Religious Institutions Update: October 2009
Fundraising is always tougher in an economic downturn. Consequently, faith-based organizations may be tempted to expend or borrow funds given for designated purposes on general budgetary or other expenses. Resist the temptation. Donations earmarked for particular purposes should be used for them; otherwise, disgruntled donors may have a variety of claims against the charity. For example, one of the cases below reveals that donors may have an intentional misrepresentation cause of action. Donors may also claim deceptive and unfair trade or advertising practices or plead equitable theories, such as a constructive trust. Accordingly, it is best not to view designated funds as the solution to general budgetary shortfalls.
Fair Housing Act Does Not Inhibit Religious Exercise of Homeless Shelter
A federal district court in Idaho has ruled that the Fair Housing Act (FHA) does not preclude a religious homeless shelter from requiring guests to participate in religious exercise as a condition of receiving services. Intermountain Fair Housing Council v. Boise Rescue Mission Ministries, No. CV-08-205-S-EJL, 2009 WL 2914180 (D. Idaho Sept. 10, 2009). A former resident sued Boise Rescue Mission, claiming that the shelter discriminated in housing against him on the basis of religion and sex by requiring him to participate in chapel services in order to reside and eat meals at the shelter. A second plaintiff who chose the program after full disclosure over a secular program also complained about its religious content. Because the FHA makes it unlawful to “discriminate against [a] person in the terms, conditions, or privileges of sale or rental of a dwelling,” the court was required to consider whether the shelter was a dwelling or whether a religious exception to the FHA applied. The court held the religious exception inapplicable, because the shelter did not limit occupancy to persons of the same religion or give preference to such persons. But in the face of conflicting authority about whether a shelter was a dwelling, it held this particular shelter not a dwelling, because residents ordinarily could stay for a maximum of 17 consecutive nights, had to leave during the day and were not guaranteed the same bed each night upon return. Alternatively, the court held that the Religious Freedom Restoration Act bars application of the FHA to the shelter’s religious activities, even if prohibiting religious discrimination is a compelling governmental interest.
Religious Institution May Be Liable for Intentional Misrepresentation About Use of Donations
Former parishioners of the St. Paul Catholic Church in Pass Christian, Mississippi, sued, inter alia, the Catholic Diocese of Biloxi, Mississippi, and the bishop after he closed the church due to Hurricane Katrina-related damage. Schmidt v. Catholic Diocese of Biloxi, No. 2008-CA-00416-SCT, 2009 WL 2960706 (Miss. Sept. 17, 2009). The extent of the damage was disputed by the parties. Before closing the church donations were solicited to rebuild it. While parishioners filed a canonical appeal of the closing that was eventually rejected, they also sued in court: (1) alleging the defendants held the St. Paul property and insurance proceeds in trust for their benefit; (2) requesting an accounting; and (3) claiming that a pastor “made intentional misrepresentations by soliciting donations to rebuild St. Paul, while having personal knowledge that the decision not to rebuild already had been made.” The plaintiffs argued that their claims were purely secular and could be decided under a neutral principles of law approach. The court disagreed, except with respect to their misrepresentation claim. The court found the alteration of a parish was a matter of internal church governance at the core of ecclesiastical affairs over which it lacked jurisdiction. Furthermore, the court held that the plaintiffs lacked standing to claim the St. Paul property was held in trust for them, because the effect of the dismemberment of the parish and transfer of their membership was to deprive them of all rights as members in the church property. On the other hand, the court held that the church defendants did not enjoy First Amendment protection against donors’ “claims that [the church defendants] solicited and accepted funds to be held in trust for a specific, stated purpose, but spent the funds for an unauthorized purpose.” It said that, although the defendants enjoyed “almost unfettered discretion in their administrative decision-making,” donors could reclaim funds diverted from their solicited purpose.
Courts in California and Michigan, but Not South Carolina, Rule Against Disaffiliating Congregations
Courts in California and Michigan, but not South Carolina, ruled against congregations seeking to disaffiliate from national denominations while retaining their facilities. In Lamont Cmty. Church v. Lamont Christian Reformed Church, 06-055721-CZ, 2009 WL 3030033 (Mich. App. 2009), Lamont Christian Reformed Church created a “nondenominational” property holding company and purported to transfer the church’s property to it without the knowledge of the Christian Reformed Church of North America. The church argued that the court should find, as a matter of law, that the denomination was congregational in character with respect to property. But the court held that this was a question of fact that had to be answered based on the language of the Church Order and other governing documents, and, to the extent there was any remaining ambiguity, based on the interpretation of the denomination’s highest judicatory. Furthermore, because the parties conceded that the denomination was presbyterial, the court was convinced it “must be the opposite of congregational” or hierarchical. As such, the court held that it was required to abstain from second-guessing the decision of the denomination that the church was without authority to transfer the property and had not properly disaffiliated. The court held that the congregation’s “arguments related to the procedure for adoption of changes to the Church Order and questioning whether the Denomination properly acted according to its own laws are outside the scope of what civil courts may decide….”
Likewise, in Classis of Central Cal. v. Miraloma Comty Church, 2009 WL 2940183 (Cal.App. 1 Dist. 2009), the court held that it could not review the decision of the Reformed Church in America to close Miraloma Community Church due to declining membership, and that Miraloma Community Church’s effort to avoid being “superseded” by amending its articles of incorporation and bylaws to sever its denominational ties was invalid. The court applied a “neutral principles of law” approach, considering, where relevant, not only California corporations law, but also the national church’s constitution, canons, etc. Miraloma Community Church argued that Presbyterian governance is representative, rather than hierarchical, but the court disagreed, based on the denomination’s “tiered structure”; it accordingly found deference due the general synod’s ecclesiastical judgment. Miraloma Community Church also argued that its power to amend its bylaws grew out of the general corporate code and rendered the “supersedure” process illegal, but the court found no contradiction between the procedure and code. According to the Book of Church Order, the governing body of the church, the consistory, could not sell, transfer or encumber real property without the approval of a regional governing body, the classis, of which the church was a member. Therefore, the denomination had the right to replace the Miraloma Community Church’s board of directors.
Applying the same neutral principles of law approach, the Supreme Court of South Carolina reached a different result in All Saints Parish Waccamaw v. Protestant Episcopal Church, No. 26724, 2009 WL 2998941 (S.C. 2009). In this case, the court ruled that a disaffiliating congregation lawfully severed its ties to the national Episcopal Church in the United States of America and the South Carolina Diocese by adopting amendments to its articles of incorporation. The court held that the diocese’s recording of a notice with the county clerk of court in 2000, purporting to put the public on notice that the congregation held its property in trust for the diocese and denomination was invalid, because at the time the deed was recorded the diocese had no interest in the property. A 1745 trust deed and 1903 quitclaim deed from the diocese invested the property squarely in the parish congregation. The court held that deference to the denomination was not necessary, on the grounds that no meddling in doctrinal matters was needed to find that the members of the majority vestry adopted articles of amendment in compliance with the South Carolina Non-Profit Act, and because nothing in the Church bylaws or the Constitutions and Canons of the denomination or diocese required “third-party approval for amendments to the congregation’s corporate charter.”
Religious Institutions in the News
Civil rights and other groups appealed in September to U.S. Attorney General Eric Holder to withdraw a George W. Bush-era legal memorandum on aid to religious organizations enabling them to take religion into account when hiring. See Reversal Urged for Bush-Era Memo on Aid to Religious Groups; Groups Push to End Hiring Bias Legalized for Religious Charities; and OLC Reviewing Bush-Era Memo On Faith-Based Initiatives.
The U.S. Supreme Court cleared the way for the release of sealed documents concerning sexual abuse by priests. See Church Loses Fight Over Sealed Papers; and Supreme Court: Catholic abuse documents can't stay sealed.
The U.S. Department of Health and Human Services has issued a guide for community and faith-based organizations on dealing with the H1N1 flu. See H1N1 Flu: A Guide For Community and Faith-Based Organizations.
About the Editor: Nathan Adams