New Hope Lutheran Ministry v. Faith Lutheran Church of Great Falls, Inc.
328 P.3d 586
Mont.2014Background
- Faith Lutheran Church (a Montana nonprofit corporation) adopted a 1993 constitution containing a 90% supermajority rule: if 90% of voting members vote to transfer to another Lutheran body, "title to property shall continue to reside in this congregation."
- On May 2, 2010, the congregation voted (by secret ballot) 71% to leave ELCA and affiliate with LCMC; ~29% voted to remain with ELCA. The majority continued as Faith Lutheran corporation; roughly half of the minority formed New Hope.
- New Hope (minority members who remained with ELCA) sued for declaratory relief and to quiet title to all church property then held by Faith Lutheran and by the Foundation for Endowment of Faith Lutheran Church (a separate nonprofit created to benefit Faith Lutheran).
- District Court granted summary judgment to New Hope: (1) New Hope had standing; (2) neutral-principles review applied; (3) New Hope entitled to property held by Faith Lutheran; (4) District Court also ordered Foundation property turned over (finding a trust/fiduciary duty). District Court denied prejudgment interest and attorney fees.
- Supreme Court of Montana: affirmed New Hope’s standing, jurisdiction under neutral principles, and entitlement to Faith Lutheran’s property; reversed the finding that Foundation property was held in trust and reversed denial of prejudgment (and granted post-judgment) interest on liquid assets; affirmed denial of attorney fees; remanded for interest calculation and further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to sue | New Hope is the organized minority that voted to remain with ELCA and suffered injury to its property rights under the 1993 constitution | Faith Lutheran: New Hope’s corporate form changed and it cannot prove it represents the minority voters | New Hope has organizational standing as the minority faction and alleged an injury redressable by court |
| Subject-matter jurisdiction / First Amendment | Neutral-principles review can resolve interpretation of the constitution and property rights without doctrinal inquiry | Faith Lutheran: dispute is ecclesiastical; courts must abstain (challenge to constitution’s validity precludes neutral review) | Court applies neutral principles; jurisdiction is proper; constitution (1993) is valid for this dispute |
| Entitlement to property held by Faith Lutheran | 90% provision means if <90% vote to transfer, title does not remain with the disaffiliating corporation; minority succeeds to property | Faith Lutheran: 1993 constitution invalidly adopted or 90% provision inapplicable; property disposition unclear when <90% | Under neutral contract/corporate interpretation, because 90% not obtained, the minority (New Hope) is entitled to property held by Faith Lutheran as of vote |
| Entitlement to Foundation property | Foundation’s stated purpose to "advance and support activities of Faith Lutheran" and transfers from church make Foundation assets effectively for the congregation/minority | Foundation: separate nonprofit with its own Articles; no express trust or cy pres basis to transfer assets to minority; court lacked notice to consider trust theory sua sponte | Reversed: New Hope failed to prove an express trust or applicability of cy pres; Foundation retains separate corporate control of its assets |
| Prejudgment and post-judgment interest | New Hope seeks prejudgment interest on cash accounts/financial assets it was awarded | Faith Lutheran argued declaratory/quiet-title relief precludes prejudgment interest | Prejudgment interest required on $95,744 (cash accounts) because monetary obligation, certainty, and vesting date (May 2, 2010) satisfied; post-judgment interest also owed |
| Attorney fees under declaratory judgment statute | New Hope sought fees as prevailing party | Faith Lutheran argued dispute was genuine and both sides were reasonably represented | Denial of attorney fees affirmed—equity did not support fees given genuine, difficult dispute and parity of parties |
Key Cases Cited
- Watson v. Jones, 80 U.S. 679 (1872) (historic principle that civil courts may adjudicate property rights of religious organizations but must avoid doctrinal entanglement)
- Presbyterian Church v. Mary Elizabeth Blue Hull Meml. Presbyterian Church, 393 U.S. 440 (1969) (courts must not resolve church disputes by interpreting religious doctrine)
- Jones v. Wolf, 443 U.S. 595 (1979) (endorses neutral-principles approach to church property disputes)
- Second Int’l Baha’i Council v. Chase, 106 P.3d 1168 (Mont. 2005) (Montana Supreme Court applying neutral-principles analysis to resolve internal church property dispute)
- Maktab Tarighe Oveyssi Shah Maghsoudi, Inc. v. Kianfar, 179 F.3d 1244 (9th Cir. 1999) (discussion of deferential approach where hierarchical decision-making bodies are undisputed)
- In re Hofer, 124 P.3d 1098 (Mont. 2005) (applied neutral-principles to bylaws/articles to assess existence of trust over religious property)
- Kraft v. High Country Motors, Inc., 276 P.3d 908 (Mont. 2012) (prejudgment interest statutory criteria and purpose)
- Hughes v. Ahlgren, 258 P.3d 439 (Mont. 2011) (attorney fees under declaratory judgment act: equity and "tangible parameters" analysis)