Wednesday, January 7, 2009

A Legal Fable

The Dennis Canon supposedly establishes a permanent trust on "property held by or for the benefit of any [Episcopal] Parish, Mission or Congregation" in favor of the diocese in which the property is located, and in favor of "this Church". The California Supreme Court just held that the Canon established such a trust on the property of St. James Church in Newport Beach, even though there is no document in which St. James agreed to establish such a trust, as State law has consistently required since 1850, and as the Statute of Frauds has required since 1677.

Some commentators who are sympathetic to the national Church believe in their Episcopal hearts that the result simply reflects "an already existing understanding of the fiduciary and trustee relationship of parishes with their property; and [the fact that] by their admission into the church they have voluntarily accepted its law as governing and limiting their actions." Indeed it does; indeed it does reflect "an already existing . . . relationship". Such a relationship has, however, two sides. If there is an understood promise always to devote the property to the use of the larger church, isn't there a corresponding promise to keep the larger church faithful to "the faith once delivered to the saints"? It is again one of those ironies of the law that the former promise should (currently, at least) be enforceable in the courts, but not the other---because it would "entangle" the courts in religious doctrine. And yet the one is the consideration for the other.

So there is an enforceable trust on the property. Just what are its terms, and where do we go to look for them? So many people seem willing to assert the existence of a trust---including, apparently, the California Supreme Court---but there are precious few who are willing to say just what the Dennis Canon means.

The litigants themselves, for example, need this information. Currently, their attorneys seem to disagree over what happens next. According to the diocesan chancellor, Canon John Shiner, the decision was "final, conclusive, [and] definitive"---meaning the litigation is over, I assume. The defendants' lead attorney, Eric Sohlgren, however, points out that they have not yet answered the complaints of the diocese and the Church. All the news reports that sites like epiScope, Episcopal Café and Thinking Anglicans are fond of citing talk about the decision as a fait accompli, but then there is a reason why such sites link only to one kind of source, and never to sites like George Conger's, or to this one. When you read only those people who agree with you, pretty soon you believe that the "whole world" is on your side. But in California, as elsewhere in jurisdictions which follow the rule of law, a party gets an opportunity to answer the plaintiff's complaint before there is a final judgment. One needs to read more balanced commentary, such as George Conger's excellent piece cited earlier, to learn that:

Although the litigation began in September 2004, no testimony or evidence has been presented to the courts, as the abstract question of which legal theory governs the dispute has been under review for the past four years.
Thus the parties now return to the Orange County Superior Court, barring any appeal to the U.S. Supreme Court in the next ninety days or so, to ask it to clarify Justice Blackmun's dictum that led to this whole mess. And I return to my question. The Diocese and the Church are asking the court to give effect to the trust embodied in the Dennis Canon. Parishes all over California might well be asking the question: What is the effect of the Supreme Court's decision on their property, and what are the terms of any trust imposed by the Dennis Canon?

What follows is a pure legal fable---as fabulous as the terms of the Dennis Canon are nebulous. It is only a fable, but is offered half seriously; maybe somewhere, some parish or congregation will be able to fashion out of it some solution for their own internal divisions, if such exist. (It was inspired by a taunting comment left on an earlier post: "What would you have TEC folks do? Wave goodbye?") If it leads to only one creative solution, I will feel that I have expiated a bit of the mess which the courts have made of the current situation. (Anyone who can manage to avoid the courts at this point is, believe me, far, far better off than those who are compelled to be involved with them.) 

To understand what follows, we start with the language of the Canon itself (Title I, Canon 7.4):

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.
The parish property ". . . is held in in trust for this Church . . .". But what person is "this Church"? As discussed many times on this blog, the organization that now calls itself "the Episcopal Church" has a number of different aspects. It is first and foremost a voluntary association of dioceses that accede to the national Constitution and Canons, and which began with a convention in Philadelphia in 1789. Since an unincorporated association cannot hold title to property in a number of States, the Church also has an incorporated arm---the Domestic and Foreign Missionary Society, which is a religious corporation under New York Law. As a corporation, it can hold title to property of the Church, such as 815 Second Avenue.

But the Church also is sometimes thought of as its General Convention, which is a gathering of lay and clergy deputies in one house, and of its bishops in the other house, that meets once every three years for just two weeks---that is to say, it exists for just two weeks out of every one hundred and fifty-six (somewhat like the mythical village of Brigadoon, only not as whimsical). And there is its Executive Council, which meets in the interim between Conventions. Last but not least, there is the Office of the Presiding Bishop, which according to Canon I.2, is "the representative of this Church and its episcopate in its corporate capacity." How is one to say, from just the words "this Church" in the Canon, for which of its multifarious aspects the property of a parish is held in trust? Which part of "this Church" gets to say when that trust is not being performed to its satisfaction? Who gives the Church's attorneys their instructions what to ask for in court?

It is a little easier seeing the diocese in which the parish is located as the beneficiary of the trust. At least it is in the geographical neighborhood, and is led by a single bishop. In any conflict between the diocese and the national church over how the trust is to be enforced, a court would probably be inclined more to defer to the position of the diocese, under the theory that "what's good for the diocese must also be good for the church as a whole."

So we have a trust, and we have a likely beneficiary, and we have trust property to be "held in trust." How long does the trust last? The Dennis Canon does not say, but since it is a charitable trust, it can last for as long as the charity itself. And who is the trustee?

Ah, now that is an interesting question. The Canon itself uses the passive voice ("All . . . property . . . is held in trust . . ."), so it studiously avoids naming the trustee outright. But since the second sentence gives the parish complete power and freedom over the property while it remains part of the Church, it can only be the parish itself which is the trustee of the trust. 

But what happens when a parish chooses to disaffiliate from the Church? Is it somehow "removed" thereby as trustee? 

A trustee cannot be removed by a trust beneficiary, but only by a proper court---the trustee has to remain independent of, and not subject to, the beneficiary. (This is what makes the Dennis Canon trust such a strange creature under trust law. The parish is both the trustee and the primary beneficiary of the trust, and unlike a real trustee, can deal freely with the property as if it were its own. The Diocese is only a secondary beneficiary, and has very little say in how the property is operated; nor does it benefit from the use of the property as such.) But in the case of the Dennis Canon, the trustee becomes independent of the beneficiary only if, paradoxically, the parish disaffiliates.

Whatever else the California Supreme Court did, it did not remove St. James as trustee. All it did was declare the existence of a trust. And a trust has to have a trustee. What the Dennis Canon literally says is that the power of the trustee to deal with the property as its own becomes limited only if and when the trustee disaffiliates. In other words, it becomes a true trust only when the trustee decides to leave the Church, because it is only then that the trustee (by the act of leaving) becomes actually independent of the other beneficiary (the diocese), and is able to be a real trustee!

For parishes considering disaffiliation from the Church, therefore, this fact may open up some possibilities for a genuinely Christian solution to the problem of how to accommodate the desires and needs of both the group that splits off, and the group that wishes to stay in the Episcopal Church. Let's assume that in a typical parish (not St. James) of, say, 100 people attending services on an average Sunday, that 60 wish to leave, and 40 wish to stay. Let's assume also that the parish's articles and bylaws make it subject to the Dennis Canon.

The solution that offers itself for Christians is that the 60 who want to disaffiliate agree to continue to hold the property for the benefit of the 40 who wish to remain. They share the space, and hold different services on Sunday, at different times. The forty can bring in their own Episcopal priest to conduct their services, but they should not need to engage any other staff. The Sunday School teachers can still teach all the children, and the parish secretary now puts out two Sunday bulletins instead of one---but they will have the same lectionary, the same psalm, and can even have the same hymns. The only thing that changes are the names of the lectors, greeters, and the names of the clergy.

The 60 who disaffiliate contribute 60% of the expenses of the operation and upkeep of the property, and of the permanent staff---that is their compensation to the Diocese for their physical use of the building and its staff, except that they pay 100% of the salary of their rector (but they were going to have to do that anyway). The 40 who remain pay 40% of the expenses, plus the entire salary of their rector. The two congregations might even arrange to share a common coffee hour between services!

The property goes nowhere, and no title needs to be changed; there is just an acknowledgment that it is held in trust for the Diocese. And by allowing the 40% who remain with the Diocese the full use of the property, the trustee (the group with the 60%) is fulfilling its obligations to the fullest extent possible, by accommodating every Episcopalian in the area who still wants to go to church there. (The Diocese could scarcely be heard in court that it wanted the property sold to the highest bidder, when that would throw its 40 parishioners out of their own church.)

This arrangement could continue for as long as the two groups wished it to. Naturally, for reasons that commenter BabyBlue explained well here, the group that disaffiliates will not be investing much, if any, money in improving the property. Unless the group that remains chooses to do so, the property will become more run-down with time, so this suggests that the solution will not be a permanent one. If the group that disaffiliates gets much larger over time, then it will assume more of the expenses, until maybe it will choose to acquire a property that is truly its own. And if the group remaining becomes larger, maybe it, too, will choose to do the same, at which time the Diocese could sell (or just rent) the property to the other group.

I do not say it is a perfect solution; nor is it one that will work in just any case. But at least it has the virtue of being thoroughly Christian---and it fully honors the Dennis Canon, such as it is.



  1. Dear Curmudgeon,

    A few (hopefully) simple questions suggest themselves to me.

    How does the recently publicized absence of any convincing documentation that the Dennis Canon was actually approved, at least in the form quoted by TEC and herein by you, affect the question of the trust's existence? Were I, as a humble layman with respect to the law, on a jury hearing this case, the assertion of a trust by TEC's legal representatives in this case, absent the expected records of its adoption would, I suspect, be sufficient grounds for me to find TEC's case unproven. (I am herein assuming that such evidence would be admissible in this case).

    Clearly this is not a jury trial, but why would a sitting jurist be inclined to view things any differently?

  2. Mr. Haley-

    You assert that a parish has "complete power and freedom over the property while it remains part of the Church." This is certainly not the case in New York - and perhaps in other places - where parishes are not alllowed to alienate real property wihtout the consent of the Bishop, Satnading Committee and the state court.
    But you raise the question of a congregation's relinquishing of those rights when it chooses to cease to be an Episcopal parish and asserted that such a congregation does not cease to be the trustee when it departs. I see an error in your thinking here, because the legal status congregation changes when it ceases to belong to the Episcopal Church. The trustee is "St. James Episcopal Church" but those who have left have no right to claim to be that trustee. St. James Episcopal Church still exists as a parish of its diocese, even if all of its former members and its last rector are members of a new body. By agreeing to abide by the canons of the Episcopal Church, we (clergy and vestry members) have agreed to limit legal rights that we might have in other contexts.

  3. I would raise a point that has been raised by Fr. Tobias Haller, that the property of any parish is not simply property acquired through the efforts of the present members and thus reasonably divided on the basis of the desires of those members. Much of the property was, in all but the newest parishes, acquired through the efforts of people who have died. They worked and contributed for the ministry of an Episcopal parish and, since we cannot find out what their wishes might be, the only reasonable assumption is that they would want what they worked to build to continue as an Episcopal parish.
    I recall that in a midwestern diocese, a very new congregation negotiated a property settlement with the diocese and I assume that the fact that most of the original members were still members was a consideration in the negotiations.
    I am in favor of negotiated settlements, even though that seems not to be the position of the leadership of the Episcopal Church. I see such settlements as a parting gift that the Episcopal Church can give to our sisters and brothers who have come to the conclusion that they can no longer continue to journey as Episcopalians. It would not, in my view, be a matter of acknowledging any rights under the canons, but in act of generosity.

  4. Father Weir, the restriction on the parish's ability to encumber or alienate its real property applies only to parcels with a dedicated Church or Chapel on it, and appears in Canon 6.2 of Title II. That restriction thus applies on its face to all Episcopal parishes in whatever diocese. However, there is no restriction on the alienation or use of any other parish property, including funds in its bank accounts, except as local canons or trust restrictions may impose.

    My main point is that whereas the usual trust places very strict limits on a trustee's power to deal with the trust property as his own (no commingling of funds, no use of trust funds for personal expenses, etc.), there is no such restriction under the Dennis Canon language itself.

    As far as "those who leave" having a "right to claim to be . . . trustee", that again is not my point. A trustee once in office continues in office until he or she resigns, dies, or is removed for misconduct by a court in a suit brought by a beneficiary. The parish continues in the position of trustee---even after it votes to leave the Church---until the Diocese brings suit to remove it, or its vestry, or whoever holds title to the parish property; removal is not automatic. And under my "fable", given proper acknowledgment of the trust, removal would not be necessary.

  5. In regard to your second comment above, Father Weir, please note that I was not proposing to change the fact that the property remains in trust for the Diocese. All I was proposing was that the two groups split current expenses in the same ratio as their numbers, on the assumption that the expenses are incurred in proportion to those numbers. If that is not true for a given expense, the parties could agree upon another fair arrangement.

  6. Martial Artist, if a court allows the presentation of evidence on the question of whether the Dennis Canon was adopted in accordance with the Church's procedures, I submit that a question of fact would indeed be raised that would have to be resolved by the trier of fact, whether a jury or the court sitting alone.

    Unfortunately, the courts thus far to address the matter (which surfaced only recently) have tended to view the matter as on a par with raising the issue of whether the 16th Amendment to the U.S. Constitution (allowing the income tax) was properly passed by Congress. They take the view that too much water has passed under the bridge---or, in other words: "My (our) mind is made up; don't disturb me (us) with the facts."

    The most recent casualty of this attitude appears to have been Father Matt's church, in the suit in Binghamton, NY.

  7. It doesn't appear that Fr Weir's question is answered by referring to property parcels. Besides, I don't think Dan's rebuttal is on the proper side of the coin.
    Certainly, diocesan canons specify that if a parish wants to move a church building to a different site, or sell the property outright, or desire other changes to the property as it currently exists it must have approval at the diocesan level to do so.
    The real question here I believe is whether or not The Episcopal Church (in its various facets as the Curmudgeon has identified in the post) has any power or authority to take away control of a parish's property or facilities or any other assets from the existing parish's valid leadership, vested in the rector and vestry. The answer is no. The language of approval is at the diocesan level. But even the diocesan ecclesiastical authority cannot arbitrarily take control of such a parish. The safeguard is on a parish.
    So my question is does the Dennis Canon erode those parish (and thus to both the advantage and the detriment of the diocesan) safeguards?
    If so, both parishes and dioceses will want to include language in bylaws and incorporation articles and canons to provide legal protection against the very set of canons that are presumably in place for the ordering and protection of the Church.
    Here, insert Pogo's famous quote.

  8. Mr Haley,

    Although not an attorney, I would suggest that once St. James Episcopal Church ceases to be an Episcopal parish, the vestry's claim to act as trustee is at least open to challenge. Not understanding the full legal meaning of alienation of real property, I can only suggest that the continued use of the parish church by the congregation that has left the Episcopal Church could be considered illegal.

    As to your point about the alienation restriction applying "only to parcels with a dedicated Church or Chapel on it" that is not the case in New York where the sale of any real property must be approved by the Bishop, the Standing Committee and a state court. Having served two parishes where such sales were being done, I know that the Bishop and the Standing Committee were very careful that the sales would not negatively affect the parish's ministry.

  9. Amateurcanonist, that's a great comment! (For an amateur [:>)], I find you very astute.) Reading the Dennis Canon to override Canon II.6.2 is a proposition I will have to think some more about. Certainly I find it remarkable that both the Diocese and the Church chose to enforce the trust expressed in the Dennis Canon, rather than the restriction stated in Canon II.6.2.

  10. A few comments, as I'm sitting in an airport, waiting to return home from the annual Heckerling Conference for Estate & Trust planning professionals.

    First let me continue to say that I am grateful for your publication and that this is in no way intended as a flame, but instead as a simple rhetorical exercise as "Devil's Advocate".

    (1) In many jurisdictions (hereinafter, "JXs"), a trust, even one over/containing real property may be inferred by the conduct of the parties, even if it would at first glance appear to otherwise violate the Statute of Frauds. Courts tend to be particularly open to such arguments in situations involving charitable bequests and other charitable gifts.

    (2) As a Parish Treasurer (in addition to my day job as a trusts & estates attorney), I would likely argue that the actual relationship of the trust imposed by the Denis cannon would be as follows: The Vestry are the Trustees, who hold the property in trust for the primary beneficiary/life interest, the Parish Church, with the 'national church' (i.e., TEC/ECUSA) as a secondary/residual beneficiary or remainderman. The Trustee's serve in a fiduciary capacity over the property with the primary benefit of the Parish Church. Under the trust, the Trustees are allowed to use assets in trust to benefit the primary beneficiary/life interest holder (the Parish Church) but in so doing, they cannot violate their fiduciary duties to the remainderman. Consequently, when the Vestry, as trustees, are no longer capable of representing the interests of both remainder and life interest holders, because they have participated in a decision that would, in effect, cut off the remainderman's interest in the trust and transfer the same to the life beneficiary (thereby creating in the life beneficiary full ownership over the property and nullifying the original trust itself), then the Vestry are no longer capable of discharging their fiduciary duties and are no longer qualified to serve as trustee. It isn't uncommon at all for a beneficiary to have the power to remove a trustee when it is no longer serving its interests. In personal trusts, we use a role called a trust protector to prevent mischief by a class of beneficiaries seeking the removal of the trustee, but one doesn't have to do so.

    (3) The retro-active argument doesn't particularly bother me. Perhaps an analogy to consider is the retroactivity of duties imposed by marriage. One cannot annul one's marriage or otherwise be exempt from post facto municipal, state, and federal laws governing marriage and the duties and obligations to each other that are promulgated after one enters into holy matrimony and has the relationship recognized under secular law. The law implies fiduciary obligations to the parties, even in absence of a written trust, even when the title to property is captioned in the name of one spouse or the other. Now, admittedly, it is rare for there to be a unilateral property split, but the analogy still holds strong as to retroactive application and the empressment of a trust.

    Just a few ideas, for what they're worth.



  11. Thank you, Craig, for those comments; they are most helpful. I can see the vestry as trustees for the parish property, because that is the way that most existing vestries have the title to their parish's property in any event.

    But then we are asked to accept the following proposition: that all of these vestries, by the simple virtue of an unheralded and largely unknown canon that may or may not have passed GC in 1979, are suddenly impressed with the terms of a further trust, which they did not ask for, and which imposes on them new duties toward two contingent remaindermen, whose interest springs into life only at the moment the parish (not the vestry, mind you---the vestry alone has no power to amend the parish articles) votes to disaffiliate from ECUSA. And because of that vote, the vestry suddenly has to be removed? What if a majority of the vestry voted against the change, but they were in the minority of their parish?

    I agree with you that trustees who act to prejudice a remainder interest may be removed, of course. And in many cases of the Dennis Canon's application, the analysis no doubt would come down to that. But I have never heard of a case in which the trustee was removed because of the act of the beneficiary prejudicial to the interests of the remaindermen---at least, where the act was other than waste, which would destroy the entire trust corpus, and which is not analogous here.

    So I would require a very strong showing of course of conduct indeed before I would find that the parish vestry has accepted the canonical amendment to the terms of their trust---simple inaction in the face of lack of knowledge would not be enough.

    I thank you, as always, for your thoughtful comments. You have helped to clarify one point about the difference between the parish as primary beneficiary and the vestry as trustee, and that furthers the analysis by quite a bit.