Friday, January 2, 2009

The Episcopal Church Cases - a Summary

There are a lot of anxious (and praying) people this weekend. The California Supreme Court is due to post the opinions in the Episcopal Church Cases (No. S055194) at 10:00 a.m. PST this Monday, January 5. Here is a summary of what is at stake.

The case involves a dispute over the property of St. James Church in Newport Beach, California, which voted to disaffiliate from the Diocese of Los Angeles in July 2004. (There are simultaneously suits pending against two other parishes that withdrew from the Diocese shortly afterwards: All Saints' Church, in Long Beach; and St. David's Church, in North Hollywood. The result in the St. James case will govern the other two.)

After St. James voted to disaffiliate, the Diocese of Los Angeles, along with two of its bishops and a former lay member of its corporation, brought suit against it (a California religious corporation), its volunteer directors, and three of its priests (and later, against the other two churches, their priests and directors as well). The three suits were consolidated before one judge in Orange County. The Episcopal Church (USA) was allowed to intervene with its own complaint. The Diocese sought a judgment from the court that the parish property belonged to it, in trust for those at St. James who wanted to remain in ECUSA. For its part, ECUSA supported the claim of the Diocese, since it asserted that the parish's property could be used only for the benefit of the denomination. (Please note: for reasons best expressed here, and because of its perverse refusal to follow its own canons, I no longer "accede" to ECUSA's desire to be known as just "The Episcopal Church", or "TEC". It remains today what it was when it was ECUSA, and ECUSA it shall be for me until it shows itself as something different.)

The trial court found that the Diocese's action was subject to California's anti-SLAPP statute, and ordered its complaint stricken. (SLAPP stands for "Strategic Lawsuit Against Public Participation"---it protects people from being sued by overbearing plaintiffs who want to punish them for speaking out or otherwise taking a stand on an issue of public importance. Unless the plaintiff can show that his suit is not motivated by a desire to silence opposition, and has a good chance of prevailing on the merits, the court will order the lawsuit stricken.) At the same time, the court sustained the parish's challenge to the sufficiency of ECUSA's complaint, held that its defects could not be cured by amendment, and dismissed it.

Both the Diocese and ECUSA appealed to the Fourth District Court of Appeal. A three-judge panel of that court reversed the trial court in a lengthy, 77-page decision. Essentially, the panel held that the trial court had erred by adopting an analysis based on "neutral principles of law". By joining a line of cases to that effect which it said was "upsetting the stable legal universe that existed in California up until that time", the trial court had failed to apply the "correct" rule, which the panel euphemistically named the "'principle of government', or 'highest church judicatory' approach". (I shall explain these terms in a minute.)

The Fourth District panel held that under the latter approach, ECUSA and the Diocese were within their rights in enforcing a Dennis Canon trust against the parish property. Thus the trial court's conclusion that the latter's action was subject to being stricken under the SLAPP statute was wrong, as was its upholding of the parish's challenge to ECUSA's complaint. But it also reached the same conclusion under its analysis of California Corporations Code section 9142, which I quoted and discussed in this post. For ease of reference here, I quote the relevant parts of that section again:

Subdivisions (c) and (d) of section 9142 provide:
“(c) No assets of a religious corporation are or shall be deemed to be impressed with any trust, express or implied, statutory or at common law unless one of the following applies:

“(1) Unless, and only to the extent that, the assets were received by the corporation with an express commitment by resolution of its board of directors to so hold those assets in trust.

“(2) Unless, and only to the extent that, the articles or bylaws of the corporation, or the governing instruments of a superior religious body or general church of which the corporation is a member, so expressly provide.

“(3) Unless, and only to the extent that, the donor expressly imposed a trust, in writing, at the time of the gift or donation.

“(d) Trusts created by paragraph (2) of subdivision (c) may be amended or dissolved by amendment from time to time to the articles, bylaws, or governing instruments creating the trusts. However, nothing in this subdivision shall be construed to permit the amendment of the articles to delete or to amend provisions required by Section 214.01 of the Revenue and Taxation Code to a greater extent than otherwise allowable by law.”

The California Supreme Court, therefore, is called on to decide three questions:

1. Which line of analysis should California courts apply to religious property disputes---the "principle of government/highest church judicatory" approach, or the one that follows "neutral principles of law"?

2. If courts are to use the latter approach, what is the effect of Corporations Code section 9142 (c) (2) on that analysis?

3. Was the trial court correct in applying the SLAPP statute to the Diocese's complaint?

Notice that each of the later questions depends on the answer given to the one before it. As I shall explain below, if the Court decides to apply the "principle of government" approach, it then will defer to the Dennis Canon; section 9142 (c) (2) may be read in support of that approach, and then the suit is not a SLAPP action.

If, however, the Court decides to apply "neutral principles", then as I will also explain, it must decide how to apply section 9142 (c) (2) together with the property deeds and Church constitution and canons, and depending on how it resolves that question, it may either uphold the trial court's SLAPP finding, or reverse it.

Now, then, what is the difference between the two analytical approaches? Essentially, we are talking about specifying which of two decisions by the United States Supreme Court, one hundred years apart from each other, California courts must follow in church cases.

In the first, Watson v. Jones (1872) 80 U.S. [13 Wall.] 679, the Court held that if the highest church body to address the matter has decided a doctrinal or religious question in such a way as to resolve the issue of, say, who owns an individual church's property, then that decision cannot be questioned or reversed by a civil court. Courts were required to defer to the "highest church judicatory" in such cases---which meant that the method applied to churches where there was a hierarchical structure, or polity, with regional or national bodies having authority over local ones. Such a structure was in contrast to congregational churches, where the individual parish itself was the highest authority, and was not subject to any regional or national authority. 

In the second case, Jones v. Wolf (1979) 443 U.S. 595, the Court held that State courts alternatively could decide religious property disputes by applying "neutral principles of law"---i.e., the same legal principles that apply to any dispute over real property between two private parties. Under this approach, courts would not have to defer to the decision of the "highest church judicatory", but could---so long as they did not have to entangle themselves in questions of religious doctrine---look at the deeds and other church documents bearing on questions of title, and decide the case like any other. (Thus the approach was termed "neutral", because there was no a priori deference to the church's hierarchy.) The Court expressly held in Jones v. Wolf that the First Amendment did not mandate the different (earlier) approach of Watson:

We cannot agree, however, that the First Amendment requires the States to adopt a rule of compulsory deference to religious authority in resolving church property disputes, even where no issue of doctrinal controversy is involved.
(For more detailed discussion of the differences between the two cases and their approaches, please see this post.) In the cases now to be decided, the Court of Appeal was therefore saying that in California until very recently, the courts had all followed the Watson approach, and that the trial court was wrong to go with a few more recent cases that had adopted the Jones v. Wolf approach.

When the case is looked at in this way, I have to say that the Court of Appeal was being rather arbitrary in holding as it did. For the question of which (U.S.) Supreme Court precedent should be followed in California is ultimately not up to it to decide. The only authority a three-judge panel of one of the Courts of Appeal has is to say what the law is in the judicial district in which it sits---here the Fourth Appellate District, which includes Orange County. And in this instance, there was a prior decision by a different panel in the same Fourth Appellate District which had adopted the "neutral principles" approach. Ordinary principles of stare decisis, therefore, would have required the panel in the Episcopal Church cases to apply the same approach as the earlier panel's decision.

But after a lengthy analysis, the present panel decided that the earlier one had erred in its reading of Jones v. Wolf and earlier Supreme Court cases, so it declined to use the "neutral principles" approach. (It is zigs and zags like these that drive us appellate lawyers crazy.) Parting company with most of the recent California courts on the subject, it decided to resurrect the "principle of government" approach of Watson v. Jones. The decision to do so, in turn, created a conflict between appellate courts---indeed, between different panels on the same Court of Appeal---which the California Supreme Court pretty much had to resolve, since no other court could. And as a result of what that panel decided to do, we will finally have some certainty as to which approach applies in California, when we read the Supreme Court's resolution of that question next Monday morning.

For ECUSA and the Diocese, therefore, the problem was to fashion arguments that would work under either approach. They argued that under the hierarchical ("principle of government") analysis, the Diocese, as the highest applicable authority vis-à-vis the individual parish, had the power to require by canon that the parish property always be used for the benefit of the Diocese and its members, and that no court could hold otherwise, regardless of what the property deeds might say. 

Under the "neutral principles" approach, they argued that the Dennis Canon (and the parallel provision in the diocesan canons) trumped the property deeds after 1979. That is to say, even though the parish acquired its property outright in 1950, because it had agreed in its application to become a parish that it shall "forever . . . be bound by" the diocesan and the Church's Constitution and canons, the adoption of the Dennis Canon in 1979 changed its ownership from title in fee simple to title in trust for the Diocese and the denomination. In this position they claimed legislative support from section 9142 quoted above, because it explicitly allows religious property to be made subject to a trust "to the extent that . . . the governing instruments of a superior religious body or general church of which the corporation is a member, so expressly provide."  

Those arguments, as I explained above, prevailed in the Court of Appeal. The parish of St. James had prevailed in the trial court, however, by arguing (a) the court should apply "neutral principles" analysis, and (b) under that approach, California law provided that a trust could be created only by the owner of the property in question. Thus while the Dennis Canon might be a valid enactment of the national church in some states, it could have no effect in California, because it was not a declaration of trust by the parish which was the record owner of the property.

And how did the trial court deal with section 9142? It followed the reasoning of another California Court of Appeal case, which held that section 9142 was never intended to change or alter existing trust law in California; that instead, the statute was intended to allow the enforcement of a trust that was already valid under some other statute, or under common law. (Notice the language in the introductory part of subsection [c] quoted above.)

The Episcopal Church [USA] and the Diocese argued that the appellate court in that case (California-Nevada Annual Conf. v. St. Luke's United Methodist Church [2004] 121 Cal.App.4th 754) had gone out on a limb, and was not supported in its reading of section 9142 by any other court. (To view the case from the link, you will need to agree to the site terms, then enter the citation on the next screen as "121" [choose: "Cal. App. 4th"] "754".) The Fourth District agreed---as did the Sixth District in a more recent decision discussed here. The California-Nevada case is significant because it was decided by the Fifth District Court of Appeal, and that is the court that will decide any appeal in the current San Joaquin litigation. Nevertheless it, like all the other Courts of Appeal, will after Monday be bound by however a majority of the Supreme Court decides to interpret section 9142.

These, then, were the arguments made to the California Supreme Court, convening at a special session in Riverside last October. The Court and counsel for both sides spent a fair amount of time discussing whether the neutral principles approach was better, and if so, which side prevailed under that analysis. There seemed to be little appetite on the Court for retaining the 1872 approach of Watson v. Jones; Justice Corrigan came out squarely in favor of the "neutral principles" approach. Counsel for ECUSA contended that the national church should prevail under either approach, but she maintained (perhaps feeling more secure with the hierarchical argument) that California should stick with the traditional "principle of government" analysis, as the Fourth District panel had strongly argued. Justice Corrigan asked her: "But if you win under either test, why should we go back to the days of the Civil War, if we can use neutral principles?"

With this post as a background to the oral argument, I will put up another one soon that discusses how each side fared in its arguments to the Court. Then I will conclude with an educated guess as to what we might expect on Monday.

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