Vanderburgh County, where Evansville is located. And there they tried out their trust theories in front of the Hon. Carl Heldt.

The first thing Judge Heldt did was to examine how title to the various assets was actually held. He noted that the bank "accounts are not joint, nor are there contingent beneficiaries, any trust interest for any person or entity or any other interests identified in the accounts other than being solely held by the corporation . . .". The same was true of the warranty deed to its property, which named Olivet as the sole grantee. "The deed conveys no interest to the POV, the Synod or the PC(USA) or any predecessor denomination. There are no restrictions, reservations, reversions and/or trusts identified. . . . It is further undisputed that the Olivet Real Estate and improvements have been continuously owned by Olivet since its purchase to the current time."

Next, the Court noted that since the formation of PC(USA), Olivet had mortgaged its property to both the Synod and the Presbytery at various times, and that the mortgages provided further "indicia of ownership" under a neutral principles analysis:
Olivet points to the existence of these undisputed notes and mortgages indicating Olivet is "mortgagor." Olivet asserts and the Court finds that this is another indicia applicable under the Neutral Principle Analysis that the Plaintiffs have acknowledged the full ownership interest in the real property held by Olivet. Standing alone, it would be insufficient; but it is an indicia of ownership since mortgagees do not have a real estate title interest in property unless or until there is a foreclosure. If the mortgagees (both Plaintiffs) owned the property in trust, this would be inconsistent with the mortgage form utilized and recorded by both Plaintiffs[, which also implicitly allowed Olivet to convey title to another -- there was no "due on sale" clause].
The Court then turned to an examination of Olivet's status as a not-for-profit corporation under Indiana law. As such, it had both Articles and Bylaws, both of which could be amended without any restriction, or requirement of approval at any higher level. The Court acknowledged that in its Bylaws, Olivet had "indicated that it was a congregation of the Presbyterian Church (USA) and recognized church governance as the constitution." In a key passage, the Court went on:
The facts providing indicia of support for Olivet concerning the Articles of Incorporation and the By-laws are that nowhere in the Articles of Incorporation or in the Bylaws was any statement made that the real or personal property was being placed in trust for the benefit of any of the Plaintiffs and/or the PC(USA). Further, nowhere in the Articles of Incorporation or By-laws was it stated that membership was irrevocable. . . .
Further indicia of a Neutral Principles Analysis in favor of Olivet is that there are no specific sets of By-laws prescribed by the Book of Order or other authority of Plaintiffs. Also, I.C. § 23-17-1-1(3), et seq. indicates that a non-profit corporation has the statutory right to make and amend by-laws. Neither side has been able to provide any authority for requirement for any specific set of by-laws and this Court must conclude that none exists.
The Neutral Principle Analysis that Plaintiffs assert is that the By-laws indicate that they are a congregation of the Presbyterian Church (USA) and recognized church governance as the constitution while they voluntarily chose to be affiliated with such denomination. Also, Plaintiffs point out that the By-laws state that they will not be changed so as to be inconsistent with the church constitution while they voluntarily chose to be affiliated with such denomination. Olivet contradicts these assertions by Plaintiffs through indicating that there is no specific set of by-laws prescribed by the Book of Order, the Book of Order contemplates individuals and/or congregations leaving the denomination and finally, it is undisputed that one of the checklist items prescribed by the Plaintiffs to effect Olivet's disassociation was that Olivet change their By-laws.

. . . Olivet agreed to abide by the governance of the church so long as they were a member, but church governance permits their departure and all agree they have departed and are following a new Presbyterian Church governance. As Olivet has indicated, they had a voluntary right to put [language] in and have the same voluntary right to take it out regarding when they follow or recognize church governance.
These are the exact same issues which are currently at stake in the litigation both in Fresno and in Ft. Worth, which is now before the respective Courts of Appeal in those cities and awaiting oral arguments and eventual decisions. In ECUSA, no provision of the Constitution or Canons requires that a parish -- or diocese -- seek approval before amending its articles or bylaws. (Many dioceses place such restrictions on their parishes, but ECUSA does not.) The articles and bylaws of parishes, and the constitutions of dioceses, frequently provide that they shall not be inconsistent with the national canons or constitution, and that they "recognize the authority of General Convention", or words to that effect. However, there is no provision which would prevent that language from being changed in the event of a withdrawal. The appellate courts in Ft. Worth and Fresno are both being asked to rule whether the dioceses in question could, under state law and in the absence of any national restriction or prohibition, amend their respective constitutions so as to remove the language of accession to the national church.

Judge Heldt continues with his analysis under neutral principles:
The next indicia under a Neutral Principles Analysis is to look at other written documents. Based upon a review of the record, there is no written express trust existing between Olivet and the Plaintiffs. . . . No written and signed express trust has been presented by either party and thus the Court concludes one must not exist. This indicia favors Olivet's position. An express trust is one created by the direct and positive act of the settlor by some writing, deed, will or oral declaration. I.C. § 30-4-2-1 (a). Plaintiffs indicate that the Indiana trust provisions relied upon by Defendants were not passed until after purchase of the property. However, nothing prohibited a trust clause being inserted in the Olivet deed, which [clause] does not exist. Further, nothing prohibited Defendants from making a written expression signed by the appropriate official of the church indicating that the property was put in trust after passage of the Indiana trust statutes in 1971 and certainly none of the Plaintiffs nor PC(USA) appear to have sought to have Olivet make such a written expression since 1971.
Finally, with respect to the trust provision in the Book of Order, Judge Heldt acknowledged that it "provides an indicia of ownership in the [national] church under a Neutral Principles Analysis." The only question remaining was: what effect could an Indiana secular court give to such a provision in a religious book of discipline? With regard to that question, Judge Heldt will later make this observation (op. pp. 21-22):
Indiana real estate law governs whether title to real estate has been transferred. If the real estate property owned by Olivet Presbyterian Church of Evansville, Indiana is to be placed in trust, it ought to be done through real estate transfer by the property owners. Plaintiffs' initial admission concedes that Olivet never did so. (Complaint, ¶ 31). While Plaintiffs suggest the Trust Code requiring a writing was passed in Indiana after Olivet's original purchase of the property in 1968, nothing prohibited either party from inserting a trust clause in its deed or signing a written trust agreement placing the property in trust as required for real property being transferred into a trust through a written instrument bearing the signature of the authorized owner of the real estate, LC. § 30-4-2-1, et seq. Also, the Indiana Statute of Frauds has prohibited parole evidence to demonstrate transfer of title to real property to contradict a writing, I.C. § 32-21-1-13, and requires the conveyance to be made by a deed in writing and properly signed.
First, however, Judge Heldt first surveys the state of First Amendment law in Indiana's higher courts, and finds that they have determined to adopt the "neutral principles" approach espoused by the United States Supreme Court in Jones v. Wolf, 443 U.S. 595 (1979). He consequently rejected the plaintiffs' request that he follow the "[hierarchical] polity approach" first articulated more than 100 years earlier, in Watson v. Jones, 80 U.S. 679 (1871) (see this earlier post, and this one, for more background on the two cases). Almost in passing, he notes that the "implied trust doctrine" (see the earlier of the two posts just linked) has been rendered "'impotent [in Indiana] . . . in so far as such theory is based upon principles of ecclesiastical law, church doctrine, or church discipline. It is clear that the civil courts cannot rely upon ecclesiastical law of the church to impose an implied trust in real estate.'" (Slip opinion at p. 17, quoting from Merryman v. Price, 259 N.E.2d 883 [Ind. Ct. App. 1971].) Judge Heldt describes the Merryman case in the following terms (p. 18, emphasis added):
. . . a quiet title action was brought by trustees of a local church against officials of a general church. The Indiana Court of Appeals held that where the local church officials made their prima facia case with reference to the legal title to the church property and where the positions of the officials of the general church could not be sustained without reference to ecclesiastical law, church discipline and/or church doctrine, title was properly quieted in the trustees of the local church.
With these legal principles established, Judge Heldt turns to the national trust provision in the Book of Order, and finds that he must regard it in the light of another provision:
Generally, the Presbyterian Chmch (USA) Book of Order is an ecclesiastical set of rules. Unless one is sitting as an ecclesiastical judge, little reference is needed to the Book of Order and that book so states:
G-9.0102 [Chapter IX, Paragraph 1(a)]
Governing Bodies of the Church are distinct from the government of the state and have no civil jurisdiction or power to impose civil penalties. They have only ecclesiastical jurisdiction for the purpose of serving Jesus Christ and declaring and obeying His will in relation to truth and service, order and discipline.
Compare this provision in the Book of Order with the following provisions in Sections 2 and 3 of ECUSA's Canon IV.14:
Sec. 2. Resort to secular courts. No Member of the Clergy of this Church may resort to the secular courts for the purpose of interpreting the Constitution and Canons, or for the purpose of resolving any dispute arising thereunder, or for the purpose of delaying, hindering or reviewing or affecting in any way any proceeding under this Title.

Sec. 3. Review of proceedings by secular courts. No secular court shall have authority to review, annul, reverse, restrain or otherwise delay any proceeding under this Title.
In their different ways, both PC(USA) and ECUSA are saying the same thing with these provisions: ecclesiastical matters of doctrine, discipline and worship are for ecclesiastical courts, and not secular ones. What does that make of the Dennis Canon? Well, watch what Judge Heldt does with the Book of Order's equivalent of the Dennis Canon:
Plaintiffs' case significantly relies upon G-8.0201, added to the Book of Order in 1981, which states:
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.).
. . .

The Olivet Defendants reply asserting that the Book of Order is an ecclesiastical document which by its very terms is not supposed to have civil law jurisdiction[, citing the language of section G-9.0102 quoted above] . . . .

. . . the Court concludes that wading into various portions of the Book of Order which may or may not be conflicting requires this Court to determine ecclesiastical questions in the process of resolving property disputes which is prohibited by the First Amendment to the United States Constitution. Presbyterian Church in the United States v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440, 447 (1969). Plaintiffs ask this Court to hold that pursuant to G-8.0201, the Olivet property is held in trust for the use and benefit of the Presbyterian Church (USA) and yet Defendants assert that G-8.0201 is not a settlor's declaration but an assertion by an entity that does not hold title to any of the property at issue in the instant case and which never held property at issue in the present case. Plaintiffs assert the actions of its Presbytery consisting of voting members of various churches must be upheld while Defendants cite Chapter G-9.0102, stating goveming bodies of the church (i.e., a Presbytery) have only ecclesiastical jurisdiction. As further example, G-1.0307 of the Book of Order states: "That all church power, whether exercised by the body in general or in the way of representation by delegated authority is only ministerial and declarative . . . ." At G-1.0308 it states "An ecclesiastical discipline must be purely moral or spiritual in its object and not intended with any civil effects . . . ." This conflict and the other potentially conflicting provisions in the Book of Order appear to this Court to force an evaluation or determination of ecclesiastical questions or interpretations in the process of resolving this property dispute. This Court declines to do so, based upon the First Amendment to the United States Constitution, the Indiana State Constitution, U.S. Supreme Court precedent and state court precedent. "Civil courts will be bound to give effect to the result indicated by the parties, provided it is embodied in some legally cognizable form." Jones v. Wolf, 443 U.S. 595, 606 (1979).
Judge Heldt concludes with an observation which echoes that made by the Hon. Randy Bellows, Judge of the Fairfax County Circuit Court in the Virginia litigation, in a decision which is now on appeal to the Virginia Supreme Court (the appeal is scheduled to be argued sometime during the week of April 12-16):
If it were intended that the Olivet Real Estate and personal property were to be held in trust for PC(USA), the same could have been done by revising the deed and documents of ownership. Such was the charge of the United States Supreme Court in Blue Hull, that the parties organize their relationship to establish the trust clearly so Courts would not be forced to weigh conflicting evidence. The fact that this was not done allows an inference that the parties, or at a minimum Olivet, did not intend for an implied or express trust to be established. Insufficient evidence has been provided by PC(USA) to show that the property at issue in this case is held in trust. The best evidence of ownership is presented by Olivet in the language of the deed and the documents of ownership.
And with that, Judge Heldt concludes that judgment is to be entered against plaintiffs, and for the defendant Olivet, establishing that it, and it alone, owns the title to all of its property, free and clear of any trust sought to be imposed by PC(USA).

At this point, it is not known whether the Presbytery or the Synod plans to appeal. Given the Merryman decision as cited and quoted by Judge Heldt, it would appear that his decision is solidly based on Indiana precedent, and that the chances of any such appeal being successful would be from slim to none.

In a later post, I will compare and contrast Judge Heldt's decision in Indiana with a recent decision to the opposite effect from a trial court in Connecticut. It is only through the study of what makes the courts reach different outcomes in different circumstances that one can truly appreciate the degree to which the Dennis Canon has entangled ECUSA in secular disputes, and thus detracted from its mission as a branch of the one true catholic and apostolic Church.


  1. WOW! MY hometown ! I think you mean Vanderburgh County in your first sentence as you write later. Never heard of Olivet Presbyterian but hey this could be good news for the parish where I was as a child!

    Interesting that this judge has essentially come to the same conclusions as the SC Supreme Court i.e. the PCUSA book of order and, in the case of TECUSA, the Denis Canon DO NOT by themselves make a trust upon the parish/church/presbytery. To do that the required trust documents must be signed. Very interesting indeed.

    Is this an actual case or is this Judge just going through this as an exercise in the proper application of neutral principles of law?

  2. Never mind, I checked an Indiana court site. You are right, Vanderburgh Circuit Court.

  3. This is a decision in an actual case, Alexi. (You can download it from the link I give near the top.) I consider it so well done that I have used it as an example of how to apply neutral principles.

  4. "The appellate courts in Ft. Worth and Fresno are both being asked to rule whether the dioceses in question could, under state law and in the absence of any national restriction or prohibition, amend their respective constitutions so as to remove the language of accession to the national church."

    Actually, in the Fort Worth case that issue isn't before the Court of Appeals just yet.

  5. Thank you so very much for this excellent analysis.

    Hopefully, it will be of benefit to many.

  6. Paul Powers, I realize that as far as Bishop Iker and his attorneys are concerned, that issue is not before the Court of Appeals yet. However, Kathleen Wells and her cohorts have submitted a brief for Bishop Gulick and ECUSA which argues (among other things) that the amendments made to the governing documents and completed at the annual convention in 2008 were contrary to the national constitution and canons, and hence void. The appellate court may not have to reach that issue to decide the writ on just the Rule 12 issues, but it could do so under at least one possible scenario, if it takes up the merits, because those were certainly addressed at the hearing before Judge Chupp when he challenged ECUSA's attorneys to cite the specific provisions that they claim had been violated.

    At least that is my understanding, from reading the transcripts and the briefs. If you have better or different information, please feel free to correct me.

  7. I see your point, Mr. Haley, the mandamus action is an original proceeding and the real parties in interest are the attorneys Ms. Wells and Mr. Nelson themselves, not the parties they say they are representing. So, if the court of appeals were issue an opinion that the 2007-2008 amendments to the diocesan constitution were void, I believe that the opinion would have to be for purposes of the mandamus proceeding only. The issue would still have to be adjudicated in the district court (although obviously the court of appeals' opinion is likely to have a strong influence on the district judge's decision).

  8. Thanks for Mr. Haley for your analysis of Judge Heldt's decision. With your analysis of Judge Heldt's clearly written decision even this layman can understand it. I wonder if Judge Heldt knows of the SC Supreme Court decision which was reasoned along similar lines if I remember correctly.

    I look forward to your comparison of Judge Heldt's decision with another court's decision.

    SC Blu Cat Lady

  9. It is amazing how the work of one rational and capable jurist can begin to restore one's hope for the future of jurisprudence and the Rule of Law in these United States. Mr. Justice Heldt appears to be a justice capable and willing to do his duty to the best of his ability—to examine the evidence in light of the law, decide each point of evidence and testimony and reach logical and patently sound conclusions based on that law and that evidence.

    Simultaneously, it puts to shame those other judges who seem incapable of being bothered either to examine and address the evidence in light of the requirements of the law or to seek a conclusion consistent with the law and the factual information.

    A thinking type (Mr. Justice Heldt) versus feeling types (in several of the other cases), I rather strongly suspect. That is to say, in respect to the latter types, people installed as judges who decide cases on whether the result "feels right" rather than on what the law and the facts of the case dictate.

    Would that there were more Judge Heldts, and fewer (better still none) of the others.

    Pax et bonum,
    Keith Töpfer

  10. I wish we had that judge in Tulsa, OK. Kirk of the Hills would not have had to pay a $1.7MM ransom.