Landmen and attorneys frequently find churches and other religious institutions within their chains of title, either as current or past holders of record title. These religious institutions are often conveyed valuable mineral or royalty interests, either through an unsevered estate, or more directly through a severed mineral or royalty interest. Therefore, it is crucial that landmen and attorneys understand the legal frameworks regarding church ownership of real property when engaging in leasing, conveyancing, or otherwise examining title. It’s important for them also, to Compare Conveyancing Quotes to obide with the legal framework.
Unfortunately, the applicable legal frameworks can be somewhat complex and confusing. This is likely due to the inherent conflict between constitutional law and property law. On one hand, the constitution requires that courts defer to the religious institutions, so as to refrain from becoming too entangled with the establishment or free exercise of religion. This means that courts must exercise certain levels of deference to religious institutions regarding their internal beliefs or rulings as to which branches, levels, parish or other type of sub-entity has the rights of ownership and authority over church property. However, on the other hand, courts must also rule on property disputes. When dealing with property disputes it is important to know the things to do about a property boundary dispute. This jurisprudencial battle is outside the scope of this article, but it should provide some direction in understanding goal behind the various frameworks that have developed for analyzing church property ownership and conveyancing disputes.
Generally, the topic can be divided into two subissues: (1) whether the status of the entity is such that, in the relevant time period, it could legally hold title to real property in its own name rather than a trustee, and (2) which persons or entities within the church organizational structure technically hold title to the real property. Understanding these issues, and the applicable legal frameworks, are crucial to effectively handling oil and gas title, leasing, and royalty payout.
What is the legal framework?
Courts have established two main approaches for determining ownership of church property: the “hierarchical approach” and the “neutral principles approach.” See Westbook v. Penley, 231 S.W.3d 389, 399 (Tex. 2007). Under the “hierarchical approach,” a court must first determine the organizational structure of the church and then, if it determines that the church is hierarchical, it must defer to the decision of the highest judicatory body of the hierarchical church. Jones v. Wolf, 443 U.S. 595, 603 (1979). If the church is not hierarchical, then it may defer to the local body. Id.
Under the “neutral principles” approach, a court will examine legal documents of title, state statutes governing the holding of church property, and the secular provisions of church documents, including the terms of the local church charters and the provisions of the constitution of the general church concerning the ownership and control of church property. Id. The “neutral principles” relies exclusively on objective, well-established concepts of trust and property law. Id.
So which approach applies? Unfortunately, there is no simple answer. The Texas Supreme Court has not specified whether the “hierarchical approach” or the “neutral principles” method is the required method in Texas for resolving church property disputes. Windwood Presbyterian Church, Inc. v. Presbyterian Church (U.S.A.), 2012 Tex. App. LEXIS 7663, 12-13 (Tex. App. Houston 1st Dist. Aug. 30, 2012). However, both approaches have been acknowledged as accepted methods of dealing with church property in Texas. See Westbook v. Penley, 231 S.W.3d 389, 399 (Tex. 2007). Pragmatically, a thorough analysis will generally turn to both frameworks when dealing with a conveyance of church property.
The “hierarchical approach” essentially determines the principal governing body of the church, and gives deference thereto. This is crucial in determining the powers afforded to the person(s) claiming to transfer an interest on behalf of a church. There are two general types of religious bodies or organizations recognized under Texas law, referred to as congregational churches and hierarchical churches. Presbytery of the Covenant v. First Presbyterian Church of Paris, Inc., 552 S.W.2d 865, 870 (Tex.Civ.App.—Texarkana 1977, no writ). A congregational church, by the nature of its organization, is strictly independent of any other ecclesiastical association and, so far as church government is concerned, owes no fealty or obligation to any higher authority. A hierarchical church, on the other hand, is where the local congregation is but a subordinate member of some general church organization in which there are superior ecclesiastical tribunals with general and ultimate power of control more or less complete in some supreme judicatory over the whole membership of that general organization.
Unfortunately, the determination of ownership of church property is highly fact-based, and will involve numerous factors. However, the following continuum may be of assistance in determining the organizational structure of a church: (1) whether the constitution of a church organization has established, in every respect, a hierarchical system of governance; (2) whether the constitution established an ascending order of government, established ownership in the parent church, and whether the constitution required licensing by the parent church of local ministers; (3) whether the parent church owns and is entitled to possession of the property under a mutually binding constitution; or (4) whether the church is congregational, by virtue of its own incorporation and rules, and independent of any other ecclesiastical association.
Neutral Principles Approach
Again, under the Neutral Principles approach, a court will examine legal documents of title, state statutes governing the holding of church property, and the secular provisions of church documents, including the terms of the local church charters and the provisions of the constitution of the general church concerning the ownership and control of church property. Therefore, part of the issue comes down to whether the church is incorporated, or is an unincorporated association.
In Texas, a religious society or church may incorporate as a nonprofit corporation, and thereby be governed by its bylaws, articles of incorporation, and the Texas Business Organizations Code. Tex. Bus. Org. Code Ann. § 22.224. This allows the nonprofit corporation to hold title to real property. Where not incorporated, the Texas Supreme Court has defined an ‘unincorporated association’ as an entity which “consists of a voluntary group of persons, without a corporation, formed by mutual consent for the purpose of promoting a common enterprise or . . . common objective.” Cox v. Thee Evergreen Church, 836 S.W.2d 167, 169 (Tex. 1992).
Historically, unincorporated associations were not considered separate legal entities and had no existence outside of the membership. Cox v. Thee Evergreen Church, 836 S.W.2d 167, 169 (Tex. 1992). Because of the lack of a separate legal status prior to 1996, it was generally considered that unincorporated associations could only hold property by and through its trustees. See, e.g., O.K.C. Corp. v. Allen, 574 S.W.2d 809, 812 (Tex.Civ.App.—Texarkana 1978, writ ref’d n.r.e.); Parrish v. Looney, 194 S.W.2d 419 (Tex.Civ.App—Galveston 1946, no writ). Even as to adverse possession, the courts held that an unincorporated association could acquire title by limitation by and through its trustees, so long as it adversely occupied and possessed land in the required manner and for the proper length of time. O.K.C. Corp., 574 S.W.2d at 812. Therefore, as to church property issues prior to 1996, the determination almost always turns to Trust law, and an analysis of the trust documents, if they existed.
However, the Texas Uniform Unincorporated Nonprofit Association Act (hereinafter “UUNAA”), promulgated in 1996, changed this legal framework for “nonprofit associations.” Under the UUNAA, a “nonprofit association” is “an unincorporated organization, other than one created by a trust, consisting of three or more members joined by mutual consent for a common, nonprofit purpose.” Tex. Bus. Org. Code Ann. § 252.001. The UUNAA departed from the historical barrier to unincorporated church property ownership, allowing a “(a) a nonprofit association in its name may acquire, hold, encumber, or transfer an estate or interest in real or personal property;” and stating that “(b) a nonprofit association may be a beneficiary of a trust, contract, or will.” Tex. Bus. Org. Code Ann. § 252.004.
Neutral Principals Conclusion
Therefore, when faced with an issue concerning church ownership of real property, the analysis turns to, first, whether the entity was incorporated.
Unincorporated Entities: For entities that are or were not incorporated, then next step in the analysis turns to the year the association was organized. For nonprofit associations organized after 1996 under the UUNAA, it may be prudent to obtain an executed, recordable statement of authority to transfer an estate or interest in real property in the name of the nonprofit association, as provided for in Tex. Bus. Org. Code Ann. § 252.005. As for conveyances by a non-incorporated entity, prior to 1996, and not organized under the UUNAA, the analysis will typically turn to the powers enumerated in the underlying Trust Agreement.
Incorporated Entities: For a church not organized under the UUNAA, it must be determined whether the church was an incorporated entity. If so, as with any incorporated entity, a conveyance that is signed and acknowledged by an officer, an authorized attorney-in-fact, or other authorized person of a corporation and recorded is prima facie evidence that the conveyance was duly authorized under the Texas Business Organizations Code and the governing documents of the corporation. Tex. Bus. Org. Code Ann. §§ 9.202, 10.253. Prior to August 28, 1989, the presumption of corporate authority only extended to conveyances executed by the president or a vice president. Acts 1955, 54th Leg., p. 239, ch. 64. Accordingly, instruments that are executed by another officer prior to the amendments should be accompanied by a showing of the officer’s authority. However, if the instrument has been recorded for more than four years (two years, effective September 1, 2007, prospective only), such authority may be presumed. Tex. Civ. Prac. & Rem. Code Ann. § 16.033.
Understanding the principles that apply in determining how churches own and convey title to real property is crucial when seeking to obtain an oil and gas lease from a church, and in determining the successors in interest of a church in a chain of title. Pragmatically, both the hierarchical approach and the neutral principles approach must be utilized.
The hierarchical approach, typically used by courts when determining whether local church or the parent organization owns the property, is useful in determining where to find the controlling documents, such as the bylaws and constitution of the church. It can facilitate a due diligence investigation as to which level of the churh heierarchy should be approached regarding a lease, or for validating a prior conveyance.
On the other hand, the neutral principals is likely the approach that will supply the most readily accessible information, and is more likely to be found in the county records. This approach is frequently used by courts in determining the actual authority of persons conveying on behalf of the religious institution, whether that be a previous owner in the chain, or a current church executing a current oil and gas lease.