New Hope Lutheran Ministry v. Faith Lutheran Church of Great Falls, Inc. , 374 Mont. 229 ( 2014 )

March 12 2014
DA 13-0127
IN THE SUPREME COURT OF THE STATE OF MONTANA
2014 MT 69NEW HOPE LUTHERAN MINISTRY, a
non-profit corporation, and THE MINORITY
MEMBERS OF THE CONGREGATION OF
FAITH LUTHERAN CHURCH OF GREAT FALLS
WHO VOTED TO REMAIN AFFILIATED WITH
THE ELCA, an unincorporated association,
Plaintiffs, Appellees, and Cross-Appellants,
v.
FAITH LUTHERAN CHURCH OF GREAT FALLS, INC.,
and THE FOUNDATION FOR ENDOWMENT OF
FAITH LUTHERAN CHURCH, INC., and JOHN DOES 1-25,
Defendants and Appellants.
APPEAL FROM: District Court of the Eighth Judicial District,
In and For the County of Cascade, Cause No. ADV-11-586
Honorable Greg Pinski, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Gregory R. Schwandt (argued), Michael P. Talia (argued), Church, Harris,
Johnson & Williams, P.C., Great Falls, Montana
For Appellees:
Nathan G. Wagner (argued), J.R. Casillas, Datsopoulos, MacDonald &
Lind, Missoula, Montana
For Amicus:
Timothy C. Fox, Montana Attorney General, Jon Bennion (argued),
Assistant Attorney General, Helena, Montana
Argued and Submitted: December 11, 2013
Decided: March 12, 2014
Filed:
__________________________________________
Clerk
2
Justice Jim Rice delivered the Opinion of the Court.
¶1 Appellants Faith Lutheran Church of Great Falls, Inc. (Faith Lutheran) and the
Foundation for the Endowment of Faith Lutheran Church, Inc. (Foundation) appeal the
order of the Eighth Judicial District Court, Cascade County, denying their motions for
summary judgment and granting summary judgment to New Hope Lutheran Ministry and
the Minority Members of the Congregation of Faith Lutheran Church of Great Falls Who
Voted to Remain Affiliated with the ELCA (collectively New Hope). The District
Court’s order quieted title to all property held by Faith Lutheran and the Foundation in
New Hope. New Hope cross-appeals the District Court’s denial of its request for
prejudgment interest and attorney fees.
¶2 We restate and consider the following issues:
¶3 1. Did the District Court err in determining that New Hope has standing to bring
a claim?
¶4 2. Did the District Court err in determining it had subject matter jurisdiction?
¶5 3. Did the District Court err in determining that New Hope was entitled to the
property held by Faith Lutheran?
¶6 4. Did the District Court err in determining that New Hope was entitled to the
property held by the Foundation?
¶7 5. Did the District Court err in denying New Hope’s request for prejudgment
interest?
¶8 6. Did the District Court err in denying New Hope’s request for attorney fees?
¶9 We affirm in part, reverse in part, and remand for further proceedings.
3
FACTUAL AND PROCEDURAL BACKGROUND
¶10 Faith Lutheran was incorporated as a religious corporation in the early 1950s and
has existed continuously since that time. Since its incorporation, Faith Lutheran has held
certain property, including the church building, in its own name. Either at the time of
incorporation or at some later point, Faith Lutheran became an affiliated church of the
American Lutheran Church (ALC) denomination. In 1988, Faith Lutheran affiliated with
the Evangelical Lutheran Church of America (ELCA) denomination, which was formed
by the merger of the ALC, the Lutheran Church in America, and the Association of
Evangelical Lutheran Churches. As part of ELCA, Faith Lutheran was organized within
a regional denominational governing entity, the Montana Synod, administered at all
relevant times herein by Bishop Jessica Crist.
¶11 In 1978, Faith Lutheran adopted a constitution to provide organization and
governance for the church corporation. An amended constitution was adopted in 1993.1
The 1993 constitution was the first to address Faith Lutheran’s affiliation with ELCA. It
provided that if the congregation desired to disaffiliate from ELCA, the congregation
must first consult with the Montana Synod and then obtain a two-thirds majority vote of
the members. This provision was similar to a provision in the 1978 constitution that
required a two-thirds congregational vote to disaffiliate from ALC. The 1993
1
The church constitution regulates day-to-day operations of the church, including who may be
members, the process for the annual meeting, method and requirements for voting, etc. The
1993 constitution notes that revisions were made to the constitution in 1/91 and 1/92, while other
documents reference revisions made in 1989. However, no other version of the constitution has
been provided, nor have the parties referenced other versions in their briefing. Therefore, only
the 1978 and 1993 constitutions are at issue here.
4
constitution further provided that if the congregation chose to affiliate with a different
Lutheran Church body, “title to property shall continue to reside in this congregation”
upon a 90% majority vote.
¶12 The Foundation was incorporated as a nonprofit corporation in 1986. The
Foundation’s Articles of Incorporation state that the purpose of the Foundation is “the
advancement and support of activities of Faith Lutheran Church, Great Falls, Montana.”
The Articles provide that the Foundation “shall not be required to expend all income
annually, but may accumulate it.” The record does not demonstrate how the Foundation
was originally funded. Regarding the period from 2001 to 2010, New Hope filed the
affidavit of Wes Swenson (Swenson), treasurer for Faith Lutheran during that time, that
stated a routine practice existed to transfer funds donated to Faith Lutheran without a
designated purpose to the Foundation. He recalled two such donations amounting to
$150,000 being transferred to the Foundation.
¶13 In 2002, the Foundation’s Articles were judicially restated to eliminate individual
membership and provide governance by a Board of Directors. The statement of purpose
and all other provisions of the Articles relevant to this appeal were unaffected. The
Board is composed of “not less than seven” persons, including: the senior pastor of Faith
Lutheran; one member from Faith Lutheran’s Church Council, as chosen by the Council;
and other individuals elected by the members of Faith Lutheran. The Articles provide
that, upon dissolution of the Foundation, all property held by the Foundation is to be
distributed to “the Faith Lutheran Church Council acting for Faith Lutheran Church.”
5
The Articles are silent regarding any denominational affiliation of Faith Lutheran or of
the Foundation itself.
¶14 In 2009, ELCA adopted a resolution allowing men and women in committed,
same-sex relationships to become ordained ministers. The pastor and some members of
Faith Lutheran opposed this decision. Discussions about disaffiliating with ELCA began
in January 2010, when a preliminary congregational vote was taken, and a final vote was
scheduled for May 2, 2010. In April 2010, members opposing disaffiliation made a
formal request for adjudication by the Montana Synod Council on the effect of the
upcoming vote under Faith Lutheran’s constitution. When notified of the pending
adjudication, Faith Lutheran’s Church Council sent correspondence to the Synod
Council, including a letter from an attorney explaining its position, but voted not to
otherwise participate in the Synod’s process. On April 26, 2010, the Synod Council ruled
that, under Faith Lutheran’s 1993 constitution, a 90% vote of the congregation would be
necessary “in order to keep the property. Otherwise, the constitution stipulates that the
property stays with the group that remains with the ELCA.”
¶15 On May 2, 2010, a congregational vote was conducted. Prior to the vote, the
ruling of the Synod Council regarding the interpretation of the 1993 constitution was
discussed. The election was by secret ballot, with 241 members, or 71%, voting to
terminate Faith Lutheran’s affiliation with ELCA and to affiliate with the Lutheran
Congregations in Mission for Christ (LCMC), and 99 members, or 29%, voting to remain
affiliated with ELCA. Thereafter, the majority continued as Faith Lutheran under the
6
same corporate structure, and continued its use and control over all church property.
Approximately half of the minority formed the group that would ultimately become New
Hope. On June 8, 2010, Bishop Crist sent a letter to Del Schmidt (Schmidt), president of
the new minority group, stating the Synod Council had recognized it as an authorized
worshipping community with ELCA, and appointed Tammy Bull (Bull), Associate in
Ministry for Faith Lutheran before the schism, to provide pastoral services for the
minority group.
¶16 New Hope filed an action seeking a declaration that the minority was the rightful
owner of all church property, including property held by the Foundation, and to quiet title
to the same. No other minority member has sought to intervene or filed any other claim
against either Faith Lutheran or the Foundation with regard to the property.
¶17 The District Court determined that New Hope had standing to bring the claim for
declarative relief. It held that New Hope, as the minority choosing to remain affiliated
with ELCA, was entitled to property held by Faith Lutheran. With regard to property
held by the Foundation, the court held that the Foundation owed a fiduciary duty to the
congregation of Faith Lutheran and held its property in trust for the congregation.
Because the court determined that New Hope was entitled to all Faith Lutheran property,
it ordered the Foundation to turn its property over to New Hope as well.
¶18 Additional facts will be included where relevant to the analysis below.
7
STANDARD OF REVIEW
¶19 We review a district court’s grant or denial of a motion for summary judgment de
novo, using the same M. R. Civ. P. 56 criteria applied by the district court. Parish v.
Morris, 2012 MT 116, ¶ 10, 365 Mont. 171, 278 P.3d 1015. Summary judgment may
only be granted when there are no genuine issues of material fact and the moving party is
entitled to judgment as a matter of law. M. R. Civ. P. 56(c); Lorang v. Fortis Ins. Co.,
2008 MT 252, ¶ 37, 345 Mont. 12, 192 P.3d 186. The party seeking summary judgment
bears the initial burden of establishing the absence of genuine issues of material fact.
Lorang, ¶ 37. If the moving party meets this burden, the burden then shifts to the
non-moving party to “present substantial evidence, as opposed to mere denial,
speculation, or conclusory statements” to establish that a genuine issue of material fact
exists. Peterson v. Eichhorn, 2008 MT 250, ¶ 13, 344 Mont. 540, 189 P.3d 615. All
reasonable inferences that may be drawn from the offered evidence should be drawn in
favor of the party opposing summary judgment; however, inferences requiring a
“speculative leap” are inappropriate for summary judgment. Knucklehead Land Co. v.
Accutitle, Inc., 2007 MT 301, ¶¶ 24-25, 340 Mont. 62, 172 P.3d 116. We review the
determination that the moving party is entitled to judgment as a matter of law for
correctness. Peterson, ¶ 13.
¶20 Whether a party has standing is a question of law, which we review de novo.
Heffernan v. Missoula City Council, 2011 MT 91, ¶ 28, 360 Mont. 207, 255 P.3d 80. We
8
exercise plenary review over constitutional issues. Big Sky Colony, Inc. v. Mont. Dept. of
Labor & Indus., 2012 MT 320, ¶ 16, 368 Mont. 66, 291 P.3d 1231.
¶21 A district court’s decision granting or denying prejudgment interest is a question
of law which we review for correctness. Total Indus. Plant Servs. v. Turner Indus.
Group, LLC, 2013 MT 5, ¶ 57, 368 Mont. 189, 294 P.3d 363. We review a district
court’s award of attorney fees for an abuse of discretion. Jacobsen v. Allstate Ins. Co.,
2009 MT 248, ¶ 17, 351 Mont. 464, 215 P.3d 649.
DISCUSSION
¶22 1. Did the District Court err in determining that New Hope has standing to bring
a claim?
¶23 Faith Lutheran offers several arguments to support its position that New Hope
lacks standing to bring this action. However, if New Hope has standing under any one
theory, other theories are unnecessary to address. We conclude that New Hope has
organizational standing.
¶24 As an initial matter, Faith Lutheran argues that New Hope is not an entity that can
be a party to this suit. New Hope originally incorporated as a religious corporation sole,
declaring that all property of the corporation was owned by Bishop Crist. This action
was filed by New Hope while incorporated as a religious corporation sole, but its
Complaint states that New Hope is “a non-profit corporation,” rather than a religious
corporation. Faith Lutheran pointed out New Hope’s status as a religious corporation
sole in a brief supporting a motion to dismiss filed September 21, 2012. On October 1,
2012, New Hope was voluntarily dissolved as a religious corporation sole, noting that it
9
had mistakenly been designated a religious corporation sole when its incorporator, a
non-attorney, selected this option because it was the only one with “religious” in the title.
New Hope simultaneously re-incorporated as a religious nonprofit corporation of the
same name, with members. Faith Lutheran argued for dismissal because New Hope
(religious sole) had been dissolved and it was “too late” to substitute a party. New Hope
responded that its correction of the corporate structure had merely brought its identity in
line with its original pleading, making substitution unnecessary, and alternatively argued
that substitution was permissible under M. R. Civ. P. 25 without any prejudice to Faith
Lutheran. It does not appear the District Court ruled on this issue, but its entry of
summary judgment in favor of New Hope implies that Faith Lutheran’s motion was
denied and that substitution was rendered unnecessary.
¶25 Because New Hope (religious nonprofit) was not substituted as a party for New
Hope (religious sole), Faith Lutheran argues this case must be dismissed. Faith Lutheran
has not provided specific authority for this position, nor any facts to demonstrate that
New Hope in its current form is not the same entity as when this action was filed, other
than the change in corporate designation. Faith Lutheran has demonstrated no prejudice
by the manner in which New Hope corrected its corporate designation, or by the lack of a
District Court order substituting the re-incorporated New Hope as a party. We decline to
dismiss the case for this alleged procedural defect and turn to the issue of standing.
¶26 Standing is the question of whether a litigant is “entitled to have the court decide
the merits of the dispute.” Heffernan, ¶ 30. To have standing, the plaintiff must have a
10
personal stake in the outcome of the controversy at the commencement of litigation.
Heffernan, ¶ 30. As a constitutional matter, the plaintiff must clearly allege a past,
present, or threatened injury to a property or civil right, and the injury must be one that a
judgment by the court could alleviate through the action. Heffernan, ¶ 33.
¶27 An organization may assert standing either as an entity or by the associational
standing of its members. Heffernan, ¶ 42. As an entity, an organization may “file suit on
its own behalf to seek judicial relief from injury to itself and to vindicate whatever rights
and immunities the [organization] itself may enjoy.” Heffernan, ¶ 42. Alternatively, an
organization can assert associational standing without a showing of injury to itself when
“(a) at least one of its members would have standing to sue in his or her own right, (b) the
interests the association seeks to protect are germane to its purpose, and (c) neither the
claim asserted nor the relief requested requires the individual participation of each
allegedly injured party in the lawsuit.” Heffernan, ¶ 43.
¶28 New Hope alleges that it constitutes the minority membership of Faith Lutheran
who chose to remain affiliated with ELCA and, as such, is entitled to succeed to the
property owned by Faith Lutheran because, in accordance with the church’s constitution,
the vote to disaffiliate with ELCA was not approved by a 90% margin. Thus, it alleges
an injury to itself as an organization.
¶29 Faith Lutheran offers several arguments for its position that New Hope cannot
claim to be the minority ELCA faction of Faith Lutheran. These arguments essentially
posit that because the vote to disaffiliate was taken by secret ballot, New Hope cannot
11
prove that any of its members voted to stay affiliated with ELCA, and even if it could, at
most 48 of 99 such voters are members of New Hope.2 However, no legal authority has
been presented to support the position that in order for an organization to have standing
its membership must include every person similarly injured. There is no evidence of
other factions claiming to be among the original minority. The evidence supports the
conclusion that New Hope is composed of approximately half of the minority, while the
other half has chosen to join other churches or not to attend another church.
¶30 New Hope’s claim that it constitutes the Faith Lutheran minority is supported by
further evidence in the record. On April 6, 2010, Pat Goodover (Goodover) and Trudi
Schmidt (Trudi) submitted formal notice to the Church Council that they had requested
the Synod’s interpretation of the 1993 constitution, including the 90% rule, in light of the
upcoming May 2nd congregational vote. The notice stated that it was submitted by
Goodover and Trudi as “represent[atives of] the members of Faith Lutheran Church who
wish to remain with the ELCA,” that “resolution of this issue is critical to making an
informed decision by the voting members of Faith Lutheran Church about whether to
vote to leave the ELCA,” and that “[t]he Council of Faith Lutheran Church HAS A
RESPONSIBILITY to diminish the likelihood of litigation over Faith Lutheran Church’s
property by making sure this issue is resolved BEFORE any vote to disassociate occurs.”
(Emphasis in original.)
2
Although the voting was conducted secretly, members were required to sign in at the meeting
to obtain a ballot. There is thus a record of individuals who received ballots, though no record of
each person’s vote.
12
¶31 Just after the vote on May 2, 2010, a group calling themselves “Friends of ELCA”
held an organizational meeting. The minutes from this meeting indicate that 45 people
were in attendance. Schmidt, Goodover, and eleven others were elected to the group’s
Council, with Swenson elected as treasurer, Schmidt as president, Goodover as
vice-president, and Delores Goodover as secretary.3 Faced with Faith Lutheran’s claim
to the church property, the group unanimously voted to “immediately file legal
proceedings naming Church Council of Faith Lutheran Church, LCMC, as defendants in
the property issue.” Bishop Crist sent a letter dated June 8, 2010, addressed to Schmidt
stating the Synod Council had recognized “the group from Faith Lutheran Church whom
you represent” as an authorized worshipping community with ELCA, and that Bull was
appointed as the Synodically Authorized Minister for the group.
¶32 Bull, the Associate in Ministry of Faith Lutheran prior to the May 2nd vote, was
the person who first registered New Hope Lutheran Ministry as a religious corporation
sole on June 16, 2011. The registered agent was Swenson. When it was re-registered as
a religious nonprofit on October 3, 2012, Goodover was the registered agent. Throughout
the proceedings herein, Schmidt served as president of New Hope and Goodover as
vice-president.
¶33 The evidence demonstrates that New Hope is an entity composed of minority
members of Faith Lutheran wishing to remain affiliated with ELCA. Though the
organization has changed names and structure since the May 2nd vote, the same persons
3
At least six of the members elected to the Friends of ELCA Council the day of the vote also
signed the request for adjudication by the Montana Synod regarding the 90% provision.
13
sought to enforce their rights under Faith Lutheran’s 1993 constitution before the vote,
immediately following the vote, and at all times since. The New Hope organization,
formed by former Faith Lutheran members who voted in the minority, has established
standing to sue on its own behalf to vindicate rights, if any, originating under the 1993
constitution.
¶34 Having determined that New Hope has alleged an injury to itself, we turn to the
question of whether the alleged injury is one which the courts can redress. Faith
Lutheran argues that the court cannot grant relief because this action is derivative in
nature and was required to be brought under Title 35, chapter 2, part 13, MCA, governing
derivative actions for nonprofit corporations. Because the action was not brought under
this part, Faith Lutheran argues that no other relief is available to the minority
represented by New Hope. However, a derivative action may be brought by a nonprofit
corporation’s director or minority member “in the right of” the corporation. Section
35-2-1301, MCA. Here, New Hope is not asserting rights on behalf of the corporation,
Faith Lutheran. Rather, it is asserting minority rights that came into existence on the day
of the vote, were never held by Faith Lutheran, and which are contrary to the “best
interests” of the corporation. See § 35-2-1304(1), MCA. Further, members bringing a
derivative suit “must be a member at the time of the proceeding.” Section
35-2-1301(2)(b), MCA. New Hope is composed of former members of Faith Lutheran,
not current members. This action is more appropriately viewed as one asserting
14
dissenter’s rights. See e.g. Hansen v. 75 Ranch Co., 1998 MT 77, 288 Mont. 310, 957
P.2d 32.
¶35 New Hope filed this action seeking a declaratory judgment regarding its legal
rights in property held by Faith Lutheran and by the Foundation, pursuant to Faith
Lutheran’s 1993 constitution. Section 27-8-202, MCA, of the Uniform Declaratory
Judgments Act provides:
Any person interested under a deed, will, written contract, or other
writings constituting a contract or whose rights, status, or other legal
relations are affected by a statute, municipal ordinance, contract, or
franchise may have determined any question of construction or validity
arising under the instrument, statute, ordinance, contract, or franchise and
obtain a declaration of rights, status, or other legal relations thereunder.
Unless otherwise prohibited, as discussed below, a court could render an effective
judgment by a declaration of the respective rights of New Hope and Faith Lutheran under
Faith Lutheran’s constitution. We thus affirm the District Court’s ruling that, having
alleged an injury to itself as an organization that the court could alleviate, New Hope has
standing to proceed.
¶36 2. Did the District Court err in determining it had subject matter jurisdiction?
¶37 Faith Lutheran argues the District Court erred by exercising jurisdiction over the
subject matter of this case. Faith Lutheran asserts that this action involves “an
intra-membership ecclesiastical dispute” that cannot be resolved by the civil judicial
system without violating the First Amendment’s Free Exercise and Establishment
clauses.
15
¶38 “The States have a legitimate interest in the peaceful resolution of property
disputes, and their civil courts are generally proper forums for such resolution.” Second
Intl. Baha’i Council v. Chase, 2005 MT 30, ¶ 13, 326 Mont. 41, 106 P.3d 1168 (citing
Jones v. Wolf, 443 U.S. 595, 602, 99 S. Ct. 3020, 3024-25 (1979)). As the United States
Supreme Court noted, “[r]eligious organizations come before us in the same attitude as
other voluntary associations for benevolent or charitable purposes, and their rights of
property, or of contract, are equally under the protection of the law, and the actions of
their members subject to its restraints.” Watson v. Jones, 80 U.S. 679, 714 (1872).
However, disputes over church property pose special problems. When considering
disputes over property of religious organizations, courts “must exercise great care to
avoid resolving such disputes on the basis of religious doctrine or practice.” Chase, ¶ 13
(citing Presbyterian Church v. Mary Elizabeth Blue Hull Meml. Presbyterian Church,
393 U.S. 440, 449, 89 S. Ct. 601, 665 (1969); Jones, 443 U.S. at 602, 99 S. Ct. at 3025).
¶39 The United States Supreme Court has recognized two approaches for resolving
disputes involving church property, although it has not characterized these approaches as
exclusive. Chase, ¶¶ 16, 18. Under the first approach, civil courts may defer to a
determination made by an established decision-making body of a “hierarchical church.”
Chase, ¶ 16. A court thus “avoids entanglement in ecclesiastical controversy by
accepting the judgment of the established decision-making body of the religious
organization.” Chase, ¶ 16. This “deferential approach” is most readily employed when
there is no dispute between the parties regarding either the hierarchical nature of the
16
church or the identity of the decision-making body. Chase, ¶ 16 (citing Maktab Tarighe
Oveyssi Shah Maghsoudi, Inc. v. Kianfar, 179 F.3d 1244, 1248 (9th Cir. 1999)).
“[W]hen either is disputed on the basis of religious doctrine, however, the resolution of
these threshold questions may require a court to intrude impermissibly into religious
doctrinal issues.” Chase, ¶ 16.
¶40 Alternatively, a court may pursue a “neutral principles approach” to resolve a
dispute over church property by applying
neutral, secular principles of property, trust, and corporate law when
instruments upon which those principles operate are at hand. Thus, no First
Amendment issue arises when a court resolves a church property dispute by
relying on state statutes concerning the holding of religious property, the
language of relevant deeds, and the terms of corporate charters of religious
organizations. Maktab, 179 F.3d at 1249 [citation omitted]. “The key
inquiry is whether church documents . . . contain express, secular language
indicating what is to happen to church property in the event of a particular
contingency . . . . If the documents do contain express, secular language,
separable from the non-secular language, then that language dictates the
outcome.”
Chase, ¶ 17 (quoting Laurence H. Tribe, American Constitutional Law § 14-11, at 1238
(2d ed., Found. Press 1988)).
¶41 Faith Lutheran argues that because it disputes the validity of the 1993 constitution,
courts are precluded from applying a neutral approach to this dispute. It cites In re Hofer,
2005 MT 302, ¶ 25, 329 Mont. 368, 124 P.3d 1098, for the proposition that a neutral
principle approach is only permissible “where the church organizational documents are
undisputed.” (Emphasis added.) However, that position is not supported by In re Hofer.
We have not previously been asked to decide an issue where a church’s governing
17
documents themselves were disputed. In both Chase and In re Hofer, we were presented
with undisputed church documents. However, we did not restrict our jurisdictional
inquiry under the neutral approach to only cases involving undisputed documents.
Concerns about a disputed decision-making process have been more commonly
expressed in the context of the deferential approach. See Chase, ¶ 16 (“This approach is
most easily employed when there is no dispute between the parties concerning the
hierarchical nature of the church or the identity of its decision-making body . . . .”).
Nothing in our prior cases precludes us from utilizing a neutral approach to a church
property dispute, including an underlying dispute over church documents, if resolution
under neutral principles is possible.
¶42 In Chase, we were presented with the question of whether the civil courts could
exercise jurisdiction over an action brought by the Second International Baha’i Council
against Chase, the president of the Council, alleging wrongful interference with the
conduct of the church corporation and conversion of corporate property. Chase, ¶ 7. The
district court dismissed the action for lack of jurisdiction on First Amendment grounds.
Chase, ¶ 8. We reversed, holding that a “purely secular” reading of church documents
permitted the dispute to be resolved on the merits with neither an inquiry into Baha’i
religious doctrine nor intrusion into “private consciences.” Chase, ¶ 24. We held that
“[t]he First Amendment does not preclude the District Court’s consultation of corporate
bylaws, state statutes, and general corporate and property law to determine” issues of
church property. Chase, ¶ 26.
18
¶43 In re Hofer required a determination of whether the bylaws and Articles of
Incorporation of a Hutterite Colony created a trust over Colony property for the benefit of
its members. Relying on our analysis in Chase, we held that the First Amendment was
not violated by a neutral principle approach applying property, trust, and corporate law to
the Articles, bylaws, and constitution of the Colony. In re Hofer, ¶ 25.
¶44 Consistent with these holdings, we conclude that a dispute over church documents
susceptible to application of neutral principles may likewise be resolved by a court using
the neutral approach. The challenge raised here by Faith Lutheran to the validity of the
1993 constitution does not require us to delve into doctrinal matters, and only separate,
secular language is used. Resolution is possible under application of neutral principles of
contract, trust, and corporate law. Thus, no First Amendment concern is raised that
would prohibit a court’s exercise of jurisdiction over the dispute. We reach the same
conclusion regarding the dispute over application of the 90% provision, which provides
as follows:
If a 90% majority of the voting members of this congregation present at a
regularly called and conducted special meeting of this congregation vote to
transfer to another Lutheran Church body, title to property shall continue to
reside in this congregation. Before this congregation takes action to
transfer to another Lutheran Church body, it shall consult the
representatives of the Montana Synod.
Nothing in this provision requires the court to delve into religious doctrine. Its operation
turns on language that is purely secular and presents no potential for doctrinal
entanglement. We are not here asked to determine who qualifies as a “voting member.”
19
The dispute before us can be resolved by application of neutral legal principles, and we
turn to these disputed issues.
¶45 Faith Lutheran contends that the 1993 constitution was not properly adopted,
particularly the 90% provision, and that only the 1978 constitution was valid at the time
of the May 2, 2010 vote. It points to the requirement of the 1978 constitution that
amendments are adopted after (1) an announcement of proposed changes at a public
service or by mailing to voting members 30 days before the annual meeting; (2) approval
by a majority vote at the first annual meeting after the proposed changes are announced;
and (3) ratification of the amendments at the subsequent annual meeting with a two-thirds
vote by written ballot. Faith Lutheran contends there is no proof the final vote on the
1993 constitution was either conducted by written ballot or passed by a two-thirds vote,
because the minutes from the annual meeting only note that a motion was made to accept
the amendments and that it was “seconded and carried.” Faith Lutheran provided an
affidavit from Lorraine Severson, secretary of Faith Lutheran at the time the two subject
annual meetings were conducted. Severson states:
6. To the best of my knowledge and belief, there was no voting by
ballot on the proposed Constitutional amendments at either the 1989
or the 1990 annual meeting of Faith Lutheran.
7. The votes for and the votes against were not recorded for either the
1989 vote or the 1990 vote. Thus, I cannot say with regard to the
1990 vote whether or not the motion passed by a 2/3rds majority.
8. If there had been a motion to forego a written ballot for either or
both votes, that would have been included in my meeting minutes.
There was no such motion to forego a written ballot at either
meeting.
20
9. If there had been a ballot vote, I would have recorded the outcome of
the ballot vote in the minutes, noting the number voting for and the
number voting against the amendments.
¶46 It is notable that Faith Lutheran failed to object to the 1993 constitution at any time
prior to New Hope’s filing of this action. Despite the attention brought to the constitution
during the Synod’s adjudication process, and the congregational discussion about the
Synod’s decision prior to the May 2, 2010 vote, no objection was raised then or at any
time in the many years after its adoption. Faith Lutheran’s position during the Synod
adjudication was not that the constitution was invalid, but that the 90% provision did not
apply because the “2/3 required to leave the ELCA in essence trumped the 90%
[provision].” The challenge to its validity was not raised until nearly one year after New
Hope filed this action. The significant lapse in time between the allegedly defective
process in the constitution’s adoption and Faith Lutheran’s objection to it raises two
longstanding maxims: “Acquiescence in error takes away the right of objecting to it,”
§ 1-3-207, MCA, and “[t]he law helps the vigilant before those who sleep on their
rights,” § 1-3-218, MCA.
¶47 New Hope provided hundreds of pages in exhibits dating from 1988 to 1993,
including Church Council meeting minutes addressing the discussion regarding this
provision and other amendments;4 a letter to the congregation with the proposed changes
4
For example, the November 3, 1988 minutes note that the bylaw committee reported on, and
the council discussed, the “change from 2/3 majority to 90%.”
21
including the new 90% provision;5 various drafts of the changes;6 two consecutive annual
meeting minutes where it is noted that the amendments were voted on and passed;7 the
letter sending the amended constitution to the Montana Synod;8 and Montana Synod
correspondence discussing the changes.9
¶48 New Hope presented substantial evidence demonstrating that the revisions
culminating in the 1993 constitution, including the 90% provision, were discussed over a
period of several years, processed through the myriad steps for approval as required by
the 1978 constitution, and thereafter utilized by Faith Lutheran for some 20 years.
Relevant here is the law’s recognition of a presumption, disputable, that the ordinary
5
The letter is dated December 29, 1988, from Pastor Stan. It notes that only portions of the
constitution with proposed changes are attached, with both the old and new versions. Page 5 of
the new version includes the current 90% provision.
6
Various drafts show different dates on the front cover including “1978-Revised 1989,”
“1978-Revised 1992 and 1993,” but each includes the 90% provision. The current version of the
constitution presented by New Hope states on the front page: “The content of the constitution
and bylaws is as previously written with ratified revisions of constitution (1/92) and of bylaws
(1/91 and 1/92).”
7
The January 29, 1989 minutes note that, after a few amendments unrelated to the 90%
provision, a “[m]otion to accept the proposed constitution changes as presentd [sic], and as
amended, [was] seconded and carried.” The January 21, 1990 minutes note under “unfinished
business” that “Dorothy Sowa moved we accept the constitution as previously amended. Motion
seconded and carried.”
8
This is a handwritten note, dated “3-12” but without a year, from Peggy Dean, past secretary of
Faith Lutheran. It states: “Here are the changes made to the Faith Lutheran Constitution over the
past two years. I think I should have sent them sooner but didn’t think about it until I cleaned by
books at the end of my term.” New Hope alleges this was sent in March of 1993.
9
An April 3, 1993 letter from Hugo Eskildsonn addressed to Rev. Jessica Crist notes “In C9.03 a
90% majority is mentioned as a requirement for transfer to ‘another Lutheran church body’
although in C9.04 only a ‘two-thirds majority’ is cited for transfer to a non-Lutheran church
body.”
22
course of business was followed. Section 26-1-602(20), MCA. After New Hope
presented this evidence, the summary judgment burden shifted to Faith Lutheran to
present substantial evidence in opposition, rather than mere denial, conclusory
statements, or speculative evidence. However, the affidavit submitted by Faith Lutheran
does not affirmatively state that a two-thirds majority vote approving the 1993
constitution was not obtained, but only that the affiant could not verify that it had passed
by a two-thirds majority because the numbers were not recorded. Likewise, the affidavit
does not affirmatively aver that a ballot vote was not taken, but merely raises a question
about the method of balloting due to a lack of information in the minutes. In order to
meet its evidentiary burden, and dispute the presumption of regularity, Faith Lutheran
had to do more than point to a lack of detail in meeting minutes from 20 years ago. At
best, Faith Lutheran’s evidence can be viewed as raising questions, but failing to raise a
genuine issue of material fact about the approval of the 1993 constitution. We are not
persuaded by Faith Lutheran’s reliance on a lack of detail in the aged minutes, and thus
conclude it has failed to meet its burden.
¶49 Further, as the District Court noted, Faith Lutheran itself relied on the provisions of
the 1993 constitution allowing it to vote to withdraw from ELCA, provisions that were
not present in the 1978 constitution.10 After relying on portions of the 1993 constitution
10
We acknowledge Faith Lutheran’s contention that it was impossible for the 1978 constitution
to make reference to ELCA, as the ELCA was not created until 1988. However, this does not
negate the fact that the 1993 constitution is the only constitution that references the ELCA. All
references in the 1978 constitution to the ALC, a non-existent entity as of 1988, would have been
of questionable validity at the time of the disaffiliation vote. Without some other governing
23
for its own purposes, Faith Lutheran now asks us to invalidate it. This we decline to do.
See § 1-3-212, MCA (“A person who takes the benefit shall bear the burden.”).
¶50 Having concluded that a neutral principles approach is appropriate for resolution of
both the challenge to the validity of the 1993 constitution and its interpretation, we affirm
the District Court’s exercise of jurisdiction, and its determination that the 1993
constitution is valid, when it entered summary judgment. We thus turn to interpretation
of the constitution.
¶51 3. Did the District Court err in determining that New Hope was entitled to the
property held by Faith Lutheran?
¶52 Faith Lutheran’s 1993 constitution begins in Chapter 1 by explaining that,
throughout the constitution, the Faith Lutheran corporation is referred to as “the
congregation,” and that, for purposes of the document, “members of this corporation, and
members of the congregation of the Faith Lutheran Church of Great Falls, are hereby
declared to be one and the same.” This establishes an initial point of interpretation: that
references made in the constitution to “the congregation” are meant to refer to the Faith
Lutheran corporate entity.
¶53 Chapter 5 of the constitution provides for affiliation of Faith Lutheran with ELCA,
and also explains how Faith Lutheran can disaffiliate with ELCA. C5:04 provides that
Faith Lutheran’s affiliation with ELCA may be terminated if the congregation dissolves,
ceases to exist, is removed from membership with ELCA through disciplinary action, or
document dictating the procedure for withdrawal from ELCA, Faith Lutheran’s actions in
conducting preliminary and final votes to disaffiliate, as well as submitting its decision to the
ELCA, as required by the 1993 constitution, could well have been superfluous.
24
if the congregation follows the disaffiliation procedure set forth in Chapter 5 (C5:05).
The procedure for voluntary disaffiliation from ELCA provided in C5:05 requires an
initial two-thirds vote of the voting members to pass a “resolution indicating the desire”
to terminate, followed by additional steps that culminate in a second vote to disaffiliate
requiring a two-thirds majority.
¶54 Chapter 9 governs “legal ownership” of church property. It provides for
disposition of church property under various circumstances, pertinent here being Faith
Lutheran’s affiliation with “another Lutheran Church body.” That provision states:
If a 90% majority of the voting members of this congregation present at a
regularly called and conducted special meeting of this congregation vote to
transfer to another Lutheran Church body, title to property shall continue to
reside in this congregation. Before this congregation takes action to
transfer to another Lutheran Church body, it shall consult the
representatives of the Montana Synod.
¶55 It is undisputed that a 71% majority voted to disaffiliate with ELCA and to
transfer to another Lutheran Church body. A 90% majority was not obtained. We
disagree with Faith Lutheran’s argument that, in order for the 90% provision to apply at
all, the congregation was required to conduct a separate vote on the specific issue of
future ownership of the church property. This section contemplates only a vote on
affiliation, with the disposition of church property made dependent upon the vote margin.
Faith Lutheran offers the alternative argument that, even if the 90% provision is
applicable, New Hope is not entitled to the church property because the provision doesn’t
specifically explain how the property is disposed if a 90% majority is not obtained,
leaving a multitude of dispositional options for the property. To the contrary, we agree
25
with the District Court’s conclusion that, under neutral principles of contract
interpretation, the provision dictates that when a vote falls between two-thirds and 90%
support, “both contingencies have not been met” for the title of the property “to reside in
this congregation,” meaning, as explained above, the Faith Lutheran corporation.
Although a 71% majority vote in favor of a new affiliation is successfully carried, title to
church property in that instance is not retained by the corporation, which must divest
itself of the property in favor of the minority that have chosen to remain affiliated with
ELCA, here represented by New Hope. Faith Lutheran’s retention of its corporate
identity does not change the fact that it is the disaffiliating faction. While the provision is
not a model of clarity or completeness, when read together with the other constitutional
provisions governing property ownership, it dictates this outcome. We therefore affirm
the District Court’s determination that New Hope was entitled to the property owned by
Faith Lutheran as of May 2, 2010.
¶56 4. Did the District Court err in determining that New Hope was entitled to the
property held by the Foundation?
¶57 The District Court concluded the Foundation owed a fiduciary duty to the church
and held its property in trust for Faith Lutheran, although it provided little substantive
analysis explaining why this was so. After so determining, it ruled that the 90%
provision dictated that New Hope was entitled to all property held by the Foundation and
ordered such property transferred outright to New Hope.
¶58 New Hope’s position on appeal is that the Foundation is “an asset that belonged to
the congregation,” and that the cy pres doctrine would support this result, even if the
26
District Court did not cite or rely on the doctrine. The Foundation argues that reversal is
required because the District Court raised the trust/fiduciary duty theory sua sponte and
the Foundation had no opportunity to respond. It further argues that reversal is required
because it is a separate corporate entity that has the authority to amend its Articles at any
time, including its corporate purposes, which necessarily negates any claim of interest by
New Hope or other congregants.
¶59 We disagree that the District Court’s theory was raised sua sponte and without
notice. “[D]ue Process requires a reasonable notice as to give everyone interested their
opportunity to be heard.” Baston v. Baston, 2010 MT 207, ¶ 18, 357 Mont. 470, 240 P.3d
643 (citation omitted). A review of the record shows that New Hope raised fiduciary
duty and trust theory in its pleadings and briefings to adequately put the Foundation on
notice of a trust claim. New Hope asserted in its First Amended Complaint that the
Foundation possessed property belonging to Faith Lutheran and argued in summary
judgment briefing that “the Foundation is holding title to property in trust for the benefit
of Faith Lutheran Church.” Additional arguments concerning trust theory were also
made by New Hope. While raising a trust issue generally, New Hope did not specifically
allege a resulting or constructive trust in the District Court, nor does so here. Likewise,
the District Court’s order did not indicate what kind of trust it was finding. It appears
that the court concluded that an express trust existed.
27
¶60 The party asserting “the existence of a trust has the burden of proving its existence
and contents by clear, unmistakable, satisfactory and convincing evidence.” In re Hofer,
¶ 28. Under the trust law in effect at the time of the disaffiliation vote, an express trust
could be created by “a declaration by the owner of property that the owner holds the
property as trustee” or “a transfer of property by the owner during the owner’s lifetime to
another person as trustee.” Section 72-33-201, MCA (2009). A trust could be created
“only if the trustor properly manifests an intention to create a trust,” § 72-33-202, MCA
(2009), and was subject to the requirements of the statute of frauds if not created by
operation of law, § 72-33-208, MCA (2009). These same basic requirements are
contained in the current Montana Uniform Trust Code. See §§ 72-38-401, -402(1)(b),
-407, MCA.
¶61 The court relied on two provisions of the Foundation’s Articles in concluding that
a trust existed. First, Article V of the Foundation’s Articles provides that the purpose of
the Foundation is “[t]o use and apply funds and property for the advancement and support
of activities of Faith Lutheran Church, Great Falls, Montana.” Second, Article IX
provides that, in the event of dissolution of the Foundation, the Foundation’s property is
to be “distributed to the Faith Lutheran Church Council acting for Faith Lutheran Church
for the purpose of providing financial assistance to the Faith Lutheran Church, Great
Falls, Montana.”
¶62 While these provisions demonstrate that the Foundation’s purpose is to benefit
Faith Lutheran Church, they do not negate the fact that the Foundation is a separate,
28
stand-alone entity organized under the laws of this state as a nonprofit corporation. See
Articles IV, V (The period of existence of the Foundation “shall be in perpetuity.” The
Foundation “shall have and exercise all powers conferred by the law of the state of
Montana upon corporations formed under the Montana Non-Profit Corporation Act.”).
The formal provisions here are distinguished from those at issue in our cases concluding
that an express trust existed. See e.g. McCaffrey v. Laursen, 215 Mont. 305, 697 P.2d
103 (1985) (express trust found where father deeded property to son and son
simultaneously signed a document agreeing that all income from property belonged to
father, to reconvey property on demand of father, and that property would be considered
an asset of father’s estate upon his death); In re Hofer, ¶ 26 (trust found where bylaws of
religious corporation stated that all property of the corporation “shall be held in the name
of [the corporation] for the sole benefit of the Members . . . and for their natural heirs and
successors.”). Further, although New Hope argues that the Foundation’s purpose and
property was to serve “the congregation”—meaning the individual members of Faith
Lutheran—that purpose is not stated in the Foundation’s Articles. Rather, the Articles
declare support for Faith Lutheran church, and, in any event, we have already established
that “the congregation” as defined in Faith Lutheran’s corporate documents means the
singular Faith Lutheran corporation, solidifying that the Foundation’s purpose was to
benefit that particular corporate entity, which continued to exist after the disaffiliation
vote. As amicus Attorney General argues, to permit the particularly stated charitable
purposes of a nonprofit corporation to be malleably converted into an express trust for
29
unnamed beneficiaries, and then its property transferred outright to those beneficiaries,
could negate much of the substance of the Nonprofit Corporation Act.
¶63 We further reject New Hope’s argument that the District Court’s decision can be
supported by the cy pres doctrine. As then codified, the cy pres doctrine provided:
If property is given in trust to be applied to a particular charitable
purpose, and it is or becomes impossible, impracticable, or illegal to carry
out the particular purpose, and if the trustor manifested a general intention
to devote the property to charitable purposes, the trust need not fail. The
court may direct the application of the property to some charitable purpose
which falls within the general charitable intention of the trustor.
Section 72-33-504, MCA (2009) (repealed and replaced by § 72-38-413, MCA (2013)).
New Hope argues that the Foundation’s purpose has become impracticable following the
schism because donations were given at a time when Faith Lutheran was associated with
ELCA. First, application of the cy pres doctrine requires the existence of a trust and does
not operate to convert a nonprofit corporation into a trust. We have already determined
that no trust has been established here, but further, the Foundation’s charitable purposes
have not here become “impossible, impracticable, or illegal to carry out.” Section
72-33-504, MCA (2009). The cy pres doctrine is inapplicable in these circumstances.
¶64 The issue then becomes whether the Foundation’s Articles contain any provisions
addressing the consequences of a decision by Faith Lutheran to disaffiliate from ELCA
upon the Foundation or its property. There are none. The District Court reasoned that
“[i]f Faith Lutheran had followed the decision of the Synod Council th[e]n the assets of
the Foundation would have remained appropriately for the benefit of the faction that
voted to stay affiliated with the ELCA.” However, no mention of ELCA or of Faith
30
Lutheran’s denominational affiliation is made by the Foundation’s Articles. While Faith
Lutheran was affiliated with ELCA for much of the Foundation’s existence, the
Foundation predates Faith Lutheran’s affiliation with ELCA to the time when Faith
Lutheran was affiliated with ALC. A reading of the plain language of the Articles
demonstrates that, absent amendment, the Foundation is tied to Faith Lutheran without
regard to its denominational affiliation. Similarly, no provision addresses the
consequences of any schism or incorporates the constitutional provisions of Faith
Lutheran with regard to any other contingency.
¶65 The Foundation’s designated purpose, to benefit Faith Lutheran Church of Great
Falls, is still capable of being carried out. Faith Lutheran Church of Great Falls has
continued and can be traced as an ongoing entity. As an independent entity, the
Foundation retains discretion over the use and control of its property, subject to the
limitations of its Articles and of the Nonprofit Corporation Act.
¶66 We recognize that New Hope presented evidence that a significant portion of
funds held by the Foundation came directly from Faith Lutheran, rather than from private
donors, that the Foundation gave reports to Faith Lutheran during its annual meetings,
and that all Board members were either representatives of Faith Lutheran or elected by
Faith Lutheran. However, such evidence, without more, does not require creation of an
express trust. While this evidence may have been relevant to a resulting or constructive
trust theory, or a “piercing the corporate veil” theory, neither was raised in this litigation.
31
¶67 We reverse the District Court’s order declaring that the Foundation held its
property in trust for Faith Lutheran and directing it to transfer all property to New Hope.
¶68 5. Did the District Court err in denying New Hope’s request for prejudgment
interest?
¶69 New Hope appeals from the District Court’s denial of prejudgment interest on the
property it was awarded. The District Court concluded that, because New Hope’s action
was for declaratory judgment and quiet title, the gravamen of the action was in
ownership, not money damages, preventing application of § 27-1-211, MCA.
¶70 The primary objective of the prejudgment interest statute is to “‘fully compensate
the injured party for the loss of use of his money during the period in which a valid claim
was not paid.’” Kraft v. High Country Motors, Inc., 2012 MT 83, ¶ 71, 364 Mont. 465,
276 P.3d 908 (quoting Byrne v. Terry, 228 Mont. 387, 391, 741 P.2d 1341, 1343 (1987)).
If the party requesting prejudgment interest satisfies the criteria under § 27-1-211, MCA,
an award of interest is not discretionary. Kraft, ¶ 71. Three criteria must be satisfied:
(1) an underlying monetary obligation; (2) amount of recovery is certain or capable of
being made certain; and (3) right to recover must vest on a particular day. Kraft, ¶ 70.
¶71 New Hope does not contend that it is entitled to prejudgment interest on the value
of the real property, merely on the monetary amounts held in bank accounts or
certificates of deposit it was entitled to following the May 2, 2010 vote. Given our
determination that New Hope was entitled to the property held by Faith Lutheran
following the schism, New Hope has established that it is entitled to an underlying
monetary obligation. The amount in Faith Lutheran’s financial accounts as of May 2,
32
2010, is undisputed to be $95,744.00, thus the amount of recovery is certain. Finally,
New Hope’s right to recover this amount vested on May 2, 2010, following the majority
faction’s disaffiliation from ELCA. New Hope can satisfy the requirements for
prejudgment interest, and was denied the use of this money during the pendency of this
case by Faith Lutheran’s refusal to relinquish control over it. Thus, New Hope is entitled
to an award of prejudgment interest pursuant to § 27-1-211, MCA, in order to fully
compensate it.
¶72 New Hope also requested post-judgment interest; however, the District Court
never ruled on this request. Post-judgment interest is not merely awarded in the
discretion of the court, but is a statutory right. In re Marriage of Pospisil, 2000 MT 132,
¶ 49, 299 Mont. 527, 1 P.3d 364 (citing § 25-9-205, MCA). Thus, New Hope is entitled
to post-judgment interest on the $95,744 owed to it by Faith Lutheran since the date of
the District Court’s order, excepting any period during which the “debtor is prevented by
law” from paying the debt.11 Pospisil, ¶ 51.
¶73 The District Court’s order on prejudgment interest is reversed. Upon remand, pre-
and post-judgment interest on the $95,744 award must be calculated.
¶74 6. Did the District Court err in denying New Hope’s request for attorney fees?
¶75 Under § 27-8-313, MCA, a District Court may award attorney fees to a prevailing
party in a declarative relief action “if equitable considerations support such an award.”
11
The District Court entered a temporary stay of execution pending resolution of post-judgment
motions, and another contingent upon posting of a supersedeas bond. Generally, no interest
accrues during the pendency of appeal when a stay of execution is in place. Pospisil, ¶ 51 (citing
§ 27-1-211, MCA).
33
Hughes v. Ahlgren, 2011 MT 189, ¶ 13, 361 Mont. 319, 258 P.3d 439. The award of
attorney fees under this section is the exception, rather than the rule. Western Tradition
Partn. v. Atty. Gen. of Mont., 2012 MT 271, ¶ 11, 367 Mont. 112, 291 P.3d 545. We
have applied a “tangible parameters” test to determine whether an award of attorney fees
is necessary and proper. Hughes, ¶ 13. However, before applying the tangible
parameters test, the court must conclude that equity supports an award of attorney fees.
Hughes, ¶ 13 (citing United Natl. Ins. Co. v. St. Paul Fire & Ins. Co., 2009 MT 269, ¶ 38,
352 Mont. 105, 214 P.3d 1260). “Equity generally does not support an award of attorney
fees under [the Uniform Declaratory Judgment Act], however, if similarly situated parties
genuinely dispute their rights.” Hughes, ¶ 16 (citing United Natl. Ins., ¶ 39).
¶76 The District Court disagreed with New Hope’s argument that this case involved
“very straightforward” facts. We agree with the District Court that this case involved a
genuine dispute between the rights of the parties that required complex legal analysis of
competing claims. We also agree with the District Court’s assessment that the parties
were not unequal in their respective status or position. Though Faith Lutheran comprises
a majority faction as opposed to New Hope’s minority, the parties were similarly situated
and both were, as noted by the District Court, “exceptionally well represented by
competent legal counsel in the face of settled, but uncommonly litigated, law.”
Therefore, we conclude there was no abuse of discretion in the District Court’s denial of
New Hope’s request for attorney fees.
34
CONCLUSION
¶77 The District Court correctly determined that New Hope had standing to bring this
action. New Hope alleged an injury to itself as an organization that the courts could
alleviate, and was not required to file a nonprofit derivative action against Faith Lutheran
because the claims here were not brought on behalf of the church corporation. The
District Court also correctly determined that subject matter jurisdiction could be
exercised, despite the religious nature of the parties, by application of neutral principles
of law to the church governing documents.
¶78 Applying neutral principles of law, the District Court correctly determined that
New Hope, representing the minority members, was entitled to property held by Faith
Lutheran as of the date of the disaffiliation vote because the 90% super-majority
necessary for Faith Lutheran to retain the property under the constitution was not
obtained. However, the District Court erred by holding that New Hope was entitled to
the Foundation’s property because New Hope failed to prove that an express trust existed
over Foundation property in favor of the church members, or otherwise establish that
New Hope was entitled to the Foundation’s property.
¶79 Because New Hope was entitled to all Faith Lutheran property as of the
disaffiliation vote, including cash accounts, the District Court erred in denying
prejudgment interest to New Hope for the loss of use of those monetary amounts. New
Hope is likewise entitled to post-judgment interest on these funds. Finally, the court did
not abuse its discretion in denying New Hope’s request for attorney fees.
35
¶80 Affirmed in part, reversed in part, and remanded for further proceedings consistent
with this opinion.
/S/ JIM RICE
We concur:
/S/ MIKE McGRATH
/S/ PATRICIA COTTER
/S/ BETH BAKER
/S/ MICHAEL E WHEAT
/S/ JON A. OLDENBURG
District Court Judge Jon Oldenburg
sitting in for Justice Laurie McKinnon
/S/ GREGORY R. TODD
District Court Judge Gregory R. Todd
sitting in for former Justice Brian Morris
36