SUPREME COURT REVERSES SUMMARY JUDGMENTS IN EPISCOPAL CHURCH PROPERTY-DIVISION CASES

Masterson v. The Diocese of Northwest Texas
Texas Supreme Court, No. 11-0332 (August 30, 2013)
Justice Johnson (Opinion)

The Episcopal Diocese of Fort Worth v. The Episcopal Church
Texas Supreme Court, No. 11-0265 (August 30, 2013)
Justice Johnson (Opinion)
In divided opinions, the Texas Supreme Court reversed summary judgments in two cases involving property disputes between the Episcopal Church and local units that had separated from the Church. In both cases, the lower courts had deferred to the Episcopal Church’s determinations regarding the continuing governance of the local units and ownership of property associated with those units. The Supreme Court announced that such property disputes should not be resolved by deferring to church decisions, but should instead be decided on neutral principles of law applicable to secular disputes. In one case, the court concluded the Church had not sufficiently pleaded or moved for summary judgment based on such neutral principles. In the other case, the court concluded the summary-judgment proof was inadequate to establish either party’s entitlement to judgment as a matter of law. There were dissents in both cases.

Masterson. The board of trustees of an Episcopal congregation in San Angelo received title to certain real property in 1961. The congregation later applied for and received parish status with the Diocese of Northwest Texas. In conformance with canons of the Diocese, the congregation incorporated under the Texas Non-Profit Corporations Act, and the property owned by the trustees was conveyed by warranty deed to the new corporation. The corporation’s bylaws provided that the corporation would be managed by a vestry elected by members of the parish.

In 2006, because of doctrinal differences, some members of the parish proposed disassociating from the Episcopal Church and re-organizing as an independent church. The parish held a meeting at which a majority of eligible members voted to amend the corporate bylaws to remove all references to the Episcopal Church and the Diocese, dissolve the congregation’s union with the Church, and revoke any trusts that may have been imposed on any of the congregation’s property by the Church.

The Diocese took the position that the San Angelo congregation could not unilaterally disassociate from the Episcopal Church, and the Diocese designated a new vestry to continue operating the parish. The withdrawing faction continued to use the parish property; so the Diocese filed suit against the leaders of the withdrawing faction and sought a declaratory judgment that, among other things, the Diocese and the vestry appointed by it were entitled to possess and control the property. The trial court granted summary judgment for the Diocese, and the court of appeals affirmed.

The Supreme Court began by reviewing United States Supreme Court case law regarding the constitutional limitations on courts’ ability to intervene in internal religious affairs. From this body of law, the court concluded that two approaches—“deference” and “neutral principles of law”—are constitutionally permissible. Under the “deference” approach, a court defers to and enforces the decision of the highest authority of the ecclesiastical body to which the matter has been taken. “Deference” is the only permissible approach when ecclesiastical questions are at issue. When non-ecclesiastical questions are to be decided, however, a court may apply the “neutral principles of law” approach, under which the question is decided by using generally applicable legal principles. After reviewing United States Supreme Court case law and its own 1909 decision in Brown v. Clark, the court determined the “neutral principles” approach is appropriate when deciding “issues such as land titles, trusts, and corporate formation, governance, and dissolution, even when religious entities are involved.” To reduce confusion and increase predictability, the court instructed that Texas courts should use only the “neutral principles” construct in such cases.

Applying neutral principles to this case, the court determined the Diocese was not entitled to summary judgment. While the Diocese’s decisions regarding the relationship between the Episcopal Church and the local congregation were ecclesiastical decisions entitled to deference from the courts, the Diocese’s decisions regarding ownership and use of the property were not. Because the Diocese “neither pleaded nor urged as grounds for summary judgment that they are entitled to the property on the basis of neutral principles,” their pleading and motion could not support summary judgment.

In a section of the opinion joined by five justices, the court went on to provide guidance to the trial court on arguments that may be presented on remand. The court observed that it was undisputed that title to the property is in the name of the local corporation. The court rejected the Diocese’s argument that, because the original bylaws of the local corporation incorporated the General Constitution and Canons of the Episcopal Church, the local congregation was required to remain subject to the Church’s authority. The court noted that bylaws may be amended under Texas law, and it considered questions about the validity and effect of such amendments to be secular, not ecclesiastical. The court also rejected the Diocese’s argument that it was entitled to possess the property because the local corporation’s adoption of the Church’s Constitution and Canons, along with its acceptance of benefits from the Church, created an irrevocable trust on the corporation’s property. Although the Church’s Canons included a statement that all property held by a local congregation was held in trust for the Church and the Diocese, that statement did not expressly create an irrevocable trust under Texas law.

Diocese of Fort Worth. Like the San Angelo congregation in Masterson, the Fort Worth Diocese of the Episcopal Church amended its governing corporate documents in 2006 to disassociate itself from the Episcopal Church. The Church later sued the Diocese, seeking title to and possession of the property held by the Diocese. Both the Church and the Diocese moved for summary judgment, and the trial court granted the Church’s motion. The Diocese appealed directly to the Supreme Court.

The court briefly reviewed its decision in Masterson and re-emphasized that disputes such as this must be decided using neutral principles of law. Those principles would require consideration of evidence such as deeds to the properties, terms of the Diocese’s governing corporate documents, and relevant provision of the general church’s governing documents. But the summary-judgment evidence in this case did not include deeds to the properties involved. The court concluded neither party was entitled to summary judgment on this record, and reversed and remanded. Four justices also joined a section of the opinion that offered guidance to the trial court similar to that provided in Masterson.

Print