Diocese of Virginia Is an Emperor without Clothes

Thanks to BabyBlue, we learn that the Episcopal Diocese of Virginia, just five days before its Bishop held out the olive branch to the departed CANA parishes, had used his other hand to hit them with a sucker punch (that came to light only afterward): his attorneys 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, as a  preliminary to Bishop Johnston's suggesting the possibility of arrangements to allow the CANA congregations to remain in their buildings, is a sign of desperation -- of applying maximum pressure on the congregations to give up and return, lest they be held liable for 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.