Appeal by defendants from orders entered 6 July 2001 and 23
January 2002 by Judge John B. Lewis, Jr. and Judge John R. Jolly,
Jr., respectively, in Carteret County Superior Court. Heard in the
Court of Appeals 18 February 2003.
Wheatly, Wheatly, Nobles, Weeks & Valentine, P.A., by C. R.
Wheatly, Jr. and C. R. Wheatly, III; Charles B. Park, III;
Miller, Hamilton, Snider & Odom, L.L.C., by Palmer C.
Hamilton, for plaintiff-appellees.
Taylor & Taylor, by Nelson W. Taylor, III; Beswick, Marquardt
and Goines, P.A., by M. Douglas Goines; Susan H. McIntyre, for
defendant-appellants.
HUNTER, Judge.
Defendants appeal an order denying their motion to dismiss
plaintiffs' complaint for failure to allege registration of an
assumed name certificate in their original complaint, as well asfailure to join a real party in interest in this action. Further,
defendants appeal an order granting plaintiffs' motion for summary
judgment, which resulted in plaintiffs being declared the true St.
Andrew's Episcopal Church of Morehead City and the rightful owners
of all the parish's real and personal property. We affirm the
trial court's decision with respect to both motions; however, we
reverse the trial court's decision to assess liability against
defendants in their individual capacities.
The Protestant Episcopal Church in the United States of
America (PECUSA) is a hierarchical or connectional church
composed of 109 geographical dioceses. One such diocese, The
Diocese of East Carolina (Diocese), admitted a missionary
congregation called St. Andrew's Episcopal Church of Morehead City
(St. Andrew's) as a parish in 1952. As a parish within the
Diocese's boundaries, St. Andrew's was bound by the Constitutions
and Canons of that diocese, as well as the Constitutions and Canons
of PECUSA.
Upon admission into the Diocese, St. Andrew's was deeded a
parcel of land (containing three lots) in Morehead City by the
Diocesan Trustees. The deed, which conveyed the land to the
Vestrymen and Trustees for St. Andrew[']s Episcopal Church of
Morehead City, . . . and their successors in office, contained the
following language pursuant to PECUSA Canon II.6.1:
The purpose of this conveyance is to transfer
the above described property to the
Vestrymen[] or Trustees of [] St. Andrew[']s
. . . for the construction of a church or
place of worship, and for the purpose of
church use, and consent and approval for suchconstruction by the Bishop of the Diocese and
the Trustees is hereby freely given.
Over the next several years, St. Andrew's purchased and had
conveyed to it by name, or to its then current vestry persons as
vestry persons, nine other lots and parts of two others.
Following its establishment as a parish in the Diocese, St.
Andrew's acted with full parish status and complied with the Canons
of PECUSA and the Diocese. However, on 28 February 2000, the
vestry of St. Andrew's unanimously resolved to withdraw from PECUSA
and the Diocese. Its decision was announced at a subsequent parish
meeting, and a majority of the parishioners supported the
withdrawal.
Thereafter, the vestry sent a letter to the Right Reverend
Bishop Clifton W. Daniel, 3rd (Bishop Daniel), Bishop of the
Diocese, stating St. Andrew's was withdrawing from PECUSA and the
Diocese to join the Interim Anglican Expression in the United
States. The letter further stated that the name of the new parish
would be St. Andrew's Anglican Church of Morehead City
(See footnote 1)
and
enclosed documents establishing parochial ownership of the St.
Andrew's property and goods as deeded to the vestry. Bishop Daniel
answered the letter, acknowledging the vestry members' resignations
and withdrawal from the Episcopal Church, but advised them that no
vestry has the authority to withdraw a parish from membership
. . . . Bishop Daniel also laid claim to all property belongingto St. Andrew's because, pursuant to PECUSA Canon I.7.4, that
property was to be held in trust for the parent body upon
resignation and withdrawal of the vestry and other members.
On 11 May 2000, the Executive Council of the Diocese passed a
resolution finding that twenty-five members of the St. Andrew's
congregation remained loyal to PECUSA and the Diocese. Those
members had elected a new vestry and sought assistance in
recovering the St. Andrew's property and goods from the departing
vestry and members. The resolution further indicated that PECUSA
Canon I.7.4 governed the property issues, and Bishop Daniel was to
take such action as he deemed appropriate in returning the church
property and goods to the newly organized vestry and congregation
of St. Andrew's.
On 12 May 2000, Bishop Daniel, the newly elected vestry, and
the Diocese (collectively plaintiffs) filed suit against the
former vestry of St. Andrew's and three other former clergymen of
the parish (collectively defendants). Before an answer was
filed, plaintiffs filed an amended complaint that substituted the
names of the Diocesan Trustees for that of the Diocese. On 15
September 2000, defendants filed an answer which set forth motions
that plaintiffs' action be dismissed pursuant to Section 1-69.1 of
the North Carolina General Statutes (Section 1-69.1) because the
action was originally commenced naming the Diocese, an
unincorporated association, as a plaintiff without alleging the
registration of an assumed name certificate. Plaintiffs
subsequently motioned to amend their amended complaint and, on 27February 2001, plaintiffs were allowed to do so by adding
allegations that stated an assumed name certificate had been filed
for the Diocese with the Carteret County Register of Deeds.
Defendants' motion to dismiss was denied in an order entered 6 July
2001.
The case was heard in July of 2001, but resulted in the trial
court declaring a mistrial on 14 July 2001 when the jury failed to
reach a verdict. The court further denied both parties' motions
for judgment notwithstanding the verdict, as well as plaintiffs'
motion for an injunction against defendants from using the name
St. Andrew's Episcopal Church.
As further proceedings on the action began, plaintiffs filed
a motion for summary judgment on 17 December 2001.
(See footnote 2)
The trial
court granted the motion. Thus, plaintiffs were entitled to
judgment in their favor as follows: (1) Plaintiffs were deemed to
be the beneficial owners of all property formerly held by St.
Andrew's; (2) defendants were permanently enjoined from using the
name St. Andrew's Episcopal Church or any name confusingly
similar; (3) defendants were required to make a written accounting
for any funds received or appropriated from the date of defendants'
withdrawal from the Diocese; and (4) deeds recorded by defendants
purporting to convey the church building to another parish were
declared null and void. The cost of the action was taxed to
defendants jointly and severally. Defendants appeal.
I.
At the onset, we address defendants' two assigned errors
arguing that plaintiffs' non-compliance with procedural
requirements should have resulted in the dismissal of their action.
A. Assumed Name Certificate
First, defendants argue the trial court committed reversible
error in denying their motion to dismiss because plaintiffs had
failed to allege registration of the Diocese in an assumed name
certificate. Section 1-69.1 requires an unincorporated association
bringing a suit in the name by which it is commonly known and
called [to] allege the specific location of the recordation
. . . . N.C. Gen. Stat. § 1-69.1 (2001). Failure to do so is
fatal to a complaint.
Cherokee Home Demonstration Club v.
Oxendine, 100 N.C. App. 622, 397 S.E.2d 643 (1990).
Here, plaintiffs' initial complaint violated Section 1-69.1
because it lacked the proper allegation when it named the Diocese
as a party. Nevertheless, Rule 15(a) of the North Carolina Rules
of Civil Procedure allows [a] party [to] amend his pleading once
as a matter of course at any time before a responsive pleading is
served . . . . N.C. Gen. Stat. § 1A-1, Rule 15(a) (2001).
Defendants had filed no responsive pleading prior to plaintiffs
filing their amended complaint that substituted the names of the
Diocesan Trustees for that of the Diocese. Such an amendment is
appropriate and does not bar a party's action unless there is a
statute of limitations issue.
See Bob Killian Tire, Inc. v. Day
Enters., Inc., 131 N.C. App. 330, 333, 506 S.E.2d 752, 754 (1998). Since plaintiffs' action was filed well within the limitations
period, the trial court did not err in allowing the Diocese's name
to be substituted so that it could act through its trustees.
See
N.C. Gen. Stat. § 61.1 (2001).
B. Real Party in Interest
Further, defendants argue the court erred in denying their
motion to dismiss plaintiffs' action because PECUSA was not named
as a party. Rule 17 of the North Carolina Rules of Civil Procedure
provides, in part, that [e]very claim shall be prosecuted in the
name of the real party in interest[.] N.C. Gen. Stat. § 1A-1,
Rule 17(a) (2001). A real party in interest is 'a party who is
benefited or injured by the judgment in the case. An interest
which warrants making a person a party is not an interest in the
action involved merely, but some interest in the subject matter of
the litigation.'
Parnell v. Insurance Co., 263 N.C. 445, 448-49,
139 S.E.2d 723, 726 (1965) (citation omitted).
In the case
sub judice, plaintiffs seek to enforce PECUSA
Canon I.7.4, which essentially states that all real and personal
property held by or for the benefit of St. Andrew's is held in
trust for PECUSA and the Diocese. Defendants contend plaintiffs'
action should have been dismissed because the canon specifically
provides that the trust is for the benefit of the Diocese
and
PECUSA. We conclude that based upon the language of PECUSA Canon
I.7.4, PECUSA was a real party in interest because it had a legal
right to enforce the claim in question. Yet, Rule 17 provides that
[n]o action shall be dismissed on the ground that it is notprosecuted in the name of the real party in interest until a
reasonable time has been allowed after objection for ratification
of commencement of the action by, or joinder or substitution of,
the real party in interest[.] N.C. Gen. Stat. § 1A-1, Rule 17(a).
Thus, the trial court did not err in denying defendants' motion to
dismiss; but, before ruling on plaintiffs' summary judgment motion,
the court should have either granted a continuance to permit
PECUSA's joinder or corrected the defect
ex mero motu.
See
Carolina First Nat'l Bank v. Douglas Gallery of Homes, 68 N.C. App.
246, 251, 314 S.E.2d 801, 804 (1984).
Nevertheless, this Court has also held that the absence of
the real party in interest . . . does not constitute a 'fatal
defect,' [if the defendants] failed to 'show real prejudice in not
having had the real party joined at the original trial.'
Id.
Defendants have not argued, nor have we found, any way in which
they were prejudiced by not having PECUSA made a party to this
action. Moreover, although defendants did raise this issue in
their answer as an affirmative defense, they never pursued the
defense in the trial court or raised it in opposition to
plaintiffs' motion for summary judgment. Therefore, the denial of
the motion was not prejudicial to defendants.
II.
Defendants also argue the trial court erred in granting
summary judgment in favor of plaintiffs because there were genuine
issues of material fact regarding the ownership of the St. Andrew's
property. On an appeal from a grant of summary judgment, this Court
reviews the trial court's decision
de novo.
Falk Integrated Tech.,
Inc. v. Stack, 132 N.C. App. 807, 809, 513 S.E.2d 572, 574 (1999).
Thus, when viewing the evidence in the light most favorable to the
non-movant, we must determine whether the trial court properly
concluded that the moving party showed, through pleadings and
affidavits, that there was no genuine issue of material fact and
that the moving party was entitled to judgment as a matter of law.
Bruce-Terminix Co. v. Zurich Ins. Co., 130 N.C. App. 729, 733, 504
S.E.2d 574, 577 (1998).
Moreover, [w]hile the civil courts have no jurisdiction over
and no concern with purely ecclesiastical questions and
controversies due to constitutional guarantees of freedom of
religious profession and worship, the courts do have jurisdiction
to determine property rights which are involved in, or arise from,
a church controversy.
Looney v. Community Bible Holiness Church,
103 N.C. App. 469, 473, 405 S.E.2d 811, 813 (1991). In determining
these rights, a central question is whether the church is
connectional or congregational.
Fire Baptized Holiness Church v.
McSwain, 134 N.C. App. 676, 680, 518 S.E.2d 558, 560 (1999).
Connectional churches are governed by large bodies and individual
congregations bear the same relation to the governing body as
counties bear to the State. Congregational churches are
independent republics, governed by the majority of its members and
subject to control or supervision by no higher authority.
Looney,
103 N.C. App. at 473, 405 S.E.2d at 813 (citations omitted). In the instant case, it is undisputed that St. Andrew's is a
connectional church. As a general rule the parent body of a
connectional church has the right to control the property of local
affiliated churches, and, as a corollary, this right will be
enforced in civil courts.
Id. Plaintiffs contend the trial court
properly granted summary judgment in their favor because, as a
connectional church, the ownership of the St. Andrew's property is
governed by the Constitutions and Canons of both PECUSA and the
Diocese. Specifically, plaintiffs cite the following two canons to
establish their rights to all the property:
[PECUSA Canon I.7.4]. All real or personal
property held by or for the benefit of any
Parish, Mission or Congregation is held in
trust 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 to, this Church and its Constitution
and Canons.
. . . .
[Diocese Canon II.6.2]. In the event of the
dissolution of any Parish or Mission by the
Convention, the real and personal property of
the Parish or Mission shall immediately vest
in the Trustees of the Diocese, in trust for
the dissolved Parish or Mission.
Defendants, however, contend that these canons do not apply because
this Court clearly recognized in
Looney and
Fire Baptized Holiness
Church that a church could be congregational as to property matters
even though connectional in other ways. In
Looney, a local church joined with a denomination for
purposes of fellowship. Following its joinder, the local church
changed its name and wrote deeds to itself in that new name. Years
later, the local church disassociated itself from the denomination,
which subsequently appointed new trustees for the local church.
The new trustees deeded the local church property to themselves,
but members of the local church continued to occupy the property.
The denomination, through the new trustees, brought suit against
the local church seeking possession of the property. The trial
court overruled the denomination's motions for directed verdict and
for judgment notwithstanding the verdict and, following a jury
verdict, declared the local church the sole owner of the property.
On appeal, the
Looney Court considered,
inter alia, whether
the local church had manifested an implied assent to be governed by
the denomination's General Assembly minutes which provided that the
denomination controlled the local church property. The
Looney
Court concluded that, when viewed in the light most favorable to
the local church, the evidence created a jury question as to
whether
as to church property the local church intended to
establish a connectional relationship with the denominational
church.
Looney, 103 N.C. App. at 474, 405 S.E.2d at 813-14. The
trial court's judgment was upheld.
The
Looney holding was heavily relied upon by this Court in
the decision rendered in
Fire Baptized Holiness Church. In that
case, a local church also voted to withdraw from a denomination.
The denomination's trustees conveyed the local church property tothemselves as trustees of a newly formed church. In an action
brought by the denomination to determine ownership of the local
church property, a jury found the denomination did not have rights
to the property because the local church was not connectional.
On appeal, this Court determined there was evidence that
signified the local church (1) had not recorded deeds as set out by
the denomination's rules, and (2) had acquired additional property
despite the denomination's clear disapproval. Evidence further
indicated that the denomination had made no effort to enforce its
rules at the time of those violations. Thus, as in
Looney, this
Court determined there was contradictory evidence regarding whether
the local church manifested an implied assent to the denomination's
rules governing ownership of the church property and whether the
local church's failure to adhere to those rules signified its
desire for independence prior to its ultimate secession from the
denomination[.]
Fire Baptized Holiness Church, 134 N.C. App. at
682, 518 S.E.2d at 561. The judgment in favor of the local church
was affirmed.
Defendants argue that similar to
Looney and
Fire Baptized
Holiness Church, this case should have been presented to a jury
because a genuine issue of material fact exists as to whether
defendants acted in a congregational manner with respect to
property matters. Particularly, defendants contend that the
evidence indicates they are the owners of the St. Andrew's real
property because (1) as the former Vestry of St. Andrew's, they are
the successors of the original parcel of land deeded to the parishby the Diocese, and (2) the additional real property owned by the
parish was purchased without the assistance of PECUSA or the
Diocese and prior to the adoption of PECUSA Canon I.7.4. Yet,
despite the similarities between these three cases, there are also
significant distinctions which require this Court to reach a
different result.
In
Looney and
Fire Baptized Holiness Church, we held that
there was a genuine issue of material fact as to whether the local
church that withdrew from the denomination had impliedly assented
to the rules of that denomination with respect to property matters.
Conversely, the present case involves a controversy between
competing factions of the St. Andrew's congregation, each faction
claiming ownership of the same property. The evidence in the
record establishes that prior to defendants' withdrawal, the entire
St. Andrew's congregation had adhered to the Constitutions and
Canons of PECUSA and the Diocese for nearly fifty years. During
that time, St. Andrew's elected delegates to participate in various
conventions at which new and revised canons were adopted, and
defendants did not contest the adoption of those canons thereafter.
Under the language of these canons, it is clear that the St.
Andrew's property was to be held in trust for the Diocese.
Defendants' withdrawal from St. Andrew's essentially resulted in a
dissolution of the parish whereby the property immediately vested
in the Diocesan Trustees until the Executive Council of the Diocese
passed a resolution recognizing those members of the original St.
Andrew's congregation that remained loyal to PECUSA and the Dioceseas the new St. Andrew's. Thus, the canons clearly established a
form of governance impliedly assented to by defendants that
precluded the seceding vestry from taking control of the St.
Andrew's property.
III.
Despite our conclusion that St. Andrew's is a connectional
church as to property matters, defendants argue that material
questions of fact still exist as to whether they have a defense
that prevents the canons from encumbering the property.
Specifically, defendants contend (A) PECUSA Canon I.7.4 does not
create an interest in the property for plaintiffs because it was
never recorded; (B) defendants were the owners of the St. Andrew's
property by adverse possession; (C) PECUSA Canon I.7.4. violated
the Statute of Frauds because it was not signed; and (D) the
doctrine of estoppel or laches bars plaintiffs' action because
neither PECUSA nor the Diocese attempted to enforce PECUSA Canon
II.6.2
(See footnote 3)
when St. Andrew's conveyed away and encumbered its property
without obtaining the prior consent of the Bishop.
A. Recordation
With respect to the St. Andrew's real property, PECUSA Canon
I.7.4 essentially established a deed of trust. Defendants contend
that since this canon was never recorded with the Register of
Deeds, it cannot effectively create an interest for plaintiffs in
the property. However, North Carolina recognizes that [t]he
registration of deeds is primarily for the protection of purchasers
for value and creditors; an unregistered deed is good as between
the parties and the fact that it is not registered does not affect
the equities between the parties.
Bowden v. Bowden, 264 N.C. 296,
302, 141 S.E.2d 621, 627 (1965).
See also Patterson v. Bryant, 216
N.C. 550, 5 S.E.2d 849 (1939). Defendants, in their positions as
former vestry and clergy of St. Andrew's, had knowledge of PECUSA
Canon I.7.4. Thus, while it is likely this unrecorded canon would
have been unenforceable against innocent purchasers for value or
creditors, it is enforceable against defendants.
B. Adverse Possession
Defendants argue the trial court committed reversible error by
allowing plaintiffs' motion for summary judgment when there were
material questions of fact as to whether defendants had adversely
possessed the St. Andrew's real property. Defendants, however, did
not forecast evidence that their possession of that property was
hostile, an essential element of adverse possession. A 'hostile'
use is simply a use of such nature and exercised under such
circumstances as to manifest and give notice that the use is being
made under claim of right.
Dulin v. Faires, 266 N.C. 257, 261,145 S.E.2d 873, 875 (1966). The record does not indicate that
defendants' possession of any of the property was hostile prior to
their decision to withdraw from PECUSA and the Diocese on 28
February 2000. Plaintiffs filed this action on 12 May 2000.
Therefore, absent such hostility for the required period of time,
we cannot conclude that the trial court erred in granting summary
judgment in favor of plaintiffs on this issue.
C. Statute of Frauds
Defendants further argue PECUSA Canon I.7.4 violated the
Statute of Frauds and thus, does not govern the ownership of the
St. Andrew's property because they never signed it. This Court
recognizes that [a] grantee, by acceptance of a deed, becomes
bound by conditions, etc., contained therein, even though he has
not signed the deed. The delivery and acceptance of a deed takes
covenants contained therein out of the operation of the statute of
frauds.
Harris & Gurganus v. Williams, 37 N.C. App. 585, 587, 246
S.E.2d 791, 794 (1978) (citations omitted). As previously stated,
St. Andrew's is a connectional church that agreed to be bound by
the Constitutions and Canons of PECUSA and the Diocese. In doing
so, defendants, as the former vestry and clergy of St. Andrew's,
accepted PECUSA Canon I.7.4 as establishing a deed of trust in
which the St. Andrew's property would be held upon their
resignation and withdrawal. Therefore, this canon did create a
valid trust even though it was not signed by defendants.
D. Estoppel and Laches
Additionally, defendants argue plaintiffs' action is barred by
either the doctrine of estoppel or laches. However, after
considering our analysis of the previous arguments raised by
defendants in this case, we conclude this argument to be without
merit and warrants no further decision.
IV.
Next, defendants argue there was a genuine issue of material
fact as to whether the name, St. Andrew's Episcopal Church, had
acquired a secondary meaning exclusive to plaintiffs thereby
resulting in the trial court enjoining defendants from further use
of that name. Defendants contend the words St. Andrew's and
Episcopal are so common and generic that their use of these words
as the name of their new church will not result in confusion of the
public. We disagree.
In addressing plaintiffs' argument, we are persuaded by
Purcell v. Summers, 145 F.2d 979 (4th Cir. 1944). In
Purcell,
three branches of the Methodist Church joined to become The
Methodist Church for the United Church. However, an opposing
group seceded and began using the name of one of the former
branches, The Methodist Episcopal Church, South. The Methodist
Church brought litigation to enjoin the use of the former branch
name, which the trial court denied. On appeal, the United States
Court of Appeals for the Fourth Circuit concluded:
The right to use the name inheres in the
institution, not in its members; and, when
they cease to be members of the institution,
use by them of the name is misleading and, if
injurious to the institution, should be
enjoined. No question of religious liberty isinvolved. Men have the right to worship God
according to the dictates of conscience; but
they have no right in doing so to make use of
a name which will enable them to appropriate
the good will which has been built up by an
organization with which they are no longer
connected. . . .
. . . .
It is said that the words Methodist and
Episcopal are generic terms and that
defendants have the right to use them for that
reason, but defendants are not proposing to
use either of these words in a new name so
different from the old that no confusion could
result. . . . [T]he question is, not whether
they have the right to use Methodist or
Episcopal in a new name so constructed as to
avoid confusion, but whether they have the
right to use the old name in a way that
amounts, as we think it does, to implied
misrepresentation to the damage of plaintiffs.
Id. at 987-88. See also Christian Science Bd. of Directors v.
Robinson, 115 F. Supp. 2d 607 (W.D.N.C. 2000).
The issue addressed by the Fourth Circuit appellate court in
Purcell is virtually identical to the issue currently before us.
Here, plaintiffs sought to enjoin defendants from using the same
name that was adopted by PECUSA and the Diocese for a parish that
has been located in Carteret County for approximately fifty years.
Defendants, as the seceding members of St. Andrew's, should not be
allowed to confuse the public or appropriate the standing and good
will of this still existing parish by establishing another church
in Carteret County with the same name. Therefore, based on the
rationale applied in Purcell, we conclude summary judgment was
properly granted in favor of plaintiffs enjoining defendants fromusing the name St. Andrew's Episcopal Church or any name
confusingly similar.
V.
Finally, defendants argue the trial court erred in placing
liability on them individually because they were acting as
directors and officers of a religious society. We agree.
Section 61-1(b) of our statutes states that [a] person
serving as a trustee . . . or a director or officer of a religious
society shall be immune individually from civil liability for
monetary damages, except to the extent covered by insurance, for
any act or failure to act arising out of this service[.] N.C.
Gen. Stat. § 61-1(b).
See also Pressly v. Walker, 238 N.C. 732, 78
S.E.2d 920 (1953). Plaintiffs contend defendants are not immune
from individual liability because they were not acting within their
official duties as vestry members or clergymen of St. Andrew's when
they appropriated the church's real and personal property after
seceding from the Diocese and PECUSA. Whether defendants were
acting as trustees or directors of the original St. Andrew's or of
the church they formed after withdrawal from the Diocese and
PECUSA, defendants were nonetheless still acting on behalf of a
religious society. Thus, the trial court erred in finding
defendants individually liable.
In conclusion, the trial court did not err in denying
defendants' motion to dismiss plaintiffs' action for failure to
allege the Diocese in an assumed name certificate. Nor did the
court commit prejudicial error by not joining PECUSA as a realparty in interest. Moreover, the court did not err in granting
plaintiffs' summary judgment motion with respect to ownership of
the St. Andrew's property and enjoining defendants from using the
name St. Andrew's Episcopal Church or any name confusingly
similar. However, the trial court did err in assessing liability
against defendants in their individual capacities.
Affirmed in part, reversed in part.
Judges BRYANT and ELMORE concur.
Footnote: 1