Christians v. Crystal Evangelical Free Church

judgment affirm Thomson’s entered

favor below.

AFFIRMED. YOUNG;

In re Bruce Nancy Young. CHRISTIANS, Appellee, A.

Julia America, Intervenor, FREE

CRYSTAL EVANGELICAL

CHURCH, Appellant. Society; Legal As- The National

Christian Evangelicals; Americans

sociation of Separation of Church and

United for America;

State; for Concerned Women Baptist on Public Joint Committee

Affairs; Baptist Conven- Southern

tion; The of Sev- General Conference Adventists; Evangelical

enth-Day America,

Luthern Church in Amicus Cu-

riae. Hatch; Orrin G.

United States Senator Latter-

The Church of Jesus Christ of

Day Saints; League for Catholic Reli- Rights;

gious and Traditional Val- Civil Coalition; Church

ues Worldwide

God, Amicus Curiae.

No. 93-2267. Appeals,

United States Court

Eighth Circuit. Sept.

Submitted 6,May

Decided Rehearing Suggestion

Petition for Rehearing En Banc Denied 27, 1996.*

June * published opinion in a later Judge opinion specially will be an concur- banc. Beam wrote ring petition rehearing volume of F.3d. en in the denial of Brooklyn Corey-Edstrom, Cen-

Kenneth ter, MN, argued, appellant. for TX, Austin, argued, for Douglas Layeoek, amici curiae. Thomson, Minneapolis, Thomas

Richard MN, argued, appellee. MAGILL, McMILLIAN

Before BOGUE,* District Judges, and Circuit Judge.

McMILLIAN, Judge. Circuit Evangelical Free Church Crystal church) (hereinafter appeals from a final Court for in the District order entered * designation. sitting by Bogue, W. Andrew The Honorable Dakota, Judge of South for the District District affirming worship an order en

District Minnesota and non-members are welcome at for the services other church services whether Bankruptcy tered Court Dis they disputed tithe or not. It is not required the church trict Minnesota that faith. debtors are sincere over to A. Christians to turn trustee Julia Nancy funds Bruce and certain February 1992 the debtors filed Young had church as contributed to the Chapter joint bankruptcy petition. During during year filing preceding tithes Chapter preceding petition bankruptcy. Young, petition, and at a time when (Bankr.D.Minn.1992), aff'd, B.R. 886 insolvent, they $13,- contributed a total (D.Minn.1993). reversal, 450.00 to church. The trustee filed this argues church that the contributions were adversary proceeding against church in § not avoidable under U.S.C. order to recover those contributions as the contributions not made in “fraudulent transfers” under 11 U.S.C. exchange “reasonably equiva for less than 548(a)(2)(A).1 § The cross-mo filed argues value.” that lent The church also summary judgment. tions for In order to it requiring to turn over contributions transfers avoid against religion and discriminates violates 548(a)(2)(A), § prove the trustee must that the free exercise first amend clause (1) was a transfer of the debtors’ inter below, ment. the reasons discussed we (2) property year est made on or within a reverse order of the district court. (3) preceding filing petition of the while BACKGROUND FACTS (4) exchange the debtors were insolvent for which the debtors than rea received less disputed. facts The are not debtors equivalent sonably parties stipu value. The members of church. For are active sev- lated to the existence of the first three fac years, part religious eral belief tors; dispute factor in whether was voluntarily practice, and the debtors contrib- equivalent “reasonably the debtors received church; certain funds as uted tithes to exchange value” “in for” their contributions money tangible prop- did receive or to the church. exchange erty contributions. their Tithing spiritual practice. is a and financial DECISION OF THE BANKRUPTCY tithe, tenth, traditionally give or Believers COURT organization religious of their income to a 27:1, 30,32 (New a church. bankruptcy granted such as See Lev. court the trust- Version) (“The International Lord said summary judgment ee’s motion for and de- everything A bankruptcy Moses.... tithe of from the nied the church’s motion. The land, grain soil or from the fruit court held that the debtors’ contributions to trees, Lord; belongs from the it the church were avoidable transfers under 548(a)(2)(A) holy Lord.... The entire tithe of the because the did not every and “reasonably equivalent herd tenth animal receive value” “in ex- flock— passes shepherd’s under the change rod—will be for” contributions. 148 B.R. at Lord.”). holy to the teaches bankruptcy The church 890-93. The court concluded should regular solely Christians offer contributions that “value” referred val- economic is, message ue, support “property” the work and of the physical in a or mate- However, sense, services, church. the church does not insist rial and that theo- payment particular require logical on a amount or programs and access to the church’s membership or attendance fees. Members facilities did meet this economic defini- 548(a) provides (2)(A) part: reasonably equiv- 1. 11 received less than a exchange alent value transfer or (a) such any The trustee transfer avoid of an obligation; and property, the debtor in or obli- debtor, gation incurred that was made (B)(i) was insolvent on the date that such or incurred on or within before one obligation petition, transfer curred, made or such was in- date of if the debtor voluntarily involuntarily— or became insolvent as of such a result obligation. transfer or 2426, 2433-34, (rejecting S.Ct. Id. at 895-96 tion of value. (“The (1986) (Bankr.N.D.Ga. qua non Moses, sine charitable re 1986) (Moses) money prop- a transfer of (holding con- contribution is church services consideration.”). 548), erty adequate meaning of without within property stitute bankruptcy void Missionary court declared the transfers Baptist Foundation (Bankr.N.D.Tex. America, and ordered the trustee recover from the 24 B.R. 1982) $13,450.00, plus church interest and costs. (holding good will constitut- (Upreach) appealed The church decision of the reasonably equivalent value ed church)). bankruptcy court to the district court. for charitable contributions THE DECISION OF DISTRICT COURT bankruptcy concluded that court also economically were not ben- contributions appeal, On the district affirmed the . B.R. at 893. In eficial to the debtors. 148 statutory interpretation court’s view, any bankruptcy court’s benefit was 548(a)(2)(A) analysis agreed merely strictly religious and thus incidental “reasonably debtors did receive individually enjoyed by the equivalent value” for post-peti- pre-petition or either their church. 948. The district & n. 10. The tion estate. Id. 893-94 also found neither the judicial also bankruptcy court noted services nor the tax deductions for charita- system cannot differentiate between “reli- reasonably ble contributions constituted benefits, gious” and “secular” much 548(a)(2)(A). benefits § equivalent value under Id. benefits, and put less a value on those agreed at 948-49. The district court with “fraught with value calculation would bankruptcy court’s to follow decision not entanglement that the Constitu- sort of Upreach In the and Moses. district court’s forbids,” tion and the debtors’ contribu- view, good will and church services thus as tions to the church were avoidable “fairly the kind of benefits re- concrete” 548(a)(2)(A). § fraudulent transfers under reasonably quired equivalent constitute 13, & 896 & n. 17 148 B.R. at 893-96 n. value, and “in neither case addressed the entanglement (noting potential excessive exchange requirement. The for” Id. at 950. having problems in courts calculate value of court noted that church services and district services, though parties even them- given charitable were not “in ex- deductions not raise first amendment con- selves did Id. change for” the debtors’ contributions. cerns). at 949-50. The district court also distin- present on the guished Moses from the case bankruptcy court also determined had re- ground that Moses church that, assuming the received val even as a of the quired condition ue, had received “in that value not been as a Id. at employment deacon. debtor’s no exchange for” their contributions because stipu- parties exchange place. Id. at 895-96. As took required to lated that debtors were not court, noted church to attend church services contribute order worship made available services and programs. participate church otherwise members, including programs all the debt court, ors, appeal church any way linking in the district those services On without argued applying first time that (noting at 894 to financial contributions. Id. 548(a) § violate the exercise proper would free that debtors could have received clause of the first amendment. ty contributions for establishment 548(a) § The district court exercised its discretion purposes and at the same time re- arguments consider the constitutional those contributions as charitable de treated 170(c)(4)). held jected The district court first them. See ductions Commissioner, standing raise the the church had 490 U.S. Hernandez v. 691, 109 in addi- 2144-45, 104 rights of L.Ed.2d 766 constitutional S.Ct. (debtors could (1989) its at 950-51 quo tion to own. Id. (quid pro is inconsistent with contribution); effectively assert free exercise v. not charitable in this Endowment, parties are not rights because Bar 477 U.S. American proceeding). applied exactly entangle- court then could district lead the sort Smith, Employment forbids. Id. This Division v. ap- ment the 494 U.S. Constitution (1990) peal S.Ct. followed. (Smith), held that church’s free CERTIFICATION OF CONSTITUTIONAL claim exercise failed on the merits because QUESTION Bankruptcy a neutral Code was law 13, 1993, On November after the district general applicability which has an inci- court filed its had decision while this religion. dental effect 152 B.R. at 953-54. appeal pending, signed President Clinton that, district held the alternative Religious Freedom Restoration Act pre-Smith ap- even if the test (RFRA), 2000bb.2 this rea- plied, government’s policy allowing “[t]he son, questions application about the of the get a while debtors to fresh start at the same (or constitutionality) pre- were not treating fairly possible time creditors district sented to the court. Pursuant to qualifies [governmental] compelling as a in- request, supplemen- court’s filed terest.” Id. at 954. addressing applicability tal briefs 548(a) The district court also held that RFRA. unfairly against did not discriminate reli- preparing argument, While for oral this contributions, gious id. and that the recognized, belatedly, albeit that certi- “hybrid” right speech debtors’ to free 2403(a) fication under 28 U.S.C. was re- impaired free exercise was not because limit- quired questioned appeal because the ing the amount an individual contribute constitutionality provision of a of the bank- organization only to a marginally cause ruptcy affecting public code interest and ability restricts contributor’s to commu- party. the United States was not a Accord- particular message. Id. nicate that ingly, we the argu- removed the 548(a)(2)(A) § district court noted that appeal ment calendar and the certified to the content-neutral, narrowly protect- drawn and Attorney and General invited the United important governmental ed an interest in appeal States to intervene the on the maximizing estate, the debtors’ and did not question constitutionality of of 11 U.S.C. separation

violate the doctrine of of church 548(a) § if it so desired. See Id. and state. 2403(a); 44; § Fed.R.App.P. Fed.R.Civ.P. 24(c). Finally, parties court requested district held that The had not 548(a) court, § did not bankruptcy violate establishment the district court or this Id. at 955. notify General, clause. district ap- Attorney court to and the Kurtzman, plied the Lemon v. bankruptcy 403 U.S. district and the court had (1971), § 91 S.Ct. 745 L.Ed.2d entan- that 28 requires realized U.S.C. glement § test and found that a Attorney has notification of the General whether purpose, requested secular to parties. maximize the size of the or not it is None- estate; “[fjailure theless, primary debtor’s notify Attorney its effect neither to Gen- religion; jurisdictional defect, nor advances inhibits and its eral is not en- a and belated requirement.” Tonya forcement does not excessive K threaten entan- notice satisfies Education, glement v. Board between church and state. 152 847 F.2d Cir.1988) (citations (7th omitted). agreed 955. The district court with the Certifica- attempting quantify court that tion judgment has occurred even after at the E.g., v. appellate the value received Merrill Town of the debtors ex- level. Addison, (2d change Cir.1985) for their the church 763 F.2d (citing Act, (b) Religious 2. The Freedom Restoration EXCEPTION—Government substan- 2000bb, person’s provides part: tially religion burden a U.S.C. exercise of application only if it demonstrates that (a) IN GENERAL—Government shall not person— burden to the substantially person's burden a exercise of reli- (1) compelling govern- is in furtherance of a gion even if the burden results from rule of interest; mental and general applicability, except provided (2) least is the restrictive means of further- (b). subsection ing compelling governmental interest. Corp. Celote of material fact.” x cases). designed give ine issue “The rule is Catrett, 317, 323, make its 477 U.S. 106 S.Ct. the time to Branch both Executive (1986) inter- opportunity (quoting Fed. known and the views 56(e)). to the appeal moving a direct party to take has in order Once vene R.Civ.P. burden, decision should non-moving Court if the Supreme party can this met constitutionality.” statute’s allegations adverse in the simply rest on the Education, F.2d at Tonya rather, K. v. Board set pleadings; the non-movant “must would have been practical purpose No showing that specific there is forth facts ease to the bank- remanding 56(e). served genuine for Fed.R.Civ.P. issue trial.” pur- district court ruptcy court light in the most Although we view the facts certification, the belated certifi- poses non-moving party, in order favorable impair prejudice or otherwise cation did summary judgment, a motion for defeat fully pres- ability of the States United simply cannot create a factu the non-movant question of the constitu- on the ent its views rather, genuine must be dispute; al 548(a). Merrill v. Town tionality of See actually dispute over those facts could Addison, 763 at 83. F.2d the outcome of the lawsuit. affect certification, the Following case, genuine there are no In the in the case and filed to intervene decided dispute material fact in because issues of trustee supporting position brief parties stipulated to the relevant facts constitutionality defending the only questions of raise issues 548(a)(2)(A) and the both Smith law. briefs were filed Several amicus RFRA. argument appeal principal church’s on argu- position.3 the church’s Oral support of requiring church to return these is that How- September 1994. were held in ments the free exercise clause contributions violates ever, immediately argument, the oral before The church relied the first amendment. participation in the States ended United raised a its main brief but also Smith its brief. intervenor and withdrew ease as ar- compelling governmental with- States to decision the United gument supplemental in its brief. court, but surprised draw argues the district court church also was substituted counsel for trustee applying 11 548 to these erred in at the last moment the United States finding and that the debtors contributions ably argument. presented oral “reasonably equivalent value” did not receive OF REVIEW STANDARD exchange” for their contributions “in summary grant of review the We argu- statutory the We will discuss church. question the before judgment de novo. first. ments court, appeal, court on is and this district TRANSFERS UNDER “FRAUDULENT” record, light when viewed whether the 548(a)(2) § party, non-moving favorable to the most bankruptcy code The section of the to genuine no issue as that there is shows recovered the contri under which trustee moving party any fact and that material issue, captioned § at is butions U.S.C. of law. judgment to as matter is entitled obligations.” As a and 56(c). “fraudulent transfers moving party bears Fed.R.Civ.P. matter, that preliminary argues the church identifying por “those initial burden of merely is “unfortunate” but caption depositions, this pleadings, ‘the answers tions of section file, purpose significant because interrogatories, admissions on to affidavits, made with fraudulent if it is to avoid transfers any,’ which together with the circumstances under genu- or at least under the absence of a intent believes demonstrate Convention, Conference of Sev- support the General filed in tist 3. Amicus briefs were Society, Adventists, Legal Evangelical enth-Day Christian Luther- church on behalf of the and the Evangelicals, America; Ameri- the National Association of Jesus the Church an Church State, Separation Saints; of Church and cans United Latter-Day States and United Christ of America, Baptist Joint Concerned Women for G. Orrin Hatch. Senator Affairs, Bap- the Southern Committee Public may parties stipulated which transfer be considered fraudu- the first three ele- satisfied, argues only lent. church that the section was were ments issue was not drafted with bona fide charitable contri- had whether debtors received “reason- present exchange butions mind and that in the ably equivalent “in for” value” question is no fraudulent intent. church. Id. As contributions noted above, The church notes the debtors did not district concluded that the change frequency recip- or amount gratuitous contributions were trans- debtors’ ient face contributions fers, spiritual at id. changing financial circumstances. support “reasonably equiv- did not constitute alent value.” Id. 949-50. The district cap The term “fraudulent” that, assuming court also concluded even and, § inapposite tion of 548 is “reasonably church services did constitute 548(a)(2), respect least with can certain value,” equivalent present in the case the Newman, ly misleading. provided services had not “in church’s been (Bankr.D.Kan.1995). may 245 & n. 9 It exchange for” the debtors’ contributions be- be, noted, the district court “describ stipulated cause the that the church ing [debtors’ contributions] ‘avoidable regardless services available transfers’ rather than ‘fraudulent transfers’ they any or not made contributions. Id. appropriate it be more lessens culpability.” inference of [unwarranted] appeal argues On the church the district 152 B.R. at 950. Fraudulent intent is not erroneously defined “value” include required to recover transfers made within tangible property ignored how the one valued what received from the 548(a)(2). 548(a)(1) Compare 11 U.S.C. argues church. The church in- that “value” (under required which intent is fraudulent indirect cludes economic benefits and that transfers). avoid Section re the debtors received “value” in the form of fraud,” quires only “constructive actual contributions, tax deductions for charitable “A is intent defraud. transfer construc membership spiritual counseling, church tively fraudulent if an debtor insolvent trans and, concretely, more access to church facili- property fers some of its for less than rea ties because from the sonably equivalent value.” In re helped pay oper- and others for the church’s 183 B.R. at 245 n. 9. case the ating expenses. argues The church also has not trustee accused the debtors and the in concluding the district court erred conduct, improper church much less contributions were made “in important, however, fraud. actual What for” indirect economic benefits the debt- caption misleading not the but that the trust ors received the form of church services. required prove ee actual fraud in argues The church a nexus between existed order recover the contributions under the contributions and those benefits because 548(a)(2)(A). § We next consider the the during debtors made the contributions statutory argument. church’s substantive period they the same time the received bene- fits. transfer, In order to find a fraudulent

or, accurately, transfer, 548(d)(2)(A) more an avoidable 11 Title U.S.C. defines ‘Val- 548(a)(2), 11 “property, has occurred under U.S.C. ue” as or satisfaction or securing prove by preponderance present debtor, trustee must a of a or of antecedent debt of the (1) a unperformed promise evidence that there was transfer but an of does include (2) property, an of support interest the debtor to or furnish to debtor the rela- was within present transfer made one before the tive In of the debtor.” case it (3) petition, undisputed date of the was that the church did satis- fy present debtor was insolvent on the date the or transfer or secure antecedent debt of (4) made, debtors; only the debtor received less issue was whether the equivalent than a “property” reasonable value in ex debtors received some or sort ‘Value,” change “property right,” B.R. the transfer. 152 at 945 and therefore from (citations omitted). present bankruptcy In the case the the church. The court decided

1415 However, any is not clear. the district economic means did not receive that the debtors clearly “property” B.R. the church services. 148 court did not define from benefit bankruptcy that general, court noted or 898-94. “indirect economic benefit” at although received substantial particular, only legal equitable the debtors in terms of or services, the church spiritual comfort from ownership Compare rights or interest. did not at n. the church services id. (bankruptcy arguably B.R. at 891 limit- them, pre-petition much less their provide “property” legal equitable rights to or ed estates, recognizable any “tangible or with subject ownership) things with id. at 893- benefit,” val “marketable financial economic (value requires transfer economic bene- point utility from a creditor’s ue or economic estate); fit to debtor’s cf. agree We that of view.” Id. 894. (noting tithing give at 247 that does not bankruptcy over-emphasized the finan property right, enforceable contract defining considerations cial economic equitable right partake right to attend or requirement “[T]he “value” church). in services offered the debtor does not de economic benefit to event, case, replaces any present in the trans mand consideration something tangible any else property with whether the debtors received ferred economic satisfy that can be sold services is or leviable benefit the church beside Ep claims.” David G. point. assuming debtor’s creditor’s Even debtors re (1992). stein, 6-49, Bankruptcy value,”4 “reasonably equivalent ceived stipulated present precluded in the case facts court, however, the Unlike the finding any made their con only in “value” district court did not define exchange “in for” the church ser tributions tangible property or marketable terms of 152 B.R. at 148 B.R. at 893. vices. correctly financial The district court value. contemplates quid pro quo. Section aspects “all transaction examined stipulations the parties’ carefully of all benefits the value measure[d] quo. quid pro inconsistent with debt debtor, or indi- and burdens direct stipulated made ors the contribu rect,” including “indirect economic benefits.” religious obligation out of a sense of tions required district court 152 B.R. at 945. The (or and not order to attend church receive the indirect economic benefits deduction). stipulated a tax also Id., citing “fairly In re Minneso- concrete.” that the church services were available all Inc., Utility Contracting, ta any regardless whether contributions were (D.Minn.1990) (MUC) (bank required words, In other the debtors’ contribu made. security corporation grant bank voluntary way in no purely tions line of in its to extend additional credit assets availability of church services. linked corporation same to a second owned Similarly, worship the church conducted ser shareholders; indirect economic benefit indepen services provided vices and other “reasonably equiva- corporation first could be debtors’ contributions. Under long dent indirect economic bene- lent value” facts, quid concrete”; stipulated pro was no “fairly fit was no evidence no for church quo, corporation first received indirect eco- benefits). “fairly concrete” services.5 nomic What analysis, we purposes of have also as- Finding eco- that the church services had some and the church the made the sumed that the contributions nomic benefit and that debtors reasonably equivalent exchange and thus were for those services services suspect constitutionally up the and treating not take would into those contribu- need call doubt attempting to value the church difficult task of tions deductible charitable contributions. See Commissioner, 680, 490 U.S. 690- services. Hernandez 2144-45, 2136, 104 L.Ed.2d 766 109 S.Ct. fact, given (1989) (charitable expect, In as one would contributions are deduct- context, consideration; tithing any adequate of nexus between the absence ible if without made typical availability religious organization services payments and made to a See, e.g., In re taxpayer, the case law this area. exchange a even a for benefit Tessier, (Bankr.D.Mont. 1995) benefit, qualify “purely religious” 190 B.R. do not as char- (church fully accept contributions). welcome and would itable did ruptcy appeal

Because not receive the onor in the district court (or court). church “in for” con- appeal services on in this We hold that tributions, the contributions were avoidable standing the church has to raise the free by transfers and were recoverable the trust- rights of exercise the debtors. See In re 548(a)(2). ee Newman, under U.S.C. 183 B.R. at This issue in concept standing. volves the third-party FREE EXERCISE OF RELIGION Standing jurisdictional prerequisite, a and Having concluded that the debtors’ general parties legal must raise their own contributions were avoidable transfers However, rights. litigant can raise by recoverable trustee under rights party of a third if the third law, we turn now to the church’s first amend party effectively cannot rights. assert those arguments. parties’ arguments ment on Maryland, 420, 430, McGowan v. 366 U.S. and, the merits are related to a certain de 1101, 1107-08, (1961) S.Ct. gree, repetitive. Because we hold that re (department challenging Sunday store clos quiring the church return the debtors’ ing law could not raise rights free exercise RFRA, contributions violates the dowe agree patrons). We with the district court reach merits of the constitutional issues. effectively the debtors could not have above, though As noted even church rights. asserted their free exercise did not arguments raise constitutional in trustee, estates, representing the debtors’ the bankruptcy court raised them the parties church were the in this ad court, appeal first on time the district versary proceeding; the debtors were not. district court its exercised discretion to con court, by As noted district nowas arguments sider appeal. the constitutional indication that the debtors were able to as argues The trustee that this is not the kind rights sert free exercise in another extraordinary case that an ex warrants addition, forum. the interests of the ception general reviewing rule that a debtors, church and the who are members should consider issues raised church, sufficiently were similar so that appeal. E.g., first time on church representa would be an effective Harris, (8th Trustee v. 960 F.2d Cir. rights. tive of the debtors’ free exercise 1992). hold that We the district court did considering abuse discretion RETROACTIVE APPLICATION OF arguments by constitutional raised RFRA church appeal. for the first time on arguments constitutional raised Although was enacted after the church for the on appeal first time involved decision, district court’s provides the RFRA purely legal issues. No additional evidence “applies law, it to all Federal and State or argument would have affected the out implementation law, of that whether come of E.g., the ease. Universal Title In statutory otherwise, or adopted States,

surance Co. v. United 942 F.2d before after November 1993.” RFRA (8th Cir.1991). 1314-15 6(a), 2000bb-3(a). The RFRA STANDING “government” broadly defines the term branch, argues department, trustee also include “a agency, in- (or church standing lacks to raise the free exer and official strumentality, person other rights debtors, cise law) acting who under color of of the United States, adversary State, in the proceeding in bank- subdivision a State.” tithing); with or any privileges without would lose at church if reduced or (Bankr.D.Kan.1995) Packham, (noting tithing); debt- eliminated 603, (Bankr.D.Utah 1991) ors would tithed same (only speculation have even if amount church reduced deny services and church would debtors that the church would them provided tithe). have they temple services to debtors even if recommend if But failed Moses, all); (Bankr.N.D.Ga. had reduced their tithe or not tithed In at re B.R. 59 818 cf. Lees, (Bankr.D.Mont. 1994) (no 1986) (contributions 192 required B.R. 758 as condition of longer deacon). indication that employment by debtors could no or attend debtor’s as a church

1417 below, 2000bb-2(1). discussed we hold 5(1), the reasons Id. recovery the contributions sub law, that of the federal is bankruptcy code federal stantially free burdens the debtors’ States, and are branch of the United courts religion not in and is furtherance in in the case would decision our compelling governmental of a interest and bank of federal implementation volve light the RFRA. In of therefore violates circuits have held and other ruptcy law. We holding the RFRA is this and because retroactively in applies other the RFRA that right protective more of exer Schriro, 74 F.3d E.g., Hamilton v. contexts. Smith, see, e.g., City Flores v. cise than of (8th Cir.1996); v. 1545, 1549 Holterman Hell Boerne, (describing F.3d RFRA 73 at 1361 Cir.1995) (8th (table); 1276 ing, 70 F.3d expansion of “a First substantive (8th Harris, F.3d 69 v. 26 Brown-El “an Amendment doctrine” and in effect as Boerne, Cir.1994); City also v. see Flores signment by higher of a Congress value Cir.1996) (5th 1352, 1355 (city histor F.3d 73 freedoms than the val free-exereise-secured ordinance); Droz v. Commis preservation ic is, assigned courts —that ue strict (Social (9th Cir.1995) sioner, 48 1120 F.3d scrutiny versus a form of intermediate — denied, U.S.-, taxes), Security cert. scrutiny”), we need not consider whether (1996). 698, 133 Bank 656 116 S.Ct. L.Ed.2d recovery of the contributions violates jurisdictions ap have ruptcy courts in other ques did raise the Smith. See, retroactively. e.g., In plied RFRA RFRA, constitutionality tion of the (Bankr.D.Mont. Tessier, re constitutionality and we do consider 1995) tithing, (applying protect RFRA to but (holding at of the RFRA. id. 1356-64 See unconstitutional); In holding RFRA authority Congress has 5 of four under (holding RFRA B.R. at 251 teenth amendment to enact RFRA and protect tithing). does not power usurp judiciary’s RFRA does Constitution). interpret This circuit RFRA eases applied has RFRA other with argues On the merits the church constitutionality questioning its out requiring the of these contribu that return implicitly thus has at least held against religion unfairly tions discriminates RFRA is constitutional. But Hamilton cf. and, against reli general specifically, more Schriro, (McMillian, J., at F.3d (and religions) of those gions the members un dissenting) (arguing that argues The church tithing. that believe Congress does not constitutional because personal exempting a residence tools § 5 of the fourteenth power have goods, Tessier, RFRA); of a trade or household see U.S.C. to enact amendment 522(d), contributions dis (holding RFRA is inconsis but B.R. at 405-07 separation against religion. church also criminates and violates the tent with Smith doctrine). powers contribu argues requiring the return of against religions tions discriminates Supreme Court held that Smith supported. inway which basis free exercise clause does first amendment’s church, emphasize religions, like the Some facially application neutral law of not bar services, rely personal tithing; upon others religiously motivated general application to public, from fees for ser at 1601. 110 S.Ct. conduct. U.S. donations, vices, membership dues. The Native Ameri- two members Smith that, among argues even those church also unfairly that the state can Church claimed donations, rely religions religions upon compensation unemployment them denied encourage tithing at the like the church peyote use of more are much at traditional level 10% misconduct. Court determined looking potential to a trustee did not bar tractive clause held that the free exercise Appel pey- religions. prohibiting than other Brief assets sacramental state (table average denying unemployment listing at 13 % house lant ote use therefore discharged for charity by Americans donated to denomina benefits to Native hold income 10%). at 1606. using 110 S.Ct. 3.8%, peyote. Id. much less than tion 1.3 1418 rejected expressly application phy way

The Court a life. or burdened belief [T]he sincerely governmental by compelling [person].” of the must be held McCotter, 1476, v. 49 1 test Werner F.3d 1480 n. least restrictive means set forth cases (10th Cir.) Yoder, Verner, 398, 83 v. (citing Wisconsin 406 like v. Sherbert U.S. S.Ct. 1533-35), 215-19, 92 U.S. at S.Ct. at cert. 1790, (1963), as unworkable — denied, -, 2625, U.S. 115 S.Ct. unnecessary in analysis. free exercise (1995). In L.Ed.2d 866 order to consid- be 885, 1603-04, 886-90, 110 494 U.S. at at S.Ct. burden, governmen- ered a “substantial” explained 1604-06. Justice Scalia that “significantly tal action must inhibit or con- application gov whereas the compelling expression strain conduct that or manifests equal ernmental interest test fields such [person’s] some central of a tenet individual protection speech produces or free constitu beliefs; [religious] meaningfully must curtail norms, in tional the free it exercise context [person’s] ability a express adherence is, anomaly,” produces a “constitutional faith; deny his or her or [person] must a private right ignore applicable a generally opportunities engage reasonable in those (footnote Id. laws. at 110 S.Ct. at 1604 [person’s] activities are fundamental to a omitted). emphasized Justice Scalia “ McCotter, religion.” v. Werner 49 F.3d at judicial ques ‘[i]t is within ken to Assuming analysis for purposes of centrality particular tion the beliefs or constitutionally that courts can determine the faith, practices validity particu to a or the belief, parameters religious what beliefs litigants’ interpretations lar those ” fundamental, important or a 887, 110 creeds.’ at citing Id. S.Ct. at particular practice is of minimal reli- Commissioner, v. Hernandez at U.S. gious significance, defining substantial bur- 699, 109 at S.Ct. 2148. Justice Scalia cau broadly den religiously to include motivated presume tioned that “courts must to de religiously compelled as well as conduct is place particular termine the of a belief a with the purpose consistent RFRA’s to re- religion plausibility religious of a pre-Smith store free exercise law. See claim.” 494 U.S. at S.Ct. Sullivan, F.Supp. Sasnett 1440- adequately Concerned Smith did not (W.D.Wis.1995) (extensive discussion of protect rights, Congress free exercise in 1993 requirement). “substantial burden” passed expressly response analysis, purposes we can assume Congress Smith. intended “to restore the recovery of these contributions compelling [governmental] interest test” as substantially would burden the debtors’ free forth set in Sherbert v. Verner and Wiscon religion. though Even the church Yoder, sin v. 406 U.S. 92 S.Ct. encourages compel tithing, but does not (1972), guarantee L.Ed.2d 15 applica “to tithing important debtors consider an tion all cases where exercise of reli expression sincerely religious held gion substantially pro burdened” and “to words, case, beliefs. other in the a persons vide defense to whose claim motivated, tithing religiously but not reli- substantially exercise is burdened giously compelled, practice. Permitting the government,” 2000bb(b)(1), government to recover these contributions (2), “even if the burden results from rule of effectively prevent would 2000bb-1(a). general applicability.” Id. tithing, immediately least inquiry threshold under the preceding bankruptcy peti- governmental RFRA is whether the action in tions. We do think it is relevant that the question “substantially person’s burdens” debtors can continue tithe or that there religious practice. question This is a of law ways are other can which. which we review de novo. Hamilton v. express beliefs that are not Schriro, 74 F.3d at 1552. The individual has governmental affected action. It is establishing burden of the existence of governmental sufficient that action curtails, substantial burden. question 2000bb- meaningfully albeit retroac- 1(a). governmental “[T]he action must bur tively, religious practice mini- of more than a religious philoso- den rather significance way merely belief than mal ain that is not

1419 Tessier, security safety, public Gillette v. United 190 B.R. at and In re incidental. Cf. States, 828, 437, (debtors though that even 401 U.S. 91 S.Ct. 28 L.Ed.2d testified 403-04 failing Massachusetts, (1971); them for not sanction v. 321 church would 168 Prince tithe, religion 158, 165, 438, 441-42, faithful exercise their 64 S.Ct. 88 L.Ed. U.S. tithe; continuing to “contingent” upon (1944). Yoder, is v. 645 Wisconsin 406 U.S. at allowing debtors tithe holding 1532, that 213, govern 92 at S.Ct. held the substantially burdens Chapter plan 13 under in compelling providing ment has a interest however, noting right; free exercise However, in public education. Sherbert v. religious giving Chapter attack 7 trustee Verner, 406, 1795, 374 U.S. at 83 S.Ct. at the transfer action by bringing a fraudulent governmental compelling found no in Court 11 under against institution unemploy in preventing fraud in the terest 548(a), present § as was done in the U.S.C. compensation system. applying ment Cases case, Chapter dismissing 7 case for or government have the RFRA held that 707(b)). § 11 U.S.C. substantial abuse enforcing partic compelling has a interest in 251 183 B.R. at But cf. system, ipation security in the social Droz v. already paid (recovery does of tithes Commissioner, 1122-23, 48 F.3d at and in it substantially burden free exercise security maintaining safety prisons, and continuing from prevent debtors does not Schriro, 1554, Hamilton v. 74 F.3d 548(a)(2) tithe; § that 11 U.S.C. no evidence schools, 883, Thompson, v. 67 F.3d Cheema debtors, any prevented other member (9th Cir.1995) (ban wearing on of cere 885 church, fulfilling personally-held campus), pro monial knives as well as time). religious obligation to tithe at education, viding public v. Di Fleischfresser question is 15 The next rectors School District F.3d (7th Cir.1994) compelling governmental (reading program a interest. 690 skills anti-Christian). gov shown that Once the individual has described as substantially burdens his ernmental action present question In the is whether government right, the must her free exercise general bankruptcy code in substantial burden demonstrate 548(a)(2)(A)in a com- particular § constitute governmental in compelling furtherance a pelling governmental interest. The trustee is the restrictive means terest and least general, bankruptcy argues the code governmental in furthering compelling 548(a)(2)(A) particular, furthers (b). 2000bb-1(a), These terest. governmental in allow- compelling interests of law we review de questions are which get a fresh while at the ing debtors start Schriro, 74 at 1552. novo. Hamilton v. F.3d protecting the interests of credi- same time “compelling gov RFRA does define by maximizing the estate. The tors debtor’s Compelling govern interest.” ernmental bankruptcy cases decided under the have in a interests been described mental Neuman, split. In In 183 B.R. at are ease as “in post-Smith establishment clause which, case, involved a case like highest terests of order.” Church of adversary brought by proceeding an Hialeah, Aye, City v. Lukumi Babalu Inc. as fraudulent Chapter 7 trustee to recover 520, 546, 2217, 2233, 508 U.S. S.Ct. sums transfers under 11 U.S.C. (1993). However, pre-Smith L.Ed.2d had to their contributed example, Her case law is instructive. church, bankruptcy court concluded that Commissioner, 490 U.S. at nandez v. 548(a), as Bankruptcy Code 2148-49, govern held that the S.Ct. whole, governmental in- compelling served compelling interest in maintain ment has specifically noted Lee, terest. The Newman ing system. tax allowing important policies of debtors to 1055-56, 252, 258-59, 102 S.Ct. U.S. start, fairly treating creditors as (1982), get a fresh govern held that possible, and the administration enforcing compelling ment has a interest system, historical system. bankruptcy as well security in the social participation recovery trans- importance of of fraudulent recognized compelling gov law has Case maintaining bankruptcy law. Id. In re Navar- national fers ernmental Cf. (Bankr.E.D.Pa.1988) agree ro, with In We re Tessier that the inter- (pre-RFRA; administration of bankruptcy system ests advanced system protection legitimate compelling interests Although under the RFRA. compelling governmental of creditors are necessarily in we interpret would compel- terests). ling governmental The Newman court also found narrowly interests as as did, agree was the least the Tessier court we restrictive that bank- furthering ruptcy comparable of compelling security means is not govern national public safety. mental interest. agree allowing We also get debtors to a fresh protecting start or comparison, In bankruptcy In comparable interests creditors is not Tessier, re compel B.R. at found no through the collection of revenue the tax ling governmental However, interest. system integrity or the fiscal of the social arguably interpreted compelling Tessier security system, recognized which have been governmental requirement more compelling governmental interests in the narrowly than In re Newman to include See, face of a e.g., exercise claim. “only the free exercise context those inter Commissioner, Droz v. 48 F.3d at 1122-24. pertaining republic ests to survival of the or Moreover, recognition we cannot see how the physical safety of its citizens.” Id. what is effect a free exception exercise proeedurally distinguishable Tessier is from to the avoidance of fraudulent transfers can present it Chap because involved a integrity undermine the bankruptcy objection ter 13 trustee’s to the debtors’ re whole; system a necessarily its effect will Nonetheless, organization plan. it is sub creditors, limited the debtor’s who will stantively similar to the case because as a result have fewer assets available to objected the trustee to the debtors’ charita apply outstanding liabilities, and not per ble contribution of month to their $100 all creditors or even all debtors. This is not church, words, in other a tithe. The Tessier say recognition of a free exercise acknowledged government that “the exception under these circumstances clearly providing has interests in ... have adverse consequences economic for both start, efficiently debtor with a fresh adminis debtors; example, creditors and creditors tering bankruptcy cases, protecting [and] the may be doing more cautious in business with creditors,” interests of but concluded that those who tithe or make contributions to such interests fell “short of direct national religious organizations. security public safety concerns.” Id. allowing Because we hold that debtors a The Tessier court concluded that these inter protecting fresh start and ests, “rational, interests of although important,” even governmental creditors are compelling sufficiently grave were “not to deserve the RFRA, interests under the we need not ‘compelling’ against label when balanced question govern- reach the parishioner’s Id., religion.” mental action is the Verner, least restrictive means citing Sherbert v. 374 U.S. at (the furthering compelling governmental key in- S.Ct. at compelling governmen terest. rejected tal interest case govern which preventing ment’s claim that fraud in unem sum, we hold that because the substan- ployment compensation compelling was a tial on burden the debtors’ free exercise of interest). governmental The Tessier court religion is not furthered a compelling then held that the RFRA was unconstitution governmental interest, provides the RFRA al, and thus had no effect on the against defense order the district court code, restoration of the substan permitting the trustee to avoid the debtors’ compelling governmental tial inter burden/ contributions to the church under 11 U.S.C. . est test was inconsistent with Smith’s “valid 548(a)(2)(A). The trustee entitled to general and neutral law of applicability” test $13,450 recover from the church.

for free exercise claims and sep violated the powers aration of doctrine. 190 B.R. at 405- Accordingly, the order the district court is reversed. dissenting. practice or de minim- BOGUE, Judge, asserted is incidental District Senior is.” Id. holding majority’s agree I with the While majority, governmen- stated As reasonably did not receive that the debtors “significantly tal action must inhibit or con- exchange for the debtor’s equivalent value in expression that manifests strain conduct church, I cannot financial contributions [person’s] central tenet of a individual some the merits under agree with decision beliefs; [religious] meaningfully must curtail RFRA1, respectfully dissent. therefore [person’s] ability express adherence analysis requires step in RFRA The first faith; deny [person] his or her or must challenged to plaintiff the establish in opportunities engage those reasonable to “substantially government burdens” action [person’s] activities that are fundamental to a religion. If is no of their exercise Although religion.” Op. at it is 1418. undis- burden, inquiry the and the ends substantial puted sincerely in the debtors believe In New- challenger’s petition must fail. tithing tithing is central to the and that (Bankr.D.Kan.1995) man, 183 251 B.R. religion they practice, I would conclude (“If burden, no substantial RFRA there is recovering of the trustee’s action monies articulated apply.”). not Courts have does in- during year tithed the the debtors were required to make a show- standards various substantially not solvent does burden ing burden. of substantial religion. free exercise of their conclusion, I majority coming RFRA does to this note that agree I with the tithing by year in tithing is the act of the debtors compel the church to show that Chapter protec- 7 prove preceding in to a their by order “required” the church i.e., executed, alleg- regardless of enough It if tion was in fact substantial burden. outcome, they given a eventual were edly impinged conduct is motivated they opportunity practice religion v. their sincerely religious to as held belief. Sasnett Sullivan, they (rejecting during insolvent. F.Supp. 1444 chose were 908 “re- no conduct or ex- in favor of a There was “constraint “religiously mandated” test of pression” respecting a ligiously purposes of de- central tenet test for motivated” burden).2 belief, being ability to termining nor a curtailment of their That substantial ” faith, “express nor said, adherence to their important it is that the substantial bur- they analysis opportunities re- reasonable to “en- step the RFRA is not denied den gage that were funda- perfunctory to in those activities” duced determination religion. They engaged to searching inquiry A is mental their foregone conclusion. fully activity tithing government from the “protect[ conduct required ] to expressed sincere regulations com- adherence belief having justify to under a Unfortunately, tithing to the church. pelling interest standard if burden on constitutionality Put as the Smith case. another of RFRA I understand I understand that RFRA, currently postured. way, passage [church] us this case is "but for the is not before as compelled notwithstanding, I note That feel succeeded on free exercise [its] could have specter analytical employing 5489(a)(2)].” challenge the unusual [11 U.S.C. Hamil- RFRA, of the where the author ton, pre- framework (acknowledging 74 F.3d 1561 majority opinion has indicated his belief that far much less onerous as RFRA standards were Schriro, v. is unconstitutional. Hamilton concerned). government as was J., (8th Cir.1996)(McMillian, F.3d 1557 74 constitutionality, I the statute’s dubious Given Having dissenting). studied the reviewed and supplementary requested have believe we should Hamilton, thorough opinion in I am author's briefing hearing, along with certification Further, agree position. with his inclined to General, constitutionality Attorney on the regardless by majority, cases relied on RFRA. issues, ultimately have found resolution on some Tessier, In re RFRA to unconstitutional. majority’s (Bankr.D.Mont.1995). concern I also share 406-07 constitutionally determine courts can constitutionality particularly relevant in issue belief, religious RFRA, parameters what beliefs opposed analysis "the employing fundamental, Smith, important and whether Employment U.S. under Division (1990), particular practice is of minimal L.Ed.2d S.Ct. case, Op. significance...” at 1418. at least "caused” the reversal the current during year pre- stipulated debtors were insolvent ties have that church services were ceding February they joint persons 1992 when available all regardless filed of whether Chapter bankruptcy petition. As such the contributions were made. The fact that properly sought purely voluntary trustee to recover that for the debtors’ or- tithes were which the reasonably retroactively debtors did receive dered recovered the trustee equivalent change value in for their contri- fact does that the debtors can services, butions the church. participate attend church in church programs, worship they and believe as recovering The trustee’s act of the tithes They choose. can continue to tithe as has the church custom, assuming been their no additional change does not the fact that the debtors did facts, filings. Given these I can- way all expressing could not conclude the debtor’s free practicing agree beliefs. I religion substantially burdened. with the which rea view, my soned: church’s failure demon- strate a substantial burden would end the 548(a) there is no evidence that section inquiry require and would affirmance. Yet prevents the debtors or other church if even section 548 worked substantial bur- Indeed, tithing. member from religious den on the debtors’ I practice, certainly suggest record does not that sec- would conclude that the statute serves a com- prevented tion 548 these debtors tith- pelling governmental interest and is the least ing. Equally important, the has church no achieving restrictive means of said interest. might records which show that other mem- did bers not tithe section 548 dicta, Although agree I stated with the no since one ever checks if to see members bankruptcy district court’s view code actually do tithe. The funds the trustee 548(a)(2)(A) compelling furthers to already seeks recover have been tithed governmental allowing to debtors debtors, to the in all likeli- get defendant. a fresh start while at the same time hood, continue to tithe to the defendant. protecting by the interests of creditors max- their obli- imizing fulfilled Young, the debtor’s estate. re In gation by tithing year prior to their (D.Minn. 1993); 152 B.R. In accord bankruptcy filing. statute, by its own (“Section Newman, 548(a), re B.R. operation, nothing prevent does whole, Bankruptcy and the Code as a serve a personally debtors’ fulfillment held interest.”); compelling governmental re In religious obligation and, therefore, to tithe Navarro, (Bankr.E.D.Pa. not place does a “substantial burden” on 1988) (the “administration of the practice religion. debtors’ of system protection legitimate of the inter- Newman, compelling In ests of creditors” govern- re serves a (emphasis 183 B.R. at 251 interest). added).3 mental Further evidence of the lack of fairly substantial It can be said our nation’s econ- burden tithing omy depends uncontroverted fact that extensively availability on the required is not to fully participate in church of credit individuals businesses. by majority, services. As par- noted Bankruptcy extraordinary is an remedy for choice, It cannot be denied that the work they accept a matter of the limits on their organizations may important be more now than own conduct as a matter of conscience and faith Contributing, ever financially before. superimposed statutory or other- are not to be on the wise, religious organi- further mission of a binding schemes which are on others in that laudatory said, practice. being zation activity.”). That The debtors should be commended religious contributions cannot be considered contributing be- for their commitment yond reproach regulation in all circumstances. church. There is no dishonor the fact that the Lee, 252, 261, United States v. 455 U.S. during insolvency ought 102 S.Ct. tithes offered to be 1051, 1057, (1982) ("... every reality recovered the trustee. The is that the person cannot be shielded from all money part burdens inci- tithed should be of the estate avail- exercising every aspect right creditors, dent faith, good able to who in advanced practice religious money, goods beliefs. upon When followers of a or services to the debtors particular activity sect enter repayment. into commercial condition of requirements are met is harsh and oftentimes insolvent able the transfer. trustee to recover protec- few of the creditor’s One creditors. like recovery statutes section tions are today includes which elements, specific The statute contains four religious giving in exception for all of which are satisfied the trustee bankruptcy. preceding tailored, narrowly this case. The statute is may it ad- majority closely proper be correct when and the trustee followed not, by Bankruptcy may procedures set forth in the Code today’s monishes that decision donations, avoiding recovering itself, integrity of the bank- undermine against and took no action these debtors system But I as a share the ruptcy whole. against any which be taken other would not majority’s that credit transac- apprehension transferee the same factual situation. involving persons similar to tions with views involve hereinafter the current debtors conclusion, I would hold that the trustee probing inquiry. delicate Given more requirements has satisfied of RFRA and potential today’s holding, cautious credi- court. would affirm the district (including government government- tors creditors) expected sponsored ques- now applicants depth regarding highly

tion

personal activity religious giving? And is denied on the application

what if said giving

grounds applicant’s religious extending unwarranted risk? credit an

makes aside, enough that all

Pragmatic issues it is society compelling has a interest main- America, Appellant, STATES of taining between debtors and UNITED the balance creditors in current state. 548(a)(2) Finally, I find that section would TUCKER; Marks, Guy Jim William J. furthering

is the restrictive means of least Sr.; Haley, Appellees. John H. compelling above-articulated interest. action, In re Newman also Like Justice; Department of attempted recovery of involved a trustee’s California, Diamond Growers of Sun 548(a)(2). tithed funds under U.S.C. Amicus Curiae. finding passes that section least No. 95-3268EA. test, court noted: restrictive means Appeals, States Court United portion in this of the statute issue Eighth Circuit. recovery those trans- allows property which oc- fers of debtor’s May 6, 1996. curred within one filing, the debtor was insol- occurred while

vent, given reasonably Clearly, equivalent value. way

the statute was drawn such a ability dispose debtor to

balance the property protect unse- with need example, if in this

cured creditors.

ease the debtors had not been insolvent to the defen-

the dates the transfers place, then the transfers would

dant took Only all

not be recoverable. when

Case Details

Case Name: Christians v. Crystal Evangelical Free Church

Court Name: Court of Appeals for the Eighth Circuit

Date Published: May 6, 1996

Citation: 82 F.3d 1407

Docket Number: 93-2267

Court Abbreviation: 8th Cir.