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Will the Texas Supreme Court invalidate the UMC Trust Clause and free local Methodist Church’s from the denomination?

The Texas Supreme Court has led the nation in evaluating the viability of trust clauses in religious property disputes involving claims made by denominations that local church property is held in trust for the mainline denomination. The Court has invalidated the Episcopal and Presbyterian Church USA trust clause. The next one to fall may be the United Methodist trust clause. In an orders list released Friday, Texas’ highest court agreed without comment to hear arguments in the case of Southern Methodist University and Paul J. Ward v. South Central Jurisdictional Conference of the United Methodist Church and Bishop Scott Jones.  Oral arguments have been scheduled for Jan. 15, 2025.

Here are some things to know about the current status of Texas case law concerning religious property disputes:

The Masterson decision

In Masterson v. Diocese of Nw. Texas, 422 S.W.3d 594, 600 (Tex. 2013) (“Masterson”), the Texas Supreme Court addressed the issue of what happens to religious property when a majority of the membership of a local church vote to withdraw from the larger religious body of which it has been a part. The Supreme Court of Texas held that neutral principles of law should be used to determine property interests when religious organizations are involved and stated that Texas courts must use the neutral principles of law approach.  

The neutral principles approach requires the court to decide a church property dispute by examining in—a purely secular manner—the (1) language of the deeds, (2) local church charters, (3) state statutes, and (3) provisions of the general church’s constitution. Even when religious entities are involved, the approach is applied to issues concerning titles and trusts, as well as corporate formation, governance, and dissolution.  

The local church in Masterson held title to the property by deeds which did not refer to a trust in favor of the national church or diocese. However, similar to Paragraphs 2501 and 2503 of the United Methodist Discipline, a canon of the Episcopal Church provides the following:

All property held by or for a particular church, a presbytery, a synod, the General Assembly, or the Presbyterian Church (U.S.A.), whether legal title is lodged in a corporation, a trustee or trustees, or an unincorporated association, and whether the property is used in programs of a particular church or of a more inclusive governing body or retained for the production of income, is held in trust nevertheless for the use and benefit of the Presbyterian Church (U.S.A.).

The Court concluded that applying deference to those issues did not necessarily determine who owned the property. And because the national church did not plead or urge as grounds for summary judgment that it was entitled to the property based on neutral principles, the Court did not reach the issue. It simply found that the trial court erred in granting the national church’s motion for summary judgment—which was limited to a deference-type argument.

The PC USA decision

After Masterson, the Court of Appeals of Texas decided Presbyterian Church, Inc. v. Presbyterian Church (U.S.A.), 438 S.W.3d 597 (Tex. App. 2014). There, like Masterson, the local church held title to the property by warranty deeds which made no reference to a trust in favor of the national church, The Presbyterian Church (U.S.A.) (“PCUSA”).  Before filing suit, the local church amended its articles of incorporation to add a declaration that all real property held by the corporation constituted a trust held for the benefit and enjoyment of the members of the local church only. Subsequently, the local church filed suit seeking a declaration that the national church had no legal, equitable, or other interest in the property on which the local church’s campus is located.

Like Masterson, the national church filed a motion for summary judgment arguing that the PCUSA is a hierarchical church, and, as such, its decision on church property matters is entitled to deference by civil courts. Again, like in Masterson, the trial court sided with the national church and granted summary judgment. The local church appealed.

This time, the Court of Appeals of Texas reversed the trial court’s decision. Analogizing the case to Masterson, the Court noted that the PCUSA’s motion was based solely on the contention that this property dispute should be resolved by applying the hierarchical deference approach and deferring to governing church authorities. And because this was the only ground urged for summary judgment, the Court reversed the trial court’s decision in favor of the PC USA and remanded the case to the trial court for further proceedings.

The Salazar decision

The most recent case addressing the neutral principles of law approach is Episcopal Diocese of Fort Worth v. Episcopal Church, 602 S.W.3d 417 (Tex. 2020), decided by the Supreme Court of Texas. There, the Court reiterated its previous decisions concerning the neutral principles of law approach and church property disputes:

[W]hat happens to the relationship between a hierarchical religious organization and a subordinate unit after a vote to disassociate “is an ecclesiastical matter over which civil courts generally do not have jurisdiction. But what happens to the property is not, unless the [local entity’s] affairs have been ordered so that ecclesiastical decisions effectively determine the property issue.

There are at least three things we must highlight about the Episcopal Diocese of Fort Worth v. Episcopal Church (Tex. 2020) decision:

  1. The dispute was between the regional diocese (the Diocese of Forth Worth) and The Episcopal Church (TEC). If we were to compare TEC’s religious organizational structure with the UMC’s, the dispute would be similar to a hypothetical dispute between an annual conference and the UMC, as opposed to the more common dispute between a local UMC church and the annual conference.
  • The Court made it very clear that local churches “are free to disassociate from a hierarchical church at any time.” However, the Court expressly recognized that church property disputes “involving hierarchical church organizations, like TEC, are challenging because their organizational structure requires subordinate units to accede to ecclesiastical control by higher authorities.”
  • The Diocese of Fort Worth is an unincorporated association and, accordingly, issues concerning its officers and control are governed by the Uniform Unincorporated Nonprofit Association Act. Thus, keep in mind that if a local UMC church is in fact incorporated as a non-profit, the Texas Nonprofit Corporation Law would provide the applicable statutory provisions, Tex. Bus. Orgs. Code Ann. § 22.001 – § 22.516. However, aside from the corporate issues, the law on whether or not a valid trust exists would be the same under Texas trust law.

The Southern Methodist Church case

The South Central Jurisdictional Conference of the United Methodist Church filed a lawsuit in district court in Dallas County, accusing SMU leadership of committing “unauthorized acts” and stating that the regional body was supposed to be the “electing, controlling, and parental body of SMU.” The amendment to the Articles divested SCJC of “all its rights guaranteed by the 1996 Articles and SMU’s other governing documents and to effectively terminate the long-standing and permanent relationship between SMU and SCIC,” reads the lawsuit.  The Methodist Conference argued that “t]he Trustees of SMU had and have no authority to amend the Articles of Incorporation without the prior approval and authorization of SCJC. Because the Trustees’ acts were neither approved nor authorized by SCJC, the resulting November 2019 Articles are void from their inception.”

The Dallas County Court ruled in favor of SMU in 2021 and dismissed the SCJC’s complaint with prejudice, and the UMC regional body filed an appeal. In July 2023, the Texas Court of Appeals reversed the lower court ruling and sided with the SCJC, noting that the UMC has a detailed history with the university.

“In this case of first impression, we must determine whether a nonprofit corporation like SMU, whose governing documents provide that it is to be ‘forever owned, maintained and controlled’ by the conference and that no amendments to said articles ‘shall ever be made’ without the conference’s prior approval, can unilaterally amend the articles to remove these provisions and all other references to the conference,” 

While the panel concluded that the district court erred when it dismissed the SCJC’s breach-of-contract claim, they upheld the dismissal of the conference’s claim that SMU’s move to separate from the church represented a breach of fiduciary duty. The opinion stated, “[w]e have already determined […] that the conference has no legal or equitable title to the SMU campus under its claim of fiduciary duty and therefore affirm summary judgment on that theory of recovery,” stated the panel opinion.

The impact on local UMC Churches in Texas

Should the Texas Supreme Court affirm its precedent, local United Methodist churches will no longer be bound to the denomination. No legal claim of an implied or express trust will bind the local churches and the Texas conferences together. They must take steps ahead of time to make sure that they are free to leave.

Don’t hesitate to contact Daniel Dalton to discuss the impact of this case and the steps a local church in Texas needs to take to free itself from the United Methodist Church denomination.

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