Church Contracts May Be Subject to Judicial Review

In September of 2018, the Virginia Supreme Court held, in Pure Presbyterian Church of Washington v. Grace of God Presbyterian Church¹,  that the lower court had authority to rule on a merger agreement and subsequent contract between two churches. Central to the court’s analysis was whether the trial court was violating the ecclesiastical abstention doctrine that prohibits the courts from getting involved in a religious institutions’ internal religious governance or theological disputes. The Supreme Court of Virginia held that contract law principles are neutral and that the courts are permitted to use them to resolve contract disputes between churches. This post reviews the details of the case and the analysis of the issues by the Virginia Supreme Court.

Merging and Taking On the Debt

The Pure Presbyterian Church of Washington (“Pure Presbyterian”), a small Korean-speaking Presbyterian church, filed for bankruptcy in November of 2015. Another Korean Presbyterian church in the area, the Grace of God Presbyterian Church (“Grace Presbyterian”), suggested the two churches consider a merger. The churches belonged to different Korean Presbyterian denominations, but the leaders agreed they were doctrinally compatible. After additional merger discussions, both congregations voted to merge the churches in February of 2016. In March of 2016, the churches began holding services together. Grace Presbyterian sold its former church property and assumed liability for the debts of Pure Presbyterian. In April 2016, church leaders drafted a Merger Agreement outlining who would fill the roles of main pastor, worship leader, elders, and specified that Grace Presbyterian would pay off debt for Pure Presbyterian. In compliance with the Merger Agreement, a Merger Council was created to oversee merger issues as needed. This plan was submitted to the Bankruptcy court and approved. In November of 2016, leaders of the now unified church received notice that Pure Presbyterian wanted to withdraw from the “proposed” merger. In December of 2016, the pastor found himself locked out of the church. A “Do Not Trespass” sign was posted on the door, which also noted that the church was the property of Pure Presbyterian Church members only. Subsequently, Pure Presbyterian tried to sell the church property to a third party. Grace Presbyterian, on behalf of the unified church, sued to enforce the merger agreement. At the trial court, the jury found that a merger agreement had been formed. The case was then appealed by Pure Presbyterian to the Virginia Supreme Court. 

Church Autonomy Argument—Courts Can’t Decide Theological Matters

At the Virginia Supreme Court, Pure Presbyterian made the argument that the courts lack authority to review the case because it was not merely a contract dispute, but an ecclesiastical dispute and the court lacked subject matter jurisdiction to consider matters of a theological nature. Only a church can decide theological matters. Pure Presbyterian argued that the courts could not decide if there was a merger agreement.

Courts Can Decide Factual and Legal Matters

The Virginia Supreme Court disagreed with Pure Presbyterian and upheld the jury’s findings at the trial court that a merger was formed between the two churches and was subsequently breached by Pure Presbyterian. 

The court held that the jury’s findings were valid because there were no theological questions or religious disputes implicated. In this case, there was nothing inherently ecclesiastical about the merger of these two churches. The dispute was not theological, but factual. The question was whether the two churches agreed to merge. The supreme court maintained that contract law principles are neutral principles of law that courts can use to resolve disputes between churches like this one. Here, there were no theological questions at issue in the jury’s findings about whether there was a merger and whether it was breached. 

Conclusion

While the First Amendment protects the internal procedures of a religious institution and requires the courts to defer to internal church governance, church leaders should be mindful that there are limits to that protection. When neutral principles of law can be applied to resolve church contract disputes without implicating theological questions, the courts have legal authority to decide the matter.

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¹ No. 171098, 2018 WL 3913151 (Va. Aug. 16, 2018).