Friday, June 17, 2011

Another Court Sets an Example for "Neutral Principles"

A little more than a year ago, I discussed in this post the proper application of "neutral principles of law" in resolving a church property dispute, which was in front of Circuit Judge Carl Heldt of Vanderburgh County, Indiana. Now comes word of a similarly principled decision from a local Circuit Court Judge in Jackson County, Missouri (a .pdf version of the seven-page opinion and order is here -- H/T: Layman online).

Both the Indiana and Missouri cases involve offshoots of the Presbyterian Church, and both involved congregations which split off from their local presbytery -- which then sued them for the real and personal property of the respective parishes. The presbyteries in each case staked their claim on arguments of express and implied trust, basing themselves on this language from the Book of Order (constitution) of the PCUSA:
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.).
This provision, first added in 1981, parallels ECUSA's Dennis Canon, added in 1979. However, the two provisions differ in significant ways. In PCUSA's version, all parish property is declared to be held in trust "for the use and benefit" of PCUSA. The Dennis Canon spells out that while all parish property is held in trust for ECUSA and the local diocese, that trust "shall in no way limit the power and authority" of the parish over its property, "so long as the particular Parish, Mission or Congregation remains a part of, and subject to, this Church and its Constitution and Canons."

The Presbyterian version attempts to declare a simple trust, and has no language of defeasance -- that is, of forfeiture -- if the parish in question decides to leave the presbytery. Technically, it could be read to mean that the parish in question may continue to hold legal title to the property, but that it would have to make the property available for the "use of" any congregants still remaining in the presbytery.

The Episcopal version is, however, equally unclear about who is entitled to become the "trustee" of the parish's property (i.e., hold the legal title to it) once the parish is no longer subject to the church or its canons. The courts which have ruled on the matter thus far have simply handed the property over to the local diocese, for it to install a new congregation if it can, or to sell to others if it cannot.

The Missouri court made much of the weaknesses in the PCUSA provision. Comparing its terms with a Missouri statute which spells out how a trust is created, it observed that none of the facts shown fit within the statute:
Defendant admits that at all times the property in question has been titled to Colonial (hereinafter referred to as "plaintiff') solely, and not to Defendant. Defendant also admits that Plaintiff is not financially indebted to Defendant in connection with any ofthe property in dispute. In order to create an express trust under Missouri law, plaintiff as grantor would have to declare that it holds the property in trust for defundant. Defendant, however, cites the following clause from the PCUSA's Book of Order, added in 1983, in support of their position that an express trust exists:
The court quotes the language from the Book of Order as quoted above, and then points out: "The language 'for the use and benefit', confers only a right to use the property, it does not confer ownership of the property." In a normal trust, as earlier indicated, the trustee holds the legal title to the property. The beneficiary of the trust is the one who uses and occupies the property. But the PCUSA clause wants to take a shortcut -- it wants to make the church the beneficiary of the property without any deed by its owner first putting it into a trust.

The court points out, first of all, that the language of the Book of Order does not convey any title to anything -- which is one of the requisites for a trust to be created under Missouri law: "The Book of Order is a unilateral document created by the defendant as beneficiary of said trust and not by Plaintiff, the grantor. It is not signed by Plaintiff."

Next, the court points out another defect -- the language of the Book of Order is too vague, and does not specify any particular Missouri property:
The above clause in the Book of Order refers to property, generally. Missouri law requires that in order for a trust to be created, the subject matter must be definite. Edgar v. Fitzpatrick, 377 S.W. 2d 314 (Mo 1964). The above clause does not describe the property with any specificity.
This is a new point, which I have not seen touched upon in any of the Episcopal Church cases -- and attorneys for the parishes in those cases would do well to note it. For ECUSA's Dennis Canon is equally vague about describing any particular property to which it applies. If there is any state law on this point, you should be sure to cite it! The court now concludes, with respect to its discussion of an express trust:
Missouri law also requires that an express trust be created by the "direct or express words of a grantor or settler, or by the intentional act of the party having dominion over the property." Gwin v. Gwin, 219 S.W.2d 282 (Mo App. 1949). The above clause is drafted by the beneficiary and not the grantor contrary to and in violation of Missouri law. For these reasons, the court finds that the above clause does not create a trust over plaintiff's property.
. . . Defendant cannot create a trust of another's property for its benefit. The defendant's alleged trust clause violates Missouri law. No express trust exists.
Next, the court moves on to the presbytery's claim that Colonial's property, which The Layman reports has an assessed valuation of $4.7 million, had been imposed with an implied trust in its favor. First the court surveyed the law on implied trusts in Missouri (emphasis is the court's):
Missouri law identifies two types of implied trusts, a resulting or a constructive trust.
A resulting trust is one implied by law from the acts and condnct of the parties and the facts and circumstances which at the time exist and surround the transaction out of which it arises. . . . A resulting trust arises "where one pays the purchase price for land with legal title taken in another.". . . The theory behind a resulting trust is that one who provides purchase money for property intends to receive the benefit of that property. . . . A resulting trust arises, if at all, the instant a deed is taken. . . . It cannot be created by subsequent occurrences. . . . Clear and convincing evidence must exist in order for a court to find a resulting trust.
. . . "To establish a constructive trust, an extraordinary degree of proof is required. The evidence must be unquestionable in character. The evidence must be so clear, cogent, and convincing as to exclude every reasonable doubt in the mind of the trial court." . . . "The stringency of the proof requirements has been attributed to the public policy in favor of the security of titles and the reluctance of courts to disturb record or other apparent ownership." . . . The touchstone for imposition of a constructive trust is injustice or unfairness, which may take the form or be the product of fraud, abuse of a fiduciary or confidential relationship, undue influence, or unjust enrichment.
One sees at once that the presbytery has a very high bar to reach under Missouri law to establish its claims of an implied trust. And indeed, it does not take the court long to find a lack of any evidence -- let alone clear or unquestionable evidence:
There are no facts in the counterclaim or motions submitted herein that allege that defendant provided purchase money for the property, that there was a taking of the deed resulting in fraud or mistake or that plaintiff has been unjustly enriched.

There is no evidence that a deed was taken, that purchase money for the property was provided or that plaintiff has been unjustly enriched. There is no evidence of fraud or mistake. Rather the Court finds that it would be defendant who would be unjustly enriched by taking possession of plaintiff's property.
Exactly -- thank you for that clarity, Judge Del Muro.

1 comment:

  1. Excellent news. Thank you.

    Certainly hope attorneys for individual parishes are doing their due diligence and have paid close attention to both of these cases.