Discord within a faith community comes with all the challenges of a secular dispute, but carries with it the special responsibility that members of a congregation share in a collective spiritual undertaking. Yet, there are limits that test even the bounds of The Bible’s guidance that, “Blessed are the peacemakers.” Matthew, 5:9.
In McKnight v. Wakefield Missionary Baptist Church, Inc., 2021 NCBC 35, the Business Court considered the splintering of an unincorporated religious association so rancorous that one surviving entity claimed the other “no longer exists.”
After a more than 150-year history, internal financial disputes within the congregation of Wakefield Missionary Baptist Church (WMBC) escalated to such a degree that a group of its trustees fired the senior pastor, locked the doors to the church, “and purported to reorganize the church as a nonprofit corporation” – Wakefield Missionary Baptist Church, Inc. (WMBC, Inc.). They also subsequently transferred the real property of the church to WMBC, Inc. Id. ¶ 6-7.
What arose, then, was a very Business Court-looking dispute in which WMBC’s trustees raised fiduciary duty, constructive fraud and unjust enrichment claims centered on transfers of church property. And WBMC Inc.’s trustees countered with claims for trade name infringement, conversion, and civil conspiracy.
The Court’s subject matter jurisdiction in such settings is narrow, as the First Amendment’s ecclesiastical entanglement doctrine “severely circumscribes the role that civil courts may play in resolving church property disputes.” Id. ¶ 21 (quoting Harris v. Matthews, 361 N.C. 265, 271 (2007). As the Court explained:
“Simply put, secular courts may not adjudicate ‘controversies over religious doctrine and practice.'”
Id. Harris limits a court’s ability to resolve factional disputes within a church to those:
“that can be resolved on the basis of neutral principles of law such as (1) who constitutes the governing body of this particular church, and (2) who has that governing body determined to be entitled to use the properties.”
361 N.C. at 272. The Business Court held that its secular authority could be employed in just that way – to determine the appropriate governing body at key junctures and whether its actions met the terms of the church’s constitution and bylaws. 2021 NCBC, ¶¶ 23, 25.
The Court concluded that a fiduciary duty claim could lie against the trustees who formed WMBC, Inc. because they were trustees of WMBC when they did it. Id. ¶ 30. See N.C.G.S. § 61-2. But the Court made a more interesting call when it allowed constructive fraud claims against the defendant trustees to proceed by finding that plaintiffs had adequately pled those trustees had benefitted themselves by moving the church’s property to an entity they controlled – WMBC, Inc. The Court observed that, “[r]ead liberally,” those allegations suggested a personal benefit to the trustees because they controlled the new entity. 2021 NCBC, ¶ 31.
The Court resolved a couple of standing issues worthy of note. First, defendants claimed plaintiffs were not trustees of WMBC and therefore had no standing to sue under N.C.G.S. § 61-2. Judge Conrad held defendants made no showing plaintiffs weren’t trustees, and absent that it was good enough that they said they were. 2021 NCBC, ¶ 16. See N.C. R. Civ. P. 9(a) (plaintiffs required to “make an affirmative averment showing [ ] capacity and authority to sue”).
The Court also rejected the argument by the defendant trustees that because they had converted WMBC to WMBC, Inc., plaintiffs were attempting to sue on behalf of an entity “that has ceased to exist.” 2021 NCBC, ¶ 18. The Court noted that because the propriety of WMBC Inc.’s incorporation “is one of the key issues underlying this case,” it was not required to resolve that merits issue in response to a standing challenge. Id. ¶ 19. See Cline v. Teich, 374 S.E.2d 462, 465-66 (N.C. App. 1988).
- A secular court can use neutral principles of law to resolve a dispute among church factions about who constitutes its governing body and what that means for control of its property.
Brad Risinger is a partner in the Raleigh office of Fox Rothschild LLP.