Oral Argument Requested AUS:650116.3 NO. 11-0265 ______________________________________________________________ IN THE SUPREME COURT OF TEXAS ______________________________________________________________ THE EPISCOPAL DIOCESE OF FORT WORTH, et al., Appellants v. THE EPISCOPAL CHURCH, et al., Appellees ______________________________________________________________ On Direct Appeal From the 141st District Court of Tarrant County, Texas Cause No. 141-252083-11 ______________________________________________________________ APPELLANTS’ BRIEF ______________________________________________________________ Scott A. Brister State Bar No. 00000024 Kendall M. Gray State Bar No. 00790782 Gavin B. Justiss State Bar No. 24070027 ANDREWS KURTH LLP 111 Congress Ave., Ste. 1700 Austin, TX 78701 Tel: (512) 320-9200 Fax: (512) 320-9292 [email protected]Shelby Sharpe State Bar No. 18123000 SHARPE TILLMAN & MELTON 6100 Western Place, Ste. 1000 Fort Worth, TX 76107 Tel: (817) 338-4900 Fax: (817) 332-6818 [email protected]R. David Weaver State Bar No. 21010875 THE WEAVER LAW FIRM, P.C. 1521 N. Cooper St., Ste. 710 Arlington, TX 76011 Tel: 817-460-5900 Fax: 817-460-5908 rdweaver@weaverlawfirm.n ATTORNEYS FOR THE EPISCOPAL DIOCESE OF FORT WORTH, et al. FILED IN THE SUPREME COURT OF TEXAS 12 February 6 P4:07 BLAKE. A. HAWTHORNE CLERK
Scott A. Brister State Bar No. 00000024 Kendall M. Gray State Bar No. 00790782 Gavin B. Justiss State Bar No. 24070027 ANDREWS KURTH LLP 111 Congress Ave., Ste. 1700 Austin, TX 78701 Tel: (512) 320-9200 Fax: (512) 320-9292 [email protected]
Shelby Sharpe State Bar No. 18123000 SHARPE TILLMAN & MELTON 6100 Western Place, Ste. 1000 Fort Worth, TX 76107 Tel: (817) 338-4900 Fax: (817) 332-6818 [email protected]
R. David Weaver State Bar No. 21010875 THE WEAVER LAW FIRM, P.C.1521 N. Cooper St., Ste. 710 Arlington, TX 76011 Tel: 817-460-5900 Fax: 817-460-5908 [email protected]
ATTORNEYS FOR THE EPISCOPAL DIOCESE OF FORT WORTH, et al.
FILEDIN THE SUPREME COURTOF TEXAS12 February 6 P4:07 BLAKE. A. HAWTHORNECLERK
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IDENTITY OF PARTIES
Appellants The Episcopal Diocese of Ft. Worth The Corp. of The Episcopal Diocese Ft. Worth Bishop Jack Leo Iker, Franklin Salazar Jo Ann Patton, Walter Virden, III Rod Barber, Chad Bates, Judy Mayo, Julia Smead Revs. Christopher Cantrell, Timothy Perkins Revs. Ryan Reed, Thomas Hightower St. Anthony of Padua Church (Alvarado) St. Alban’s and St. Mark’s Churches (Arlington) Church of St. Peter & St. Paul (Arlington) Church of St. Philip the Apostle (Arlington) St. Vincent’s Cathedral (Bedford) St. Patrick’s Church (Bowie) St. Andrew’s Church (Breckenridge) Good Shepherd Church (Brownwood) St. John’s Church (Brownwood) Church of St. John the Divine (Burkburnett) Holy Comforter (Cleburne) St. Matthew’s Church (Comanche) Trinity Church (Dublin) Holy Trinity Church (Eastland) Christ the King Church (Ft. Worth) Holy Apostles Church (Ft. Worth) Iglesia San Juan Apostol (Ft. Worth) Iglesia San Miguel (Ft. Worth) St. Andrew’s and St. Anne’s Churches (Ft. Worth) Church of St. Barnabas the Apostle (Ft. Worth) St. John’s and St. Timothy’s Churches (Ft. Worth) St. Michael’s Church (Richland Hills) Church of St. Simon of Cyrene (Ft. Worth) St. Paul’s Church (Gainesville) Good Shepherd Church (Granbury) Church of the Holy Spirit (Graham) St. Andrew’s Church (Grand Prairie) St. Joseph’s Church (Grand Prairie) St. Laurence’s Church (Southlake) St. Mary’s Churches (Hamilton and Hillsboro) Trinity Church (Henrietta) St. Alban’s Church (Hubbard) St. Stephen’s Church (Hurst) Church of St. Thomas the Apostle (Jacksboro)
Represented by: Scott A. Brister State Bar No. 00000024 Kendall M. Gray State Bar No. 00790782 Gavin B. Justiss State Bar No. 24070027 ANDREWS KURTH LLP 111 Congress Ave., Suite 1700 Austin, Texas 78701 Shelby Sharpe State Bar No. 18123000 SHARPE TILLMAN & MELTON 6100 Western Place, Ste. 1000 Fort Worth, TX 76107 R. David Weaver State Bar No. 21010875 THE WEAVER LAW FIRM 1521 N. Cooper St., Ste. 710 Arlington, TX 76011
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Church of Our Lady of the Lake (Laguna Park) St. Gregory’s Church (Mansfield) St. Luke’s Church (Mineral Wells) Church of St. Peter by the Lake (Graford) All Saint’s Churches (Weatherford and Wichita Falls) Church of the Good Shepherd (Wichita Falls) Church of St. Francis of Assisi (Willow Park) Church of the Ascension & St. Mark (Bridgeport) Appellees
The Episcopal Church Local Episcopal Parties Local Episcopal Congregations
Represented by: Sandra Liser State Bar No. 17072250 Naman Howell Smith & Lee, LLP 306 West 7th Street, Suite 405 Fort Worth, Texas 76102-4911 Represented by: Thomas S. Leatherbury State Bar No: 12095275 Vinson & Elkins LLP 2001 Ross Avenue, Suite 3700 Dallas, TX 75201 Represented by: Frank Hill State Bar No. 09632000 Hill Gilstrap P.C. 1400 W. Abram Street Arlington, TX 76013
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TABLE OF CONTENTS
ISSUE PRESENTED ....................................................................................................... xvi
STATEMENT OF JURISDICTION........................................................................................ xvi
STATEMENT OF FACTS ....................................................................................................1
All Saints Parish Waccamaw v. Protestant Episcopal Church in Diocese of, S.C., 685 S.E.2d 163 (S.C. 2009) .................................................................................... 19
Avero Belgium Ins. v. American Airlines, Inc., 423 F.3d 73 (2d Cir. 2005)..................................................................................... 38
Ayers v. Mitchell,
167 S.W.3d 924 (Tex. App.—Texarkana 2005, no pet.) ........................................ 40 Bell v. Low Income Women of Texas,
95 S.W.3d 253 (Tex. 2002).................................................................................... 38 Best Inv. Co. v. Hernandez,
479 S.W.2d 759 (Tex. Civ. App.—Dallas 1972, writ ref’d n.r.e.)............................ 36 Bjorkman v. Protestant Episcopal Church in U.S. of America of Diocese of
Church of God in Christ, Inc. v. Cawthon, 507 F.2d 599 (5th Cir. 1975) ................................................................................. 42
Citizens Nat. Bank of Breckenridge v. Allen, 575 S.W.2d 654 (Tex. App.—Eastland 1978, writ ref’d n.r.e.) .............................. 40
Conley v. Daughters of the Repub.,
156 S.W. 197 (Tex. 1913) ...................................................................................... 16 Cumberland Presbytery of Synod of the Mid‐West of Cumberland Presbyterian
Church v. Branstetter, 824 S.W.2d 417 (Ky. 1992).................................................................................... 11
De Zavala v. Daughters of the Repub. of Tex.,
124 S.W. 160 (Tex. Civ. App.—Galveston 1909, writ ref’d)................................... 16 Dean v. Alford,
994 S.W.2d 392 (Tex. App.—Fort Worth 1999, no pet.) ....................................... 12 Employment Div. v. Smith,
494 U.S. 872 (1990) .............................................................................................. 47 Express One Int’l, Inc. v. Steinbeck,
53 S.W.3d 895 (Tex. App.—Dallas 2001, no pet.) ................................................. 48 Exxon Corp. v. Emerald Oil & Gas Co., L.C.,
348 S.W.3d 194 (Tex. 2011).................................................................................. 37 Foshee v. Republic Nat. Bank of Dallas,
617 S.W.2d 675 (Tex. 1981).................................................................................. 41 Gilbert Texas Const., L.P. v. Underwriters at Lloyd’s London,
327 S.W.3d 118 (Tex. 2010)............................................................................xvi, 49 Green Westgate Apostolic Church,
Hyundai Motor Co. v. Vasquez, 189 S.W.3d 743 (Tex. 2006).................................................................................. 15
Interfirst Bank‐Houston, N.A. v. Quintana Petroleum Corp.,
699 S.W.2d 864 (Tex. App.—Houston [1st Dist.] 1985, writ ref’d n.r.e.) ................ 6 Jones v. Maples,
184 S.W.2d 844 (Tex. Civ. App.—Eastland 1944, writ ref’d) ......8, 15, 16, 28, 29, 45 Jones v. Wolf,
443 U.S. 595 (1979) ....................................................................................... passim Lamont Community Church v. Lamont Christian Reformed Church,
Original Glorious Church of God In Christ, Inc. of Apostolic Faith v. Myers,
367 S.E.2d 30 (W.Va. 1988) .................................................................................. 11 Presbyterian Church v. Hull Church,
393 U.S. 440 (1969) .............................................................................................. 15 Presbytery of Cimarron v. Westminster Presbyterian Church,
515 P.2d 211 (Okl. 1973) ...................................................................................... 12 Presbytery of the Covenant,
552 S.W.2d 865..................................................................................................... 42 Scotts African Union Meth. Prot. Church v. Conf. of African Union First Colored
426 U.S. 696 (1976) .............................................................................................. 17 In re Salazar,
315 S.W.3d 279 (Tex. App.—Fort Worth 2010, orig. proceeding) .......................... 4 In re Slusser,
136 S.W.3d 245 (Tex. App.—San Antonio 2004, no pet.) ..................................... 48 Smith v. N. Tex. Dist. Council of Assemblies of God & House of Grace,
80 U.S. 679 (1871) ............................................................................................ 9, 17 Whitten v. Republic Nat. Bank of Dallas,
397 S.W.2d 415 (Tex. 1965).................................................................................. 46 Wise v. Haynes,
103 S.W.2d 477 (Tex. Civ. App.—Texarkana 1937, no writ).................................. 36
Andrew Soukup, Note, Reformulating Church Autonomy, 82 Notre Dame L. Rev. 1679 (2007)...................................................................... 11
Article I, section 6 of the Texas Bill of Rights ............................................................. 20
Benton C. Martin, Comment, Protecting Preachers From Prejudice, 59 Emory L.J. 1297 (2010)........................................................................................................... 11
BLACK’S LAW DICTIONARY 15 (9th ed. 2009)......................................................................... 38
BLACK’S LAW DICTIONARY 615 (9th ed. 2009)....................................................................... 18
BLACK’S LAW DICTIONARY 1391 (9th ed. 2009) ..................................................................... 43
BLACK’S LAW DICTIONARY 1662 (9th ed. 2009) ..................................................................... 46
Lord McNair, THE LAW OF TREATIES 149 (1961) ................................................................... 38
Neutral Principles of Texas law.......................................................................21, 28, 34, 49
Texas Trust Act § 7 (formerly TEX. REV. CIV. STAT. art. 7425b‐41), Act of April 19, 1943, 48th Leg., R.S., ch. 148, § 7, 1943 Tex. Gen. Laws 232................................ 40
Texas Trust Code ......................................................................................................... 6, 34 Texas Uniform Unincorporated Nonprofit Association Act ............................................... 6 WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY OF THE ENGLISH LANGUAGE
UNABRIDGED 764 (2002) ......................................................................................... 18 WHITE & DYKMAN, ANNOTATED CONSTITUTION AND CANONS FOR THE GOVERNMENT OF THE
PROTESTANT EPISCOPAL CHURCH IN THE UNITED STATES OF AMERICA, 51 (Church Publishing Inc. 1981)....................................................................................... 29, 32
WHITE & DYKMAN, ANNOTATED CONSTITUTION AND CANONS FOR THE GOVERNMENT OF THE
PROTESTANT EPISCOPAL CHURCH IN THE UNITED STATES OF AMERICA, 90 (Church Publishing Inc. 1981)............................................................................................. 19
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REFERENCES TO THE RECORD & THE PARTIES
The Record
28CR5926 Volume 28 of the Clerk’s Record, page 5926 of the sequentially numbered electronic record.
1SCR7189 1st Supplemental Clerk’s Record, page 7189 of the sequentially numbered electronic record.
Tab A‐2 Document A-2 under Tab A in the Appendix.
The Plaintiffs TEC The Episcopal Church.
Local TEC All parties that filed the Local Episcopal Parties’ Motion for Partial Summary Judgment in this case. See 27CR5814.
Plaintiffs All parties that filed Notices of Cross-Appeal in this case. See 32CR7164-67 & 32CR7184.
The Defendants the Diocese The Episcopal Diocese of Fort Worth.
the Corporation The Corporation of The Episcopal Diocese of Fort Worth.
Bishop Iker Bishop Jack Leo Iker.
the Trustees Franklin Salazar, Jo Ann Patton, Walter Virden, III, Rod Barber, and Chad Bates.
Defendants All parties that filed the Notice of Direct Appeal in this case. See 32CR7133-35.
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Statement of the Case
Nature of the Case A national church association and its adherents sued a Texas church association, its Texas nonprofit corporation, and numerous officers to gain control of more than 60 churches and other property in Fort Worth and the surrounding area. Plaintiffs sought court orders removing the officers elected by the majority of the Texas association, and replacing them with officers selected by a minority group.
Trial Court The Honorable John P. Chupp, 141st District Court, Tarrant County, Texas.
Proceedings Both sides filed cross-motions for summary judgment.
Disposition The trial granted the Plaintiffs’ motion in part and denied the Defendants’ motion on February 8, 2011, ordering the Defendants to surrender control of all property within 30 days of final judgment. See 32CR7126-27 (Tab A-1). The Order became final and appealable when the trial court severed the summary judgment proceedings on April 5, 2011. See 1SCR7189-92 (Tab A-4). This appeal followed.
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ISSUE PRESENTED
On the cross-motions for summary judgment, did the trial court err by
granting the Plaintiffs’ motions in part and denying Defendants’ motion?1
STATEMENT OF JURISDICTION
The jurisdictional bases for this direct appeal are set out in Appellants’
Statement of Jurisdiction and Amended Reply filed in this case in June 2011,
which are incorporated herein by reference.
As the Order at issue here was based on cross-motions for summary
judgment, this Court has jurisdiction to “consider both sides’ summary-
judgment evidence, determine all questions presented, and render the judgment
the trial court should have rendered.”2
1 See Malooly Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970).
2 Gilbert Texas Const., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010).
AUS:650116.3
STATEMENT OF FACTS
This is the largest church property dispute in the history of Texas. The suit
involves control of property rather than title: all parties agree the Corporation
holds legal title,3 but they disagree whose representatives are entitled to sit on its
Board of Trustees.4 The facts are undisputed; the only question is whether the
case is governed by: (A) the Corporation’s articles of incorporation, by-laws, and
applicable state laws, or (B) documents and opinions about the structure,
practices, and beliefs of the churches involved.
The Diocese. The Episcopal Diocese of Fort Worth (“the Diocese”) was
created by division of the Diocese of Dallas, and came into existence at a Primary
Convention in November 1982.5 Seven weeks later, it was admitted into union
with TEC’s governing body, the General Convention, on December 31, 1982.6
The Diocese is a Texas unincorporated association,7 and is governed by a
Constitution and Canons adopted by the Diocese’s own Convention.8
3 See 21CR4337 (TEC’s motion stating that “The Diocesan Corporation holds title to substantial real and personal property of the Diocese”); 27CR5889 (Local TEC’s motion stating the same); see also 28CR5955 (1982 Constitution) & 28CR5981 (2006 Constitution) (“The title to all real estate acquired for the use of the Church in this Diocese … shall be held subject to control of the Church in the Episcopal Diocese of Fort Worth acting by and through a corporation known as “’Corporation of the Episcopal Diocese of Fort Worth.’”).
4 See 21CR4338 (TEC motion); 27CR5899 (Local TEC motion).
5 See 28CR6049; 28CR6037.
6 See 28CR6162.
7 See 28CR5961 (¶ 2).
8 See 28CR5967-6035 (1982 version); 28CR6076-6149 (2006 version).
2 AUS:650116.3
The Corporation. The Corporation of the Episcopal Diocese of Fort Worth
(“the Corporation”) holds legal title to all the real and personal property at issue
herein, including that of the Diocese and the parishes.9 The Corporation is a
Texas non-profit corporation,10 and is governed by its articles of incorporation,
by-laws, and a Board of Trustees.11 The articles and by-laws reflect neither
control by nor affiliation with TEC.12 All the property held by the Corporation
came either by gift from the Diocese of Dallas or by gifts contributed by local
parishioners; TEC contributed neither property nor funds.13
The Controversy. In recent years, many in the Diocese believed that TEC’s
actions reflected “a substantial departure from the biblical and historic faith.”14
Accordingly, in 2007 an amendment was offered to remove references to TEC
from the Diocese’s Constitution. At that year’s Diocesan Convention, a huge
majority (83% of clergy, 77% of lay delegates) voted to adopt the changes.15 At a
second convention in 2008 (as required to amend the Diocese’s Constitution16),
16 See 28CR5985 (1982 Constitution); 28CR6098 (2006 Constitution).
3 AUS:650116.3
the changes were approved by similar majorities (79% of clergy, 80% of lay
delegates17) and went into effect.
The Diocese Attempts Conciliation. Recognizing that a handful of churches
dissented, the Diocese adopted procedures for an amicable separation.18 In
February 2009, the Corporation transferred property to three parishes who
withdrew from affiliation with the Diocese.19 These transfers were granted not
as a matter of right, but to avoid litigation and reach a peaceful settlement.20
TEC Files Suit. TEC soon put an end to conciliation. On April 14, 2009, this
suit was filed by TEC and 36 individuals drawn from the minority who lost the
2007 and 2008 Convention votes and had withdrawn from the Diocese.21 The
Plaintiffs demanded turnover of more than 60 churches in the Diocese, including
49 churches in which not a single member was willing to appear as a
representative Plaintiff.22 All told, the contested properties have an insured
value in excess of $100 million dollars.
17 See 28CR5962.
18 See 31CR6821-22 (discussing proposed amendment to Canon 32); 31CR6852 (Convention’s approval of amendment).
19 See 29CR6281; 31CR6785 (deed to Trinity Episcopal (Fort Worth)); 31CR6790 (deed to St. Luke’s Episcopal (Stephenville)); 31CR6801a (deed to St. Martin-in-the-Fields Episcopal (Keller)).
20 See 29CR6281 (¶ 4).
21 See 28CR5963 (listing 6 former clergy members, 27 former lay members, and 3 who have never been members).
22 See 19CR3903-04 (listing representative plaintiffs for 12 churches and 49 others without any). See also 21CR4224 (¶ 106) & (Exhibit A) (listing 80 church-owned properties sought).
4 AUS:650116.3
The Mandamus Appeal. The Plaintiffs originally filed suit in the name of the
Diocese and Corporation, without authorization from either. Accordingly, the
Defendant Diocese and Corporation filed a Rule 12 motion demanding that
Plaintiffs’ counsel show authority from the clients they purported to represent.
The trial court denied the motion, but the Second Court of Appeals granted
mandamus relief, ordering the trial court to bar Plaintiffs’ counsel from
appearing in this case as attorneys of record for the Corporation or Diocese. See
In re Salazar, 315 S.W.3d 279, 287 (Tex. App.—Fort Worth 2010, orig. proceeding).
The Cross‐Motions for Summary Judgment. Back in the trial court, both sides
moved for summary judgment. The Hon. John Chupp granted the Plaintiffs’
motion in part and denied the Defendants’ motion on February 8, 2011, ordering
the Defendants to surrender control of the Corporation and all church properties
within 30 days of final judgment.23 That Order became final on April 5, 2011,
when the trial court severed the summary judgment proceedings and stayed the
remaining claims in the original suit.24 Defendants filed a supersedeas bond to
postpone turnover of the property, and filed a direct appeal in this Court.
23 See 32CR7126-27.
24 See 1SCR7189-92.
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Introduction
This suit involves churches from downtown Fort Worth and Arlington to
downtown Brownwood and Comanche. TEC filed suit to gain by a hostile
takeover that which it had contributed nothing to build.
From its early days, this Court has held that a church’s rules are binding
on all sides, and none can ask the courts to ignore those rules:
When, therefore, persons enter into organizations for purposes of social intercourse or pleasure or amusement, and lay down rules for their government, these must form the measure of their rights in the premises, and it is vain to appeal to the Bill of Rights against their own agreements.25
On precisely this ground, the Court recently rejected a negligent-counseling
claim against a pastor because the plaintiff was bound by disciplinary
procedures stated in the church’s constitution.26
In this case, the Diocese, the Corporation, and TEC long ago established
rules in their constitutions, canons, corporate articles, and by-laws. The
Plaintiffs’ suit asks that all those rules be disregarded on constitutional grounds.
But according to the rules everyone agreed to long before, the Defendants are
entitled to control of the Corporation and its property.
25 Manning v. San Antonio Club, 63 Tex. 166, 1884 WL 20384, at *5 (Tex. 1884) (emphasis added).
26 See C.L. Westbrook, Jr. v. Penley, 231 S.W.3d 389, 401-02 (Tex. 2007) (rejecting tort claim based on church disciplinary process to which all members agreed).
6 AUS:650116.3
GOVERNING LAW
Texas law governs all issues in this appeal, as none of the summary
judgment motions asserted any other state’s law as grounds.27 In addition:
• Law governing the Corporation. As the Corporation was incorporated in Texas,28 issues concerning its governance are governed by the Texas Non-Profit Corporation Act (Tab D);29
• Law governing the Diocese. As the Diocese was formed and operates in Texas,30 issues concerning its governance are governed by the Texas Uniform Unincorporated Nonprofit Association Act (Tab E);31 and
• Law governing Trusts. As the trust alleged by Plaintiffs includes Texas real property and is administrated by Texas residents,32 its existence is governed by the Texas Trust Code (Tab F).33
27 See TEX. R. CIV. P. 166a(c) (“The motion for summary judgment shall state the specific grounds therefore.”); Timpte Indus., Inc. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009) (“[A] trial court cannot grant a summary judgment motion on grounds not presented in the motion.”).
28 See 28CR6184-85.
29 See TEX. REV. CIV. STAT. art. 1396-1.02(A)(1) (defining “corporation” as used in the Act to exclude “a foreign corporation”); id. at 1396-10.02(A), 1396-10.04; see also RESTATEMENT (SECOND) CONFLICT OF
LAWS (1971) § 304; TEX. BUS. ORGS. CODE § 1.101 (providing that Texas law governs internal affairs of entities formed by certificate of formation from Texas).
30 See 28CR5967, 28CR5969.
31 See TEX. REV. CIV. STAT. art. 1396—70.01; see also TEX. BUS. ORGS. CODE § 1.103 (providing that Texas law governs internal affairs of entities formed in Texas without filing with a governmental authority).
32 See 28CR6002 (requiring trustees to be canonically resident or members of local parishes).
33 Trusts holding Texas land are governed by Texas law. See Toledo Soc. for Crippled Children v. Hickok, 261 S.W.2d 692, 697 (Tex. 1953); Interfirst Bank-Houston, N.A. v. Quintana Petroleum Corp., 699 S.W.2d 864, 877 (Tex. App.―Houston [1st Dist.] 1985, writ ref’d n.r.e.) (“[A]s a general rule it is held that the administration of a trust imposed on land is governed by the law of the state where the land is located and must be supervised by the courts of that state.”); RESTATEMENT (SECOND) CONFLICT OF LAWS (1971) § 278. Trusts administered by Texas trustees are governed by Texas law. See Warner v. Florida Bank & Trust Co., 160 F.2d 766, 771 (5th Cir. 1947) (“Matters of administration are determined by the law of the situs or the seat of the trust, and the domicile of the trustee of intangible personal property including shares of stock is usually the seat of the trust.”); RESTATEMENT (SECOND) CONFLICT OF LAWS 2d (1971) § 270(b), comment a.
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The Texas Business Organizations Code does not apply to this case as all
actions occurred and suit was filed before January 1, 2010.34 But the Code
incorporated the Nonprofit Acts with little change, so parallel citations are
included to show that Texas law has not changed.
SUMMARY OF THE ARGUMENT
If Texas follows the Neutral Principles approach in church property
disputes (like almost every other state), the trial court granted the wrong motion.
Neutral Principles have been used by Texas appellate courts for some years with
no problem. The approach has numerous advantages over the Deference
approach urged by the Plaintiffs, including disentanglement from issues about
church government in favor of the same laws that apply to all other cases. The
Deference approach may also create problems with the Texas Constitution,
which bars any preferences in the treatment of one form of religion over another.
All the property at issue here is owned by the Corporation. Texas
corporate law provides that the election and removal of corporate officers must
be governed by the entity’s articles of incorporation and by-laws. The Defendant
Trustees were elected according to the Corporation’s charter provisions; the
Plaintiffs’ ersatz replacements were not.
34 See TEX. BUS. ORGS. CODE §§ 402.006, 402.014.
8 AUS:650116.3
Similarly, Texas law provides that the election and removal of officers in
unincorporated associations must be governed by the association’s own rules.
The Diocese elected Bishop Iker according to diocese rules; the Plaintiffs did not.
Under Jones v. Maples, Texas courts cannot decide which bishop can baptize or
preach, but must decide which one sits on the Corporation’s board that controls
its property.
Texas law requires that any trust concerning realty must be written and
signed by the settlor. TEC has no trust interest in this property because it
contributed nothing to create it, and has no trust instrument signed by anyone
who did. Texas law also makes all trusts revocable unless they expressly state
otherwise, which no trust alleged by the Plaintiffs does. So even assuming a
trust for TEC ever existed, it was revoked in 1989 by express act of the Diocese.
Finally, the corporate amendments of which the Plaintiffs complain are
irrelevant to the property issues involved here. The Corporation had the right to
amend its charters under Texas law, and none of the amendments challenged by
the Plaintiffs deprived the Plaintiffs of anything.
The trial court disregarded all these statutes on the ground that this
Court’s 1909 opinion in Brown v. Clark required that Texas courts must enforce
whatever TEC commands. This Court should correct that error.
9 AUS:650116.3
I. TEXAS SHOULD ADOPT THE NEUTRAL PRINCIPLES APPROACH
A. The Two Jones Cases: Neutral Principles or Deference?
At the outset, this Court must settle whether Texas law in church property
lawsuits is: (A) the same law governing all other property suits, or (B) a special
rule applicable only to churches. These two approaches were approved by the
U.S. Supreme Court in two cases brought by Presbyterians named “Jones.”
In 1871 in Watson v. Jones (hereafter “Watson”), the Supreme Court
authorized the so-called Deference approach for church property suits, which
states that:
• in hierarchical churches, property disputes are settled by the highest church judicatory to which the matter has been carried;
• in congregational churches, property disputes are settled by ordinary legal principles governing associations (usually majority rule).35
A century later in 1979 in Jones v. Wolf (hereafter “Wolf”), the Supreme
Court authorized an alternative method, the so-called Neutral Principles
approach.36 This approach simply applies the same legal rules that govern all
private property:
The method relies exclusively on objective, well-established concepts of trust and property law familiar to lawyers and judges. It
35 See Watson v. Jones, 80 U.S. 679, 725, 727 (1871); see also Jones v. Wolf, 443 U.S. 595, 607 (1979) (“Majority rule is generally employed in the governance of religious societies”).
36 443 U.S. 595, 604 (1979) (“We therefore hold that a State is constitutionally entitled to adopt neutral principles of law as a means of adjudicating a church property dispute.”).
10 AUS:650116.3
thereby promises to free civil courts completely from entanglement in questions of religious doctrine, polity, and practice.37
The states are free to adopt either approach.38
This Court has not addressed a church property suit since Brown v. Clark in
1909,39 a full 70 years before the Neutral Principles approach was approved by
the U.S. Supreme Court. Yet in applying the Deference rule in Brown, this Court
also applied the Neutral Principles rule, deferring to the national church only
after analyzing what the church constitution said40 ― a key feature of the Neutral
Principles approach.41
In this case, although the Fort Worth court of appeals has twice stated that
Texas courts follow Neutral Principles (see part I(C)), the trial judge followed the
Deference rule on the ground that Brown was this Court’s last pronouncement. If
Texas follows Neutral Principles, that was error.
37 Wolf, 443 U.S. 595, 603.
38 Id. at 602 ([T]he First Amendment does not dictate that a State must follow a particular method of resolving church property disputes.”).
39 116 S.W. 360 (Tex. 1909).
40 See id. at 363 (“The principal question in this case is: Did the General Assembly of the Cumberland Church have authority to consummate the reunion and union of that church with the Presbyterian Church? … [T]hat was clearly a question committed to the assembly by that provision of the [church] constitution which authorized it, with the approval of two-thirds of the presbyteries, to change the confession of faith of that church, and, that action having been taken whereby it was declared that the change made in the confession of faith of the mother church removed all obstacles to reunion and union of the two bodies, that decision is final upon the civil courts. Watson v. Jones, ….” (emphasis added)).
41 Wolf, 443 U.S. 595 at 604 (“The neutral-principles method … requires a civil court to examine certain religious documents, such as a church constitution …”).
11 AUS:650116.3
B. Almost Every State Has Adopted Neutral Principles
“A majority of states that have decided on a test following Jones have
chosen the ‘neutral principles’ approach for addressing intra-church disputes.”42
Calling this a “majority” is actually an understatement — in the last 20 years
every state supreme court that decided a church property dispute has employed
the Neutral Principles approach.43
A table showing the current status of the law in the 49 states (omitting
Texas) and the District of Columbia is attached as Tab B of the Appendix. As
shown in that table, American courts have overwhelmingly chosen to employ
Neutral Principles in church property disputes:
• 36 have adopted Neutral Principles;44
• 1 has rejected it (West Virginia);45
• 3 are unclear or in flux;46 and
42 Benton C. Martin, Comment, Protecting Preachers From Prejudice, 59 EMORY L.J. 1297, 1322 (2010); see also Andrew Soukup, Note, Reformulating Church Autonomy, 82 NOTRE DAME L. REV. 1679, 1692 n.105 (2007) (“Following Jones, most states decided to adopt, in church property disputes, the neutral principles approach ….”).
43 See the following states listed in Tab B: Alaska, Arkansas, California, Connecticut, Delaware, District of Columbia, Georgia, Maine, Maryland, Mississippi, Montana, Nebraska, New Hampshire, New York, North Carolina, Pennsylvania, South Carolina, Utah, and Wisconsin.
44 See Tab B.
45 See Original Glorious Church of God In Christ, Inc. of Apostolic Faith v. Myers, 367 S.E.2d 30, 34 (W.Va. 1988).
46 Those are Kentucky (compare Bjorkman v. Protestant Epis. Church, 759 S.W.2d 583, 585-86 (Ky. 1988) (applying Neutral Principles)) with Cumberland Presbytery v. Branstetter, 824 S.W.2d 417, 419-22 (Ky. 1992) (applying both rules)); Michigan (Lamont Community Church v. Lamont Christian Reformed Church, 777 N.W.2d 15, 28 (Mich. App. 2009) (“Michigan law provides that courts should generally use the
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• 10 have yet to address the issue since Wolf.47
This is no coincidence; there are many reasons why all these courts ― in red
states, blue states, and purple states ― have uniformly moved toward Neutral
Principles (see part I(E)).
C. Texas Courts Have Been Using Neutral Principles
Until a year ago, courts in Texas all assumed that Neutral Principles
applied to church property disputes in Texas too. As the Fort Worth Court of
Appeals expressly held in 1999 and again in 2006:
Notwithstanding the First Amendment’s proscription, courts do have jurisdiction to review matters involving civil, contract, or property rights even though they stem from a church controversy. Neutral principles of law must be applied to decide such matters so that courts do not violate the constitutional prohibition against government established religion.48
The Second Court of Appeals was not alone; the First, Fifth, Tenth, and
Fourteenth Courts of Appeals have held that Texas courts follow Neutral
hierarchical method. However, the neutral principles of law method may be appropriate in situations ....”); and New Jersey (see Scotts African Union Meth. Prot. Church v. Conf. of African Union First Colored Meth. Prot. Church, 98 F.3d 78, 89-94, 94 n. 6 (3d Cir. 1996) (concluding that New Jersey courts follow the Deference approach but “show a decided progression ... toward adoption of a neutral-principles approach in resolving intrachurch property disputes”).
47 Those states are Hawaii, Idaho, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, Vermont, and Wyoming. Some of these have older cases that apply the Deference approach, but have not addressed the issue since 1979. See, e.g., Presbytery of Cimarron v. Westminster Presbyterian Church, 515 P.2d 211, 217 (Okl. 1973) (pre-Wolf case stating that court was “not free” to adopt Neutral Principles).
48 Dean v. Alford, 994 S.W.2d 392, 395 (Tex. App.—Fort Worth 1999, no pet.); Smith v. N. Tex. Dist. Council of Assemblies of God & House of Grace, No. 2-05-425-CV, 2006 WL 3438077, at *2 (Tex. App.—Fort Worth Nov. 30, 2006, no pet.) (“[C]ourts do have jurisdiction to review matters involving civil, contract, or property rights …. Neutral principles of law must be applied to decide such matters ….”).
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Principles analysis.49 And in 2007, this Court declined to “expand” the neutral-
principles approach beyond property cases to personal injury cases.50
Yet TEC has single-handedly reversed this trend in Texas, convincing three
Texas courts recently to return to the Deference approach and defer
(unsurprisingly) to TEC.51 Perhaps the most striking thing about TEC’s 64-page
motion for summary judgment in this case is that it never mentioned “Neutral
Principles” ― not even once. And its Response urged complete rejection of the
approach: “In Texas, the Neutral Principles Test Does Not Apply to Hierarchical
Churches.”52
TEC has taken this drastic approach because it cannot win under neutral
application of Texas law. The straightforward question in this case is whether
Texas should reverse the state and national trends to benefit a single litigant.
49 See Chen v. Tseng, No. 01-02-01005-CV, 2004 WL 35989, at *6 (Tex. App.—Houston [1st Dist.] Jan. 8, 2004, no pet.) (applying Neutral Principles and church’s by-laws to determine rights to property); Hawkins v. Friendship Missionary Baptist Church, 69 S.W.3d 756, 759 (Tex. App.—Houston [14th Dist.] 2002, no pet.) (recognizing Neutral Principles but not apply it as church had no governing documents to construe); Cherry Valley Church of Christ/Clemons v. Foster, No. 05-00-10798-CV, 2002 WL 10545, at *3 (Tex. App.—Dallas Jan. 4, 2002, no pet.) (not designated for publication) (recognizing but not applying Neutral Principles as church’s articles and by-laws provided for officer selection “according to the custom and practices of the church”); Libhart v. Copeland, 949 S.W.2d 783, 793 (Tex. App.—Waco 1997, no writ) (applying Neutral Principles to determine entitlement to proceeds from sale of church building).
50 C.L. Westbrook, Jr. v. Penley, 231 S.W.3d 389, 399 (Tex. 2007) (emphasis added) (“But even if we were to expand the neutral-principles approach beyond the property-ownership context as Penley requests, we disagree that free-exercise concerns would not be implicated.”).
51 In addition to the district court in this case, see Masterson v. Diocese of Nw. Tex., No. 03–10–00015–CV, 2011 WL 1005382, at *6 (Tex. App.― Austin Mar. 16, 2011, pet. filed) and St. Francis on the Hill Church v. The Episcopal Church, Cause No. 2008-4075, Final Summ Jdgt., (Dist. Court—El Paso [210th Jud. Dist.], Dec. 17, 2010) (30CR6541-44).
52 30CR6420.
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D. TEC’s Effort To Avoid Neutral Principles Using “Identity”
TEC labored mightily in the trial court to prove this case is not really a
church property dispute, but an “identity” dispute about the true Bishop of the
Diocese and true leaders of the Corporation.53 That re-classification should be
rejected based on a third Jones case ― this one with the authority of this Court.
There are some disputes to which Neutral Principles does not apply. In
Westbrook v. Penley, this Court held that church discipline of members was an
“inherently religious function with which civil courts should not generally
interfere.”54 Similarly, the U.S. Supreme Court recently held in Hosanna-Tabor
that civil courts generally cannot interfere in a church’s decision about hiring or
firing its ministers.55
The exception for “inherently religious” issues could apply to a property
suit in the rare instance when a deed or charter provision incorporates doctrinal
standards.56 But there are no doctrinal standards in the deeds or property
provisions here. Moreover, trying to re-cast neutral deeds to create a doctrinal
53 See, e.g., 21CR4356-57 (“[U]nder Brown and its progeny a church property dispute may be conclusively resolved by focusing on the question of ‘identity’ - that is, by determining which persons have remained ‘loyal’ to the hierarchical church, and declaring their right to control the property.”); 27CR5861 (“[T]the identity question answers the property question.”).
54 231 S.W.3d 389, 399 (Tex. 2007).
55 See Hosanna-Tabor Evangelical Lutheran Church v. E.E.O.C., No. 10–553, 2012 WL 75047, at *9 (U.S. Jan. 11, 2012).
56 Jones v. Wolf, 443 U.S. 595, 602 (1979) (“[T]he [First] Amendment requires that civil courts defer to the resolution of issues of religious doctrine or polity by the highest court of a hierarchical church organization.”).
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issue would frustrate one of the main obligations the Wolf court sought to
encourage, namely “the obligation of States, religious organizations, and
individuals to structure relationships involving church property so as not to
require the civil courts to resolve ecclesiastical questions.”57
In Wolf, the U.S. Supreme Court rejected a similar effort to turn a property
case into an “identity” case. There, the owner of the property was the “Vineville
Presbyterian Church,” but a schism made it unclear which faction that was. The
highest church court to which the dispute had been carried (a regional
Presbytery in the hierarchical church) declared that it was a “loyal” minority
group.58 But the Supreme Court held that Georgia need not defer to the
Presbytery’s determination of “identity,” but could decide who got the property
based on Neutral Principles of state property law.59
Almost 70 years ago, this Court used precisely that approach in a third
Jones case ― this one involving a preacher named “Jones” who was acting as
president of a Texas cemetery association. In Jones v. Maples (a writ-refused case
bearing the authority of this Court60), it was settled that Texas courts generally
do not intervene in disputes about who are the proper officers of a nonprofit
57 Id. at 604 (quoting Presbyterian Church v. Hull Church, 393 U.S. 440, 449 (1969)).
58 See id. at 600; see also id. at 621 (Powell, J., dissenting).
59 Id. at 602-03.
60 Hyundai Motor Co. v. Vasquez, 189 S.W.3d 743, 754 n.52 (Tex. 2006).
16 AUS:650116.3
association, but they must do so when “incident to the question of proper custody
of money and property.”61 As the Maples Court stated, civil courts have a duty to
enforce an association’s “right that its own officers, and not others, even though
members of the Association, have the custody, control and management of the
property.”62
Texas courts have had little trouble making the distinction between
property and ecclesiastical claims. For example, in 2004 the First Court of
Appeals decided who were the corporate directors entitled to control a Tien Tao
temple, but refused to decide who could minister at the temple’s altar.63 Texas
law since Maples is clear: courts cannot decide who should hold the keys of the
Kingdom, but must decide who should hold the keys of the real property. If
Texas courts can decide who controls the Alamo (once a church property and
since 1836 something close to it),64 Texas courts are perfectly capable of deciding
this case on the same basis.
E. The Advantages Of Neutral Principles
In Wolf, the U.S. Supreme Court noted several advantages to the Neutral
63 Chen v. Tseng, No. 01-02-01005-CV, 2004 WL 35989, at *6 (Tex. App.—Houston [1st Dist.] Jan. 8, 2004, no pet.)
64 See Conley v. Daughters of the Repub., 156 S.W. 197, 202 (Tex. 1913); De Zavala v. Daughters of the Repub. of Tex., 124 S.W. 160 (Tex. Civ. App.—Galveston 1909, writ ref’d).
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Principles approach, all of which this Court should consider.
Familiarity. Under Neutral Principles, church property suits are decided by
construing the deeds, the national and local church charters (e.g., constitution,
by-laws, or articles of incorporation), and state statutes.65 As the Court noted,
this approach “relies exclusively on objective, well-established concepts of trust
and property law familiar to lawyers and judges.”66
Implied Consent. The Deference approach is based on implied consent to a
church’s government.67 But it is hard to imply consent when a church violates its
own charters. Yet the only time Neutral Principles and Deference lead to
different results is when a church has done precisely that. In this case, for
example, it would not matter whether Deference or Neutral Principles applied
but for the fact that TEC must disregard its own charter provisions and those of
the Diocese to win. Courts have always been uneasy with the Deference rule in
such circumstances; as the late Chief Justice Rehnquist put it: “If the civil courts
are to be bound by any sheet of parchment bearing the ecclesiastical seal and
purporting to be a decree of a church court, they can easily be converted into
65 See Jones v. Wolf, 443 U.S. 595, 603 (1979).
66 Id.
67 See Watson v. Jones, 80 U.S. 679, 729 (1871) (“All who unite themselves to such a body do so with an implied consent to this government, and are bound to submit to it.”).
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handmaidens of arbitrary lawlessness.”68
Flexibility. The Wolf Court noted that Neutral Principles is “flexible,”
allowing parties the freedom to arrange affairs as they wish, thus taking
advantage of “the peculiar genius of private-law systems.”69 Under Neutral
Principles “the outcome of a church property dispute is not foreordained” by
legal rules other than those a church has picked.70 By contrast, under the
Deference approach all outcomes are foreordained: the local majority always
wins in congregational churches, and the hierarchy always wins in all the rest.
Less Entanglement. Neutral Principles involves less entanglement in
matters of religious doctrine.71 The Deference rule requires civil courts to decide
what form of government a church practices and who has final authority on
property issues. These questions often require “a searching and therefore
impermissible inquiry into church polity.”72 For example, even if Deference
applied in this case, the record shows that the highest and final authority on
property and other issues is not the national church but the local bishop:
68 See Serbian Eastern Orthodox Diocese v. Milivojevich, 426 U.S. 696, 727 (1976) (Rehnquist, J., dissenting). The two dissenters in Milivojevich were in the majority in Wolf.
69 Wolf, 443 U.S. at 603.
70 Id. at 603, 606.
71 Id. at 605.
72 Id. at 604.
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• the word “Episcopal” itself means “bishop”;73
• TEC’s Constitution and Canons use the term “Ecclesiastical Authority” more than 150 times, and define it as “the Bishop of the Diocese”;74
• TEC’s Constitution expressly provides that no one can “perform episcopal acts” in a diocese except by invitation of the Bishop;75 and
• TEC was formed by the dioceses,76 and can be dissolved by majority vote of the dioceses and their bishops.77
By contrast, under Neutral Principles courts do not decide whether a church is
hierarchical or congregational; they simply apply the same rules to all of them.78
Diversity. The Deference rule assumes churches come in only two types:
hierarchical and congregational. Perhaps that reflected the American religious
scene in 1871, but not today. What if a church is hierarchical at the regional level
73 See BLACK’S LAW DICTIONARY 615 (9th ed. 2009) (“episcopacy . . . 1. The office of a bishop”); see also WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY OF THE ENGLISH LANGUAGE UNABRIDGED 764 (2002) (“fr. episcopus bishop . . . 1: of, being, or suited to a bishop.).
74 See 23CR4829 (TEC Canon IV.15).
75 See 24CR5131 (TEC Const. Art. II, § 3: “A Bishop shall confine the exercise of such office to the Diocese in which elected, unless requested to perform episcopal acts in another Diocese by the Ecclesiastical Authority thereof . . . .”); see also 24CR5232 (TEC Canon III.12, § 3(e) (“No Bishop shall perform episcopal acts … in a Diocese other than that in which the Bishop is canonically resident, without permission or a license to perform occasional public services from the Ecclesiastical Authority of the Diocese in which the Bishop desires to officiate or perform episcopal acts.”).
76 See WHITE & DYKMAN, ANNOTATED CONSTITUTION AND CANONS FOR THE GOVERNMENT OF THE
PROTESTANT EPISCOPAL CHURCH IN THE UNITED STATES OF AMERICA, 90 (Church Publishing Inc. 1981) (noting that TEC was formed “through the federation of the separate Churches in the several states.”).
77 See 24CR5136 (TEC Constitution, Art. XII) (providing that TEC Constitution can be altered or amended “by a majority of all Bishops … and by an affirmative vote … by a majority of the Dioceses …”).
78 See All Saints Parish Waccamaw v. Protestant Epis. Church in Diocese of S.C., 685 S.E.2d 163, 172 (S.C. 2009) (“Church disputes that are resolved under the neutral principles of law approach do not turn on the single question of whether a church is congregational or hierarchical. Rather, the neutral principles of law approach permits the application of property, corporate, and other forms of law to church disputes.”).
20 AUS:650116.3
but congregational at the national level? What if a church is hierarchical in some
respects but congregational with respect to property? The Deference rule simply
does not answer in these cases.
The Texas Constitution. Texas may have a special problem with the
Deference rule under the state Constitution. Article I, section 6 of the Texas Bill
of Rights provides that “no preference shall ever be given by law to any religious
society or mode of worship.” The Deference rule obviously treats hierarchical
and congregational churches differently; Neutral Principles treats them the same.
When the U.S. Constitution mandated Deference, it did not matter what the
Texas Constitution said. But now that either is an option, one must ask whether
Deference gives a preference to one form of church organization over another.
Simplicity. Neutral Principles is simply easier to apply. This case is a good
example: a complete picture of TEC’s rules regarding diocese property requires
reviewing four provisions;79 a complete picture of TEC’s organization, structure,
and operation requires reviewing all 180 pages of them.80 TEC’s motions relied
on the Deference rule, so it included a 70-page affidavit about TEC history81
(rebutted by Defendants’ equally long affidavit from an equally qualified church
79 See 24CR5166 (Canon I.7.3) (requiring bishop’s approval for encumbrance of parish property); 24CR5177 (Canon I.14.2) (Dennis canon); 24CR5189 (Canon II.6.2) (requiring bishop’s consent for parishes to hold or encumber property); 24CR5189 (Canon II.6.4) (Dennis canon re consecrated churches).
80 See, e.g., 24CR5123-5307.
81 22CR4519-91 (Affidavit of Dr. Robert Bruce Mullin).
21 AUS:650116.3
expert82), and 100 pages of century-old documents.83 Yet despite all this, TEC’s
“history” fails to mention that TEC itself began when dioceses left the Church of
England with all their property ― just like the Church of England had done from
Rome before that.
II. THE DEFENDANTS ARE THE CORPORATION’S FIVE ELECTED TRUSTEES
Under Neutral Principles of Texas law, the properly elected officers of the
Corporation must be the five Defendant Trustees.84 But the trial judge did not
follow the Texas Non-Profit Corporation Act; he struck out both references to the
Act in the Order drafted by TEC’s counsel (Tab A-2).85 Instead, he held that
Brown v. Clark compelled him to defer to TEC’s choice of the proper Trustees:
1. Because the Church is hierarchical, the Court follows Texas precedent governing hierarchical church property disputes, which holds that in the event of a dispute among its members, a constituent part of a hierarchical church consists of those individuals remaining loyal to the hierarchical church body. See, e.g., Brown v. Clark, 102 Tex. 323, 116 S.W. 360 (1909) … [A] local faction of a hierarchical church may not avoid the local church’s obligations to the larger church by … invoking nonprofit corporations law ….86
82 See Affidavits of Dr. Jeremy Bonner, 29CR6284-6365 & 29CR6388-92.
84 See 28CR5963 (listing Defendant Trustees as Dr. Franklin Salazar, Jo Ann Patton, Walter Virden, III, Rod Barber, and Chad Bates).
85 See 32CR6995-96; cf. 32CR7126-27.
86 32CR7126-27.
22 AUS:650116.3
Although unwilling to say it, the trial judge held the Non-Profit
Corporation Act unconstitutional as applied. Brown v. Clark is a constitutional
ground (as this Court stated in 2007),87 and constitutional grounds are the only
way “Texas precedent” can overrule legislation. By contrast, if Texas follows the
Neutral Principles rule, the Act is the constitutional test, and should not have
been disregarded.
A. Under Texas Law, The Corporate By‐Laws Determine The Trustees
The Act provides that directors of a Texas non-profit corporation can be
installed, removed, or replaced only as provided in a corporation’s articles and
by-laws:
• “[D]irectors shall be elected … in the manner and for the terms provided in the articles of incorporation or the by-laws”;88
• “A director may be removed from office pursuant to any procedure therefor provided in the articles of incorporation or by-laws”;89
• “Unless removed in accordance with the provisions of the articles of incorporation or the by-laws, each director shall hold office for the term for which he is elected”;90 and
87 See C.L. Westbrook, Jr. v. Penley, 231 S.W.3d 389, 397-98 (Tex. 2007) (“This Court, too, has long recognized a structural restraint on the constitutional power of civil courts to regulate matters of religion in general, Brown v. Clark, 102 Tex. 323, 116 S.W. 360, 363 (Tex. 1909)”).
88 See Tex. Rev. Civ. Stat. art. 1396-2.15(B) (current version at Tex. Bus. Orgs. Code § 22.206).
89 See id. at 1396-2.15(D) (current version at Tex. Bus. Orgs. Code § 22.211).
90 See id. at 1396-2.15(C) (current version at Tex. Bus. Orgs. Code § 22.208).
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• “Unless otherwise provided in the articles of incorporation or the by-laws, any vacancy occurring in the board of directors shall be filled by the affirmative vote of a majority of the remaining directors.”91
In this case, the Corporation’s directors are called “Trustees,” as allowed
by the Act.92 Since inception in 1983, the Corporation’s articles have said little
about selection and removal of Trustees, stating instead that such matters “shall
be fixed by the by-laws of the corporation as the same may be adopted and from
time to time amended.”93 So to determine the valid Trustees under Neutral
Principles, a court must look to the Corporation’s by-laws.
B. The By‐Laws Say Five Defendants Are The Corporation’s Trustees
As a matter of law, the Defendant Trustees are the only ones elected
pursuant to the Corporation’s by-laws. The by-laws provide for election of one
Trustee per year at the Diocese’s annual convention,94 and for removal only by
majority vote of the Corporation’s Board.95 They say that each Trustee holds
office until a successor is duly elected and qualified.96 There is no provision in
91 See id. at 1396-2.16(A) (current version at Tex. Bus. Orgs. Code § 22.212).
92 See id. at 1396-1.02(A)(7), 1396-2.14(D) (current versions at Tex. Bus. Orgs. Code § 22.001(1), 22.201).
93 28CR6180 (Section Six); see also 28CR6187 (Art. VI).
94 See 28CR6194 (Art. II, § 3) (“There shall be elected at each annual meeting one Elected Trustee.”); see also 28CR6002 (Diocese Canon 11.3).
95 See 28CR6195 (Art. II, § 10) (“Any Elected Trustee of the Corporation may be removed by a majority of the remaining members of the Board.”).
96 See 28CR6194 (Art. II, § 3).
24 AUS:650116.3
the by-laws (or anywhere else in the record) for removing or replacing Trustees
in any other way.
It is undisputed that the Defendant Trustees were properly elected to the
Board of the Corporation before this dispute arose.97 The Plaintiffs admit this
directly in their motions,98 and indirectly by alleging violation of their duties of
office (which exist only by reason of proper election).99 It is also undisputed that
none have been removed by majority vote of the Board as so constituted.100
Instead, the Plaintiffs’ motions assert that they replaced the Board in toto,
declaring all Trustee positions vacant in 2008 and electing a new Board at a
“special” convention they called on February 7, 2009.101 Nothing in the
Corporation’s by-laws authorize such extraordinary actions, certainly not by a
decree from New York or by a minority group at a rump convention. As the trial
court seated directors contrary to the Corporation’s by-laws, it disregarded the
neutral principles of the Texas Non-Profit Corporation Act.102
97 See 31CR6871 & 31CR6810 (nomination and vote on Salazar); 31CR6912 & 31CR6876 (same—Virden); 31CR6955 & 31CR6920 (same—Barber); 31CR6991, 31CR6959 (same—Patton).
98 See 21CR4306 (stating that the Defendant Trustees “assumed their respective positions as Trustees of the Diocesan Corporation at various times prior to November 2008 by virtue of their qualification under Diocesan canons … and their election to those offices by the Diocesan Convention.”).
• was commissioned as a “Minister of Religion” and tasked with teaching “according to the Word of God”;104
• was required to complete college-level courses in religious subjects and an oral examination by Lutheran faculty;105
• claimed a housing allowance on her taxes that was available only to ministers;106 and
• led prayers three times a day, taught religion four days a week, and taught a school-wide chapel service twice a year.107
By contrast, the Corporation’s Trustees are not ordained; they have no
ministerial title; they undergo no religious training; they lead no religious
services; in fact, the only requirement anywhere in the record is that they be
“laypersons in good standing of a parish” in Fort Worth.108 This is a common
practice; many churches appoint lay members as a board majority (as did both
the Defendants and Plaintiffs here109) to separate the roles of clergy and laity.110
Nothing in Hosanna-Tabor suggests that every member of a church committee
must be treated as a “minister.”
104 See id. at *13.
105 See id.
106 See id.
107 Id. at 14.
108 See 28CR6194 (corporate by-laws); see also 28CR6002 (Diocese canons).
109 See 28CR5963 (¶ 10), 25CR5474.
110 The provision governing the Fund for the Endowment of the Episcopate (funds also at stake here) makes this explicit by requiring that the majority of Board members cannot be members of the clergy. See 28CR5983.
27 AUS:650116.3
Second, Hosanna-Tabor does not address which “church” should be left
alone in doing the hiring and firing. In this case, the Board on which the
Trustees serve was created by the Fort Worth Diocese.111 The Trustees must be
members of the Diocese, are elected by the Diocese, report to the Diocese, and
conduct all affairs by the rules of the Diocese.112 By contrast, TEC’s rules never
mention diocesan corporations or their trustees at all, and until 2009 it played no
role in either. Hosanna-Tabor does not hold that courts must allow one church to
fire the ministers of another.
No one required the Diocese to hold property in a Texas nonprofit
corporation. The question here is whether a church can make that choice and
then disregard all the corporate rules that accompany it. Again, if the directors
of a church corporation are “ministers” who can be removed arbitrarily, then
creditors will shy away and a major benefit of incorporation will be lost.
III. BISHOP IKER IS THE SIXTH TRUSTEE
According to the Corporation’s by-laws and the Diocese’s Constitution,
there is a sixth member of the Corporation’s Board who serves ex officio: the
111 See 28CR5981.
112 See 28CR6002 (Diocese Canon 11); 28CR6179 (articles of incorporation, art. IV(2)); 28CR6193-94 (by-laws art. I(1) & art. II(3)).
28 AUS:650116.3
Diocese’s Bishop.113 Unlike the lay trustees, a bishop is clearly a minister in
ecclesiastical matters. But bishops don’t wear a miter at corporate board
meetings. Under Jones v. Maples, Texas courts must decide which bishop sits on a
board that controls property, even if they cannot decide which bishop should
preach or baptize (see part I(D)). As the two groups here have gone their own
ways and each has its own bishop for ecclesiastical affairs, the only issue here is
property: which of the two is a member of the Corporation’s Board?
In one sense, this issue does not matter much, as it affects only one of six
Trustees. The Board acts by majority vote,114 so adding a single representative of
the minority faction may disrupt but cannot disestablish the status quo. But for
the reasons that follow, under Neutral Principles of Texas law Bishop Iker is the
ex officio Trustee of the Corporation.
A. Under Texas Law, An Association’s Rules Determine Its Leader
Under Texas law, an unincorporated association’s rules (constitution, by-
laws, or other rules) govern its affairs, including which persons are entitled to
113 See 28CR6193 (“The bishop recognized by the body now known as the Episcopal Diocese of Fort Worth (the “Bishop’’) shall be a trustee and a member of the Board.”); 28CR6002 (Diocese Const. Art. 11.2: “The management of [the Corporation’s] affairs shall be conducted and administered by a Board of Trustees of five (5) elected members …, in addition to the Bishop of the Diocese who shall serve as Chairman of the Board or may designate the President or other officer of the corporation to serve as such.”)
114 See 28CR6194 (“[T]he act of a majority of the members of the Board so present at a meeting at which a quorum is present shall constitute the act of the Board”).
29 AUS:650116.3
control its property and funds.115 Accordingly, the person entitled to sit on the
Corporation’s Board ex officio must be decided based on the Diocese’s
Constitution and Canons.116
Interestingly, TEC’s Constitution says exactly the same thing. Since 1789,
TEC’s rules have provided that bishops are chosen by each diocese according to
its own rules.117 At all relevant times here, TEC’s Constitution stated: “In every
Diocese the Bishop . . . shall be chosen agreeably to rules prescribed by the
Convention of that Diocese” (Tab C).118 So seating a Bishop/Trustee on the
Corporation’s Board by any means other than those in the Diocese’s rules would
violate both the Diocese’s Constitution and TEC’s Constitution too.
B. The Diocese Constitution Says Bishop Iker Is The Sixth Trustee
As a matter of law, Bishop Iker is the person entitled to sit ex officio on the
115 Jones v. Maples, 184 S.W.2d 844, 847 (Tex. Civ. App.―Eastland 1944, writ ref’d) (“The Association … has the right that its funds be paid out only on the order of the president and be paid by check of the treasurer, as provided in the constitution and by-laws.” (emphasis added)). Cf. TEX. BUS. ORGS. CODE § 1.102(35)(A) (“‘Governing authority’ means a person or group of persons who are entitled to manage and direct the affairs of an entity under this code and the governing documents of the entity” (emphasis added)); id. § 252.017(b)( (providing that chapter 1 and its definitions apply to nonprofit associations).
116 See Maples, 184 S.W.2d at 848 (holding officers entitled to control association’s property were those “duly elected” under cemetery association’s constitution and by-laws); cf. TEX. PROP. CODE § 204.004(c) (providing that board of homeowners associations “must be elected or appointed in accordance with … the association’s articles of incorporation or bylaws”).
117 See WHITE & DYKMAN, ANNOTATED CONSTITUTION AND CANONS FOR THE GOVERNMENT OF THE
PROTESTANT EPISCOPAL CHURCH IN THE UNITED STATES OF AMERICA, 51 (Church Publishing Inc. 1981) (quoting Article 4 of the 1789 Constitution: “The Bishop or Bishops in every State shall be chosen agreeably to such rules as shall be fixed by the Convention of that State.”) (emphasis added).
118 See 23CR4936 (1979 TEC Const. Art. II, § 1); 24CR5131 (2006 TEC Const. Art. II, § 1); 22CR4608 (2009 TEC Const. Art. II, § 1).
30 AUS:650116.3
Corporation’s Board, as only he has been properly elected in accordance with the
Diocese’s Constitution and Canons.119
The Diocese’s Constitution provides that the Bishop is chosen by majority
votes of both the clergy and the laity at the Diocese’s Convention.120 The
Diocese’s Canons require a large nominating committee to review the candidates
and propose nominees.121 The Convention is not limited to those nominees, but
can select anyone it chooses.122 There is no other procedure in the Diocese’s
Constitution or Canons (or in TEC’s) for selecting a bishop in an existing diocese.
The Plaintiffs admit Bishop Iker was properly elected, and for many years
has served as Bishop and a Trustee of the Corporation.123 Thus, the only dispute
is whether the Plaintiffs had the authority to remove and replace him.
TEC’s Canons allow for removal of a bishop by trial,124 but no one claims a
trial was conducted here. In a footnote in its summary judgment motion, TEC
claimed that Bishop Iker was removed from office by TEC’s Presiding Bishop on
her own authority.125 But the canon cited in that footnote applies only when a
119 28CR5962 (¶ 8).
120 See 28CR5984 (1982 Constitution); 28CR6096 (2006 Constitution).
121 See 28CR5992a-93 (1982 Canons); 28CR6145-46 (2006 Canons).
122 See id.
123 See 21CR4306 (TEC motion); 27CR5883 (Local TEC motion).
124 See 24CR5268 et seq.
125 See 21CR4320 n.10 (TEC motion), 27CR5890 (Local TEC motion); see also 24CR5113.
31 AUS:650116.3
bishop sends a written renunciation of the ordained ministry directly to the
Presiding Bishop with a request for removal.126 In TEC’s 1,470 pages of
summary-judgment evidence, there is no such written renunciation.
Yet the biggest problem for the Plaintiffs is not the authority to remove
Bishop Iker but the authority to replace him. The Plaintiffs allege they elected a
new bishop at a “special” convention in February 2009 called by TEC’s Presiding
Bishop, Katharine Jefferts Schori.127 But since inception, the Diocese’s
Constitution has authorized only the local church authorities to call a special
convention of the Diocese:
The Bishop, or a majority of all members of the Standing Committee, may call a special meeting of the Convention upon thirty (30) days notice thereof. When there is no Bishop, the Standing Committee shall have power to call a special meeting of the Convention, giving thirty (30) days notice thereof.128 (see Tab C)
Here again, TEC’s Constitution and Canons reinforce this requirement
rather than contradict it. TEC’s own Canons expressly prohibit any and all
bishops from performing “episcopal acts” in an existing diocese except by
invitation of the local bishop:
No Bishop shall perform episcopal acts or officiate by preaching, ministering the Sacraments, or holding any public service in a
126 See 24CR5235 (Canon III.12.7(a)) (“If any Bishop of this Church … shall declare, in writing, to the Presiding Bishop a renunciation of the ordained Ministry of this Church, and a desire to be removed therefrom, it shall be the duty of the Presiding Bishop to record the declaration and request so made.”).
127 See 25CR5422.
128 28CR5972 (Art. 4); 28CR6083 (Art. 4).
32 AUS:650116.3
Diocese other than that in which the Bishop is canonically resident, without permission or a license to perform occasional public services from the Ecclesiastical Authority of the Diocese in which the Bishop desires to officiate or perform episcopal acts.129 (see Tab C)
The “Ecclesiastical Authority” is the local bishop, or if there is none then the local
Standing Committee.130 This too is an ancient prohibition dating back to 1789.131
So the Plaintiffs’ problem is they have neither chicken nor egg ― only local
church authorities can call a local convention, and only a local convention can
elect local church authorities. There is no way for TEC’s national officers or a
local minority to call a convention to elect a bishop without having a local bishop
in the first place. This is not an accident; it is part of the historical plan by which
dioceses are independent hierarchies rather than subordinate parts of the
national church.
Neither the Bishop of the Diocese nor the Standing Committee called the
“special” convention in February 2009,132 and the Plaintiffs do not claim
129 See 24CR5232 (2006 TEC Canon III.12.3(e)); see also 24CR5131 (2006 TEC Const. Art. II, § 3) (“A Bishop shall confine the exercise of such office to the Diocese in which elected, unless requested to perform episcopal acts in another Diocese by the Ecclesiastical Authority thereof . . . .”); 23CR4936 (1979 TEC Const. Art. II, § 3) (same).
130 See 23CR4829 (TEC Canon IV.15) (“Ecclesiastical Authority shall mean the Bishop of the Diocese or, if there be none, the Standing Committee or such other ecclesiastical authority established by the Constitution and Canons of the Diocese.”).
131 See WHITE & DYKMAN, ANNOTATED CONSTITUTION AND CANONS FOR THE GOVERNMENT OF THE
PROTESTANT EPISCOPAL CHURCH IN THE UNITED STATES OF AMERICA, 51 (Church Publishing Inc. 1981) (quoting Article 4 of the 1789 Constitution: “And every Bishop of this Church shall confine the exercise of his Episcopal office to his proper Diocese or District, unless requested to ordain or confirm or perform any other act of the Episcopal office, by any Church destitute of a Bishop.”).
132 See 28CR5962 (¶ 9).
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otherwise. There is nothing in any church charter in the voluminous record that
allows the Presiding Bishop in New York to call a special convention in Fort
Worth, no matter what the excuse. Accordingly, for purposes incident to sitting
on the Corporation’s Board of Trustees, no one other than Bishop Iker has been
elected in accordance with the Constitution of the Diocese,133 and no one else is
authorized to sit ex officio on the Board.
C. The Corporation Itself Says Bishop Iker Is The Sixth Trustee
As an independent ground for reversal, the Corporation’s articles and by-
laws both provide that any dispute about who is the ex officio member of the
Board of Trustees must be decided by the Board itself:
In the event of a dispute or challenge regarding the identity of the Bishop of the body now known as the Episcopal Diocese of Fort Worth, the Elected Trustees … shall have the sole authority to determine the identity of the Bishop for purposes of the Corporation’s Articles of Incorporation, as amended from time to time, and these Bylaws.134
This is a standard provision in the corporate world, providing a means for
corporations to certify the names of their authorized representatives.
When the Plaintiffs filed phony amendments to the Corporation’s articles
on the same day they filed this suit,135 the Corporation immediately filed a
133 See id. (¶ 8).
134 See 28CR6187 (Art. VI); 28CR6193 (Art. II, § 2).
135 See 26CR5760-64.
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Certificate of Correction certifying that Bishop Iker was the Bishop/Trustee
recognized by the Board.136 The trial court disregarded this certification on the
ground that it was made pursuant to charter amendments that were ultra vires. If
that ruling was wrong (see part V), then this one is wrong too. The amendments
were adopted in 2006, several years before TEC’s minority group departed from
the Diocese in 2009. Under the Corporation’s charters as they existed when the
Plaintiffs departed, the trial court erred in disregarding what the Board of
Trustees decided.
IV. TEC HAS NO TRUST INTEREST
Under Neutral Principles of Texas law, the Texas Trust Code bars any trust
claims by TEC. But again, the trial judge did not apply the Texas Trust Code; he
struck out references to “trust law” from the Order drafted by TEC’s counsel
(Tab A-2).137 Instead, in paragraph 2 of the Order he granted summary
judgment on TEC’s trust claim,138 holding that all the property must be used only
for the mission of TEC:
2. As a further result of the principles set out by the Supreme Court in Brown and applied in Texas to hierarchical church property disputes since 1909, the Court also declares that, because The Episcopal Church is hierarchical, all property held by or for the Diocese may be used only
136 See 26CR5766-67.
137 See 32CR6995-96; cf. 32CR7126-27.
138 See 21CR4310.
35 AUS:650116.3
for the mission of the Church, subject to the Church’s Constitution and canons. 139
The legal basis stated for this holding was “the principles set out by the Supreme
Court in Brown” (i.e., constitutionality).140 The trial court erred by simply
deferring to TEC’s claim that it held a valid trust rather than looking to the
documents to see if that claim was actually true.
A. Under Texas Law, A Realty Trust Must Be Created And Signed By The Settlor
The Plaintiffs’ motions claimed TEC has an express trust interest in the
Diocese’s property,141 citing two sentences in TEC’s 159 pages of canons, the so-
called “Dennis Canon”:
All real and personal property held by or for the benefit of any Parish, Mission or Congregation is held in must for this Church and the Diocese thereof in which such Parish, Mission or Congregation is located. The existence of this trust, however, shall in no way limit the power and authority of the Parish, Mission or Congregation otherwise existing over such property so long as the particular Parish, Mission or Congregation remains a part of, and subject this Church and its Constitution and Canons.142
142 23CR4646 (Canon I.7.4). TEC also asserts some kind of trust based on provisions in the Diocese’s Constitutions and Canons “prohibiting the encumbrance or alienation of property without the consent of the Bishop and Standing Committee.” See 21CR4359. This claim is baseless as there is no evidence whatsoever that the Defendants sold or borrowed against the Diocese’s property after this dispute arose, and for reasons stated herein the Plaintiffs are not the proper Bishop or Standing Committee to grant consent.
36 AUS:650116.3
Adopted in 1979 immediately after Wolf,143 this amendment was placed in TEC’s
Canons rather than its Constitution, which meant it did not have to be sent to the
dioceses for review and approval at a second General Convention.144 For several
reasons, this trust claim is invalid under Texas law.
First, property can be placed in a trust only by its owner.145 Since at least
1943, Texas statutes have required either a declaration, a deed, or a will from an
owner to place property in trust.146 “Declarations of the purported beneficiary of
the trust are not competent to establish the trust.”147 TEC never owned any
property here, so the Dennis Canon is an invalid attempt to declare a trust over
somebody else’s property.
143 See 22CR4319, 27CR5869.
144 Compare 23CR4939 (Art. XI) (requiring amendments to TEC’s Constitution to be passed at two successive General Conventions, and “be sent to … every Diocese” and “be made known to the Diocesan Convention” before final adoption) with 23CR4991 (Canon V.1) (allowing amendments to TEC’s Canons at one General Convention).
145 See TEX. PROP. CODE § 112.002 (“A trust is created only if the settlor manifests an intention to create a trust.”); see also id. § 111.004(4); State v. Rubion, 308 S.W.2d 4, 10 (Tex. 1957); RESTATEMENT
(SECOND) OF TRUSTS § 351 (“A charitable trust is created only if the settlor properly manifests an intention to create a charitable trust.”).
146 See TEX. PROP. CODE § 112.001 (“A trust may be created by: (1) a property owner’s declaration that the owner holds the property as trustee for another person; (2) a property owner’s inter vivos transfer of the property to another person as trustee for the transferor or a third person; (3) a property owner’s testamentary transfer to another person as trustee for a third person …”); accord, TEXAS TRUST ACT § 7 (formerly TEX. REV. CIV. STAT. art. 7425b-7), Act of April 19, 1943, 48th Leg., R.S., ch. 148, § 7, 1943 TEX. GEN. LAWS 232, 234.
147 Best Inv. Co. v. Hernandez, 479 S.W.2d 759, 763 (Tex. Civ. App.―Dallas 1972, writ ref’d n.r.e.); Wise v. Haynes, 103 S.W.2d 477, 483 (Tex. Civ. App.―Texarkana 1937, no writ) (“[T]he declarations of the cestui que trust are not competent to establish the trust.”).
37 AUS:650116.3
Second, the statute of frauds requires that a trust involving realty must be
in writing and signed by the settlor.148 This has been Texas law since 1943.149 As
the Dennis Canon was not signed by the Diocese or the Corporation, it is invalid
in Texas.
TEC alleges that the Diocese adopted the Dennis Canon in a general
accession clause, which stated that “The Church in this Diocese accedes to the
Constitution and Canons of the Episcopal Church.”150 But the statute of frauds
requires “written evidence of the trust’s terms bearing the signature of the
settlor.”151 The accession clause contains no such terms; it doesn’t even mention
real property or a trust.
Moreover, construing this general accession clause to incorporate the
Dennis Canon would violate the rule of construction that specific provisions
prevail over general ones.152 In the same Constitution, the Diocese stated twice
that no conveyance or encumbrance of church property would be valid without
148 See TEX. PROP. CODE § 112.004 (“A trust in either real or personal property is enforceable only if there is written evidence of the trust’s terms bearing the signature of the settlor or the settlor’s authorized agent….”).
149 See also TEXAS TRUST ACT § 7 (formerly TEX. REV. CIV. STAT. art. 7425b-7), Act of April 19, 1943, 48th Leg., R.S., ch. 148, § 7, 1943 Tex. Gen. Laws 232, 234 (“Provided, however, that a trust in relation to or consisting of real property shall be invalid, unless created, established, or declared … [b]y a written instrument subscribed by the trustor or by his agent thereunto duly authorized by writing; …”).
150 See 28CR5969 (Art. 1).
151 See TEX. PROP. CODE § 112.004.
152 See Exxon Corp. v. Emerald Oil & Gas Co., L.C., 348 S.W.3d 194, 215 (Tex. 2011) (holding specific contractual provision controls over general provision).
38 AUS:650116.3
the written consent both of the Corporation and of the parish that built and
occupied it.153 These provisions were not boilerplate; the delegates to the
Primary Convention added them by floor amendment seven weeks before
joining TEC.154 Treating the accession as creating a realty trust would render
these more specific clauses meaningless.155
Finally, “accession” is a term of art from the law of treaties; it is “the act
whereby a State accepts the offer or the opportunity of becoming a party to a
treaty already signed by some other States.”156 It is well-settled in international
law that a party may qualify accession to a treaty unless reservations are
expressly forbidden,157 or an opposing party promptly objects.158 Here, it is
153 See 28CR5981(1982 Diocese Constitution), 28CR6003 (1982 Diocese Canons); see also 28CR6093 (2006 Diocese Constitution), 28CR6121 (2006 Diocese Canons). TEC’s own Canons contain the same requirement that property cannot be sold or encumbered except with the written consent of the Diocese. See 23CR4950 (1979 TEC Canons); 24CR5166 (2006 TEC Canons).
154 See 28CR6056-57.
155 Grohman v. Kahlig, 318 S.W.3d 882, 887 (Tex. 2010); see also Bell v. Low Income Women of Texas, 95 S.W.3d 253, 262 (Tex. 2002) (“Rules of constitutional interpretation dictate that all clauses must be given effect.”).
156 Avero Belgium Ins. v. American Airlines, Inc., 423 F.3d 73, 79 n.7 (2d Cir. 2005) (internal quotations omitted) (quoting Lord McNair, THE LAW OF TREATIES 149 (1961); see also BLACK’S LAW DICTIONARY 15 (9th ed. 2009) (defining “accession” as “3. Int’l law. A method by which a nation that is not among a treaty’s original signatories becomes a party to it.”); RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW § 312, comment’d (1987) (“‘Accession’ refers to the action of a state in expressing its consent to be bound by an agreement drafted by other states through a procedure in which the acceding state did not participate, or which for other reasons the acceding state did not sign.”).
157 See RESTATEMENT (THIRD) OF FOREIGN RELATIONS LAW § 312(1): “(1) A state may enter a reservation to a multilateral international agreement unless (a) reservations are prohibited by the agreement, (b) the agreement provides that only specified reservations not including the reservation in question may be made, or (c) the reservation is incompatible with the object and purpose of the agreement.” As the Dennis Canon was not adopted until 1979 and unqualified accessions were not required until 1983, it is hard to argue that either was critical to the object and purpose of the two-hundred-year-old denomination before those dates.
39 AUS:650116.3
undisputed that TEC did not begin requiring an unqualified accession from new
dioceses until January 1, 1983.159 But the Fort Worth Diocese was admitted the
day before, December 31, 1982.160 Since TEC did not require an unqualified
accession in 1982, the Diocese did not make one ― it qualified its accession with
specific limits regarding its property. TEC received the Diocese’s Constitution
and Canons for review, and then raised no objection but certified admission on
that basis.161 Thus, while the accession clause consented to TEC’s charters
generally, the Diocese’s qualified accession did not consent to the Dennis Canon.
B. Any Alleged Trust Was Revoked Twenty Years Ago
Even if a trust in favor of TEC once existed, it has long since been revoked.
Unlike most states, Texas law declares all trusts revocable unless the trust itself
expressly says otherwise: “A settlor may revoke the trust unless it is irrevocable
by the express terms of the instrument creating it or of an instrument modifying
158 Id. § 312(3) (“A reservation established with regard to another party in accordance with Subsection (2)(c) modifies the relevant provisions of the agreement as to the relations between the reserving and accepting state parties but does not modify those provisions for the other parties to the agreement inter se.”); id. comment e (“[A] reservation is considered to have been accepted by a state unless it raises an objection to it within twelve months after notification of the reservation or by the date when it expressed its consent to be bound, whichever is later.”).
159 See 20CR4044 (TEC 3rd Amd. Pet. ¶35); 20CR4071 (Indiv. Pls. 6th Amd. Pet. ¶ 39); 21CR4208 (4th Amd. Ans. to Corp. ¶ 50).
160 See 28CR5959, 28CR5964 (¶18).
161 See 28CR6162. Further, the bishop who presided at the Primary Convention and became the Diocese’s first Bishop was a member of TEC’s Executive Council. See 28CR6170-74.
40 AUS:650116.3
it.”162 The rule is different in most other states, as it was in Texas before 1943.163
But in Texas, “[t]rusts created under Texas law are revocable, unless made
specifically irrevocable.”164
Nothing in the Dennis Canon or any other church charter expressly
created an irrevocable trust,165 so any alleged trust in favor of TEC was revocable.
That is what the Diocese did in 1989 by amending its Canons to state:
Property held by the Corporation for the use of a Parish, Mission or Diocesan School belongs beneficially to such Parish, Mission or Diocesan School only. No adverse claim to such beneficial interest by the Corporation, by the Diocese, or by The Episcopal Church of the United States of America is acknowledged, but rather is expressly denied.166
This was adopted 20 years before the current controversy arose, and the Plaintiffs
do not allege it was ultra vires. As a matter of law, any beneficial interest TEC
ever had in the property in this case was validly revoked.
162 TEX. PROP. CODE § 112.051(a).
163 See TEXAS TRUST ACT § 7 (formerly Tex. Rev. Civ. Stat. art. 7425b-41), Act of April 19, 1943, 48th Leg., R.S., ch. 148, § 7, 1943 Tex. Gen. Laws 232, 234 (“Every trust shall be revocable by the trustor during his lifetime, unless expressly made irrevocable by the terms of the instrument creating the same or by a supplement or amendment thereto.”); Monday v. Vance, 49 S.W. 516, 518 (Tex. 1899); Citizens Nat. Bank of Breckenridge v. Allen, 575 S.W.2d 654, 657 (Tex. App.―Eastland 1978, writ ref’d n.r.e.) (“Fleck did not involve the application of the Texas Trust Act because the alleged trusts in that case were created before April 19, 1943, the effective date of the act. At that time, trusts in Texas, as is presently true in the majority of states, were considered irrevocable unless an expressed power of revocation was reserved in the terms of the trust.”).
164 Ayers v. Mitchell, 167 S.W.3d 924, 930 (Tex. App.―Texarkana 2005, no pet.).
165 See 28CR5964 (¶¶ 14, 15, & 17).
166 See 28CR6122 (Canon 18.4); see also 28CR6154-55 (showing adoption in 1989).
41 AUS:650116.3
C. Texas Law Of Cy Pres Does Not Apply Here
The Plaintiffs’ motions did not assert any implied trust, and for good
reason: equity may imply a trust for one who pays for property,167 but of course
TEC did not. Yet in a response, some individual Plaintiffs argued that the
property here could be diverted to them under caselaw involving the cy pres
doctrine.168
But the cy pres doctrine applies only when a charitable purpose fails, and
serves to prevent that property from returning to private use.169 There has been
no failure here. The same parishes that built and maintained the sanctuaries and
fellowship halls are using them for the same purposes today. That purpose will
fail only if TEC succeeds in taking all the property for itself. There is no record
evidence that anyone intended to donate any of this property to TEC rather than
the Diocese or a local parish; to the contrary, all donors have known since 1982
that property contributed in the Diocese would be owned by the Corporation.
The cy pres doctrine does not allow those who place money in the offering
plate to get a refund when they disagree with the pastor, or demand transfer of
past gifts to a new church. That rule would inevitably embroil the courts in all
167 See Tricentrol Oil Trading, Inc. v. Annesley, 809 S.W.2d 218, 220 (Tex. 1991); Nolana Dev. Ass’n v. Corsi, 682 S.W.2d 246, 250 (Tex. 1984).
168 See 30CR6499-6501.
169 See Foshee v. Republic Nat. Bank of Dallas, 617 S.W.2d 675, 678 (Tex. 1981); Coffee v. Wm. Marsh Rice Univ., 408 S.W.2d 269, 285 (Tex. Civ. App.—Houston 1966, writ ref’d n.r.e.).
42 AUS:650116.3
sorts of church doctrinal and managerial disputes. Cy pres applies when a
charity completely fails; it does not apply to cases in which donors (much less
non-donors like TEC) don’t approve of a charity’s management.
V. THE 2006 AMENDMENTS CANNOT BE ULTRA VIRES
The Board of Trustees amended the Corporation’s articles and by-laws by
unanimous vote in 2006, several years before the Plaintiffs withdrew.170 Under
the Texas Non-Profit Corporation Act, the Trustees (like any other corporate
directors) had the power to adopt these amendments.171 But in paragraph 3 of
the Order, the trial court granted summary judgment that some of these
Amendments were “ultra vires and void” citing cases based on Brown v. Clark:
3. Applying those same cases and their recognition that a local faction of a hierarchical church may not avoid the local church’s obligations to the larger church by amending corporate documents or otherwise invoking nonprofit corporations law, see Green Westgate Apostolic Church, 808 S.W.2d 547, 552 (Tex. App.—Austin 1991, writ denied); Presbytery of the Covenant, 552 S.W.2d 865 at 870-872; Church of God in Christ, Inc. v. Cawthon, 507 F.2d 599, 600-02 (5th Cir. 1975); Norton v. Green, 304 S.W.2d 420, 423-24 (Tex. Cir. App.—Waco 1957, writ ref’d n.r.e.), the Court further declares that the changes made by Defendants to the articles and bylaws of the Diocesan Corporation are ultra vires and void.
On the basis of that declaration, the trial court ordered the Diocese to turn over
the Corporation and all its property to TEC. That was error.
170 28CR6175-76, 28CR6190.
171 See TEX. REV. CIV. STAT. art. 1396-4.02(A)(2) (amendments to articles of incorporation); Art. 1396-2.09(B) (amendments to by-laws) (current versions at Tex. Bus. Orgs. Code §§ 22.107, 22.102).
43 AUS:650116.3
A. The Amendments Are Irrelevant
First, this issue is a red herring.172 None of the 2006 Amendments make
any difference in deciding this case.
The Plaintiffs never moved for summary judgment on the amendments to
the Diocese’s Constitution deleting references to TEC. Since TEC has no power
to control any diocese’s constitution, it has hard to imagine on what basis they
could. The Plaintiffs only challenged amendments to the Corporation’s articles
and by-laws, none of which transferred property, changed the Trustees, or
modified the terms or beneficiaries of any trust.173
The Plaintiffs’ motions complained of only three changes ― two deletions
and one addition.174 The deletions to a section describing the purposes of the
Corporation are immaterial as a matter of law:
(1) To receive and maintain a fund or funds or real or personal property, or both, from any source including all real property acquired for the use of the Episcopal Diocese· of Fort Worth as well as the real property of all parishes, missions, and diocesan institutions. Subject to the limitations and restrictions hereinafter set forth, to use and apply the whole or any part of the income therefrom and the principal thereof exclusively for charitable, religious, scientific, literary, or educational purposes
172 See BLACK’S LAW DICTIONARY 1391 (9th ed. 2009) (defining “red herring” as “[a]n irrelevant legal or factual issue, usu. intended to distract or mislead.”).
173 The Plaintiffs don’t even challenge most of the Amendments adopted by the Corporation’s Board in 2006. Compare 28CR6179-81 (1983 articles) with 28CR6193-99 (2006 articles) (conforming the articles to the Diocese’s Constitution by noting that the Bishop is a Trustee ex officio, and updating the registered office and agent).
174 See 21CR4310, 21CR4363-64, 27CR5887.
44 AUS:650116.3
either directly or by contributions to organizations that qualify as exempt organizations under Section 501 (c)(3) of the Internal Revenue Code and its Regulations as they now exist or as they may hereafter be amended.
(2) The property so held pursuant to (1) supra shall be administered in accordance with the Constitution and Canons of the Episcopal Diocese of Fort Worth Bylaws of the Corporation as they now exist or as they may hereafter be amended.
Deleting the “including” phrase in (1) is immaterial because with or without the
change the Corporation can still hold property from “any source.” The deletion
in (2) is immaterial because the by-laws of the Corporation still require the
Corporation’s affairs to be conducted “in conformity” with the Episcopal Diocese
of Fort Worth,175 and there is no summary-judgment evidence that the by-laws
are inconsistent in any way with the Diocese’s Constitution and Canons.
The Plaintiffs’ only substantive complaint is the addition allowing the
Board to determine the qualifications of one of its officers ― a standard provision
in the corporate world. Surely a Texas corporation can amend its charters to
allow the board to certify its own officers. But in any event, as the Plaintiffs have
no power to pick a new bishop/trustee (see part III supra), the property dispute
here does not turn on the validity of this amendment.
As voiding these Amendments would not affect property, under Jones v.
Maples this is a nonjusticiable claim.
175 See 28CR6193 (by-laws Art. I).
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B. Plaintiffs Have No Standing To Assert Ultra Vires Claims
The TEC motions argued that the 2006 Amendments were “ultra vires and
void.” But none of the Plaintiffs have standing under Texas law to assert an ultra
vires claim. By Texas statute, an ultra vires act can be brought against a
corporation only by (1) a member seeking to enjoin the action, (2) a derivative
claim by a member, or (3) the Attorney General.176 The Corporation has no
members (as allowed by Texas law177), so the first two don’t apply. And the
Attorney General was given notice of this suit but declined to intervene.178 No
court can ignore a Texas statute limiting standing. As the Plaintiffs have no
standing by statute, the trial court erred by granting them summary judgment.
C. Amended Articles Cannot Be Ultra Vires
Even if the Plaintiffs could overcome their standing problem, amending
articles of incorporation cannot be ultra vires. To be ultra vires, a corporate act
must be “beyond the scope of power allowed or granted by a corporate charter
or by law.”179 But articles of incorporation state the corporation’s purposes,180
176 See TEX. REV. CIV. STAT. art. 1396-2.03(B) (current version at TEX. BUS. ORGS. CODE § 20.002(c)).
177 See 28CR6176 (¶ 7); see also TEX. REV. CIV. STAT. art. 1396-2.08(A) (“A corporation … may have no members.”) (current version at Tex. Bus. Org. Code § 22.151(a)).
178 See TEX. CIV. PRAC. & REM. CODE § 37.006(b).
179 BLACK’S LAW DICTIONARY 1662 (9th ed. 2009); see Whitten v. Republic Nat. Bank of Dallas, 397 S.W.2d 415, 417 (Tex. 1965).
180 See id. at 1396-2.01(A).
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and by statute “[a] corporation may amend its articles of incorporation from time
to time, in any and as many respects as may be desired.”181 Thus, substantive
amendments to articles of incorporation cannot be ultra vires as the amendment
itself makes the new purposes intra vires (“within the power”). If the rule were
otherwise, corporations could never amend their articles of incorporation, as
every change would be ultra vires according to the previous version.
Similarly, a corporation’s board can amend the by-laws without any
restrictions unless the articles expressly state one.182 Since inception, the
Corporation’s articles have contained no such restrictions;183 to the contrary, they
expressly recognized that by-laws “may be adopted and from time to time
amended.”184
The Plaintiffs’ ultra vires claim has nothing to do with the Corporation’s
charters or Texas law. Their claim is based on a religious belief: that the
Corporation is subordinate to TEC and cannot do anything of which TEC 181 TEX. REV. CIV. STAT. art. 1396-4.01(A) (current version at Tex. Bus. Org. Code § 3.051).
182 See TEX. REV. CIV. STAT. Art. 1396-2.09(B) (current version at Tex. Bus. Orgs. Code § 22.102(c)):
A corporation’s board of directors may amend or repeal the corporation’s by-laws, or adopt new by-laws, unless: (1) the articles of incorporation or this Act reserves the power exclusively to the members in whole or in part; (2) the management of the corporation is vested in its members; or (3) the members in amending, repealing, or adopting a particular by-law expressly provide that the board of directors may not amend or repeal that by-law.
183 See 28CR6176; 28CR6179-82.
184 See 28CR6180.
47 AUS:650116.3
disapproves. In some cases, a nonprofit corporation may be controlled by a
religious or charitable association,185 but that must appear somewhere in the
corporate and association charters,186 as it does between the Corporation and the
Diocese. There is nothing like that between the Corporation and TEC; the two
have never had any kind of affiliation, and TEC has never had any control,
involvement, or even notice of the Corporation’s activities. If Texas courts can
set aside corporate actions as ultra vires based on a religious belief that appears
nowhere in the corporate charters or chain of control, it will have serious
consequences for all Texas nonprofits.
The First Amendment does not exempt churches from compliance with
every state law.187 If TEC wanted the right to veto the Corporation’s actions, it
should have acquired that right as a condition to membership in some legally
cognizable form. But it did not. As nothing in any church charter prohibits the
2006 Amendments, TEC cannot make the First Amendment do the dirty work
that it never took the trouble to require before.
VI. PLAINTIFFS CANNOT ASSERT TORT CLAIMS FOR THE DIOCESE
Some Plaintiffs have filed tort claims against the individual Defendants,
185 See TEX. REV. CIV. STAT. 1396-2.14(B) (current version at TEX. BUS. ORGS. CODE § 22.207(a)).
186 See TEX. BUS. ORGS. CODE § 22.207(b).
187 See Employment Div. v. Smith, 494 U.S. 872, 879 (1990).
48 AUS:650116.3
including claims for conversion, misappropriation of trade-name, breach of
fiduciary duty, and trespass to try title. Defendants’ motion for summary
judgment asked the trial court to dismiss these claims as they belong to the
Diocese and the Corporation rather TEC or the individual Plaintiffs.188
The Plaintiffs have not alleged derivative claims on behalf of the Diocese
or Corporation. Nor can they do so now, as they are no longer members of
either. The Corporation has never had any “members,”189 and the Diocese’s
“members” are those with the right to participate in its convention.190 All of the
individual Plaintiffs have dissociated themselves from membership in the
Diocese and no longer attend its annual convention.191 As no Plaintiffs are
“members” of the Corporation or Diocese, they cannot assert tort claims on
behalf of those entities.192
188 See 28CR5950-53.
189 See 28CR6176 (¶ 7).
190 See TEX. REV. STAT. art. 1396―70.01, § 2(1) (“‘Member’ means a person who, under the rules or practices of a nonprofit association, may participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of policy of the nonprofit association.”) (current version at Tex. Bus. Orgs. Code § 252.001(1)).
191 See 28CR5963; see also 28CR5970, 28CR5992 (1982 Constitution and Canons); 28CR6081, 28CR6105 (2006 Constitution and Canons) (both defining “members” of the Diocesan Convention as (1) the Bishop, (2) priests canonically resident in the Diocese, and (3) lay delegates chosen by parishes in union with the Convention).
192 See Chu v. Hong, 249 S.W.3d 441, 444 (Tex. 2008) (conversion); Express One Int’l, Inc. v. Steinbeck, 53 S.W.3d 895, 899 (Tex. App.―Dallas 2001, no pet.) (misuse of trade-name); TEX. REV. STAT. Art. 1396–2.28 (breach of fiduciary duty); Martin v. Amerman, 133 S.W.3d 262, 265 (Tex. 2004) (trespass to try title); In re Slusser, 136 S.W.3d 245, 248 (Tex. App.―San Antonio 2004, no pet.) (quiet title).
49 AUS:650116.3
If the trial court was wrong about who is entitled to the property at issue
here, then it was also wrong not to grant the Defendants’ motion for summary
judgment against these tort claims. Accordingly, this Court should render the
judgment the trial court should have rendered.193
CONCLUSION
If given a chance, this case might have been settled amicably with five or
six churches leaving the Diocese with their church buildings intact and the vast
majority continuing in it. But that opportunity was lost when TEC demanded
everything held by anybody, even if that included local churches where TEC had
not a single adherent. Based on the deeds, the church constitutions and canons,
and Neutral Principles of Texas law, the Plaintiffs are not entitled to any of this.
This case is not a contest about which bishop or group TEC can claim as its
own; it is about what property TEC can claim as its own. The only way it can
take property it has never owned or paid for is if Texas courts defer to whatever
TEC says ― even if that is contrary to its own church rules. Under Neutral
Principles of Texas law, the Defendants are entitled to summary judgment
against the Plaintiffs’ claims.
193 See Gilbert Texas Const., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010).
50 AUS:650116.3
Respectfully submitted,
By: /s/ Scott A. Brister
Scott A. Brister State Bar No. 00000024 Kendall M. Gray State Bar No. 00790782 Gavin B. Justiss State Bar No. 24070027 ANDREWS KURTH LLP 111 Congress Ave., Suite 1700 Austin, Texas 78701 512.320.9200 512.320.9292 - Fax [email protected][email protected] Shelby Sharpe State Bar No. 18123000 SHARPE TILLMAN & MELTON 6100 Western Place, Ste. 1000 Fort Worth, TX 76107 Telephone: (817) 338-4900 Facsimile: (817) 332-6818 [email protected] R. David Weaver State Bar No. 21010875 THE WEAVER LAW FIRM 1521 N. Cooper St., Ste. 710 Arlington, TX 76011 Tel: 817-460-5900 Fax: 817-460-5908 [email protected]
ATTORNEYS FOR THE EPISCOPAL DIOCESE OF FORT WORTH, et al.
51 AUS:650116.3
CERTIFICATE OF SERVICE
I hereby certify that the foregoing Appellants’ Brief was served upon counsel for all parties, as indicated on the attached service list, by electronic transmission, on this the 6th day of February, 2012.
/s/ Scott A. Brister Scott A. Brister
SERVICE LIST
Jonathan D. F. Nelson State Bar No: 14900700 JONATHAN D.F. NELSON, P.C. 1400 West Abram Street Arlington, Texas 76013 Fax: 817.274.9724 [email protected] Kathleen Wells State Bar No. 02317300 3550 Southwest Loop 820 Fort Worth, Texas 76133 Tel: 817.332.2580 Fax: 817.332.4740 [email protected] William D. Sims, Jr. State Bar No. 18429500 Thomas S. Leatherbury State Bar No. 12095275 VINSON & ELKINS L.L.P. 2001 Ross Avenue, Suite 3700 Dallas, Texas 75201-2975 Fax: 214.999.7792 [email protected]
Frank Hill State Bar No. 09632000 HILL GILSTRAP P.C. 1400 W. Abram Street Arlington, TX 76013 Fax: 817.861.4685 [email protected] Sandra Liser State Bar No. 17072250 Naman Howell Smith & Lee, LLP 306 West 7th Street, Suite 405 Fort Worth, Texas 76102 Fax: 817.509.2060 [email protected] David Booth Beers Adam Chud Goodwin Procter, LLP 901 New York Avenue, N.W. Washington, D.C. 20001 Fax: 202.346.4444 [email protected][email protected] Mary E. Kostel The Episcopal Church c/o Goodwin Procter LLP 901 New York Avenue, N.W. Washington, D.C. 20001 Fax: 202.346.4444 [email protected]
/s/ Scott A. Brister Scott A. Brister
APPENDIX
Tab A Summary Judgment Orders
[A-1] Final Order on Summary Judgment (2/8/11)
[A-2] Initial Order on TEC Summary Judgment (1/21/11)
[A-3] Initial Order on Local TEC Summary Judgment (1/21/11)
[A-4] Order Granting Severance (4/5/11)
Tab B Chart: Neutral Principles in the States
Tab C Excerpts from Church Charters
Tab D Excerpts from Texas Non-Profit Corporation Act
Tab E Excerpts from Texas Nonprofit Association Act
Tab F Excerpts from Texas Trust Code
THE EPISCOPAL CHURCH, et al,,
VS.
CAUSE NO. 141-237105-09
)
)FRANKLIN SALAZAR, et al. )
AMENDED ORDER ON SUMMARY JUDGMENT
This Amended Order on Summary Judgment supersedes the Orders on Summary
Judgment signed by the Court on January 21,2011.
On January 14, 201 I, came on for consideration (1) The Episcopal Church’s Motion for
Summary Judgment, (2) "llae Local Episcopal Parties’ Amended Motion for Partial Summary
Judgment; and (3) Defendants’ Motion for Partial Summary Judgmeat. Having considered the
pleadings, motions, any responses and replies, evidence on file subject to the Court’s rulings on
the objections to that evidence, the governing law, and arguments of counsel, the Court orders as
follows:
The Episcopal Church’s Motion for Summary Judgment is GRANTED in part.
The Local Episcopal Parties’ Amended Motion for Partial Summary Judgment is
GRANTED in part.
Defendants’ Motion for Partial Summary Judgment is DENIED.
The Court hereby issues a DECLARATORY JUDGMENT pursuant ~o Texas Civil
Practice and Remedies Code §§ 37.00l, et seq., declaring that:
1. The Episcopal Church (the "Church") is a hierarchical church ~s a matter of law,
and since its formation in 1983 the Episcopal Diocese of Fort Worth (the "Diocese") has been a
constituent part of the Church. Because the Church is hierarchical, the Court follows Texas
precedent governing hierarchical church property disputes, which holds that in the event of a
dispute among its members, a constituent part
{01407433.DOC ~. )AMENDED ORDER ON SUMMARY JUDGMENT
IN THE DISTRICT COURT OF
TARRANT COUNTY, TEXAS
141ST DISTRICT COURT
7126
TAB A-1
THE EPISCOPAL CHURCH, et al.,
VS.
FRANKLIN SALAZAR, et al.
CAUSE NO. 141-237105-09
IN THE DISTRICT COURT OF
TARRANT COUNTY, TEXAS
141 ST DISTRICT COURT
AMENDED ORDER ON SUMMARY JUDGMENT
This Amended Order on Summary Judgment supersedes the Orders on Summary
Judgment signed by the Court on January 21, 2011.
On January 14,2011, came on for consideration (1) The Episcopal Church's Motion for
Summary Judgment, (2) The Local Episcopal Parties' Amended Motion for Partial Summary
Judgment; and (3) Defendants' Motion for Partial Summary Judgment. Having considered the
pleadings, motions, any responses and replies, evidence on file subject to the Court's rulings on
the objections to that evidence, the governing law, and arguments of cOWlsel, the Court orders as
follows:
The Episcopal Church's Motion for Summary Judgment is GRANTED in part.
The Local Episcopal Parties' Amended Motion for Partial Summary Judgment is
GRANTED in part.
Defendants' Motion for Partial Swnmary Judgment is DENIED.
The Court hereby issues a DECLARATORY JUDGMENT pursuant to Texas Civil
Practice and Remedies Code §§ 37.001, et seq., declaring that:
1. The Episcopal Church (the "Church") is a hierarchical church as a matter of law,
and since its fonnation in 1983 the Episcopal Diocese of Fort Worth (the "Qiocese") has been a
constituent part of the Church. Because the Church is hierarchical, the Court follows Texas
precedent governing hierarchical church property disputes, which holds that in the event of a
dispute among its members, a constituent part of a hierarchical church consists of those
(OI4117433.DOC \ jAMENDED ORDER ON SUMMAR\, JlIDG'VIENT PAGE 1
·5
individuals remaining loyal to the hierarchical church body. See, e.g. Brown v. Clar~ 102 Tex.
323, 116 S.W. 360 (1909); Presbytery of the Covenant v. First Presbyterian Church, 552 S,W.2d
865 (Tex.Civ.App.. Texarkana 1977, no writ). Under the law articulated by Texas courts, those
are the individuals who remain entitled to the use and control of the church property, ld.
2. As a further result of the principles set out by the Supreme Court in Brown and
applied in Texas to hierarchical church property disputes since 1909, the Court also declares that,
because The Episcopal Church is hierarchical, all property held by or for the Diocese may be
used only for the mission of the Church, subject to the Church’s Constitution and canons.
3. Applying those same cases and their recognition that a local faction of a
hierarchical church may not avoid the local church’s obligations to the larger church by
amending corporate documents or otherwise invoking nonprofit corporations law, see Green
ORm~t oN SUMMARY~(~11~ff~t111:01:~2 AM [¢e~ ~mcl~lllme]
J III
6996
TAB A-2Jan. 20. 2011 11:08AM No.3536 P. 6
a. ·~Idalltts did not satisfY their urdcn in support of their motion by
er. the four neutral principl factors require the conclusion
ponse to Defendants'
The Episcopal Church;
The Te:t:u: NOD-Pro Corporations Act permits su
iii. 's longstanding canons req . church property be
iv. ed to those rules when it b a Diocese in
1983.
The Court hereby ORDERS the Defendants to surrender all Diocesan property. as well as
oontrol of the Diocesan Co:rpomtion, to the Diocesan plaintiffs and to provide IQ accounting of
all DiOCC'.'lall assets within It!:!.. days of this Order.
ORDER ON SllMMARY JtJDGMENT
6 of 1 mOl201l11 :07:52 AM [Central Stanlhrd nnel PAGE 3
6996
JAR, 20, 2011 11:08A~ No. 3536 P, 7
The Com~ he.by ORDERS the Defendants not to hold themselv~ out as lr.aden of the
Diocese.
Signed ~:xis ~ d~ty of January, 2011.
PRESIDING
PAGI~ 4
6997
TAB A-2Jan,20, 2011 11: 08AM No. 3536 P. 7
The Court hereby ORDERS the DefeDdants not to hold themselves out as leaders of the
Diocese.
Signed this ~ day of January, 2011.
ORDER. ON SUMM:ARY JUDGMENT
70171f201201111:07:5i AM leentra! SIIJdI1I Tinel
)i?-r~ EPRESIDING
ACERTI~FEB .. ATTEST:
THOMAS . LDER DISTRICT CLERK
TARRANT U~ ~ .... ...--; PAGE 4
6997
To: Page 3 cd3 2011-01-20 11;13:47 CST 1:2149997792 Frem: Tom Leatherbu~i
THE EPISCOPAL CHURCH, et
VS,
FRANKLIN SALAZAR. et al.. ~
CAUSE NO. 141-237105-09
))))
IN THE DISTRICT COURT OF
TARRANT COUNTY, TEXAS
141 ST DISTRICT COURT
ORDER GRANTING LOCAL EPISCOPAL PARTIES’AMEND.I~]) MOTIO.N FOR PARTIAL SUMMARY JUDGMENT
On January 14, 201l, came on for consideration (1) the Local Episcopal Parties’
Amended Motion for Partial Summary Judgmeet2 and (2) the Defendants’ Motion for Parti~
Summ~ry Judgment. The Court considered the pleadings, motions, any responses and r~lies,
the evidence on file subject to the Co~’s rulings on the objectiens to the ev~de~co 0ad the
motions, the governing law, and arguments of oounsel, and the Court orders as follows:
The Local EpiscopM Parties’ Amended Motion for Partial Sumrrmry Judgtn~at is
GR.AN~ ED,
The Defendmats’ Motion for Partial Summary Judgment is DENIED.
The pro’ties should ¢onfer~ trod the Local Episcopal Parades should submit a more detailed
declaratory order within ten days of the date of this order.
Signed thi~.~, day of January, 2011.
’ The style is being shortenecL at the mq.ue, st or’the Clerk’s ot~ee. It does not imply that may parties are omitted ordroppe.d ~rom the
~ The Local Episcopal Parties eotmst of the Rt. Key. C. Wallis Okl, Robert Hicks. Floyd McKaxeely, Shzrmon Shi~p,David Skelton, Whir Smith~ Vlnrgm~’rt Mi~li, Anne T. Ba~s,Frederick Barl~r, "~he P,~v. David Madi~m, Robert M. Ba~s, tlae Key. James Hazel, CherJ.� SMpp, the Rev. loireSt~ley, Dr. Trace WorrelI, the Rt Key. Edwin F. GulIcl~ Jr.. ~md KatMeett Wetlg.
____ FAxAIL us ,=,,., ,~., Court’s Minutes
6998
TAB A-3To: Page 3 of 3
THE EPISCOPAL CHURCH, et al.,
VS.
FRANKLIN SALAZAR, et al.. '
2011-01-2011:13:47 CST
CAUSE NO. 141-237105~09
121499977512 From: Tom Leatherbury
IN THE DISTRICT COURT OF
TARRANT COUNTY, TEXA.S
141 sT mSTRICT COURT
ORDER GRANTING LOCAL EPISCOPAL PARTIES' AMENDED MOTION FOR PARTIAL SUMMARY JUDGMENT
On January 14, 2011, came on for consideration (1) the Local Episcopal Parties'
Amended Motion for Partial Summary Judgment2 and (2) the Defendants' Motion for Partial
Summary Judgment. The Court consid~ed the pleadings, motions, my responses and replies.
the evidence on file subject to the Court's rulings on the objections to the evidence and the
motions, the governing law, and arguments of counsel, and the Court orders as follows:
Th.e Local Episcopal Parties' Amended Motion for Partiai Summary Judgment is
GRANTED,
The Defendants' Motion for Partial Summary Judgment is DENIED.
The parties should confer, and the Local Episcopal Parties shou1d submit a more detail<:d
declaratory order within ten days of the date of this order.
Signed thiZ' / day ofJanuary, 2011.
:;Z:;Ca~
I The style is being sbortened at the request of the Clerk' a omcc. It does not imply that any parties are omitted or dropped from th" case.
~ The weal Episcopal Parties consi8t of the Rt. Rev. C. WaUis Ohl, Robert Hicks, Floyd McKneely, Shannon Shipp, David Skelton. Wltit Smith., Margam Miculi, Anne T. Bass, Wall Cabe,lhe Rev. Christopher Jambor, the Rev. Frederick Barber, the Rev. David Madi5on, Robert M. Bass, the Rev, James Hazel, Cherie Shipp, ~ Rev. John StaDley, Dr, Trace Worrell. the Rt. Rev. Edwin F. Gullck, Jr .• and Kathleen Wells.
_', lAl/il ... _ ',' ... :~_,-.,,'C:iJVIA: ~~;t~EP 'I ND"r..;;,j 1" p;. ER - HA U"I'ROPOihlDORDER THOMAS ,Wl PAGli.l
~AIL us 72R91 tv.l Court1s Minutes Dl8TRICT CLERK. - FAX a.te a:t:ft{b , '\.','; :~J_I~~? Trt {. sactior. ,i:: 3j,:;-1"ARRANT~OU~/~ - n~" I'" .,~ i {~ ,~, 'Ie; ,I..., .i fi DVI~~~_i;;;,.Io{"'~""'~'" J or J ,~V~ :~~:i7 AM' tcentreJ standard Tlmej Dl PUTY
MELLOTT
6998
1lt1 252083 ll NO. 141·237105-09
THE EPISCOPAL CHURCH, et aL § § § § §
IN THE DISTRICT COURT
v.
FRANKLIN SALAZAR, et al.
TARRANT COUNTY, TEXAS
!41ST JUDICIAL DISTRICT
ORDER GRANTING DEFENDANTS' MOTJON TO SEVER AND TO STAY PRQCEEDINGS
On this day came on to be coosidered Defenclan!s' Motion To Sever and To Stay
Proceedings. The Court, after reviewing the motion and the .opposition, 8Dil having heard the
arg-t of couDSel, finds that Defendants' Motion To Sever and To Stay Further Proceedings
should be gl'llllted and the following order entered:
IT IS, THEREFORE, ORDERED that all claims that tue the subject of this Court's
Amended Order on Summary Judgment signed on February 8, 20 II, are sevctUI from this~ e.nd
shall appear on the docket of this Court as Causelb.1 2 52 Q 8 3 ~·The Episcopal Church, et aJ vs. Franklin Salazar, el aL
IT IS FURTHER ORDERED !hat the clerk of this Court shall make a new filc;fr ~ Cl :;;;
severed suit including the following Court papers from this suit:
(I) Order Granlini Rule 12 Motion (9-16-09);
~ =- ~7 _; ~ ~~ ., - CJI -, _, ;.·; '
(2) Judgment and Opinion of Second District Court of Appeals (6-25·1 0); p '.. -o ,.,.,- :X %1_ ..
(3) Modified Order Granting Rule 12 Motion (7-8-10); :x r ro
c: ". (4) Plaintiff The Episcopal Clnm:h's Third Amended Original Petition (10-12-~); "
(S) Individual PISintiffs' Sixth Amended Original Petition (12-21·10);
(6) First Ameoded Third-Party Petition of Defendant The Episcopal Diocese of Fort Worth (12-23-IO);
OIIDI!.R <lR.AmniG D!f:ENDAHTS' MonON To Savn AND TO STA. Y PRoc'EEDINOS
Gourt's Minutes. T.-~msaction # oz
PM>El
2
TAB A-4
(7) First Amended Third-Party Petition of Intervenor The Corporation ofThe Episcopal Diocese of Fort Worth (12-23-10);
(8) First Amended Original Plea in Intervention (11-15-10) (Weaver);
(9) Intervenors' Third Amended Original Answer to Third-Party Defendants' Counterclaim and Second Amended Original Answer to Plaintiffs' Third Amended Original Petition (11·5-10);
(10) Defendants' Answer to PlaintiffThe Episcopal Church's Third Amended Original Petition (12·23-1 0);
(11) Defendants' Answer to Individual Plaintiffs' Sixth Amended Original Petition (12· 23-10);
(12) The Episcopal Diocese of Fort Worth's Answer to Counterclaims of Third-Party Defendants (12-23-10);
(13) The Corptnation ofThe Episcopal Diocese ofFort WIXI!l's Answer to Collllterclaims of Third-Party Defendants (12-23-10);
(14) Original Answer of Judy Mayo, The Rev. Christopher Cantrell, The Rev. Tunothy Perkms and The Rev. Ryan Reed (10-12-10);
(15) Original Answer of Julia Smead (11-5-10);
(16) . The Episcopal Diocese of Fort Worth's Answer to Counterclaims of Thitd-Party Defendants (12-23-10);
(17) Fourth Amended Answer and CoWlterclaims to Southern Cone Diocese's Third-Party Petition (12-21·10);
(18) Fourth Amended Answer and Counterolaims to Southern Cone Corporation's P1eain Intervention and Third-Party Petition (12-21-10);
(19) Plaintiff The Episcopal Church's Motion for Summary Judgment and Brief in Support of Motions (10..18-10);
(20) Appendix to All EpiS<:opal Parties' Motions for Summary Judgment and Partial Summary Judgment (10·18-10);
(21) P1aintiffThe Episcopal Church's Supplemental Evidence in S\II'POrt oflts Motion for Summary Judgment (10..22-10);
3
TAB A-4
:\
~
(22)
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
(33)
(34)
(35)
Local Episcopal Parties' Amended Motion for Partial SUDWlllY Judgment (12-21· 10);
Supplemental Evidence in Support of All Local Episcopal Parties' Motions for SllllliiillrY Judgment (12-21-10);
Defendants' Motion for Partial Swnmary Judgment (12-23-10);
Appendix to Defendants' Motion for Partial Summary Judgment (12-23-10);
Defendants' Objections to Plaintiffs' Summary Judgment Motions and Evideoce (1-7-11);
Defendants' Supplemental Appendix (1·7-11);
Defendants' Response to Plaintiff The Episcopal Church's Motion for Summary Judgment (1-7-11);
Defendants' Response to Local Episcopal Parties' Amended Motion for Partial Sunumuy Judgment (l-7-11);
The Episcopal Church's Response to Defendants' Motion for Partial SIIJiliiW)' Judgment(l-7·11);
Local Episcopal Parties' Response to Defendan1S • Motion for Partial SWIIIIW'Y Judgment (1·7-11);
Supplemental Evidence in Support of All Local Episcopal Parties' Responses to Defendants' Motion for Partial Summary Judgment (1-7-11);
All Episcopal Parties' Objections to Defendants' Summary Judgment Evidence (1-7-
11);
The Episcopal Church's Reply in Support ofi1S Motion for Sununary Judgment (1-11-11);
Episcopal Parties' Objections to Defendants' Supplemental Appendix and Evidence Attached to Response (1-11-11 );
(36) Motion for Leave to File Supplemental Affidavits (1-14-11);
(37) Supplemental Affidavit of Walter Virden, ID (1-14-11);
(38) Supplemental Affidavit ofChar1cs A. Hough, Ul (1-14-11);
0RDu QlAH'llMO 0Ef'EHDANT1' MonON ToS5VU. AND TO !TAV P'ROCRDCNGS
4
TAB A-4
'·
'. L ••
(39) Order Granting Motion for Leave to File Supplemental Affidavil8 (1-14-11);
(40) Order on Swnmary Judgment(J-21-11);
( 41) Order Granting Local Episcopal PIIJ'ties' Amended Motion for Partial Slliiilll8l'Y Judgment (1-21-11);
(42) Objections to Form of Summary Judgment Orders (1-25-11);
(43) Affidavit of Charles A. Hough, min support of Objections to Form of Summary Judgment Ordm (1·27-11);
(44) Episcopal Parties' Response to Defendants' Objections to Form of Summary Judgment Orders (l-31-11 );
(45) Episcopal Parties' Objections to Affidavit of Charles A. Hough, m (1-31-11);
(46) Amended Order on Sununary Judgment (2-8-11);
(47) Defendants' Motion to Sever and Stay Remaining Proceedlnp (2-8-11[,
(48) This Order Granting Defendants' Motion To Sever and To Stay Proceedings;
(49) Docket Sheet itemizing the foregoing items,
IT IS FINALLY ORDERED that all further proceedings in this cause are stayed pending a
final determination of the severed claims through the appellate process.
SIGNED this s day of~~Oll.
OROSR GRNmNO DriFaloANTS' MOTION to SEYER AND To ST.._ Y PR.OCiiliDINOS P.wi4
5
TAB A-4
State Neutral
Principles? Case Citation
Alabama Yes African Meth. Epis. Zion Church v. Zion Hill Meth. Church, Inc., 534 So.2d
224, 225 (Ala. 1988)
Alaska Yes St. Paul Church, Inc. v. Bd. of Trs., 145 P.3d 541, 553 (Alaska 2006)
Arizona Yes Rashedi v. General Bd., 54 P.3d 349, 353 (Ariz. Ct. App. 2002)
Yes Berthiaume v. McCormack, 891 A.2d 539, 547 (N.H. 2006)
New Jersey Deference
but changing
New Saint John Christian Meth. Epis. Church, Inc. v. Collier, 2008 WL 2329971, at *1 (N.J.Super. Ct. App. Div. 2008); cf. Scotts African Union Meth. Prot. Church v. Conf. of African Union First Colored Meth. Prot. Church, 98 F.3d 78, 89-94, 94 n. 6 (3d Cir. 1996)
New Mexico
no cases
New York Yes Blaudziunas v. Egan, 2011 WL 6153103, at *1 (N.Y. 2011)
North Carolina Yes Harris v. Matthews, 643 S.E.2d 566, 570 (N.C. 2007)
North Dakota
no cases
Ohio Yes Serbian Orthodox Church Congregation v. Kelemen, 256 N.E.2d 212, 216
(Ohio 1970); Hudson Presbyterian Church v. Eastminster Presbytery, 2009 WL 249791, at *2-3 (Ohio Ct. App. 2009)
Oklahoma
no cases
Oregon
no cases
Pennsylvania Yes In re Church of St. James the Less, 888 A.2d 795, 805-06 (Pa. 2005)
Rhode Island
no cases
South Carolina Yes All Saints Parish Waccamaw v. Protestant Epis. Church, 685 S.E.2d 163,
171 (S.C. 2009)
South Dakota Yes Foss v. Dykstra, 342 N.W.2d 220, 222 (S.D. 1983)
Tennessee Yes Avondale Church Of Christ v. Merrill Lynch, 2008 WL 4853085l, at *9
(Tenn. Ct. App. 2008); Anderson v. Watchtower Bible & Tract Soc., 2007 WL 161035, at *7 (Tenn. Ct. App. 2007)
Art. 1396-1.01. Short Title, Captions, Parts, Articles, Sections, Subsections and Paragraphs A. This Act shall be known and may be cited as the "Texas Non-Profit Corporation Act." B. The division of this Act into Parts, Articles, Sections, Subsections, and Paragraphs and the use of captions in connection therewith are solely for convenience and shall have no legal effect in construing the provisions of this Act. C. This Act has been organized and subdivided in the following manner: (1) The Act is divided into Parts, containing groups of related Articles. Parts are numbered consecutively with cardinal numbers. (2) The Act is also divided into Articles, numbered consecutively with Arabic numerals. (3) Articles are divided into Sections. The Sections within each Article are numbered consecutively with capital letters. (4) Sections are divided into Subsections. The Subsections within each Section are numbered consecutively with Arabic numerals enclosed in parentheses. (5) Subsections are divided into Paragraphs. The Paragraphs within each Subsection are numbered consecutively with lower case letters enclosed in parentheses. Acts 1959, 56th Leg., p. 286, ch. 162, art. 1.01.
Art. 1396-1.02. Definitions
A. As used in this Act, unless the context otherwise requires, the term: (1) "Corporation" or "domestic corporation" means a corporation not for profit subject to the provisions of this Act, except a foreign corporation. (2) "Foreign corporation" means a corporation not for profit organized under laws other than the laws of this State. (3) "Non-Profit Corporation" is the equivalent of "not for profit corporation" and means a corporation no part of the income of which is distributable to its members, directors, or officers. (4) "Articles of incorporation" means the original or restated articles of incorporation and all amendments thereto. (5) "By-laws" means the code or codes of rules adopted for the regulation or management of the corporation, irrespective of the name or names by which such rules are designated. (6) "Member" means one having membership rights in a corporation in accordance with the provisions of its articles of incorporation or its by-laws. (7) "Board of Directors" means the group of persons vested with the management of the affairs of the corporation, irrespective of the name by which such group is designated. (8) "President" means that officer designated as "president" in the articles of incorporation or by-laws of a corporation, or that officer authorized, in the articles of incorporation, the by-laws, or otherwise, to perform the functions of the principal executive officer, irrespective of the name by which he may be designated, or that committee of persons authorized, in the articles of incorporation, the by-laws, or otherwise, to perform the functions of the principal executive officer. (9) "Vice-president" means that officer designated as "vice-president" in the articles of incorporation or the by-laws of a corporation, or that officer or committee of persons authorized, in the articles of incorporation, the by-laws, or otherwise, to perform the duties of the president upon the death, absence, or resignation of the president or upon his inability to perform the duties of his office, irrespective of the name by which he, or they, may be designated. (10) "Secretary" means that officer designated as "secretary" in the articles of incorporation or the by-laws of a corporation, or that officer or committee of persons authorized, in the articles of incorporation, the by-laws, or otherwise, to perform the functions of secretary, irrespective of the name by which he, or they, may be designated.
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(11) "Treasurer" means that officer designated as "treasurer" in the articles of incorporation or the by-laws of a corporation, or that officer or committee of persons authorized, in the articles of incorporation, the by-laws, or otherwise, to perform the functions of a treasurer, irrespective of the name by which he, or they, may be designated. (12) "Insolvency" means inability of a corporation to pay its debts as they become due in the usual course of its affairs. (13) "Verified" means subscribed and sworn to under the sanction of an oath, or such affirmation as is by law equivalent to an oath, made before an officer authorized to administer oaths. (14) "Director" means a member of the board of directors of a corporation organized under this Act. (15) "Ordinary care" means the care that an ordinarily prudent person in a similar position would exercise under similar circumstances. Acts 1959, 56th Leg., p. 286, ch. 162, art. 1.02. Amended by Acts 1993, 73rd Leg., ch. 733, Sec. 1, eff. Jan. 1, 1994.
Art. 1396-2.01. Purposes A. Except as hereinafter in this Article expressly excluded herefrom, non-profit corporations may be organized under this Act for any lawful purpose or purposes, which purposes shall be fully stated in the articles of incorporation. Such purpose or purposes may include, without being limited to, any one or more of the following: charitable, benevolent, religious, eleemosynary, patriotic, civic, missionary, educational, scientific, social, fraternal, athletic, aesthetic, agricultural and horticultural; and the conduct of professional, commercial, industrial, or trade associations; and animal husbandry. Subject to the provisions of Chapter 2, Title 83, of the Revised Civil Statutes of Texas, 1925, and of such Chapter or any part thereof as it may hereafter be amended, a corporation may be organized under this Act if any one or more of its purposes for the conduct of its affairs in this State is to organize laborers, working men, or wage earners to protect themselves in their various pursuits. (1) Charitable corporations may be formed for the purpose of operating a Dental Health Service Corporation … B. This Act shall not apply to any corporation, nor may any corporation be organized under this Act or obtain authority to conduct its affairs in this State under this Act: (1) If any one or more of its purposes for the conduct of its affairs in this State is expressly forbidden by any law of this State. (2) If any one or more of its purposes for the conduct of its affairs in this State is to engage in any activity which cannot lawfully be engaged in without first obtaining a license under the authority of the laws of this State to engage in such activity and such license cannot lawfully be granted to a corporation, except as provided by Subsection C. (3) If any one or more of its purposes for the conduct of its affairs in this State is to organize Group Hospital Service, Rural Credit Unions, Agricultural and Livestock Pools, Mutual Loan Corporations, Co-operative Credit Associations, Farmers' Co-operative Societies, Co-operative Marketing Act Corporations, Rural Electric Co-operative Corporations, Telephone Co-operative Corporations, or fraternal organizations operating under the lodge system and heretofore or hereafter incorporated under Articles 1399 through 1407, both inclusive, of Revised Civil Statutes of Texas, 1925. (4) If any one or more of its purposes for the conduct of its affairs in this State is to operate a bank under the banking laws of this State or to operate an insurance company of any type or character that operates under the insurance laws of this State. C. Doctors of medicine and osteopathy … D. When doctors of medicine, … Acts 1959, 56th Leg., p. 286, ch. 162, art. 201. Amended by Acts 1961, 57th Leg., p. 959, ch. 418, Sec. 1; Acts 1983, 68th Leg., p. 142, ch. 36, Sec. 1, eff. Aug. 29, 1983; Acts 1989, 71st Leg., ch. 1039, Sec. 4.07, eff. Sept. 1, 1989; Acts 1999, 76th Leg., ch. 813, Sec. 2, eff. Aug. 30, 1999; Acts 2003, 78th Leg., ch. 534, Sec. 1, eff. June 20, 2003.
Art. 1396-2.02. General Powers
A. Subject to the provisions of Sections B and C of this Article, each corporation shall have power:
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(1) To have perpetual succession by its corporate name, unless a limited period of duration is stated in its articles of incorporation. Notwithstanding the articles of incorporation, the period of duration for any corporation incorporated before August 10, 1959, is perpetual if all fees and franchise taxes have been paid as provided by law. (2) To sue and be sued, complain and defend, in its corporate name. (3) To have a corporate seal which may be altered at pleasure, and to use the same by causing it, or a facsimile thereof, to be impressed on, affixed to, or in any manner reproduced upon, instruments of any nature required to be executed by its proper officers. (4) To purchase, receive, lease, or otherwise acquire, own, hold, improve, use, or otherwise deal in and with, real or personal property, or any interest therein, wherever situated, as the purposes of the corporation shall require, or as shall be donated to it. (5) To sell, convey, mortgage, pledge, lease, exchange, transfer, and otherwise dispose of all or any part of its property and assets. (6) To lend money to and otherwise assist its employees and officers, but not its directors, if the loan or assistance may reasonably be expected to benefit, directly or indirectly, the corporation providing the assistance. Loans made to officers must be: (a) made for the purpose of financing the principal residence of the officer; or (b) made during the first year of that officer's employment, in which case the original principal amount may not exceed 100 percent of the officer's annual salary; or (c) made in any subsequent year, in which case the original principal amount may not exceed 50 percent of the officer's annual salary. (7) To purchase, receive, subscribe for, or otherwise acquire, own, hold, vote, use, employ, mortgage, lend, pledge, sell or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in, or obligations of, other domestic or foreign corporations, whether for profit or not for profit, associations, partnerships, or individuals, or direct or indirect obligations of the United States or of any other government, state, territory, government district, or municipality, or of any instrumentality thereof. (8) To make contracts and incur liabilities, borrow money at such rates of interest as the corporation may determine, issue its notes, bonds, and other obligations, and secure any of its obligations by mortgage or pledge of all or any of its property, franchises, and income. (9) To lend money for its corporate purposes, invest and reinvest its funds, and take and hold real and personal property as security for the payment of funds so loaned or invested. (10) To conduct its affairs, carry on its operations, and have officers and exercise the powers granted by this Act in any state, territory, district, or possession of the United States, or any foreign country. (11) To elect or appoint officers and agents of the corporation for such period of time as the corporation may determine and define their duties and fix their compensation. (12) To make and alter by-laws, not inconsistent with its articles of incorporation or with the laws of this State, for the administration and regulation of the affairs of the corporation. (13) To make donations for the public welfare or for charitable, scientific, or educational purposes and in time of war to make donations in aid of war activities. (14) To cease its corporate activities and terminate its existence by voluntary dissolution. (15) Whether included in the foregoing or not, to have and exercise all powers necessary or appropriate to effect any or all of the purposes for which the corporation is organized. (16) Any religious, charitable, educational, or eleemosynary institution organized under the laws of this State may acquire, own, hold, mortgage, and dispose of and invest its funds in real and personal property for the use and benefit and under the discretion of, and in trust for any convention, conference or association organized under the laws of this State or another state with which it is affiliated, or which elects its board of directors, or which controls it, in furtherance of the purposes of the member institution. (17) To pay pensions and establish pension plans and pension trusts for all of, or class, or classes of its officer and employees, or its officers or its employees. (18) To deliver money to a scholarship fund for rural students. B. Nothing in this Article grants any authority to officers or directors of a corporation for the exercise of any of the foregoing powers, inconsistent with limitations on any of the same which may be expressly set
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forth in this Act or in the articles of incorporation or by-laws or in any other laws of this State. Authority of officers and directors to act beyond the scope of the purpose or purposes of a corporation is not granted by any provisions of this Article. C. Nothing in this Article shall be deemed to authorize any action in violation of the Anti-Trust Laws of this State or of any of the provisions of Chapter 4 of Title 32 of Revised Civil Statutes of Texas, 1925, as now existing or hereafter amended. Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.02. Amended by Acts 1977, 65th Leg., p. 837, ch. 313, Sec. 1, eff. Aug. 29, 1977; Acts 1979, 66th Leg., p. 174, ch. 96, Sec. 1, eff. May 2, 1979; Acts 1989, 71st Leg., ch. 1199, Sec. 1, eff. Aug. 28, 1989; Acts 1997, 75th Leg., ch. 904, Sec. 5, eff. Sept. 1, 1997.
Art. 1396-2.03. Defense of Ultra Vires A. Lack of capacity of a corporation shall never be made the basis of any claim or defense at law or in equity. B. No act of a corporation and no conveyance or transfer of real or personal property to or by a corporation shall be invalid by reason of the fact that such act, conveyance or transfer was beyond the scope of the purpose or purposes of the corporation as expressed in its articles of incorporation or by reason of limitations on authority of its officers and directors to exercise any statutory power of the corporation, as such limitations are expressed in the articles of incorporation, but that such act, conveyance or transfer was, or is, beyond the scope of the purpose or purposes of the corporation as expressed in its articles of incorporation or inconsistent with any such expressed limitations of authority, may be asserted: (1) In a proceeding by a member against the corporation to enjoin the doing of any act or acts or the transfer of real or personal property by or to the corporation. If the unauthorized act or transfer sought to be enjoined is being, or is to be, performed or made pursuant to any contract to which the corporation is a party, the court may, if all of the parties to the contract are parties to the proceedings and if it deems the same to be equitable, set aside and enjoin the performance of such contract, and in so doing may allow to the corporation or to the other parties to the contract, as the case may be, compensation for the loss or damage sustained by either of them which may result from the action of the court in setting aside and enjoining the performance of such contract, but anticipated profits to be derived from the performance of the contract shall not be awarded by the court as part of the loss or damage sustained. (2) In a proceeding by the corporation, whether acting directly or through a receiver, trustee, or other legal representative, or through members in a representative suit, against the incumbent or former officers or directors of the corporation for exceeding their authority. (3) In a proceeding by the Attorney General, as provided in this Act, to dissolve the corporation, or in a proceeding by the Attorney General to enjoin the corporation from performing unauthorized acts, or to enforce divestment of real property acquired or held contrary to the laws of this State. Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.03.
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Art. 1396-2.08. Members A. A corporation may have one or more classes of members or may have no members. B. If the corporation has one or more classes of members, the designation of such class or classes, the manner of election or appointment, and the qualifications and rights of the members of each class shall be set forth in the articles of incorporation or by-laws. C. If the corporation is to have no members, that fact shall be set forth in the articles of incorporation. D. A corporation may issue certificates, or cards, or other instruments evidencing membership rights, voting rights or ownership rights as may be authorized in the articles of incorporation or in the by-laws. E. The members of a non-profit corporation shall not be personally liable for the debts, liabilities, or obligations of the corporation. Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.08. Amended by Acts 1961, 57th Leg., p. 653, ch. 302, Sec. 1.
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Art. 1396-2.09. By-Laws A. The initial by-laws of a corporation shall be adopted by its board of directors or, if the management of the corporation is vested in its members, by the members. The by-laws may contain any provisions for the regulation and management of the affairs of the corporation not inconsistent with law or the articles of incorporation. B. A corporation's board of directors may amend or repeal the corporation's by-laws, or adopt new by-laws, unless: (1) the articles of incorporation or this Act reserves the power exclusively to the members in whole or in part; (2) the management of the corporation is vested in its members; or (3) the members in amending, repealing, or adopting a particular by-law expressly provide that the board of directors may not amend or repeal that by-law. Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.09. Amended by Acts 1993, 73rd Leg., ch. 733, Sec. 5, eff. Jan. 1, 1994.
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Art. 1396-2.14. Board of Directors
A. The affairs of a corporation shall be managed by a board of directors. Directors need not be residents of this State or members of the corporation unless the articles of incorporation or the by-laws so require. The articles of incorporation or the by-laws may prescribe other qualifications for directors. B. Boards of directors of religious, charitable, educational, or eleemosynary institutions may be affiliated with, elected and controlled by a convention, conference or association organized under the laws of this State or another state, whether incorporated or unincorporated, whose membership is composed of representatives, delegates, or messengers from any church or other religious association. C. The articles of incorporation of a corporation may vest the management of the affairs of the corporation in its members. If the corporation has a board of directors, it may limit the authority of the board of directors to whatever extent as may be set forth in the articles of incorporation or by-laws. Except for a church organized and operating under a congregational system, was incorporated before January 1, 1994, and has the management of its affairs vested in its members, a corporation shall be deemed to have vested the management of the affairs of the corporation in its board of directors in the absence of an express provision to the contrary in the articles of incorporation or the by-laws. D. The board of directors may be designated by any name appropriate to the customs, usages, or tenets of the corporation. E. The board of directors of a corporation may be elected (in whole or in part) by one or more associations or corporations, organized under the laws of this State or another state if (1) the articles of incorporation or the by-laws of the former corporation so provide, and (2) the former corporation has no members with voting rights. F. The articles of incorporation or the by-laws may provide that any one or more persons may be ex-officio members of the board of directors. A person designated as an ex-officio member of the board of directors is entitled to notice of and to attend meetings of the board of directors. The ex-officio member is not entitled to vote unless otherwise provided in the articles of incorporation or the by-laws. An ex-officio member of the board of directors who is not entitled to vote does not have the duties or liabilities of a director as provided in this Act. Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.14. Amended by Acts 1967, 60th Leg., p. 1716, ch. 656, Sec. 1, eff. June 17, 1967; Acts 1993, 73rd Leg., ch. 733, Sec. 9, eff. Jan. 1, 1994.
Art. 1396-2.15. Number, Election, Classification, and Removal of Directors A. The number of directors of a corporation shall be not less than three (3). Subject to such limitation, the number of directors shall be fixed by, or in the manner provided in, the articles of incorporation or the by-laws, except as to the number constituting the initial board of directors, which number shall be fixed by the articles of incorporation. The number of directors may be increased or decreased from time to time by amendment to, or in the manner provided in, the articles of incorporation or the by-laws, but no decrease shall have the effect of shortening the term of any incumbent director. The number of directors
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may not be decreased to fewer than three (3). In the absence of a by-law or a provision of the articles of incorporation fixing the number of directors or providing for the manner in which the number of directors shall be fixed, the number of directors shall be the same as the number constituting the initial board of directors as fixed by the articles of incorporation. B. The directors constituting the initial board of directors shall be named in the articles of incorporation and shall hold office until the first annual election of directors or for such other period as may be specified in the articles of incorporation or the by-laws. Thereafter, directors shall be elected, appointed, or designated in the manner and for the terms provided in the articles of incorporation or the by-laws. If the method of election, designation, or appointment is not provided in the articles of incorporation or by-laws, the directors, other than the initial directors, shall be elected by the board of directors. In the absence of a provision in the articles of incorporation or the by-laws fixing the term of office, a director shall hold office until the next annual election of directors and until his successor shall have been elected, appointed, or designated and qualified. C. Directors may be divided into classes and the terms of office of the several classes need not be uniform. Unless removed in accordance with the provisions of the articles of incorporation or the by-laws, each director shall hold office for the term for which he is elected, appointed, or designated and until his successor shall have been elected, appointed, or designated and qualified. D. A director may be removed from office pursuant to any procedure therefor provided in the articles of incorporation or by-laws. In the absence of a provision providing for removal, a director may be removed from office, with or without cause, by the persons entitled to elect, designate, or appoint the director. If the director was elected to office, removal requires an affirmative vote equal to the vote necessary to elect the director. Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.15. Amended by Acts 1989, 71st Leg., ch. 801, Sec. 45, eff. Aug. 28, 1989; Acts 1993, 73rd Leg., ch. 733, Sec. 10, eff. Jan. 1, 1994.
Art. 1396-2.16. Vacancies
A. Unless otherwise provided in the articles of incorporation or the by-laws, any vacancy occurring in the board of directors shall be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. B. Any directorship to be filled by reason of an increase in the number of directors shall be filled by election at an annual meeting or at a special meeting of members called for that purpose. If a corporation has no members, or no members having the right to vote thereon, such directorship shall be filled as provided in the articles of incorporation or the by-laws. Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.16.
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Art. 1396-3.02. Articles of Incorporation A. The articles of incorporation shall set forth: (1) The name of the corporation. (2) A statement that the corporation is a non-profit corporation. (3) The period of duration, which may be perpetual. (4) The purpose or purposes for which the corporation is organized. (5) If the corporation is to have no members, a statement to that effect. (6) If management of the affairs of the corporation is to be vested in its members, a statement to that effect. (7) Any provision, not inconsistent with law, including any provision which under this Act is required or permitted to be set forth in the by-laws, which the incorporators elect to set forth in the articles of incorporation for the regulation of the internal affairs of the corporation. (8) The street address of its initial registered office and the name of its initial registered agent at such street address.
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(9) The number of directors constituting the initial board of directors, and the names and addresses of the persons who are to serve as the initial directors unless the management of the corporation is vested in its members, in which event a statement to that effect shall be set forth. (10) The name and street or post office address of each incorporator. (11) If the corporation is to be authorized on its dissolution to distribute its assets in a manner other than as provided by Article 6.02(3) of this Act, a statement describing the manner of distribution of the corporation's assets. B. Provided that charters or articles of incorporation of corporations existing on the effective date of this Act which do not contain one or more of the requirements listed in the foregoing Section need not be amended for the purpose of meeting such requirements. Any subsequent amendment or restatement of the articles of incorporation of such corporation shall include such requirements, except that it shall not be necessary, in such amended or restated articles, to include the information required in Subsections (8), (9), and (10) of Section A. C. It shall not be necessary to set forth in the articles of incorporation any of the corporate powers enumerated in this Act. D. Unless the articles of incorporation provide that a change in the number of directors shall be made only by amendment to the articles of incorporation, a change in the number of directors made by amendment to the by-laws shall be controlling. In all other cases, whenever a provision of the articles of incorporation is inconsistent with a by-law, the provision of the articles of incorporation shall be controlling. Acts 1959, 56th Leg., p. 286, ch. 162, art. 3.02. Amended by Acts 1965, 59th Leg., p. 1294, ch. 597, Sec. 1, eff. Aug. 30, 1965; Acts 1993, 73rd Leg., ch. 733, Sec. 17, eff. Jan. 1, 1994.
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Art. 1396-4.01. Right to Amend Articles of Incorporation
A. A corporation may amend its articles of incorporation from time to time, in any and as many respects as may be desired, so long as its articles of incorporation as amended contain only such provisions as are lawful under this Act. Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.01.
Art. 1396-4.02. Procedure to Amend Articles of Incorporation A. Amendments to the articles of incorporation may be made in the following manner: (1) Except as provided in Section A(4) of this article, where there are members having voting rights, the board of directors shall adopt a resolution setting forth the proposed amendment and directing that it be submitted to a vote at a meeting of members having voting rights, which may be either an annual or a special meeting. Written or printed notice setting forth the proposed amendment or a summary of the changes to be effected thereby shall be given to each member entitled to vote at such meeting within the time and in the manner provided in this Act for the giving of notice of meetings of members. The proposed amendment shall be adopted upon receiving at least two-thirds of the votes which members present at such meeting in person or by proxy are entitled to cast, unless any class of members is entitled to vote as a class thereon by the terms of the articles of incorporation or of the by-laws, in which event the proposed amendment shall not be adopted unless it also receives at least two-thirds of the votes which the members of each such class who are present at such meeting in person or by proxy are entitled to cast. (2) Where there are no members, no members having voting rights, or in the case of an amendment under Section A(4) of this article, an amendment shall be adopted at a meeting of the board of directors upon receiving the vote of a majority of the directors in office. (3) Where the management of the affairs of the corporation is vested in the members pursuant to Article 2.14C of this Act, the proposed amendment shall be submitted to a vote at a meeting of members which may be an annual, a regular, or a special meeting. Except as otherwise provided in the articles of incorporation or the by-laws, notice setting forth the proposed amendment or a summary of the changes to be effected thereby shall be given to the members within the time and in the manner provided in this
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Act for the giving of notice of meetings of members. The proposed amendment shall be adopted upon receiving at least two-thirds of the votes of members present at such meeting. (4) Unless the articles of incorporation provide otherwise, the board of directors of a corporation with members having voting rights may adopt one or more of the following amendments to the articles of incorporation without member approval: (a) extend the duration of the corporation if it was incorporated when limited duration was required by law; (b) delete the names and addresses of the initial directors; (c) delete the name and address of the initial registered agent or registered office, if a statement of change is on file with the Secretary of State; or (d) change the corporate name by substituting the word "corporation," "incorporated," "company," "limited," or the abbreviation "corp.," "inc.," "co.," "ltd.," for a similar word or abbreviation in the name, or by adding, deleting, or changing a geographical attribution to the name. B. Any number of amendments may be submitted and voted upon at any one meeting. Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.02. Amended by Acts 1993, 73rd Leg., ch. 733, Sec. 19, eff. Jan. 1, 1994.
Art. 1396-4.03. Articles of Amendment A. The articles of amendment shall be signed on behalf of the corporation by an officer and shall set forth: (1) The name of the corporation. (2) If the amendment alters any provision of the original or amended articles of incorporation, an identification by reference or description of the altered provision and a statement of its text as it is amended to read. If the amendment is an addition to the original or amended articles of incorporation, a statement of that fact and the full text of each provision added. (3) Where there are members having voting rights, (1) a statement setting forth the date of the meeting of members at which the amendment was adopted, that a quorum was present at such meeting, and that such amendment received at least two-thirds of the votes which members present at such meeting in person or by proxy were entitled to cast, as well as, in the case of any class entitled to vote as a class thereon by the terms of the articles of incorporation or of the by-laws, at least two-thirds of the votes which members of any such class who were present at such meeting in person or by proxy were entitled to cast, or (2) a statement that such amendment was adopted by a consent in writing signed by all members entitled to vote with respect thereto. (4) Where there are no members, or no members having voting rights, a statement of such fact, the date of the meeting of the board of directors at which the amendment was adopted, and a statement of the fact that such amendment received the vote of a majority of the directors in office. Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.03. Amended by Acts 1979, 66th Leg., p. 214, ch. 120, Sec. 5, eff. May 9, 1979; Acts 1987, 70th Leg., ch. 93, Sec. 38, eff. Aug. 31, 1987.
Art. 1396-4.04. Filing of Articles of Amendment A. The original and a copy of the articles of amendment shall be delivered to the Secretary of State. If the Secretary of State finds that the articles of amendment conform to law, he shall, when all fees have been paid as in this Act prescribed: (1) Endorse on the original and the copy the word "Filed", and the month, day, and year of the filing thereof. (2) File the original in his office. (3) Issue a certificate of amendment to which he shall affix the copy. B. The certificate of amendment, together with the copy of the articles of amendment affixed thereto by the Secretary of State, shall be delivered to the corporation or its representative. Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.04. Amended by Acts 1979, 66th Leg., p. 215, ch. 120, Sec. 6, eff. May 9, 1979.
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Art. 1396-4.05. Effect of Certificate of Amendment A. Upon the issuance of the certificate of amendment by the Secretary of State, the amendment shall become effective and the articles of incorporation shall be deemed to be amended accordingly. B. No amendment shall affect any existing cause of action in favor of or against such corporation, or any pending suit to which such corporation shall be a party, or the existing rights of persons other than members; and, in the event the corporate name shall be changed by amendment, no suit brought by or against such corporation under its former name shall abate for that reason. Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.05.
Art. 1396-4.06. Restated Articles of Incorporation
A. A corporation may, by following the procedure to amend the articles of incorporation provided by this Act, authorize, execute and file restated articles of incorporation, except that member approval, if the corporation has members with voting rights, is not required if no amendments are made. The restated articles of incorporation may restate either: (1) The entire text of the articles of incorporation as amended or supplemented by all certificates of amendment previously issued by the Secretary of State; or (2) The entire text of the articles of incorporation as amended or supplemented by all certificates of amendment previously issued by the Secretary of State, and as further amended by such restated articles of incorporation. B. If the restated articles of incorporation restate the entire articles of incorporation as amended and supplemented by all certificates of amendment previously issued by the Secretary of State, without making any further amendment thereof, the introductory paragraph shall contain a statement that the instrument accurately copies the articles of incorporation and all amendments thereto that are in effect to date and that the instrument contains no change in the provisions thereof, provided that the number of directors then constituting the board of directors and the names and addresses of the persons then serving as directors may be inserted in lieu of similar information concerning the initial board of directors, and the name and address of each incorporator may be omitted; and provided further that, if the management of a church is vested in its members pursuant to Article 2.14C of this Act and if, under that Article, original articles of incorporation are not required to contain a statement to that effect, any restatement of the articles of incorporation shall contain a statement to that effect. C. If the restated articles of incorporation restate the entire articles of incorporation as amended and supplemented by all certificates of amendment previously issued by the Secretary of State, and as further amended by such restated articles of incorporation, the instrument containing such articles shall: (1) Set forth, for any amendment made by such restated articles of incorporation, a statement that each such amendment has been effected in conformity with the provisions of this Act, and shall further set forth the statements required by this act to be contained in articles of amendment, provided that the full text of such amendments need not be set forth except in the restated articles of incorporation as so amended. (2) Contain a statement that the instrument accurately copies the articles of incorporation and all amendments thereto that are in effect to date and as further amended by such restated articles of incorporation and that the instrument contains no other change in any provision thereof; provided that the number of directors then constituting the board of directors and the names and addresses of the persons then serving as directors may be inserted in lieu of similar information concerning the initial board of directors, and the names and addresses of each incorporator may be omitted; and provided further that, if the management of a church is vested in its members pursuant to Article 2.14C of this Act, and if, under that Article, original articles of incorporation are not required to contain a statement to that effect, any restatement of the articles of incorporation shall contain a statement to that effect. (3) Restate the text of the entire articles of incorporation as amended and supplemented by all certificates of amendment previously issued by the Secretary of State and as further amended by the restated articles of incorporation. D. Such restated articles of incorporation shall be signed on behalf of the corporation by an officer. The original and a copy of the restated articles of incorporation shall be delivered to the Secretary of State. If
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the Secretary of State finds that the restated articles of incorporation conform to law, he shall, when the appropriate filing fee is paid as required by law: (1) Endorse on the original and the copy the word "Filed", and the month, day, and year of the filing thereof. (2) File the original in his office. (3) Issue a restated certificate of incorporation to which he shall affix the copy. E. The restated certificate of incorporation, together with the copy of the restated articles of incorporation affixed thereto by the Secretary of State, shall be delivered to the corporation or its representative. F. Upon the issuance of the restated certificate of incorporation by the Secretary of State, the original articles of incorporation and all amendments thereto shall be superseded and the restated articles of incorporation shall be deemed to be articles of incorporation of the corporation. Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.06. Amended by Acts 1979, 66th Leg., p. 215, ch. 120, Sec. 7, eff. May 9, 1979; Acts 1981, 67th Leg., p. 832, ch. 297, Sec. 2, eff. Aug. 31, 1981; Acts 1987, 70th Leg., ch. 93, Sec. 39, eff. Aug. 31, 1987; Acts 1993, 73rd Leg., ch. 733, Sec. 20, eff. Jan. 1, 1994.
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Art. 1396-10.02. Reservation of Power A. The Legislature shall at all times have power to prescribe such regulations, provisions, and limitations as it may deem advisable, which regulations, provisions, and limitations shall be binding upon any and all corporations subject to the provisions of this Act, and the Legislature shall have power to amend, repeal, or modify this Act. Acts 1959, 56th Leg., p. 286, ch. 162, art. 10.02.
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Art. 1396-11.02. Applicability; Expiration A. Except as provided by Title 8, Business Organizations Code, this Act does not apply to a corporation to which the Business Organizations Code applies. B. This Act expires January 1, 2010. Added by Acts 2003, 78th Leg., ch. 182, Sec. 4, eff. Jan. 1, 2006.
Sec. 1. This Act may be cited as the Texas Uniform Unincorporated Nonprofit Association Act.
Definitions
Sec. 2. In this Act: (1) "Member" means a person who, under the rules or practices of a nonprofit association, may participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of policy of the nonprofit association. (2) "Nonprofit association" means 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. However, joint tenancy, tenancy in common, or tenancy by the entireties does not by itself establish a nonprofit association, even if the co-owners share use of the property for a nonprofit purpose. (3) "Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. (4) "State" means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or insular possession subject to the jurisdiction of the United States.
Supplementary General Principles of Law and Equity
Sec. 3. Principles of law and equity supplement this Act unless displaced by a particular provision of it.
Territorial Application
Sec. 4. Real and personal property in this state may be acquired, held, encumbered, and transferred by a nonprofit association, whether or not the nonprofit association or a member has any other relationship to this state.
Real and Personal Property; Nonprofit Association as Beneficiary
Sec. 5. (a) A nonprofit association in its name may acquire, hold, encumber, or transfer an estate or interest in real or personal property. (b) A nonprofit association may be a beneficiary of a trust, contract, or will.
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Capacity to Assert and Defend; Standing
Sec. 8. (a) A nonprofit association, in its name, may institute, defend, intervene, or participate in a judicial, administrative, or other governmental proceeding or in an arbitration, mediation, or any other form of alternative dispute resolution. (b) A nonprofit association may assert a claim in its name on behalf of its members if one or more members of the nonprofit association have standing to assert a claim in their own right, the interests the nonprofit association seeks to protect are germane to its purposes, and neither the claim asserted nor the relief requested requires the participation of a member.
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Effect of Judgment or Order
Sec. 9. A judgment or order against a nonprofit association is not by itself a judgment or order against a member or a person considered by the nonprofit association to be a member.
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Books and Records
Sec. 11. (a) A nonprofit association shall keep correct and complete books and records of account for at least three years after the end of each fiscal year and shall make them available to the members of the association for inspection and copying upon request. (b) The attorney general may inspect, examine, and make copies of the books, records, and other documents the attorney general deems necessary and investigate the association to determine if a violation of any law of this state has occurred.
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Effect on Other Law
Sec. 18. This Act replaces existing law with respect to matters covered by this Act but does not affect other law covering unincorporated nonprofit associations.
Applicability; Expiration
Sec. 19. (a) Except as provided by Title 8, Business Organizations Code, this Act does not apply to a nonprofit association to which the Business Organizations Code applies. (b) This Act expires January 1, 2010.
Acts 1995, 74th Leg., ch. 919, eff. Sept. 1, 1995. Sec. 19 added by Acts 2003, 78th Leg., ch. 182, Sec. 6, eff. Jan. 1, 2006.
Sec. 111.001. This subtitle may be cited as the Texas Trust Code.
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Methods of Creating Trust
Sec. 112.001. A trust may be created by: (1) a property owner's declaration that the owner holds the property as trustee for another person; (2) a property owner's inter vivos transfer of the property to another person as trustee for the
transferor or a third person; (3) a property owner's testamentary transfer to another person as trustee for a third person; (4) an appointment under a power of appointment to another person as trustee for the donee of the
power or for a third person; or (5) a promise to another person whose rights under the promise are to be held in trust for a third
person. Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2, eff. Jan. 1, 1984.
Intention to Create a Trust
Sec. 112.002. A trust is created only if the settlor manifests an intention to create a trust. Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2, eff. Jan. 1, 1984.
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Statute of Frauds
Sec. 112.004. A trust in either real or personal property is enforceable only if there is written evidence of the trust's terms bearing the signature of the settlor or the settlor's authorized agent. A trust consisting of personal property, however, is enforceable if created by:
(1) a transfer of the trust property to a trustee who is neither settlor nor beneficiary if the transferor expresses simultaneously with or prior to the transfer the intention to create a trust; or
(2) a declaration in writing by the owner of property that the owner holds the property as trustee for another person or for the owner and another person as a beneficiary.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2, eff. Jan. 1, 1984.
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Revocation, Modification, or Amendment by Settlor
Sec. 112.051. (a) A settlor may revoke the trust unless it is irrevocable by the express terms of the instrument creating it or of an instrument modifying it.
(b) The settlor may modify or amend a trust that is revocable, but the settlor may not enlarge the duties of the trustee without the trustee's express consent.
(c) If the trust was created by a written instrument, a revocation, modification, or amendment of the trust must be in writing.
