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New Hope Lutheran Ministry v. Faith Lutheran Church of Great Falls, Inc.

Supreme Court of Montana

March 12, 2014

NEW 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.

Argued and Submitted: December 11, 2013

District Court of the Eighth Judicial District, In and For the County of Cascade, Cause No. ADV-11-586 Honorable Greg Pinski, Presiding Judge.

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.

OPINION

Jim Rice, Justice.

¶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.

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 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." 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 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.

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 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 ...


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