Volume 11 Number 2
Title Tips by Tute
11, Number 2
The rules changed somewhat for churches, but not a lot. I'll start with a little history.
Once upon a time, roughly from 1786 until
2002, the Virginia constitution prohibited a church from incorporating.
The most recent citation for that prohibition was Article IV, Section 14
(20) (second paragraph). The text
read: "The General Assembly shall not grant a charter of
incorporation to any church or religious denomination, but may secure the title
to church property to an extent to be limited by law."
This prohibition was the work of Thomas Jefferson and James Madison, two gentlemen Tute is not old enough to have known personally, but by all accounts they were both pretty smart fellows. Jefferson wrote the Virginia Act of Religious Freedom (if I remember my history correctly), and Madison was its legislative proponent. Not being a student at the "THE University," it was not required for graduation that this humble title examiner memorize the three accomplishments Jefferson listed on his tombstone, but I think this Act could have been one of the three. For the curious, the Act remains part of the Virginia Code today, being "recited" as § 57-1; the second full week of every January is designated as Religious Freedom Week in the Commonwealth of Virginia, and January 16th is Religious Freedom Day. § 57-2.01.
Neither did I study political philosophy, but I believe the underlying rationale may have had something to do with protecting smaller "free-thinking" churches from the state (and the state church of the time, known as the Established Church, aka the Church of England, aka the Anglican Church, aka the Episcopal Church) You may recall the occasional reference to "glebe" lands in some of your older title searches; those were references to land held by the established church. The close relationship between the established church and the state can be seen in §§ 57-3 and 4. Local governments now administer the proceeds from glebe lands and donations to the vestry. The powers to grant, deny, and renew or decline renewal of a corporate charter may have been perceived by Jefferson and Madison as giving the state power over the very existence of the church.
In April, 2002, in the United States District Court for the Western District of Virginia (coincidentally, in the same week the United States Supreme Court handed down the Craft decision), struck Virginia's prohibition and ordered the State Corporation Commission to give Virginia evangelist Jerry Falwell a corporate charter for his Thomas Road Baptist Church. Falwell v. Miller, (Civil Action No. 6:01CV00075, decided April 15, 2002).
What does all this mean for the title examiner? It means churches may now hold title in at least three different ways. Title examiners may need to become more knowledgeable about the internal workings of the various religious denominations, so they can predict the sort of documentation they should be uncovering during the examination.
As a result of the Falwell
decision, title may be held as a corporation.
For the title examiner, this should not require any new processes or
procedures. Title needs to be
vested in the corporation, and the deed or deed of trust needs to be signed by
an authorized officer. Given the
number of small churches that abound, it may be appropriate to note that a
pastor, an alderman, a deacon and a bishop are generally not corporate officers,
and any deed signed by such an officer should be accompanied by a recorded
resolution authorizing that person to act for the corporation.
Lacking such a resolution, the title examiner may be forced to rely on
the statutory default provision, § 55-119, which states
All deeds made by corporations shall be
signed in the name of the corporation by the president or acting president, or
any vice-president, or by such other person as may be authorized thereunto by
the board of directors of such corporation, and, if such deed is to be recorded,
the person signing the name of the corporation shall acknowledge the same in the
manner provided by § 55-120.
Whenever the laws, rules or ecclesiastic polity of any church or religious sect, society or denomination commits to its duly elected or appointed bishop, minister or other ecclesiastical officer, authority to administer its affairs, such duly elected or appointed bishop, minister or other ecclesiastical officer shall have power to acquire by deed, devise, gift, purchase or otherwise, any real or personal property, for any purpose authorized and permitted by its laws, rules or ecclesiastic polity, and not prohibited by the laws of Virginia, and the power to hold, improve, mortgage, sell and convey the same in accordance with such laws, rules and ecclesiastic polity, and in accordance with the laws of Virginia. §57-16. The church best known for holding title in this manner is the Roman Catholic Church. This closely resembles a form of title holding which goes back to the earliest years of the Commonwealth, a form known as the corporation sole. In some other states, there is a separate chapter in the title governing corporations dealing with this concept. Under this form of organization, the ecclesiastical officer is the title holder, and the proper person to convey or encumber the property.
In the hope that this column provides actual helpful information, as well as a lot of theoretical hot air, I provide the following title nugget in the event you need to examine title to a Catholic Church: Francis Xavier DiLorenzo replaced Walter F. Sullivan as Bishop of the Richmond Diocese in May 2004.
The General Assembly did enact a bill setting up a study commission to transition through the change caused by the Falwell case. I do not know the results, if any, of that study commission's meetings. Probably under some pressure to facilitate the changeover, the General Assembly attempted to pass a bill allowing trustee-holding churches to change over to corporate-holding churches with a minimum of procedural interference. The language was open to interpretations not intended, and most of the bill was deleted. One portion that was enacted provides the same recording tax treatment for corporate-holding churches as for trustee-holding churches.
There does not seem to be a prohibition against a church organizing as a
limited liability company, which, by definition is an unincorporated
association, § 13.1-1002, or as some other form authorized by statute, but this
title examiner has yet to see one. Just
as was the case with the corporate entity, the church would need to comply with
all the usual requirements for their choice of entity.
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