The Supreme Court of the State of California issued its order today granting review of the Court of Appeals decision in a group of cases known as "The Episcopal Church Cases." The key issue in those cases is the ownership of the property of parishes in Orange and Los Angeles Counties, California that decided to leave the Episcopal Church. The Supreme Court's decision (which may not be issued until a year or more from now) is expected to clarify the law applicable to the ownership of parish property in the State of California.
The Episcopal Church Cases, and the anticipated Supreme Court decision, could potentially impact Catholic parishes, particularly any unresolved liability or property issues related to clergy sex abuse cases. That is so because the existing Court of Appeal opinion in the Episcopal Church Cases (Download the Opinion Here.PDF ) applies a rule of law that is different from that applied by some other recent California cases on that issue.
Now that the State Supreme Court has accepted the cases for review, the Court of Appeal decision cannot be cited as law. That may prompt some trial court judges who receive new cases on the issue of ownership of parish property to postpone ruling on the matter until the State Supreme Court decides what law applies.
The Supreme Court's acceptance of the issue for review may also pose an interesting issue for any California diocese in a bankruptcy proceeding, although that may be unlikely now that both Los Angeles and San Diego have reached settlements. Federal courts (including bankruptcy courts) ruling on issues of state law are usually bound to apply the rule that they believe the state supreme court would follow. Thus, the California Supreme Court's acceptance of the issue for review creates the potential that an uncertain issue of California law will be made clear within a year or so. Some bankruptcy court judges faced with the issue of which properties are assets of a diocese or parish estate would also delay ruling on the matter until the State Supreme Court issues its opinion.
California law concerning the ownership of parish property is presently uncertain, based upon inconsistent court decisions from different California appellate courts. Moreover, the significance of incorporating an individual parish is somewhat uncertain, in that a state statute applicable to church corporations treats them differently from corporations formed for business purposes. As a result, inconsistent characterizations of who owns parish property would naturally follow from inconsistent understandings of state law as well as from the inconsistency in the factual understanding of various individuals managing the assets.
In the Episcopal Church Cases, the trial court judges held that the individual parishes own their parish property, based upon court of appeal decisions dating back to 1979 that applied a four-factor analysis examining title; articles of incorporation; a church's constitution, canons and rules; and state statutes. That was called a "neutral principles analysis."
However, the Court of Appeal in the Episcopal Church Cases unanimously reversed those trial court decisions, holding that the diocese owns the property as trustee, holding it in trust for the parishes under Episcopal Church canon law. The Court of Appeal based its reversal upon an older line of decisions which it held is still good law. Under that Court of Appeal decision and the cases on which it relied, where a "general church" has a "governing instrument" that provides for an express trust on the property of local parish corporations who are members of the general church, that governing instrument will be enforced. Because Episcopal Church canon law provides that the bishop holds title to the property in trust for the parish, the Court of Appeals held the parish property to be the property of the bishop, as trustee, in trust for the parishes. Thus, the Court of Appeal held that the individual parishes could not take their property and leave the Episcopal Church.
That court also stated that the "neutral principles analysis," where applied, had prompted courts to come to various decisions that were difficult to reconcile with each other. The Court of Appeal opinion highlighted the differences in various California cases, as well as a change in statute, that have left uncertainty concerning the ownership of parish property. The Supreme Court, when it issues its future decision in this case, is expected to clarify the state law, thus giving churches a more definite idea of who owns parish real and personal property -- something that is presently unclear.
The Catholic Church has not yet taken a position in the Episcopal Church Cases. The Church, and various Catholic organizations, could potentially file amicus briefs in the California Supreme Court in recognition of the fact that the eventual Supreme Court opinion will probably affect Catholic parishes and dioceses too. For now, the Court of Appeals decision cannot be cited as legal authority under California law, and the ownership of parish property under California law will remain somewhat uncertain until the Supreme Court issues its decision.