Who Owns the Real Estate When an Unincorporated Association Incorporates?
A schism arose among members of an unincorporated church arose over control of the organization. One group of members incorporated and then filed suit against remaining individual members of the church seeking to quiet title to $14-million dollars worth of real estate.
The parties filed cross-motions for summary judgment. In granting the individual church members’ motion and denying the Corporation’s motion, the trial court found the church to be congregationally governed with a clear and established practice for handling real property transactions.
The intermediate Court of Appeals of Tennessee reversed the trial court, but essentially gave the individual church members practical relief. Reasoning that the Corporation “is not a member of the Church or a trustee in whose name Church property is titled, rather it is a nonprofit religious corporation formed after the Church split,” the Corporation lacked standing to sue for the relief sought.
The court pointed out that “although an unincorporated religious association, such as the Church, may incorporate, to do so and distribute all interests of the Church to the Corporation would have required the consent of all members of the Church.” Thus, while a formal deed from the Church to the Corporation may not be needed (a point not discussed in the opinion), unanimity among the Church members was required to effect a transfer to title. Church of the First Born of Tennessee, Inc. v. Slagle, No. M2014-01605-COA-R3-CV (Court of Appeals of Tennessee (Nashville), June 13, 2017)
Comment:
Disputes over ownership of property belonging to various religious groups have proliferated in recent years. Analysis and resolution of these issues can turn on many different legal concepts, such as trust law, contract law, land title law or the organic structure of the particular organization (hierarchical or congregational).
Many states have more or less elaborate statutory schemes controlling the organizational and operational aspects of various religious organizations. Of course, First Amendment concerns also hover over many disputes in which secular governments are involved with religious disputes. Transactional attorneys, as well as lenders and title insurers should have safeguards in place to adequately address the concerns inherent in these situations, many of which may not be apparent at first blush.