This matter came before the District Court, the Honorable Diane Bratvold presiding, on

Transcription

1 STATE OF MINNESOTA COUNTY OF HENNEPIN DISTRICT COURT FOURTH JUDICIAL DISTRICT Presbytery of the Twin Cities Area, v. Plaintiff, Eden Prairie Presbyterian Church, Inc. d/b/a Prairie Community Church of the Twin Cities, Defendants. Judge Diane B. Bratvold Case Type: Civil Other/Misc. ORDER GRANTING AND DENYING CROSS-MOTIONS FOR SUMMARY JUDGMENT Court File No. 27-CV This matter came before the District Court, the Honorable Diane Bratvold presiding, on December 18, 2015, pursuant to the parties cross-motions for summary judgment. Daniel Herber, Esq., appeared on behalf of Plaintiff Presbytery of the Twin Cities Area ( PTCA ). Mark Berhow, Esq., appeared on behalf of Eden Prairie Presbyterian Church, Inc. d/b/a Prairie Community Church of the Twin Cities ( EPPC ). The Court took the motions under advisement at the conclusion of the hearing. THE PARTIES AND RELEVANT BACKGROUND Defendant EPPC is a congregation organized as a Minnesota nonprofit corporation with its principal offices located at 9145 Eden Prairie Road, Eden Prairie, MN Before 2014, EPPC was affiliated with the national denomination, 1 the Presbyterian Church (U.S.A.) 1 For purposes of this Order, denomination means the national religious organization, such as PCUSA; presbytery means the religious organization located at a district level responsible for congregations within designated boundaries or the district, such as PTCA; and congregation means the local church, such as EPPC. 1

2 ( PCUSA ). PTCA is a nonprofit, Minnesota corporation and the corporate expression of PCUSA for congregations located within PTCA s district boundaries, which includes EPPC. The governance structure for PCUSA is as follows: Individual churches are governed by sessions, comprised of the church s pastors and elders. Multiple sessions are governed by a district governing body known as a presbytery, which is in turn governed by a regional body, the synod. Synods are governed by the general assembly, the highest governing body within the PCUSA. In 2014, EPPC voted to disaffiliate with PCUSA and notified PTCA. The parties disagree whether EPPC s unilateral disaffiliation was permitted and who owns the real property and personal property ( Disputed Property ) located at 9145 Eden Prairie Road, Eden Prairie, MN, which is the real estate including the land and building for the Prairie Community Church. EPPC possessed the Disputed Property while it was affiliated with PCUSA and EPPC continues to possess the Dispute Property. PTCA brought suit seeking judicial declarations, as follows: a. PTCA s claims for declaratory relief are wholly meritorious; b. The September 9, 2014, decision of PTCA assuming jurisdiction over Defendant s Session is the final decision of the Presbyterian Church (U.S.A.) and is binding on Defendant; c. The Administrative Commission elected by the PTCA on September 9, 2014 is the only legally recognized entity with the power and authority to govern Defendant and to manage the civil and ecclesiastical affairs of Defendant; d. The disposition of the Disputed Property is governed by the Constitution of the Presbyterian Church (U.S.A.); e. All property held by or for Defendant is held in trust for the use and benefit of the Presbyterian Church (U.S.A.); and f. Defendant has no valid claim against PTCA or any other council of the Presbyterian Church (U.S.A.) regarding return of or any other way regarding any property held by or for Defendant. (Compl., Count I.) Plaintiff also sought an order ejecting EPPC from the Disputed Property. (Compl., Count II.) Additionally, PTCA alleged conversion and breach of fiduciary duties. 2

3 (Compl., Counts III and IV.) EPPC filed an Answer denying allegations in the Complaint and asserting various defenses. The parties filed cross-motions for summary judgment. EPPC sought a determination that it owns the Disputed Property, the Disputed Property is not held in trust for the benefit of PCUSA, and that PTCA and PCUSA have no legal interest in the Property. PTCA sought a determination that it is entitled to the declaratory relief outlined in Count I of its Complaint, more specifically, that this Court defer to PTCA s decision to assume original jurisdiction over EPPC to avoid encroachment into ecclesiastical matters. Alternatively, PTCA sought a determination that it is entitled to the Disputed Property under neutral principles of law, because EPPC breached its fiduciary duty to PCUSA, and PTCA is entitled to relief on its conversion and ejectment claims. MATERIAL FACTS NOT IN DISPUTE As required on summary judgment, the Court views the evidence in the light most favorable to the non-moving party. Because both the claiming party and the defending party are seeking summary judgment, the Court has focused on material facts not in dispute. The parties agree that most facts are undisputed. A. History of Defendant EPPC EPPC first began worship in 1854 in a building located on one of its member s land located in the Territory of Minnesota. (Von Gohren Aff. 3.) 2 During its existence, EPPC has 2 Plaintiff PTCA did not provide an affidavit for the exhibits it references in its memoranda. For purposes of this Order, the Court will primarily cite to duplicate exhibits by referencing Mark Berhow s Affidavit or Von Gohren s Affidavit. For Plaintiff s exhibits not attached to the Berhow or Von Gohren Affidavit, the Court will cite to exhibits attached to Plaintiff s memoranda as follows: Pl. s Supp. Mem., Ex. *; Pl. s Reply Mem., Ex. *; and Pl. s Opp. Mem., Ex. *. 3

4 been affiliated with at least five different Presbyterian denominations. (Von Gohren Aff. 4.) EPPC has paid for its property through member gifts, tithes, and offerings. (Von Gohren Aff. 6; Berhow Aff., Ex. 1: Brasel Dep. 98:2-6, Oct. 22, 2015.) EPPC incorporated as a Minnesota non-profit corporation on March 27, (Berhow Aff., Ex. 3: Articles of Incorporation.) The stated purpose of the corporation was to provide services of worship and to cultivate the religious life of its members according to the evangelical tenets of the Christian faith as contained in the standards of the Presbyterian Church, U.S.A., to which religious body this society shall belong. (Id. at Art. II.) At the time of its incorporation, EPPC was affiliated with the United Presbyterian Church, U.S.A. ( United Presbyterian ) denomination. (Von Gohren Aff. 7.) In September 1959, EPPC approved the Constitution of the Presbyterian Church of Eden Prairie. (Berhow Aff., Ex. 4: EPPC Constitution, Sept. 15, 1959.) The EPPC Constitution states: This Congregation receives and adopts the Constitution of the UNITED PRESBYTERIAN CHURCH, U.S.A., Which we believe is in accord with the Holy Scriptures. This Constitution is supplementary and subordinate to the Constitution of the United Presbyterian Church, U.S.A., and shall always be construed in harmony with same, and all preaching and teaching shall conform to same. (Id. at Art. II.) B. Formation of PCUSA, Relationship to PTCA and Structure of Denomination In 1983, United Presbyterian merged with Presbyterian Church of the United States to form Presbyterian Church (U.S.A.) ( PCUSA ). (Von Gohren Aff. 8.) As a result of the merger, EPPC became affiliated with PCUSA. (Von Gohren Aff. 8.) PTCA is a Minnesota nonprofit corporation. (Compl. 4.) PTCA is the corporate expression and agent of Presbyterian Church (U.S.A.) within PTCA district boundaries. (Compl. 4.) 4

5 C. PCUSA Constitution PCUSA s Constitution is called the Book of Order. (Berhow Aff., Ex. 5: Davnie Dep. 95:15-16, Nov. 13, 2015.) The Book of Order states that all property held by a congregation, presbytery, synod, or the General Assembly, is held in trust for the use and benefit of the PCUSA, as follows: All property held by or for a congregation, a presbytery, a synod, the General Assembly, or the Presbyterian Church (US.A.), whether legal title is lodged in a corporation, a trustee or trustees, or an unincorporated association, and whether the property is used in programs of a congregation or of a higher council or retained for the production of income, is held in trust nevertheless for the use and benefit of the [PCUSA]. (Pl. s Supp. Mem., Ex. J: Constitution of the Presbyterian Church (U.S.A.), Edition.) PTCA alleges that the Constitution of its predecessor, United Presbyterian, contained similar language, which was later incorporated into PCUSA s Book of Order. D. In 1994, EPPC Amends its By-laws In 1994, EPPC adopted by-laws, which included the following language: 1. The Eden Prairie Presbyterian Church of Eden Prairie, Minnesota, being a participating congregation of the Presbyterian Church (U.S.A.), recognizes that the Constitution of said Church is, in all its provisions, obligatory upon it and its members. 18. These By-laws may be amended subject to the charter of the corporation, the laws of the State of Minnesota, and the Constitution of the Presbyterian Church (U.S.A.) at any annual meeting or at any special meeting, by a majority vote of the voters present, provided that a full reading of the same shall have been made in connection with the call of the meeting. 20. These By-laws or the charter of this corporation may not be amended contrary to, or so as not to include, the provisions of the Constitution of the Presbyterian Church (U.S.A.). (Pl. s Opp. Mem., Ex. E: EPPC s 1994 Bylaws.) 5

6 E. In 1996 and 1997, EPPC Acquires the Disputed Property In December 1996, EPPC entered into a purchase agreement with Wheaton College, as Trustee of the Hone Unitrust, and Earnest and Carol Hone. (Berhow Aff., Ex. 6: Purchase Agreement.) The agreement sold property to EPPC (the Disputed Property ). (Id.) Neither PTCA nor PCUSA were parties to the agreement. The Warranty Deed lists Eden Prairie Presbyterian Church, a Minnesota Non-Profit Corporation as the owner. (Berhow Aff., Ex. 7: Warranty Deed ) In 1997, Carol Hone conveyed and warranted the remaining portion of the Disputed Property to EPPC via Warranty Deed. (Berhow Aff., Ex. 8: Warranty Deed ) According to both parties, the Disputed Property is valued in excess of $2.8 million. F. In 1999 and 2004, EPPC Modifies its Articles of Incorporation In 1999, PCUSA proposed to its congregations that they revise corporate documents. (Berhow Aff., Ex. 10: Cutting Letter dated Mar. 9, 1999.) The proposed revisions included adding to the articles of incorporation, the following language (the Trust Clause ): The legal title to all property held by this corporation, whether the property is used in the programs of this corporation or held for the production of income, is held in trust, nevertheless, for the use and benefit of the [PCUSA]. (Berhow Aff., Ex. 10, Art. VI.) It also included the following language regarding amendment of the articles (the Right to Amend Clause ): [t]hese Articles of Incorporation may be amended by a majority of the active members of the congregation at any annual meeting or at any special meeting of the congregation called for that purpose provided that notice of meeting at which such amendments are to be considered shall include the full text of the proposed amendments. (Id. at Art. VIII.) EPPC amended its articles of incorporation to include the Trust Clause and the Right to Amend Clause. (Berhow Aff., Ex. 12: 1999 Articles at Art. III and Art. X.) 6

7 The 1999 Articles also stated these Amended and Restated Articles of Incorporation will supplant and supersede the Constitution of the Presbyterian Church of Eden Prairie previously instated September 15, (Id.) Additionally, the 1999 Articles stated that [t]his corporation shall be governed by the session, operating under the provisions of the Constitution of the PCUSA. (Id. at Art VII.) The 1999 By-laws contained similar references to the Constitution of the PCUSA. (See Ex. 12: 1999 By-laws at Arts. I, VI). In 2004, EPPC amended its Articles of Corporation and By-laws again. (Berhow Aff., Ex. 14: 2004 Articles.) The 2004 Articles retained the Trust Clause and Right to Amend Clause in the exact same form. (Id.) G. In 2008, the PCUSA Denomination Divides and PTCA Adopts a Gracious Separation Policy in 2012 In 2008, a divide within PCUSA developed. (Berhow Aff., Ex. 15: Ward Dep. 68:3-12, Oct. 12, 2015.) At PCUSA s General Assembly in 2008, PCUSA urged its presbyteries to develop a process for gracious separation of congregations requesting disaffiliation with the denomination. (Berhow Aff., Ex. 16: 218th General Assembly Minutes, 2008.) Several years later, PTCA adopted its Gracious Separation Policy and Guidelines in June of (Berhow Aff., Exs. 17 and 18.) H. In 2010, EPPC Amends its Articles of Incorporation Before PTCA adopted the Gracious Separation policy, on September 14, 2010, EPPC s Session called a Special Meeting of the Congregation to vote on proposed amendments to the EPPC articles of incorporation and by-laws, which would remove the trust language. (Von Gohren Aff., Ex. 3: Sept. 14, 2010 Letter.) The meeting took place on September 26, 2010, but no vote was taken due to inadequate quorum. (Von Gohren Aff., Ex. 4: Sept. 26, 2010 Minutes.) A second meeting was held on December 5, 2010; the session passed amendment of the Articles 7

8 of Incorporation and By-laws by a majority vote with 160 votes in favor and 1 vote against. (Von Gohren Aff., Ex. 6: Dec. 5, 2010 Minutes.) The amended Articles of Incorporation were signed on December 7, 2010 and filed with the State of Minnesota on December 13, (Von Gohren Aff. 16 and 17, Exs. 7 and 8.) I. In 2014, EPPC Disaffiliates from PCUSA Sometime in 2012, EPPC and PTCA initiated the Gracious Separation process. A number of meetings were held and, by March 2014, the parties had begun to negotiate the terms for separation. At a Special Meeting of the Session on May 27, 2014, the Session unanimously voted to terminate EPPC s voluntary affiliation with PCUSA. (Von Gohren Aff., Ex. 8: May 27, 2014 Minutes.) EPPC notified PTCA of its disaffiliation on June 2, 2014, effective immediately. (Von Gohren, Ex. 9: Jun. 2, 2014 Letter.) In June 2014, the EPPC congregation voted to affiliate with a new denomination, ECO, and in July 2014, the new affiliation was finalized. (Von Gohren Aff , Exs ) J. PTCA s Assumption of Jurisdiction Over the Session/Congregation On June 9, 2014, PTCA sent a letter to EPPC explaining that unilateral disaffiliation was ineffective and that EPPC must complete the Gracious Separation process. (Pl. s Supp. Mem., Ex. S: Davnie Letter, Jun. 9, 2014.) EPPC s senior Teaching Elder, John Ward, renounced his role as EPPC s Session Moderator, which left EPPC without a moderator. (Davnie Decl. 30.) Pursuant to PCUSA s Constitution, PTCA appointed Rev. David Liddle to serve as the moderator for EPPC s Session on July 15, (Davnie Decl. 31.) PTCA sent a letter to EPPC on July 16, 2014, which notified EPPC it was out of compliance with PCUSA s Constitution and called for Rev. Liddle to have a special meeting of the EPPC Session. (Pl. s Supp. Mem., Ex. T.) EPPC responded on July 18, 2014 stating Rev. 8

9 Liddle s call was without force and effect. (Pl. s Supp. Mem., Ex. U.) The special meeting was cancelled. (Davnie Decl. 33.) After attempts to resolve the dispute failed, on August 21, 2014, PTCA s Committee on Ministry proposed a motion to assume general jurisdiction of EPPC. (Davnie Decl. 41; Pl s Supp. Mem., Ex. P.) EPPC was notified of the upcoming vote on the motion taking place on September 9, 2014 and EPPC declined to attend. (Pl. s Supp. Mem., Exs. V and W.) On September 9, 2014, PTCA passed the motion and assumed original jurisdiction over the EPPC Session. (Davnie Decl. 46.) EPPC did not appeal the decision within the time period provided by the PCUSA Constitution. (Davnie Decl. 50.) ANALYSIS I. Is it Appropriate to Apply Neutral Principles of Law? The state, through its courts, must avoid inquiry into a religious institution s internal decision-making and governance. Jones v. Wolf. 443 U.S. 595, 602 (1979). It is not an unconstitutional entanglement if applying neutral principles of law objective, well-established concepts of trust and property law familiar to lawyers and judges resolves a property dispute involving religious institutions. Id at PTCA argues that this Court cannot reach the neutral principles analysis because the disputes at issue are doctrinal. While doctrinal disagreements may have precipitated EPPC s decision to disaffiliate, the issue before this Court is the consequence of that decision ownership of property possessed and used by EPPC. See Jones, 443 U.S. at 605. Property disputes involving religious institutions have long been resolved by the civil courts by applying neutral principles of property and trust law. The mere fact that doctrinal disputes led to a congregation s decision to disaffiliate with a denomination does not bar application of neutral principles of law to resolve property disputes. 9

10 Alternatively, PTCA argues that because PCUSA is a hierarchal church organization and the Book of Order provides a well-defined method for resolving disputes, this Court cannot review PCUSA s decision to assert original jurisdiction over the EPPC Session. In response, EPPC appears to concede that PCUSA is a hierarchal religious organization; however, it argues that blind deference to hierarchal church decisions would impermissibly violate religious freedoms under Article I section 16 of the Minnesota Constitution by giving preference to a particular type of religious establishment. PTCA claims that Piletich v. Deretich held that impermissible entanglement occurs when a court reviews a dispute that is committed to the highest tribunal of a hierarchal church for adjudication pursuant to well-defined procedures. In Piletich, the Minnesota Supreme Court determined that control over church property resided with the majority of a local congregation for a Serbian East Orthodox Church, affirming the district court s summary judgment determination. 328 N.W.2d 696, 703 (Minn. 1982). PTCA focuses on two determinations by the supreme court. First, the Mother Church was not hierarchical with respect to resolution of intra-congregational disputes over local property or membership qualifications because it placed control of local church property with the local congregation and the local congregation s charter and by-laws retained control over membership. Id. at Second, the Mother Church did not have written procedures to resolve intra-congregation disputes. Id. at 700. While these are factual differences between the Mother Church and the PCUSA, the differences do not uproot the legal analysis in Piletich where the supreme court chose the neutral principles approach over the hierarchal approach when deciding a church property dispute. The neutral principles approach obviates consideration of whether the litigants belong to a hierarchical church, an area fraught with constitutional pitfalls. Id. at 701. The supreme court 10

11 formally adopted the neutral principles of law approach to resolve church property and membership disputes. Id. ( we now formally adopt [the neutral principles of law] approach to resolution of church property and membership disputes. ) Moreover, the U.S. Supreme Court in Jones v. Wolf cautioned against a compulsory deference to religious authority in resolving church property disputes ; the outcome of a church property dispute is not foreordained. 443 U.S. at Rather, the supreme court indicated the parties can avert property disputes by making appropriate provisions in deeds, corporate charters, and denomination constitutions. Id. at 606. [T]he civil courts will be bound to give effect to the result indicated by the parties, provided it is embodied in some legally cognizable form. Id. To give effect to the parties intentions, it is inevitable that a court would have to view the pertinent documents to make a determination when disputes arise. Finally, PTCA also argues that this Court will unconstitutionally entangle itself in doctrinal issues if it does not defer to the denomination s original jurisdiction because PCUSA has already determined that EPPC is no longer the true church. The determination was based on application of PCUSA s Constitution and whether EPPC was in violation of the Constitution. However, determining which faction is the true church is not necessary to determine title to the property. See, e.g., Peters Creek United Presbyterian Church v. Washington Presbytery of Pennsylvania, 90 A.3d 95, (Pa. Commnw. Ct. 2014), appeal denied, 102 A.3d 987 (Pa. 2014) (holding that true church issue was ecclesiastical determination to which civil courts must defer, but deciding the church property dispute based on neutral principles of law approach). Thus, this Court concludes that notwithstanding PCUSA s hierarchal dispute resolution procedures, this Court is permitted to review and apply neutral principles of law to this church property dispute. 11

12 II. Applying Neutral Principles of Law PTCA argues that it prevails even upon application of neutral principles of law. Specifically, that the requirements for trust formation have been satisfied and the Disputed Property is held in trust for benefit of the PCUSA. EPPC responds that the congregation did not intend to place the local property in trust for the benefit of PCUSA. A. Summary Judgment Standard Under Rule 56 of the Minnesota Rules of Civil Procedure, summary judgment is proper when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that either party is entitled to a judgment as a matter of law. Minn. R. Civ. P The moving party has the burden of proof, and the evidence must be viewed in the light most favorable to the nonmoving party. Vieths v. Thorp Fin. Co., 232 N.W.2d 776, 778 (Minn. 1975). Once the moving party has made a prima facie case that entitles it to summary judgment, the burden to produce facts that raise a genuine issue shifts to the nonmoving party. Minn. R. Civ. P ; Thiele v. Stich, 425 N.W.2d 580, 583 (Minn. 1988). The nonmoving party may not rely on mere averments in the pleadings or unsupported allegations, but must present specific facts showing that there is a genuine issue for trial. Minn. R. Civ. P See also DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997); Musicland Grp., Inc. v. Ceridian Corp., 508 N.W.2d 524, (Minn. Ct. App. 1993). The mere existence of a factual dispute does not, by itself, make summary judgment inappropriate; rather, the facts in dispute must be material. Pischke v. Kellen, 384 N.W.2d 201, 205 (Minn. Ct. App. 1986). A material fact is one that will affect the result or outcome of the case, depending upon its resolution. Rathbun v. W. T. Grant Co., 219 N.W.2d 641, 646 (Minn. 1974). If the nonmoving party does not present specific facts showing that there is a genuine 12

13 issue for trial, summary judgment, if appropriate, shall be entered against the adverse party. Minn. R. Civ. P B. Trust Formation Requirements To form an express trust, Minnesota requires (1) a designated trustee with enforceable duties; (2) a designated beneficiary vested with enforceable rights; and (3) a definite trust res in which the trustee has legal title and the beneficiary has the beneficial interest. Bond v. Comm r of Revenue, 691 N.W.2d 831, 837 (Minn. 2005). A trust is created only if the settlor demonstrates, by external expression, the intent to create a trust. In re Bush s Trust, 249 Minn. 36, 42-43, 81 N.W.2d 615, (1957). The settlor does not need to use any particular form or words to create a trust. Id. at 42, 81 N.W.2d at 619. But the settlor must show a definite, unequivocal, explicit declaration of trust, or the circumstances show with reasonable certainty or beyond a reasonable doubt that a trust was intended to be created. Bond, 691 N.W.2d at 817 (quoting 90 Corpus Juris Secundum 41 (2002)). On summary judgment, a district court s purpose in construing a trust instrument is to ascertain the intent of the settlor. In re Trust Created Under Agreement With McLaughlin, 361 N.W.2d 43, 44 (Minn.1985). The meaning of the trust instrument is a question of law unless the instrument is ambiguous, in which case the admission of extrinsic evidence renders it a question of fact. See Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979) (stating this principle in the context of contract interpretation). Whether a writing is ambiguous is a question of law. Blattner v. Forster, 322 N.W.2d 319, 321 (Minn. 1982). Ambiguity exists where language is subject to more than one reasonable interpretation. Bus. Bank v. Hanson, 769 N.W.2d 285, 288 (Minn. 2009). 13

14 Undisclosed intentions of a settlor are not admissible as proof in judicial proceedings. Bush s Trust, 249 Minn. at 42 n.1, 81 N.W.2d at 619; see also Restatement (Second) of Trusts 4 (1959) (noting the distinction between external expression of intent and undisclosed intent). 3 Extrinsic evidence is nevertheless admissible in interpreting and clarifying a writing which is ambiguous and uncertain as to the settlor s intended meaning. Bush s Trust, 249 Minn. at 42, 81 N.W.2d at 620. Whether the extrinsic facts, as applied to an ambiguous writing, justifies an inference that the settlor intended to create a trust is a question of fact. Id. at 43, 81 N.W.2d at 620. A trial court s finding that a settlor manifestly intended to and did create a trust may not be disturbed upon appeal, unless the evidence as a whole does not reasonably sustain it, or the trust is defective for failure to include one of the essential elements of a trust. Id. C. Formation of a Trust PTCA argues that EPPC s amendment to corporate documents, specifically the 1999 Articles, created a trust. EPPC responds that it did not intend to hold the property in trust for PCUSA for multiple reasons. First, the deeds conveying title to the real property do not reference PCUSA or PTCA and the purchase of the property was funded entirely by the congregation s members tithes, offerings, and donations. Second, only a settlor can create a trust and the trust language in a beneficiary s own documents is not sufficient. Third, EPPC s corporate documents did not create a trust because it reserved a right to amend the corporate documents and the amended the articles in Before addressing whether a trust was formed, it is important to note that EPPC is a corporation organized under Chapter 317A of the Minnesota Statues. As far as this Court can 3 Minnesota courts have cited favorable to the Restatement of the Law on Trusts. See United States v. O Shaughnessy, 517 N.W.2d 574 (Minn. 1994) (citing to Restatement (Second) of Trusts); In re Berget, A , 2014 WL , at *5 (Minn. Ct. App. Dec. 8, 2014), review denied (Feb. 25, 2015) (citing to Restatement (Third) of Trusts). 14

15 tell, PTCA is not arguing that EPPC is a subsidiary of PTCA s corporation or PCUSA s corporation. Thus, EPPC s decision-making is subject to the powers vested it under Chapter 317A, which includes property disposition. Minn. Stat. 317A.161, subd. 4. The Court now turns to EPPC s arguments regarding trust formation. First, a trust does not fail because the settlor purchased the property entirely with its own funds and the deeds lack of the beneficiary s name. EPPC cites to no case law to support its argument that a settlor s independent purchase of property evidences lack of intent to hold property in trust for another. In fact, the supreme court in Jones v. Wolf expressly recognized that, in applying neutral principles of law, a court should examine deed language, church charters and constitutions, and other corporate documents. 443 U.S. at The Supreme Court held that the civil courts will be bound to give effect to the result indicated by the parties, provided it is embodied in some legally cognizable form. Id. at 606. In this case, the sequence of events does not favor the EPPC s emphasis on the warranty deeds. As discussed above, Minnesota determines whether a trust exists based on the settlor s intent at the time the trust was purportedly created. In re Bush s Trust, 249 at 42-43, 81 N.W.2d at ; see also Restatement (Second) of Trusts 4, cmt a. (1959). EPPC purchased or received the Disputed Property in 1996 and EPPC amended its Articles of Incorporation in 1999 to place all property held by this corporation in trust for the benefit of PCUSA. Had EPPC acquired the Disputed Property after 1999, the point at which PTCA alleges a trust was formed, the EPPC s claim might carry some weight. In this regard, the Court notes that absence of the PCUSA s name on a deed for property placed into trust is not necessarily fatal. See, e.g., Hope Presbyterian, 291 P.3d at 714 (reversing trial court summary judgment decision for local 15

16 church and holding that property was held in trust for PCUSA despite PCUSA s absence on deed). Second, the Court agrees with EPPC that trust language in the Book of Order did not create a trust for the Disputed Property. 4 At most, the Book of Order states the beneficiary s intent. Under Minnesota law, trust formation turns on the settlor s intent, not the beneficiary s intent, and requires an external expression of the settlor s intent. See authorities discussed supra B. 5 Other jurisdictions have also declined to find a trust was created simply on the basis of the Book of Order s trust language. See, e.g., Presbytery of Ohio Valley, Inc. v. OPC, Inc., 973 N.E.2d 1099, 1112 (Oh. 2012) (declining to find an express trust where there was no writing signed contemporaneously with the insertion of the trust provision in the PCUSA Constitution); Hope Presbyterian, 291 P.3d at 722 (holding that the express trust provision in PCUSA s constitution cannot be dispositive ); Heartland Presbytery v. Gashland Presbyterian Church, 364 S.W.3d 575, 591 (Mo. Ct. App. 2012) (holding that PCUSA s Book of Order are not necessarily binding on [the congregation], without some effective expression of [the congregation s] agreement to be bound by those provisions ). Cf. Presbytery of Greater Atlanta, Inc. v. Timberridge Presbyterian Church, Inc., 719 S.E.2d 446, 458 (Ga. 2011) (applying neutral principles of law and holding an implied trust existed in favor of PCUSA based on specific language in governing documents adopted by the local and general churches and not contradicted by the deeds). 4 It is not clear to this Court whether PCTA contends that the Book of Order, standing alone, created a trust because its argument is contained within the portions of its memorandum that argue this Court should apply hierarchal deference. (See, e.g., Pl. s Mem. Supp. Summ. J., pp ) However, EPPC responds to the argument in its opposition memorandum. (See, e.g., Def. s Mem. Opp. Summ. J, pp ) Thus the Court addresses the issue. 5 The EPPC s statute of frauds argument need not be reached because this Court has concluded that the Book of Order did not create a trust for the Disputed Property. 16

17 Finally, the Court turns to the EPPC corporate documents. Preliminarily, the Court notes that EPPC s argument that the trust was validly revoked puts the cart before the horse. This Court must first determine whether a trust was created when EPPC amended its Articles of Incorporation and By-laws in Applying neutral principles of Minnesota law regarding the establishment of a trust, the EPPC formed an express trust in 1999 when it modified its Articles of Incorporation to provide that legal title to all property held by this corporation is held in trust, nevertheless, for the use and benefit of the PCUSA. (Berhow Aff., Ex. 12, Art. III.) This language is an unambiguous expression of the settlor s intent to place all property into trust for the use and benefit of the PCUSA. The Article designates a trustee, the EPPC, a beneficiary, the PCUSA, and a definite trust res, legal title to all property held by this corporation. There is no dispute that all property held by the EPPC includes the Disputed Property. This language evidences a definite unequivocal declaration of trust, which, along with the circumstances of the EPPC s long-time affiliation with the PCUSA and the multiple references to the Book of Order in the Articles and By-laws, establish that EPPC intended to create a trust for the PCUSA s benefit. PTCA cites to Hope Presbyterian Church of Rogue River v. Presbyterian Church and Peters Creek United Presbyterian Church v. Washington Presbytery of Pennsylvania to support its analysis. The history of the congregations in Hope Presbyterian, Peters Creek and EPPC mirror each other. Each of the three congregations were affiliated with denominations that were predecessors to PCUSA and later became affiliated with PCUSA in 1983 when two denominations merged. See Hope Presbyterian, 291 P.3d 711, , 352 Or. 668 (2012); Peters Creek, 90 A.3d 95 (Pa. Commw. Ct. 2014) appeal denied, 102 A.3d 987 (Pa. 2014). 17

18 In Hope Presbyterian, the congregation amended its by-laws shortly after the merger, to state that it is governed in all its provisions by the Constitution of the Presbyterian Church, U.S.A. which includes the Book of Order. 291 P.3d at 714. Around the same time, the congregation amended its articles of incorporation to state, This corporation is a church congregation of and holds all property as trustee for the Presbyterian Church (U.S.A.). Id. A number of years later and after nearly 20 years of affiliation with PCUSA, the congregation began the disaffiliation process and initiated a quiet title action before the disaffiliation process was complete. Id. at 715. The trial court quieted title in favor of the congregation, the court of appeals reversed, holding the property was held in trust for PCUSA. Id. at 713. On further review, the Oregon Supreme Court applied the neutral principles of law approach. Id at 721. The supreme court applied the principles of Oregon trust law to the undisputed facts in the case and concluded that the congregation had created a trust. Id. at Specifically, the court relied on the congregation s long-standing affiliation with the denominational church, the presence of congregation members at the 1983 meeting approving the merger and adopting the PCUSA Book of Order, and the near-contemporaneous amendment to corporate documents to include language assenting to PCUSA s constitution and trust language. Id. at In short, there is a writing declaring the trust that is signed by the proper parties, satisfying the requirement of [Oregon s statute] and creating the trust. Id. at 726. language: In Peters Creek, the congregation amended its by-laws in 2001 to include the following This church, incorporated under the laws of the Commonwealth of Pennsylvania, and known as the Peters Creek United Presbyterian Church, being a particular congregation of the Presbyterian Church (U.S.A.), recognizes that the Constitution of said church is, in all its provisions, obligatory upon it and its members. Nothing in these bylaws shall prevail over the Constitution of said church nor the charter of this corporation. These bylaws shall be considered 18

19 to include mandatory provisions and requirements on local churches set forth in the Book of Order of the [PCUSA] whether or not incorporated by specific reference. These bylaws may be amended subject to the provisions of the charter of this corporation, the laws of the Commonwealth of Pennsylvania, and the Constitution and Book of Order of the Presbyterian Church (U.S.A.), at any meeting of the congregation or corporation called for that purpose, by a vote of not less than a majority of those present entitled to vote. 90 A.3d at 103 (emphasis original). The Pennsylvania Court of Appeals reversed the trial court s decision in favor of the local congregation and held that a trust was created when the local church incorporated PCUSA s governing documents into its governing documents and to expressly agree to be bound them Id. at In response, EPPC cites to Heartland Presbytery v. Gashland Presbyterian Church and Colonial Presbyterian Church v. Heartland Presbytery to support its argument. Gashland, 364 S.W.3d 575, 583 (Mo. Ct. App. 2012); Colonial, 375 S.W.3d 190, 193 (Mo. Ct. App. 2012). However, neither case is persuasive. In Gashland, the congregation possessed the property at issue before the 1983 PCUSA formation and the congregation amended its by-laws in 1987 to read nothing in these By-Laws shall nullify or contravene the provisions of the Constitution of the [PCUSA] and they shall be construed only in conformity therewith. 364 S.W.3d at The Missouri Court of Appeals held that the congregation s articles of agreement contained language that prevented interpreting the by-laws as the congregation s adoption of or submission to PCUSA s Constitution. Id. at 588. Specifically, the articles stated that the congregation is (1) only ecclesiastically subject to the denomination; (2) title to the congregation s property vested in the congregation itself; and (3) the congregation s property could only be conveyed pursuant to specific authorization of its members and its Board of Trustees. Id. at 587 (emphasis original). Also, state law provided that a nonprofit corporation s articles of incorporation take precedent over its by-laws. Id. at Given the specific property provisions in the 19

20 congregation s articles of agreement, the court held that the by-laws did not establish a trust. Id. at 588 In Colonial, the Missouri Court of Appeals concluded no express trust was created because the congregation s articles of incorporation and by-laws did not contain the requisite language evidencing an intent to convey the property, nor was the property described. 375 S.W.3d at 195. However, the language of the applicable articles of incorporation and by-laws are not included in the decision; therefore, it is impossible to use Colonial as a frame of reference for this Court s analysis. PTCA has the better argument because Hope Presbyterian is most similar to this case. Like the congregation in Hope Presbyterian, EPPC included trust language in its Articles of Incorporation in 1999 and was affiliated with PCUSA for over 20 years. Additionally, EPPC amended its By-laws to include language very similar to that in Peters Creek, subjecting themselves to the Constitution of the PCUSA, as well as to state law. EPPC s reliance on Gashland is misplaced. The language of that congregation s articles of incorporation explicitly limited its submission to ecclesiastical matters and also limited vesting of the property to the congregation. Here, there is no limitation to ecclesiastical submission, but rather EPPC subjected itself to PCUSA s polity and discipline, as well as state law. Most importantly, EPPC adopted express language of holding the property in trust for PCUSA, which the congregation in Gashland did not do. See 364 S.W.3d at 583 (noting presbytery points to no document that could satisfy the [legal] requirement that the intent to create a trust in land be expressed in writing ). This Court concludes that EPPC created an express trust, holding the Disputed Property for the use and benefit of PTCA when it adopted the 1999 Articles and By-laws. 20

21 D. Effect of Amendment of Trust Clause from Articles of Incorporation 1. Preservation of Power to Revoke a Trust A trust can be revoked in two ways. First, the document that created the trust may expressly reserve the right to revoke; or, second, the settlor may obtain the consent of all trust beneficiaries. In re Trust of Schroll, 297 N.W.2d 282, 284 (Minn. 1980). 6 If the settlor does not retain the power to revoke the trust, that power is lost and the trust is irrevocable unless the trust beneficiaries agree to revoke or modify the trust. Id. at 285 (holding settlor did not retain power to revoke and any modifications must be accomplished by consent of the beneficiaries). The power to revoke and the power to modify a trust are coextensive unless an express provision in the trust provide otherwise. Id. at 283 n.1 (citing Restatement (Second) of Trusts 330, 331, 338 & comments a, h (1959)). A settlor who has not reserved this power cannot unilaterally invoke it. Id. at 283. Where the terms of a trust are unambiguous regarding how the settlor may exercise the power to amend or revoke, a court will enforce those terms. See, e.g., In re Matter of Florance, 343 N.W.2d 297, 301 (Minn. Ct. App. 1984) (holding amendment of trust effective because settlor reserved right to amend and then complied with terms of trust) aff d in relevant part, rev d on other grounds, 360 N.W.2d 626, 629 (Minn. 1985); Conn. Gen. Life Ins. Co. v. First Nat. Bank of Minneapolis, 262 N.W.2d 403, 405 (Minn. 1977) (holding purported revocation of trust ineffective even though settlor reserved right to revoke because revocation did not comply with terms of trust). 6 The recently enacted Minnesota Trust Code similarly reflects an inference that a trust is irrevocable if the settlor does not expressly preserve a right to revoke. Unless the terms of a trust expressly provide that the trust is revocable, the settle may no revoke or amend the trust. Minn. Stat. 501C.0602(a). 21

22 The interpretation of an unambiguous trust instrument raises a question of law subject to de novo review. In re Trust Created by Hill, 499 N.W.2d 475, 482 (Minn. Ct. App. 1993). Whether reserving the power to modify a trust includes the power to revoke is a question of interpretation. See Restatement (Third) of Trusts 331, cmt. h (2003) ( [i]f the settlor reserves a power to modify the trust, it is a question of interpretation to be determined in view of the language used and all the circumstances whether and to what extent the power is subject to restrictions. If the power to modify is subject to no restrictions, it includes a power to revoke the trust ). Here, the parties disagree about whether EPPC retained the right to revoke the trust created in Article III of the 1999 Articles of Incorporation. In Article X, the EPPC provided that the articles may be amended by a majority of the active members of the congregation at any annual meeting or at any special meeting called for that purpose, provided that notice of the meeting at which such amendments are to be considered shall include the full text of the proposed amendments. (Berhow Aff., Ex. 12.) EPPC argues that, by retaining the power to amend, it retained the power to revoke the trust. PTCA argues that the right to amend is not the right to revoke, relying on deposition testimony by some elders. (PTCA Mem. Opp. Summ. J., p. 30.) Additionally, PTCA, in its discussion of the undisputed facts, claims PCUSA s Constitution does not permit a congregation to revoke a trust and that EPPC s by-laws stated that amendments may not be contrary to PCUSA s Constitutions. The Court s analysis begins with the language of the Articles of Incorporation, which created the Trust. Here, EPPC s corporate Articles retained the power to amend. The definition of amend is [t]o change the wording of; specif., to formally alter by striking out, inserting, or substituting words. Black s Law Dictionary (10th ed. 2014). Revoke is defined as [t]o 22

23 annul or make void by taking back or recalling; to cancel, rescind, repeal, or reverse. Black s Law Dictionary (10th ed. 2014). In other words, a revocation is a specific type of amendment. Just as Minnesota law does not require any special language to create a trust, it does not require any special language to retain the right to revoke. Where the document creating the trust includes language unambiguously retaining the power to modify, the power to revoke is coextensive, unless the trust document provides otherwise. Schroll, 297 N.W.2d at 284 n.1 (citing Restatement (Second) Trusts, 330, 331, 338 & comments a, h (1959)). Based on the unambiguous language of EPPC s Articles of Incorporation, EPPC retained the right to revoke the trust it created in PTCA s argument in opposition fails, first, because it relies on extrinsic evidence of the settlor s intent, which is not appropriate in light of the unambiguous language in the 1999 Articles of Incorporation. 7 Second, PTCA s other arguments do not hold up to careful review. PCUSA s Constitution, i.e., the Book of Order, does not prohibit a congregation from retaining the right to amend articles of incorporation or the right to revoke a trust. Preliminarily, PTCA does not establish that EPPC s Articles ever fully incorporated by reference the Book of Order. Even assuming that the Book of Order is fully incorporated by EPPC, it does not prohibit a congregation from retaining the right to amend corporate documents or revoke a trust. 7 If this Court were to examine evidence of extrinsic intent, it would conclude that the evidence supports EPPC s position that the settlor intended to retain the unlimited right to amend. PTCA submitted model articles of incorporation for EPPC s consideration in 1999 and those model articles included a provision allowing amendment. PTCA s model amendment language added limiting language that was ultimately rejected by the EPPC in Specifically, the model language stated that amendments may be permitted provided the articles at all time and in respects remain in conformity with the Constitution of the PCUSA. (Pl. s Reply Mem. at Ex. I, PCC 0535). By rejecting this limiting language, EPPC rejected limitations that the Book of Order may arguably impose on a congregation s right to amend. 23

24 In fact, the Book of Order provides that each congregation shall cause a corporation to be formed and maintained where permitted by civil law. (Pl. s Supp. Mem., Ex. J at G ) Moreover, this corporation shall have the following powers: to receive, hold, encumber, manage, and transfer property, real or personal, for the congregation, provided that in buying, selling, and mortgaging real property, the trustees shall act only after the approval of the congregation, granted in a duly constituted meeting; (Id.) While the Book of Order also provides that church property be held in trust for PCUSA, it does not comment on the power to amend or revoke any trust. (Id. at G ) Provisions in the same section require that a congregation obtain written permission of the presbytery before it sell, mortgage, or otherwise encumber any of its real property. (Id. at G ) But no mention is made of the congregation s power to amend its articles of incorporation, or to revoke a trust. PTCA is correct that EPPC s 1999 By-laws state that they may be amended subject to PCUSA s Constitution. However, the By-laws, when read in full, state that they may be amended subject to the Articles of Incorporation of [EPPC], the laws of the State of Minnesota, and the Constitution of the [PCUSA] by a majority of the active members of the congregation at any annual meeting or at any special meeting of the congregation called for that purpose, In other words, the By-laws are expressly subject to the Articles, Minnesota statute, and the PCUSA s Constitution. Minnesota law allows amendments as provided in the by-laws or articles. See generally Minn. Stat. 317A.181, subd. 1a (providing by-laws may be amended in the manner provided in the articles or by-laws). Given the Book of Order does not prohibit amendment of the Articles, and EPPC s Articles retain the power to amend, the By-laws do not obstruct what is permitted in EPPC s Articles. 24

25 To be clear, this Court is relying on Minnesota law regarding the settlor s right to revoke a trust and not case law from foreign jurisdictions. For example, EPPC cites to a Texas case to support its argument that the amendment language in the Articles of Incorporation preserved EPPC s power to revoke. Masterson v. Diocese of Nw. Tex., 422 S.W.3d 594 (Tex. 2014). However, Masterson is not helpful. First, the court s analysis of the revocation issue appears to be dicta because the court had already decided to remand for the trial court to apply the neutral principles of law to determine whether a trust existed. Id. at 609, 613. The trial court had taken the hierarchal-deference approach. Id. at Second, the deeds, articles of incorporation, and by-laws in Masterson did not contain any trust language. Id. at 613. Moreover, the dissent concluded a trust was formed based on the denomination s constitution s trust language and the congregation s reference to the constitution in its articles of incorporation and by-laws. To the contrary, this Court has concluded that trust language in PCUSA s Book of Order is not sufficient to form a trust because it is not an expression of EPPC. See discussion supra II.C. Similarly, PTCA s reliance on Hope Presbyterian is misplaced because the governing documents did not reserve any right to revoke. 291 P.3d at 727. ( Nothing in the text of either the Article of Amendment or the by-laws or in any other document in the record states or suggests that Hope Presbyterian reserved the power of revocation. ) In sum, in the unambiguous language of EPPC s Articles of Incorporation, EPPC retained the right to revoke the trust it created in Exercise of the Power to Amend the Articles of Incorporation As described in more detail in the statement of undisputed facts, EPPC amended its Articles of Incorporation in 2010 to remove all reference to property being held in trust for PCUSA. (Von Gohren Aff., Ex. 7, Art. III.) In fact, the language in Article III from 1999 was completely eliminated in 2010 by the amendment. Where previously Article III had set out 25

26 EPPC s affiliation with PCUSA and placed property in trust, the amended Article III eliminated all reference to any affiliation with PCUSA and instead moves up what had previously been Article IV. (Compare Berhow Aff., Ex. 12 with Von Gohren Aff., Ex. 7) ( Our Vision, with one statement: Live the Invitation to Follow Christ. ) In fact, the 2010 amended Articles eliminated all references to the PCUSA or its Constitution and parallel changes were made to EPPC s Bylaws. Moreover, it is undisputed that EPPC complied with its corporation documents and Minnesota law in amending its Articles in Thus EPPC validly revoked the trust it had previously created to benefit PCUSA by amending the Articles of Incorporation in 2010 to eliminate all reference to the trust. Consequently, the Court need not consider whether PTCA or PCUSA consented to the revocation after it received the 2010 Articles of Incorporation. III. Ejectment, Conversion, and Breach of Fiduciary Duty PTCA s ejectment, conversion, and breach of fiduciary duty claims fail as a matter of law because it is not entitled to possession of the Disputed Property. An ejectment action requires the ejecting party to establish a present or immediate right of possession. Ejectment is a possessory action and a plaintiff pursuing an ejectment action must show a right of possession that is present or immediate, as well as a legal estate in the property sought to be recovered, and unless both facts are established, ordinarily the defendant must prevail. Levine v. Twin City Red Barn No. 2, Inc., 296 Minn. 260, 263, 207 N.W.2d 739, 741 (1973). Similarly, a claim for conversion is dependent on a property interest. The elements of conversion are: (1) the plaintiff has a property interest and (2) the defendant deprives the plaintiff of that interest. Lassen v. First Bank Eden Prairie, 514 N.W. 2d 831, 838 (Minn. 1997). PTCA s only claim of a right to possession or property interest stemmed from the trust. Because the trust has been validly revoked, PTCA cannot establish it has a present or immediate 26