FIRST BAPTIST v. Beeson

• Decision Date: 02 February 2004
• Docket Number: No. 0112,0112
• Parties: FIRST BAPTIST CHURCH OF FRIENDLY, et al. v. Kathy BEESON, et al.
• Court: Court of Special Appeals of Maryland

841 A.2d 347

154 Md. App. 650

FIRST BAPTIST CHURCH OF FRIENDLY, et al. v. Kathy BEESON, et al.

No. 0112, Sept. Term, 2003.

Court of Special Appeals of Maryland.

February 2, 2004.

H. Robert Showers (Stephen S. McCloskey, Simms Showers, LLP, on the brief), Baltimore, for appellant.

Thomas F. Ellis, III, Annapolis, for appellee.

Panel: DEBORAH S. EYLER, KRAUSER and LAWRENCE F. RODOWSKY (Retired, specially assigned), JJ. LAWRENCE F. RODOWSKY, Judge, Retired, Specially Assigned.

This appeal is from an interlocutory order appointing a receiver. See Maryland Code (1974, 2002 Repl.Vol.), § 12-303(3)(iv) of the Courts and Judicial Proceedings Article (CJ). Procedurally the action is, in effect, a derivative suit brought by minority members of an independent Baptist congregation against church "trustees," including the pastor. Substantively, the theory of the case, at it has evolved, is that the trial court should prohibit the defendants from disbursing the proceeds from the sale of the church building for purposes that allegedly are contrary to the corporate purposes. As explained below, we shall reverse in part and remand in part.

First Baptist Church of Friendly (the Church), one of the appellants, is a Maryland corporation chartered in 1969 under the general provisions (Part I) of the Maryland Religious Corporations statute, now codified as Maryland Code (1975, 1999 Repl.Vol.), §§ 5-301 through 5-313 of the Corporations and Associations Article (CA). Originally organized as the Anacostia Church in the District of Columbia, the congregation moved to the Town of Friendly in Prince George's County about 1969. The Anacostia Church and the Church had been members of the District of Columbia Baptist Convention, but in 1999 the Church severed its connection with that convention. The Church is recognized by the Internal Revenue Service (IRS) as a tax-exempt religious corporation under § 501(c)(3) of the Internal Revenue Code, 26 U.S.C. § 501.

Randy M. Kingsley, one of the defendants and appellants, has preached and taught since 1968 and has been the parttime pastor of the Church since 1985. Pastor Kingsley is also employed full time by the United States Department of Education, a job that sometimes requires him to be traveling on Sundays. When Pastor Kingsley was "called" to the Church, the membership totaled 127 people, ten of whom, including members of Pastor Kingsley's family, were active. Also joined as defendants are the appellees, Nancy Pickering, Craig Smrcina, and Eugene Walden who are three members of the Board of Trustees of the Church.¹ The Church is a nominal defendant, inasmuch as the action is brought on its behalf.

On June 6, 1999, the Church adopted a new constitution under which two weeks' notice of a special business meeting of the congregation could be given from the pulpit. Under Article VI, § II, Subsection C, ¶ 2(a) of that constitution, action by the Church could be by a majority vote of members present and voting. At a special meeting on December 2, 2001, the congregation voted, sixteen in favor to thirteen against, to sell the Church building.² Pursuant to that vote the trustees, on February 13, 2002, entered into a contract to sell the Church building for $900,000 to St. Paul Baptist Church of Prince George's County, Inc. (St.Paul).

The instant action was filed in the Circuit Court for Prince George's County on August 2, 2002. That same day the court (Judge Michele D. Hotten) entered a temporary restraining order (TRO) enjoining further attempts to effectuate the sale to St. Paul until a further hearing, which was set for August 21.

Nine plaintiffs are listed in the action.³ Four of the plaintiffs aver that they are members of the Church but that they have been improperly removed from the roll of members by the individual defendants' "continuous course of conduct beginning with the year 2001 in an effort to railroad the congregation into agreeing to sell" the Church building. Inferentially, the other five plaintiffs are members of the Church who are considered to be active members, although there is no express allegation to that effect.⁴

The August 21, 2003 hearing on extending the TRO into a preliminary injunction was conducted by Judge James J. Lombardi. He succeeded in having the original parties enter into the following stipulation, which was signed by their respective counsel and also signed by Pastor Kingsley. It read:

"The parties are in agreement that the proceeds of the sale shall be taken before the congregation to determine the final distribution which is to be submitted to Judge Lombardi for ratification. Judge Lombardi has the sole discretion to approve final ratification without further hearing. If ratification is denied for any reason, the parties will be contacted and a hearing will be promptly scheduled."

Concurrently with the execution of the stipulation, the court dissolved the TRO, denied the preliminary injunction, and released the TRO bond. The sale to St. Paul proceeded, netting, in round figures, $834,000.⁵

A meeting of the Church congregation was held on September 22, 2002, at which twenty-two persons voted on the use and application of the net proceeds from the St. Paul sale.⁶ The distributions described below were approved by a vote of sixteen to six. A memorandum of that meeting, which was furnished to the court by counsel for the Church, described the proposed applications of the funds.

Thereafter the court approved the disbursements as described in the memorandum. By an order dated October 29, that was not docketed until November 6, 2002, the court ordered

"that the proceeds shall be distributed as follows in accordance with the majority vote of the members of the congregation on September 22, 2002 "1. $300,000.00 is to be placed in a church savings account for growth and any expenditures;

"2. $100,000.00 is to be given to Jewish Awareness Ministries for Missionary John Metzger;

"3. $202,000.00 is to be given to pay off the mortgage on Pastor Kingsley's home;

"4. $50,000.00 is to be given to Kingdom Building Ministries [KBM]; and

"5. $160,000.00 is to be given to pay off the mortgage on church missionary, Jeremy Kingsley."

This order disposed of all of the open issues in the action and was a final judgment.

On December 2, 2002, the plaintiffs moved for reconsideration of the court's order.⁷ The motion referred to a letter of September 23, 2002, which the plaintiffs had sent to Judge Lombardi and which, they averred in their motion, was intended to indicate opposition to the distribution reported to the court by the Church. The court, thereupon, by order issued December 11, and faxed that day to counsel, directed an immediate stay of disbursement of the sale proceeds until hearing of the motion for reconsideration.

At that hearing, held on January 24, 2003, before Judge Lombardi, argument and testimony focused on the payments for satisfaction of the mortgages on the homes of Pastor Kingsley and of Jeremy Kingsley, who is the son of Pastor Kingsley. The defendants argued that the court would violate their and the congregation majority's First Amendment right to the free exercise of their religion if the court were to bar execution of the majority's decision.⁸ The defendants further argued that the two challenged payments represented compensation for past services for which Pastor Kingsley and his son had not been adequately paid.

The court responded that the mortgage payments "raised some issues with the court [that it] felt ... were private benefit issues." It explained:

"[T]his is not church doctrine. This is what the court is doing. Whether it is a religious corporation, or any other type of corporation.

"When you are dealing with that, it is being wasted away by applying it to some private, non-religious purpose. That is clear to me."⁹

In the court's view "the petitioner[s] ha[d] made a prima facie case that at least two of these disbursements [i.e., the mortgage payoffs] are improper." It was not clear to the court, however, whether the mortgage payoffs were for a private purpose or whether they were "salary." Observing to the defendants that "[y]ou may persuade me that every dime of this is for salary that was earned, and never paid," the court invited testimony on that subject.

Pastor Kingsley and Edward Pickering, a member of the Church congregation since 1987 and treasurer since 1999, testified for the defendants. Pastor Kingsley's duties are to teach Sunday school, to conduct the Sunday morning and Sunday evening services, to visit the sick, and to comfort the grieving. He averages approximately thirty hours per week on these duties, which are the same as those of a full-time pastor. When he began with the Church, its annual budget was in the range of $20,000 to $30,000. At the time of trial the range was $50,000 to $60,000. There is no direct testimony as to Pastor Kingsley's salary in the early years of his service with the Church, but in 1999 he was making $22,000 per year, plus a disability insurance policy, and in 2001 his salary was $25,000 per year, plus insurance. The monies are paid as a housing allowance, which Mr. Pickering understands allows the payment to be tax free. Pastor Kingsley has no written contract with the Church, and his salary is set annually, based on the recommendation of the budget committee. Pastor Kingsley was free to leave and go to another church and possibly make more money, but he elected to stay with his government job and with the Church, at the amount that the Church was paying him. Pastor Kingsley never expressed to the treasurer that he expected at some point to get a bonus if the Church building were sold.¹⁰

Pastor Kingsley's son, Jeremy, was ordained by the Church as a minister and sent out as a missionary from the Church. He is an evangelist who concentrates on youth more than adults. A church that sends out a missionary has the responsibility to take care of that missionary. The...