Problems with the Virginia Supreme Court's Decision

For a judge, there is nothing so safe as subscribing to precedent, particularly if you do not have to re-examine it. You simply pronounce that you are following precedent, and add an entire string of case citations to "prove" you know what you are doing.

So it is with Justice Cleo E. Powell of the Virginia Supreme Court, the author of the decision in The Falls Church v. Protestant Episcopal Church (USA), which awards all of the real and personal property of what was once the largest parish in the Diocese of Virginia to that entity. (The Diocese is unable to put the property to the full use of which it is capable -- the remnant parish cannot even fill the main chapel -- and so the multi-million-dollar property comes to it as a wholly unearned windfall. No doubt the Diocese will eventually sell the property --to any entity except the congregation from whom it seized it -- in order to recoup some of the costs incurred in fighting for it.)

In one of her first major opinions since joining the Court in 2011, Justice Powell takes refuge in a coppice of previously planted judicial underbrush to justify her quixotic result. That underbrush can conceal a multitude of judicial sins, consisting chiefly of abdications of judicial responsibility. It serves at best as a trap for the unwary, into which the tyro all too easily falls. But at its worst, as we see Justice Powell deploy her precedents in the Court's opinion, it simply grows and expands, without order or restraint.

For the congregants of The Falls Church, in Virginia, a post mortem of the decision can offer scant relief. What does it matter that the Court got it wrong, since it has the final word in that State? Like Pilate, the Court says "What I have written, I have written" -- and passes to the next case on its docket.

The Court says that Virginia is a State that follows and applies "neutral principles of law," but don't let that fool you. What exactly is so "neutral" about (a) judges creating a trust out of whole cloth that the parties themselves never formalized, so that (b) a church like ECUSA can secure a windfall for the unjust enrichment of one of its dioceses?

Justice Powell's result rests entirely upon her finding that a "fiduciary relationship" existed between The Falls Church and the national Church. But she spends no time whatsoever in examining the particulars of such a relationship, or deciding just when and how it actually came into being.

Fiduciary relationships are very special in the eyes of the law. A fiduciary is a person or entity in whom one confides (such as a client with his attorney, a patient with his psychiatrist, or a penitent with his priest) -- or it can also be a person or entity to whom one entrusts money or property, such as a client with his stockbroker or banker. Or it can simply be the trustee who holds certain property in trust for what the law calls the beneficiary of that trust -- the person for whose benefit the trust was established.

The law holds fiduciaries to the highest standards of duty of care, and of loyalty to the beneficiary (no self-dealing with the property at the beneficiary's expense). As Justice Powell cites one case authority (opinion, pp. 18-19):

It is well settled that where one person sustains a fiduciary relation to another he cannot acquire an interest in the subject matter of the relationship adverse to such other party. If he does so equity will regard him as a constructive trustee and compel him to convey to his associate a proper interest in the property or to account to him for the profits derived therefrom.

Let's unpack that quotation a bit. As Justice Powell applies it, it is saying that The Falls Church, acting as a fiduciary towards the national Church, could not "acquire" an interest in its own property that was adverse to the national Church. Supposedly, that happened when The Falls Church voted in 2006 to disaffiliate from the Diocese of Virginia -- but what did The Falls Church "do" at that point to acquire the property? It already owned it. 

Assume for a moment that in 2006 the property was held by The Falls Church as a trustee for the Diocese. Then presumably by declaring itself free of the Diocese, it attempted to make its property free of that trust. And Justice Powell concludes it could not accomplish that step without betraying its fiduciary duty to keep the property available for the use of Diocese, and those loyal to the Diocese.

All right, but what about the relationship of the Diocese to The Falls Church all the time the latter was a member of the former? Was not the Diocese a fiduciary as well, in relation to The Falls Church? Did not The Falls Church rely upon the Diocese and its bishops to uphold the "doctrine, discipline and worship of [the national] Church" as that Church received them from the mother Church of England?

And what happened to that trust? The national Church and its Dioceses breached it in 2003, and breached it further in 2006 -- well before The Falls Church ever took its vote to disaffiliate in response to those breaches of trust.

When a trustee breaches the terms of a trust, the law does not award him the property held in trust as his reward. Yes, we may assume for the purposes of argument that The Falls Church held its own property in trust for the national Church and the Diocese -- but the only reason for the creation of that trust was the undertaking, by the national Church and its Diocese, to guard and preserve the faith. So the second trust was entirely dependent on the pre-existence of the first.

And when the national Church and the Diocese breached that first trust in 2003, the reason for the  second trust ceased to exist. Justice Powell takes absolutely no notice of that crucial fact (other than to observe that there was "a long-standing conflict within TEC that arose in 2003"). For her, the second trust is the only one the law can actually enforce, since the courts cannot make a church hold true in matters of doctrine, discipline and worship. But she utterly ignores the consideration for the second trust, which was the establishment of the first trust when The Falls Church joined the denomination in 1836.

Thus even though the first trust is not civilly enforceable in the courts, it nonetheless furnished the quid pro quo for the creation of the second. And when that first trust ceased to exist, the Virginia Supreme Court had no justification for continuing to enforce the second trust. The Court should have shied away from any use of the term "trust" altogether, and told the parties that it could not enforce the property trust without assessing the failure of the consideration that had been given for its creation. That would have left the parties where the court found them.

Thus the trust analysis in Justice Powell's opinion is highly problematic, and ignores more issues than it resolves. But even how she manages to get to the second trust is an exercise in contradictory logic. Consider her chain of reasoning, which is as follows:

1. In Virginia, from its earliest times until 1993, a "hierarchical" church was prohibited from creating any trusts, express or implied, in its favor.

2. Thus the Dennis Canon, enacted in 1979, had no force or effect in Virginia at the time.

3. But in 1993, the Virginia legislature abolished that rule in part, and enacted a statute which allowed such a trust, in these words:

Every conveyance or transfer of real or personal property, whether inter vivos or by will, which is made to or for the benefit of any church, church diocese, religious congregation or religious society, whether by purchase or gift, shall be valid.

4. Even though the Dennis Canon could have no operative effect to create a trust in Virginia, it nevertheless described the relationship that had always existed between the national Church and the properties of its parishes.

5. Therefore, from and after 1993, that relationship suddenly became enforceable, and so we (the Court) will enforce it now, even if we must use a constructive trust (one created entirely by judicial decision) to do so.

Do you see the problems with that reasoning?

Look at the words of the statute that changed Virginia law, quoted above. It begins: "Every conveyance or transfer of real or personal property ...". If trusts in Virginia stand or fall by the law in effect when they were created (opinion, p. 17), then what conveyance or transfer of The Falls Church property took place after 1993 to give rise to the existence of any trust as described by the Dennis Canon?

The Court cannot have it both ways (but Justice Powell tries to do just that). Either the trust in question arose at a time when it was invalid under Virginia law, or it arose at a time when it was valid, i.e., after 1993. And to arise and be effective as declared by the statute, it had to be part of a conveyance of transfer upon terms of trust executed after that date. If it "arose" out of a course of conduct or dealing, then it does not come within the language of the statute -- and so it would remain invalid under Virginia law.

I see no way out of the corner into which the Court's faulty reasoning has painted itself. It should never have purported to try to resolve the case upon principles of trust law, because they simply do not apply to the facts. As a result of its attempt, the principles applied by the Court are anything but "neutral."

Would the Court even listen to a petition for rehearing along these lines? That is for the plaintiff's  attorneys to judge, but since it got things so wrong the first time, I doubt it will have the capacity to see its error.

"Quod scripsi, scripsi" -- to quote Pontius Pilate again. Right or wrong, the Court has spoken.