Presbytery of Seattle v. Schulz

• Decision Date: 07 October 2019
• Docket Number: No. 78399-8-I,78399-8-I
• Citation: 449 P.3d 1077
• Parties: The PRESBYTERY OF SEATTLE, a Washington nonprofit corporation; The First Presbyterian Church of Seattle, a Washington nonprofit corporation; Robert Wallace, President of the First Presbyterian Church of Seattle, a Washington nonprofit corporation; and William Longbrake, on behalf of himself and similarly situated members of First Presbyterian Church of Seattle, Respondents, v. Jeff SCHULZ, Ellen Schulz, Liz Cedergreen, David Martin, Lindsey McDowell, George Norris, Nathan Orona, and Kathryn Ostrom, as trustees of The First Presbyterian Church of Seattle, a Washington nonprofit corporation, Appellants. The Presbytery of Seattle, a Washington nonprofit corporation; and The First Presbyterian Church of Seattle, a Washington nonprofit corporation, Respondents, v. Jeff Schulz and Ellen Schulz, as individuals and as the marital community comprised thereof, Appellants.
• Court: Washington Court of Appeals

449 P.3d 1077

The PRESBYTERY OF SEATTLE, a Washington nonprofit corporation; The First Presbyterian Church of Seattle, a Washington nonprofit corporation; Robert Wallace, President of the First Presbyterian Church of Seattle, a Washington nonprofit corporation; and William Longbrake, on behalf of himself and similarly situated members of First Presbyterian Church of Seattle, Respondents,

v.Jeff SCHULZ, Ellen Schulz, Liz Cedergreen, David Martin, Lindsey McDowell, George Norris, Nathan Orona, and Kathryn Ostrom, as trustees of The First Presbyterian Church of Seattle, a Washington nonprofit corporation, Appellants.

The Presbytery of Seattle, a Washington nonprofit corporation; and The First Presbyterian Church of Seattle, a Washington nonprofit corporation, Respondents,

v.Jeff Schulz and Ellen Schulz, as individuals and as the marital community comprised thereof, Appellants.

No. 78399-8-I

Court of Appeals of Washington, Division 1.

FILED: October 7, 2019

Michael Craig Subit, Frank Freed Subit & Thomas LLP, 705 2nd Ave., Ste. 1200, Seattle, WA, 98104-1798, Ryan P. Mcbride, Daniel A Kittle, Lane Powell PC, 1420 5th Ave., Ste. 4200, Seattle, WA, 98101-2375, Randall Paul Beighle, Lane Powell PC, Po Box 91302, 1420 5th Ave., Ste. 4200, Seattle, WA, 98111-9402, for Appellants.

Patrick N. Rothwell, Suzanne Karen Pierce, Davis Rothwell Earle & Xochihua PC, 520 Pike St., Ste. 2500, Seattle, WA, 98101-4083, Robert Bertelson Mitchell Jr., Peter Anthony Talevich, K & L Gates LLP, 925 4th Ave., Ste. 2900, Seattle, WA, 98104-1158, David Donald Swartling, Attorney at Law, 1017 Aaron Ave. Ne, Bainbridge Island, WA, 98110-3916, Raymond Stillman Weber, Stokes Lawrence P.S., 1420 5th Ave., Ste. 3000, Seattle, WA, 98101-2393, Judith A. Endejan, Attorney at Law, 248 Via Antonio, Newbury Park, CA, 91320-7017, for Respondents.

PUBLISHED OPINION

Leach, J.

¶ 1 This consolidated appeal involves a church property dispute and a severance agreement dispute. In Presbytery I, Jeff and Ellen Schulz, former copastors of the First Presbyterian Church of Seattle (FPCS), and six former trustees of FPCS’s board of trustees (Board) (together appellants) appeal the trial court’s declaratory judgment in favor of FPCS, the Presbytery of Seattle (Presbytery), which is authorized to act on behalf of the Presbyterian Church U.S.A. (PCUSA), and two members of the Presbytery’s administrative commission (AC) (together respondents). Appellants contend that the trial court erred in deferring to the AC’s determination assuming original jurisdiction over FPCS, rejecting FPCS’s disaffiliation from PCUSA, and finding that any interest FPCS had in church property was held in trust for the benefit of PCUSA. In Presbytery II, the Schulzes appeal the trial court’s declaratory judgment in favor of Presbytery and FPCS, claiming that the trial court erred in deferring to the AC’s determination that their severance agreements with FPCS were invalid and unenforceable.

¶ 2 In Presbytery of Seattle, Inc. v. Rohrbaugh,¹ the Washington Supreme Court established that a civil court must defer to the decision of the highest tribunal of a hierarchical church in a matter involving a church property dispute. To ensure the First Amendment guarantee to the free exercise of religion, Washington courts have extended Rohrbaugh to any civil dispute in a hierarchical church with an internal dispute resolution process. Because no genuine issue of material fact exists about whether the Presbyterian Church is hierarchical or whether it has a binding dispute resolution process, the trial court properly deferred to the AC’s determinations about the property and severance agreement disputes. We affirm.

FACTS

¶ 3 From 1983 until November 15, 2015, FPCS’s congregation was ecclesiastically affiliated with PCUSA. FPCS filed its first articles of incorporation in 1874 and its restated articles of incorporation in 1985. These articles recognized FPCS’s governing bodies as its "Session" and Board. Its Session, comprised of ministers, elders, and deacons, governed the congregation’s ecclesiastical matters. Its Board, comprised of church members, governed the FPCS’s business operations, real and personal property, and "all other temporal affairs.

¶ 4 FPCS purchased its first parcel of real estate in 1905 and added additional parcels over the years until it had accumulated all of its current real estate located on 7th Avenue in downtown Seattle. It purchased the property with funds from its members. Title to its property has remained in its name as a nonprofit corporation. Neither Presbytery nor PCUSA has financially contributed to its property.

¶ 5 In November 2015, FPCS told Presbytery that its Session was going to vote on whether to disaffiliate from PCUSA and seek affiliation with another Presbyterian denomination. And its Board was going to vote on whether to amend the articles to remove all references to PCUSA. On November 15, the Session approved FPCS’s disaffiliation from PCUSA, and the Board approved an amendment to the articles removing any reference to PCUSA.

¶ 6 On November 17, Presbytery formed the AC to investigate FPCS’s disaffiliation. On February 16, 2016, the AC issued a report assuming "original jurisdiction" over FPCS based on its finding that "the governing board of FPCS (the FPCS session) is unable or unwilling to manage wisely its affairs." This report found that the 2015 amendments to FPCS’s articles and bylaws were improper and ineffective, leaving the prior articles and bylaws in force. And it rejected FPCS’s disaffiliation, stating that FPCS remained a part of PCUSA because PCUSA had not dismissed FPCS, which the church constitution authorized only PCUSA to do. It also ousted certain FPCS members from FPCS’s Session and Board. And it elected church officers, appointed an individual to handle administrative matters, and called for an audit of FPCS’s finances. It stated, "All property held by or for FPCS—including real property, personal property, and intangible property—is subject to the direction and control of the [AC] exercising original jurisdiction as the session of the church."

¶ 7 A day after the AC issued its report, respondents filed a lawsuit against appellants (Presbytery I ). Among other things, respondents sought a declaratory judgment stating that the AC’s report was "conclusive and binding" and that any "interest FPCS has in church property is held in trust for the benefit of [PCUSA]." On March 10, 2016, respondents asked the trial court to grant partial summary judgment on its declaratory judgment claim. Appellants opposed the request and asked for a CR 56(f) continuance. They claimed respondents had not yet responded to their discovery request about whether PCUSA was hierarchical for purposes of civil disputes. Appellants also asked for a preliminary injunction to stop Presbytery from asserting control over FPCS’s corporate affairs and property.

¶ 8 In May 2016, the trial court ruled in respondents’ favor on all three requests. It concluded that (1) PCUSA is a hierarchical church and the AC’s determinations are conclusive and binding on the Session, trustees, and congregation of FPCS, (2) the AC’s February 16, 2016, findings and rulings are conclusive and binding, (3) the 2015 purported amendments to the bylaws and articles of incorporation "are void and without effect," (4) FPCS holds all church property in trust for the benefit of the PCUSA, and (5) the AC is the current governing body of FPCS. Appellants asked the court to reconsider its orders granting partial summary judgment, denying a CR 56(f) continuance, and denying a preliminary injunction. In a June 20, 2016, order, the trial court denied appellants’ request to reconsider its denial of the CR 56(f) motion, asked for briefing "on whether it is factually at issue that [PCUSA] is a hierarchical church," and reserved ruling on reconsideration of its denial of the request for a preliminary injunction.

¶ 9 On June 30, after considering appellants’ additional briefing, the trial court denied the remainder of their reconsideration requests. The trial court struck their third party complaint and dismissed their Consumer Protection Act² claim. Appellants voluntarily dismissed claims for defamation, intentional interference with contractual relations, slander of title, trademark infringement, and ultra vires actions. The parties settled their remaining claims and agreed to a stipulated final order and judgment entered on August 16, 2017. Following these orders, respondents assumed control of FPCS and its property.

¶ 10 In September 2016, Presbytery and FPCS sued the Schulzes and asked the trial court to declare the severance agreements between the Schulzes and FPCS unenforceable (Presbytery II ). The Schulzes became the copastors of FPCS in January 2006. On November 10, 2015, the Schulzes and the Board executed the Schulzes’ severance agreements. These agreements had the stated purpose of encouraging the Schulzes to remain as pastors of FPCS, "including in the event of any conflict between FPCS, its Session, and its Congregation, on the one hand, and Presbyterian Church (U.S.A.), or any Presbytery, Synod, Administrative Commission, or affiliate (other than FPCS) of Presbyterian Church (U.S.A.) (collectively "PCUSA"), on the other hand." They stated that if FPCS, while under the control of PCUSA and Seattle Presbytery, terminated the Schulzes’ employment other than for "Good Cause," as defined by the agreements, FPCS would (1) pay the Schulzes their "Regular Compensation" for two years or until they obtained comparable employment and (2) forebear for three years from the remedies FPCS had available under its 2006 home equity sharing agreement with the Schulzes. The severance agreements limited "good cause" to the Schulzes’ commission of certain identified misconduct like dishonesty, the use of illegal drugs, and moral turpitude that harmed FPCS’s reputation.

¶ 11 On August 25, 2016, the AC issued a supplemental report...