Business Tribunal Finds Little ‘Neutral’ Ground in Church Business Disputes | Fox Rothschild LLP

An intra-congregational dispute over control of church bank accounts led the Wakefield Missionary Baptist Church to a schism that forced a senior pastor, saw the church’s doors locked and resulted in competing factions worshiping under the banner of a formerly united unincorporated association. In McKnight v. Wakefield Missionary Baptist Church, Inc.2022 NCBC 10, the Business Court was faced with a tangle of disputes between splinter factions of the Church largely beyond its reach given the First Amendment edict that the judiciary cannot “resolve matters clerics” or resolving “controversies over religious doctrine and practice”.

The Court found a way by which “neutral principles of law” would allow it to determine whether a purported church congregational vote to approve the pastor’s dismissal and reorganize itself as an incorporated entity was valid. During its 150 years of existence, Wakefield had been a congregational church which was self-governing and which, in a more recently adopted constitution and bylaws, vested that authority in its members. Identifier. ¶ 3. But when the congregation approved the movement of Wakefield’s property into the new incorporated form, a dissenting faction contested and sought to undo the breakup.

A challenge to this action in North Carolina ran into great difficulty given that “the congregation has the right to control the church,” including the power to change its customs and adjudicate past decisions of the church. ‘church. Graham v. Lockhart, 42 NC App. 377, 379 (1979). Thus, the Commercial Court determined that when the incorporated entity reopened and its 37 members present unanimously ratified its change in form, the movement of the Wakefield property and the termination of its pastor, the board of The church administration had “declared the case closed”. .” CNBC 10, ¶¶ 7, 18.

But even this respect for the limits of North Carolina law left the Court to resolve a dispute using “neutral principles” that could not even fully resolve the underlying controversy over the merits of the action. the congregation. For example, congregants who did not join the group that incorporated believed that they still constituted Wakefield and that those “who had voted for ratification had ceased to be members of the church”. Judge Conrad noted that “[t]The Court does not have to make a decision that would, in effect, excommunicate church members for siding with one faction over another in matters of church governance. Identifier. ¶ 17.

Yet even ruling that the Court could not “overrule the edict of the congregation”, a “neutral” decision on who constituted the governing body of the church was weighed by the baggage that the faithful of Wakefield could continue to carry. worship under a mandate of 150 years. -old church banner and who couldn’t. Identifier. ¶ 20.

Trade name infringement

The Business Court decision was also charged with the responsibility of tackling dissident groups in Wakefield who might use its name appropriately. Judge Conrad observed that this also poses awkward problems for the First Amendment because “[w]what a church or other place of worship chooses to call itself is, after all, an expression of its religious identity. Identifier. ¶ 58. Perhaps for this reason, the Court noted, the North Carolina Supreme Court avoided deciding “whether an injunction can be issued to prohibit a church from using a name similar to that from another church. Identifier. (quoting comic. Provincial elders c. Jones, 273 N C 174, 184 (1968)). The problem was solved, ironically enough, on the premise that:

“[t]The right to use the name belongs to the institution and not to its members; and when they cease to be members of the institution, their use of the name is misleading and, if injurious to the institution, should be prohibited.

Daniel v. Wray, 158 NC App. 161, 173 (2003). Here, then, the power of the members of the congregation fueled the change in corporate form, but it was then the newly formed entity that controlled the use of the Wakefield name as an organizational label.

Take away food

  • Even carefully avoiding “ecclesiastical questions,” North Carolina courts are treading rocky ground in making neutral decisions about who constitutes a church’s governing body who can control its property.
  • A congregation has wide latitude to chart its own course, but even here there were limits to the newly incorporated Wakefield’s ability to claim that contributions made to his competing dissenting congregation were rightly his property. As the Court noted, there was no “evidence to show that the donors intended to send their money” beyond the factional congregation within which they had chosen to worship. CNBC 10, ¶ 55.

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