The Church of the Brethren, South/Central Indiana District (“the Denomination”) is composed of forty-five Church of Brethren congregations located across Indiana, and dates back to 1708. The Roann Church of Brethren, Inc. and the Roann Church, Inc. (“the Congregation”) traces its origins to mission work performed in Roann, Indiana, in 1835. The two became affiliated in the late 1930’s, and in 1939, the Congregation began sending delegates to the Denomination’s Annual Conference, at which delegates approved matters regarding denominational polity. Denomination polity is recorded and published in what is known as the Organization and Polity Manual (“the Manual”), which is subject to revision at the Annual Conference. However, local congregations are never bound to the Manual, and the Denomination does not impose discipline for any given congregation’s disharmony with denominational polity. In the 1940’s, the Denomination became concerned about protecting its assets, and later issued a report calling for the use of restrictive covenants in individual congregations’ deeds. In 1947, the Denomination approved the placement of the following language into the Manual:
[T]he title to all local church property should be held by local trustees, in trust, for the teaching and dissemination of the gospel of Jesus Christ, according to the beliefs, practices, and doctrines of [the Denomination], as set forth and promulgated from time to time by [the] Annual Conference.
Additionally, the section titled “Uniform Procedure in Conveyance” states:
Restrictive covenants should be contained in all deeds of conveyance, as follows: . . . That if the property ever ceases to be used in accordance with the provisions set forth . . . , or[,] in cases where the local church has been closed or the property abandoned, the district may, upon the recommendation of the district board, assert title to the property and have some vested in the district board, as trustees for the district.
The enacted language therefore created a method whereby the respective districts could investigate local churches’ deeds for the restrictive covenants and negotiate co-ownership of the property with local congregations. In a similar fashion, a later amendment to the Manual provided suggested language for the local congregations’ constitutions:
In case of strife or division, if any part of the congregation refuses to abide by its obligation as a member of [the Denomination], that part of the congregation, whether a majority or minority of its membership, that continues in unity with [the Denomination] shall be recognized as the lawful congregation and shall continue in possession of all the property of the congregation . . . . If the congregation (a) disbands, (b) departs from membership in [the Denomination], or (c) so decreases in numbers and financial strength as to render the congregation unable to fulfill its purpose, the district of [the Denomination] in which it is located . . . shall have the right to take charge and control of all property and thereafter to hold, manage, and convey the same at the discretion of the district.
The Manual further stated that “[a]ll action taken by the district relating to the property of a congregation shall be in conformity with the provisions of [Chapter VI].” This chapter, titled “Property Holdings and Financial Resources,” states the following: “All property owned by a congregation, whether incorporated or unincorporated, shall be held, in trust, for the use and benefit and in conformity with practices and beliefs of [the Denomination].” Further, in the section titled “Disorganizing or Withdrawing Congregation,” the Manual states:
If a congregation . . . attempts either by majority or unanimous vote to withdraw from [the Denomination] district in which it is located or otherwise ceases to exist or function as a congregation of [the Denomination], any property that it may have shall be within the control of the district board and may be held for the designated purposes or sold or disposed of in such a manner as the district board, in its sole discretion, may direct . . . .
Thus, the Denomination encouraged, but did not require, that all congregations adopt this suggested language in their individual constitutions.
In the 1980’s the Congregation acquired the property at issue in the litigation. None of the deeds, however, contained the restrictive covenant recommended by the Denomination. Further, the district never made an inquiry into the covenant’s absence. Importantly, the Congregation purchased the property with funds from member donations and an interest-bearing loan from the Denomination, which the Congregation later repaid in full. The Congregation also possesses several bank accounts, which are titled in the Congregation’s name. On the face of these assets, the Denomination has no interest in the Congregation’s property, real or personal. Although the Congregation chose not to include the restrictive covenant in its deed, in 2002, the Congregation amended its Constitutional Guidelines and Bylaws (“2002 Constitution”) to mirror the Denomination’s suggested language. However, the 2002 Constitution did not include the trust language from Chapter VI of the Manual. Moreover, a later enacted provision reserved the right to amend “[t]his Constitutional Guidelines and Bylaws . . . at Church Council by two[-]thirds vote of members present.” The Congregation’s head elder also emphasized, on cross-examination, that the Congregation included the word “Guidelines” in the title of its constitution to indicate that the Congregation could amend the document. Pursuant to this provision, in 2010, the Congregation again amended its Constitutional Guidelines and Bylaws (“2010 Constitution”) to reflect a growing divide between the Congregation and the Denomination. The provision stated:
We belong to Christ and denominational ties are secondary. The congregation shall covenant to faithfully support the beliefs of the early Church founders, recognizing Annual Conference enactments of [the Denomination] as having influence in our congregational life. We shall remain members of [the Denomination] or its successor as long as the denomination remains true to God’s word . . . .
According to the Congregation, the purpose of the language was to “intentionally . . . strip[] out some of the national language [from the 2002 Constitution] because . . . [the Congregation] didn’t want the strings [to] national . . . .” The 2010 Constitution sought to replace the 2002 Constitution in its entirety, and similar to the 2002 Constitution, the 2010 Constitution reserved the rights to amend.
On March 27, 2013, the Congregation held a vote to determine whether it would remain affiliated with the Denomination. The vote passed, and the Congregation and Denomination officially severed their affiliation with one another. As a result, on April 3, 2013, the Denomination recorded an Affidavit of Transfer of Land to transfer title of the Congregation’s property to the district.
Then, on May 21, 2013, the Denomination filed a complaint for declaratory and injunctive relief, asking the court to declare that the 2002 Constitution created an irrevocable trust in its favor. The trial court held that the Denomination had failed to establish by the required burden of proof that a trust was ever created in favor of the Denomination as to the Congregation’s property. The court stated that “[t]here [was] simply no credible evidence that [the Congregation], at any time, intended to place its property in trust for the use and benefit of [the Denomination] . . . .”
RESOLUTION:
On appeal, the Denomination argued that the trial court erred when it held that the Congregation did not place its property into an irrevocable trust, express or implied, for the benefit of the Denomination. The Denomination first asserted that, when the Congregation incorporated the suggested language of the Denomination, the Congregation demonstrated a clear intent to create a trust. Further, the Denomination asserted that the specific incorporated language did not include a reservation of a right to revoke, and therefore, the trust was irrevocable. Finally, the Denomination concluded that the revisions reflected in the 2010 Constitution were ineffective in removing any irrevocable trust language from the Constitution, and thus, the trial court’s judgment was clearly erroneous. The appellate court disagreed.
Instead, the court found that although the relationship between the Congregation and Denomination involved mutual benefits, these cited benefits were no different from those reciprocally flowing in a standard denomination-congregation relationship. According to the court, nothing in the cited language, in neither the deeds nor the Constitutions, evinced a trust relationship: the deeds did not contain the restrictive covenant trust language, and there is no indication from the 2002 Constitution that the Congregation held its property for the benefit of any entity other than itself. Because the language incorporated in both the Constitutions and the Deeds did not implicate a fiduciary relationship, there was not a “clear and unequivocal statement of the congregation’s intent to create and express trust.” The court’s conclusion was also supported by the fact that the Congregation, in incorporating the language of Chapter IV of the Manual, expressly omitted the trust-creating language. Further, the nonbinding nature of the Denomination’s Manual and the Congregation’s Constitutional Guidelines and Bylaws lend support to the Congregation’s argument against creation of a trust. Finally, the court found that, because the 2002 Constitution reserved an unqualified right to amend its provisions, the enactment of the 2010 Constitution revoked the purported 2002 trust.
Next, the Denomination argued that, in absence of an express trust, and in view of the parties’ relationship, the trial court should have imposed an implied trust as a matter of law. In support of this proposition, the Denomination relied on the case of Presbytery to argue that the trial court’s findings were erroneous. In arguing for an implied trust, the Denomination points to the long relationship between the parties, which lasted more than sixty years, and to the manual, which it characterizes as imposing a trust requirement. The court found that no part of the Manual imposed such a requirement on the Denomination’s individual congregations; rather, it merely provided suggestions for local church constitutions. Further, the Denomination did not discipline individual congregations for divergence from its polity. More importantly, Presbytery does not support the Denomination’s position.
The Presbytery court held that there was an issue of material fact regarding whether the congregation intended to create a trust in favor of the denomination because “a finder of fact could find conflicting inferences from the fact that [the Congregation] remained a member of [the Denomination] for nearly twenty-five years after insertion of the trust provisions” into the Denomination’s Book of Order. The court stated, “It is possible that inferences . . . may be drawn to support either of two opposite conclusions: that [the Congregation] did or did not intend to create a trust on its property. In the instant case, the trial court weighed the inferences and held that the Congregation did not intend to create a trust on its property. The decision of the trial court was therefore affirmed.
