Church Ownership Dispute Case Settled

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NEWPORT BEACH, CA—A 10-year legal action by the Episcopal Diocese of Los Angeles—which encompasses the counties of Los Angeles, San Bernardino, Ventura, Santa Barbara, Orange and a portion of Riverside—against Saint James Parish here over ownership of local parish property has been settled. The settlement came after the parish's appeal to a decision made by an Orange County Superior Court, which the plaintiff's side is calling definitive in the state of California and “precedent-setting” throughout the country.

John R. Shiner, a partner at Bryan Cave LLP, led a team of attorneys, including Brent Rychener, to represent the Diocese, a regional branch of the national Episcopal church, against the parish, a local branch that had applied for and been granted membership to the Diocese. He and Eric Sohlgren, an attorney with Payne & Fears who represented the parish—tell GlobeSt.com that for differences over religious doctrine, in 2004 members of Saint James Parish decided to split off from the Diocese and form a church of a separate denomination using the same property. The Diocese argued that the property belonged to it and not to the parishioners, thus creating the legal dispute. Shiner says an Orange County Superior Court issued a landmark opinion upholding claims by the Diocese and affirming its ownership of the disputed property.

The decision came down to a matter of a legal trust created by the superior church well before the dispute took place, which gave it the rights to the property involved. “There was a prior US Supreme Court decision, Jones v. Wolf, which said that in order to prevent or expedite church property disputes, the superior church in advance of the dispute can create a trust over church property,” says Shiner. “By virtue of creating that trust, it can prevent litigation over who owns the property—it's owned by the superior church.”

Shiner adds that the case “cements the principle that members of a local church looking to break away from their religious denomination cannot take church property with them.” He says the formula used by the court to come to its decision is used by courts nationwide.

He also points out that the court “resolved this property dispute without reference to church doctrine. Instead, larger religious bodies have a right to retain local parish real estate based on 'neutral principles of law,' including deeds, articles of incorporation, the general church's constitution and relevant statues.”

By applying for membership to the Diocese, the parish agreed to adhere to church principles, Shiner says. “It should not have come as a surprise” that they couldn't keep the property if they were no longer members of that denomination.”

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Not surprisingly, Sohlgren disagrees. He tells GlobeSt.com that the court decision was made in 2013, but the parties have actually settled the case following an appeal by the parish. “I don't agree with the other side's characterization of California Supreme Court's decision. The judgment against Saint James by the trial court in 2013 ordered Saint James off the property, and the decision was appealed. As part of the settlement of the case, the appeal was dismissed.”

Sohlgren says the parish's defense was that back in the late 1940s, Saint James had incorporated and held all the property in its own name. “They paid for the property and in the 1990s rebuild the church campus at its own expense. They held the title, owned and paid for the property, and it's not proper for the denomination to claim the property. Even though the Episcopal Church in 1979 passed an internal rule that all property used by its parishes is held in trust, is that sufficient to take the property?”

The second ground for the defense was that in 1991 a bishop of the Los Angeles Diocese sent a letter to Saint James stating that he would not try to impose a trust for the property in exchange for a donor coming through to rebuild the campus. The owner insisted on admitting the letter, but it was ineffective because the bishop did not have the church's authority to issue it. “We respectfully disagree because he led the people at Saint James to believe he wouldn't try to impose a trust over the property in exchange for a substantial donation.”

Sohlgren adds that different states have come down differently on the question of imposing a trust on church property. “Some states like California defer to the denomination. Other states like South Carolina have said you can't create a trust interest in the property without permission of the owner.” He suggests that if the case had been based in a state like South Carolina, the outcome may have been different.