Church Organization and Liability: A Legal Perspective
By David K. Bernard
In recent years, the subject of church organization and potential legal liability has become the focus of much discussion. This article provides general information on this subject but is not intended for legal advice relative to a specific situation.
Under United States law, churches are considered to be either hierarchical or congregational in government. Courts also recognize that some churches have a mixed, or hybrid, form of government.
The classic example of a hierarchical church is the Roman Catholic Church, which appoints local pastors, controls local church property, and is thereby liable in suits against local parishes. Classic examples of congregational churches are the independent Baptists and the Churches of Christ, who make every decision on the local level, including the ordination and disfellowshipping of ministers. It is important to note that the legal meanings of “hierarchical” and”congregational” are not necessarily the same as the theological meanings.
The United Pentecostal Church International does not follow either of these models totally, although it is closer to the congregational form of government. Which model it follows depends on the situation.
Article XIX of the General Constitution states that each local church is self-governing and also establishes some general rules for local churches to follow. The local church is self-governing, but the local church government of an affiliated church provides for district supervision when voting on a pastor. The general organization has the responsibility of licensing ministers and administrating the judicial procedure. The local church is not liable for the actions of the general organization, and vice versa.
Vern H.Schneider, legal counsel for the UPCI and the senior partner of the St. Louis law firm Rassieur, Long, Yawitz, and Schneider, describes the UPCI form of government as “connectional.” A national expert on church law, Richard Hammer, who is the author of Pastor, Church and Law and of the bimonthly Church Law & Tax Report, describes our form of government as “congregational with exceptions.” In essence, both lawyers have pointed out that the courts must decide cases involving United Pentecostal ministers and churches based on each particular situation. Instead of simply applying a legal label and following a predetermined result, they must follow the procedure established in the local church’s bylaws and in the Manual of the UPCI.
A 1991 Texas case involving a
United Pentecostal Church illustrates this point. The pastor resigned his position due to “allegations of immoral conduct.” Subsequently, he and some supporters asked for a business meeting to elect him again. Instead, the church board decided to follow the procedure established in the local church bylaws, which called for the district to supervise such an election. (The church had adopted the Local Church Government in the UPCI Manual.) The ex-pastor proceeded to hold a meeting of his supporters, who voted for him as pastor.
The court found that the expastor had violated UPCI bylaws, which required him to sever all connections with his former church, and that the meeting he conducted was contrary to local church bylaws. It ruled that the “UPCI had certain characteristics of a hierarchical church,” and therefore the members had to follow their own local church bylaws.
The court’s use of the term “hierarchical” is limited to the facts of this case, and the precedent is limited to the area of the appellate court’s jurisdiction. The legally binding point, and the significance of the court’s language, is simply that UPCI churches must follow their own local church bylaws.
The court explained, “The local bylaws [that the local church] adopted in 1959 prescribe certain procedures for the selection of a new pastor in the wake of a resignation. Much of the authority formerly vested in the local pastor transfers to the district superintendent, who must convene and preside over any church meeting at which a pastor is to be selected…. The terms hierarchical and congregational are poles on a continuum along which church organizations fall…. Appellants emphasize the importance of majority rule in Pentecostal churches. Indeed, most business decisions are submitted to a majority vote when the local church has a , presiding pastor. But when the church has no pastor authority shifts, in a hierarchical manner, to the UPCI district superintendent…. The trial court properly deferred to [the local] church bylaws governing the validity of the meeting.” See Green v. Westgate Apostolic Church, 808 S.W. 2d 547 (Tex. App. 1991).
If a plaintiff wins a lawsuit against a local church affiliated with the UPCI, against a district, or against the general organization, will another affiliated church be liable for the amount of the judgment? Some ministers have expressed concern in this matter because local churches in other organizations have been held liable for judgments against other churches in their organization. However, these cases involved a totally hierarchical form of church government in which the general organization owned the local church property and appointed the local church pastor.
These cases are not applicable to the UPCI. Each local congregation owns its own property and transacts its own business. It is liable only for its own actions, not the actions of other churches. Moreover, the general organization is incorporated and so are many districts, which limits liability to the assets owned by the corporation.
What are the advantages of incorporation for a local church or a district? What are the disadvantages? Does incorporation subject a church to greater government control, either in actuality or potentially?
The foremost advantage of incorporation is to limit liability to the assets of the corporation. The disadvantages of incorporation are the paperwork and fees involved in establishing and maintaining a corporation. In some states an unincorporated church cannot be sued by a member for damages suffered by him. This may seem advantageous in limiting liability, but it is a disadvantage to members in that they may not be able to collect from the church’s insurance policy for an injury suffered on church property.
Incorporation is a benefit bestowed by the government, not a control. The courts have ruled that incorporation does not subject an entity to greater governmental regulation. If a corporation ever felt that incorporation subjected it to greater control, it could always unincorporate, Interestingly, only certain nonprofit “corporations” technically qualify for tax-exempt status, but all churches enjoy this privilege because the Internal Revenue Service has concluded that all churches are “corporations” for this purpose.
Vern Schneider and Richard Hammar both conclude that, in general, it is advisable for a local church to incorporate, for the advantage of limiting liability is significant while the disadvantages of cost and procedure are minimal. However, this recommendation does not hold true if state law does not allow a church to incorporate (as in West Virginia) or if state law does not allow a church to be sued (as in Arkansas). In the latter case, churches’ immunity from suit is not as beneficial as it might seem, however, because a plaintiff can instead sue the pastor and board members individually. It would be preferable for them if state law allowed churches to be sued, for then they could use incorporation to shield themselves personally.
A 1991 Texas case involving a United Pentecostal Church illustrates the advantages of incorporation. A plaintiff sued all the members of an unincorporated church, alleging breach of contract and fraud by church officials. The court held that a class action suit was permissible but dismissed the case on a technicality: the plaintiff failed to designate an appropriate person as class representative. Of course, the plaintiff could correct this error in a new suit.
Significantly, the court acknowledged that each member of an unincorporated church is legally responsible for wrongful acts committed by other members or agents of the church while acting on behalf of the church, even if he did not know about the wrongful acts and did not consent to them. Moreover, the court acknowledged that each member can be personally liable for the contracts of the church. The only way for the members to avoid this liability is to incorporate the church. See Hutchins v. Grace Tabernacle United Pentecostal Church, 804 S.W. 2d 598 (Tex. App. 1991).
The above material was published by FORWARD, January-March, 1993. This material may be copyrighted and should be used for study and research purposes only.