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Texas Court invalidates denominational Trust Clause

In The Episcopal Church v. Salazar, (TX App, April 5, 2018), a Texas Court of Appeals panel issued a 178-page ruling, concluding in part, that denominational trust clauses are not enforceable.  With wide-ranging implications, and with a strong basis on the law, the Court concluded that a denominational declaration that unilaterally imposed a trust is not enforceable.

Noting that Texas law requires a writing to be signed by the settlor or the settlor’s agent to create a trust with regard to real property, the Court found that a “proposed beneficiary cannot unilaterally name itself as the beneficiary of a trust involving another entity’s property.” See, Slip Opinion, p. 134  Therefore, “because, under Texas law, an entity that does not own the property to be held in trust cannot establish a trust for itself simply by decreeing that it is the beneficiary of a trust, the Dennis Canon, by itself, did not establish a trust under Texas law.”  Id, p. 134-135.

The implications of this decision go well beyond the Dennis Canon of the Episcopal Church.  It affects all denominational trust clauses, including the United Methodist Trust Clause. For more information, download our Guide to Understanding the United Methodist Trust Clause.

While the application of the ruling in The Episcopal Church v. Salazar is limited to the State of Texas, its analysis can be applied in every state that has trust laws similar to those within the state of Texas.

Even though the local Church won on the Trust Clause issue, it lost the case based on its corporate formation. The Texas Court of Appeals held that the property remained part of the Episcopal Church based on the how the breakaway Church incorporated itself after it broke away from the denomination.

The Fort Worth Star reported that the local church will likely appeal the decision to the Texas Supreme Court.

If your local church is looking to leave the denomination it is affiliated with, contact one of the professionals at Dalton & Tomich, PLC at 313.859.6000 to guide you through the process.

For more information, visit our page on church property disputes and denominational splits or watch our video “What Are Denominational Trust Clauses? Can They be Challenged?”

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