Beware of the reverter clause in dismissal process

title and deeds and keysThe pastor on the phone asked, “What do you know about something called a ‘reversionary clause’? We’re voting on Sunday and the presbytery response team just told us we have to add this language to our deed upon dismissal. I’m not a lawyer, but the whole thing sounds fishy to me.”  It sounded fishy to me too, so I asked some real lawyers for their opinion.

First a disclaimer: Every jurisdiction is different and you should always get the counsel of a attorney licensed to practice law in your particular state. All the insights offered here are in the “amicus” spirit of a friend. The comments here are of a general nature and should not be construed to constitute specific nor direct legal advice.

The first question to ask is “What problem is the introduction of a reverter clause trying to solve?” Has ANY church that has realigned from the Presbyterian Church (USA) in recent years to join the Evangelical Presbyterian Church (EPC) or the ECO: A Covenant Order of Evangelical Presbyterians  then left those denominations to independency or some un-Reformed body?

The second question to ask is “Who decides what is and what isn’t ‘Reformed?'” Most of the churches seeking to leave the PCUSA articulate as one of their concerns that the denomination no longer adheres to some of the most basic tenets of the historic Reformed faith. So who is the PCUSA to be the judge of the sufficiency of the Reformed nature of other denominations whose confessional standards are Reformed by historic and current global definitions?

The third question is about power. The only presbyteries seeking to assert reversionary claim to the property of departing congregations are presbyteries in states where property law favors the presbytery over the local church. That means that the negotiations are between unequal parties. The party in the negotiation with the power is the presbytery — and after churches have endured long processes crafted and governed by the presbytery and then agreed to hefty financial exit fees in order to buy their freedom from the PCUSA, the presbytery demands a 10-year legal claim on the property of the departing congregation?

As churches are trying to peaceably depart, presbyteries are seeking to leave one string attached.

What we’re talking about is a legal document that asserts the presbytery’s reversionary interest in the assets of a departing congregation. It’s a power play that creates a lifetime of potential work for attorneys and a decade of waiting for the other shoe to drop for churches that are already paying substantial tolls to get out of the PCUSA.

In legalese, a “reverter” is defined by Black’s Law Dictionary as “that species of reversionary interest which exists when the grant is so limited that it may possibly terminate.”  And a “reversionary interest” is one whereby the property reverts to the grantor after the expiration of an intervening event.  A common reversionary interest we see in church property issues is the grant of a residential property to a church “so long as it is used as a manse.”  If it ceases to be used as a home for the pastor, it typically would go to some other charitable organization, such as a local hospital association.  Thus, the grantor is giving it away from his ownership, to another party for a specified use.  The important consideration here is that the grantor is giving (or selling) a legal interest in land.  That means he is conveying title to another, retaining only a reversionary interest either for himself or to a third party.  (An example of a reverter returning the land to himself would be “20 acres of land to First Presbyterian, so long as it is used as a church camp; otherwise, to the grantor or his heirs.”)

What’s wrong with a presbytery attaching that string to the assets of a departing church?

One attorney answered, “Why would you give them something to which they have no legal right? Why would you give them a reversionary interest to which they are not legally entitled?” Good question.

The denomination asserts a trust over all church property, but the majority of states that have recent rulings on the matter have opted to apply neutral principles of law to church property disputes. That means that those disputes are adjudicated like all other property disputes, under neutral principles of law. Neutral principles is the language used to describe the practice of the courts in reviewing and making judgment based on the contents of the actual deeds, corporate papers, etc. The other method used by some states is called hierarchical deference. The hierarchical deference methods “defers” to the trust claim of the “hierarchical church” body.

Under neutral principles of law, the only cases in which the denomination has a trust is where one has been entered into by the local church in a “legally cognizable form” in that state. Period.  So, if your church has never expressly placed its property in trust for the denomination, you are literally free to go.

Legally binding yourself to the denomination you are departing

Throughout the sample deed proposed by PCUSA presbyteries to departing churches is the recurrent phrase “as described in the Presbyterian Church (USA) constitution.” This language legally binds “Your” Presbyterian Church to the PCUSA for the duration of the 10-year reversionary period.

Why would a church that has discerned God’s leading out of the PCUSA agree to allow its future to be bound to the constitution of the denomination from which it is departing? We all know that the constitution of the PCUSA is subject to change every biennial General Assembly cycle. That means that the current language of the PCUSA constitution could be very different by the end of the proposed 10-year reversionary period.

Furthermore, the proposed language allows the PCUSA — and the PCUSA alone — to define “Reformed denomination.”

What constitutes a “Reformed denomination?”

Most of the deeds we’ve seen that are produced by presbyteries and presented to churches in the dismissal process include language that permits the presbytery to make its own unilateral determination that a church no longer in the PCUSA has subsequently left a “Reformed denomination.”  None of the deeds that we’ve reviewed provide the opportunity for the congregation in question nor the denomination to which they choose to affiliate to provide input. Nor do they provide opportunity for a court of law to assess the reasonableness of the alleged change.

One deed proposed to a departing congregation says that “title to this property shall automatically vest in the presbytery ….”   Worse, it states that “Either event of termination of use or membership referred to in the preceding sentence for purposes of such automatic grant shall be deemed conclusively to have occurred by a declaration to that effect in writing signed by the Presbyterian Church (USA), A Corporation, or its successors in interest, and approved by the presbytery…”

This means that the presbytery, in its own discretion, and without notice to the local church, can declare that the particular church is no longer “in a Reformed denomination.”  While the intent is clearly to include the denominations like the Evangelical Presbyterian Church (EPC) and ECO: A Covenant Order of Evangelical Presbyterians in that status at the current time, there is no guarantee that opinion would hold long term.

Imagine that a presbytery determines that ECO is currently “Reformed,” and dismisses a church with the above reverter language in the deed. Then suppose that ECO changes it confessional standard — to include more or less material than is currently found in the PCUSA Book of Confessions.  The language in the deed would allow the PCUSA to judge that to be a change in the Reformed nature of ECO — and with a stroke of the pen in Louisville and concurring approval by the presbytery, seize your church property.

Even if in a subsequent paragraph the deed expressly states that the receiving denomination is in the Reformed tradition as of the date of the contract, if the presbytery deems it no longer so, it can make that assertion unilaterally and title shall automatically vest in the presbytery.  This would invite a lawsuit, to be sure, but the deed effectively gives the presbytery the sole discretion to make that determination.  Secular courts will not be able to render a decision as to whether or not the ECO is “Reformed,” and the presbytery will find itself enriched with the local church’s property.

This may be corrected, at least in part, by adding a statement in the deed that “before any action is taken by the presbytery as a result of a perceived default, it is to contact the church and request a response as to why the church is not in default, give the church an opportunity to cure any actual default within 60 days of such notice (or such longer time as the parties may provide), and if the parties are not in agreement as to the occurrence of a default which pertains to the status of the church as a member of a Reformed body, the parties shall proceed to arbitration.  Any such arbitration shall be conducted with one arbitrator being appointed by the Presbytery, one by (name of local church), and the two arbitrators either agreeing upon a third, or requesting one be appointed from the Federal court arbitration panel.”

Payments that void the reversionary interest

As you see in the above sample, many deeds being proposed to churches seeking dismissal include some method of “paying off” the presbytery for its asserted financial interest in the property.  This is in addition to mandatory “gifts” that the churches are required to give to the presbytery upon dismissal.

What’s missing from the proposed language? The deed does not have a requirement that the presbytery provide a Notice of Satisfaction establishing that “Your” Presbyterian Church has paid the amounts due under the contract for Gracious Separation, which payments would void the reversionary interest.  That language must be added in order that “Your” Presbyterian Church can file a Notice of Satisfaction upon payment.

What have you seen presbyteries seeking to require of departing churches?  Email us at [email protected]

Carmen Fowler LaBerge