Scenic Holding v. New Board, Mission. Bap. Church

• Citation: 506 F.3d 656
• Decision Date: 06 November 2007
• Docket Number: No. 06-2934.,06-2934.
• Parties: SCENIC HOLDING, LLC, Plaintiff/Appellant, v. The NEW BOARD OF TRUSTEES OF the TABERNACLE MISSIONARY BAPTIST CHURCH, INC.; Michael R. Thompson, trustee and representative (not individually) of the New Board of Trustees of the Tabernacle Missionary Baptist Church; Joe Givens, trustee and representative (not individually) of the New Board of Trustees of the Tabernacle Missionary Baptist Church; Vince Howard, trustee and representative (not individually) of the New Board of Trustees of the Tabernacle Missionary Baptist Church; Casey Roberts, trustee and representative (not individually) of Tabernacle Baptist Church, Defendants/Appellees, Keith Molden, Trustee of Tabernacle Missionary Baptist Church; Wilson Medlock, Trustee of Tabernacle Missionary Baptist Church; David Surratt, Trustee of Tabernacle Baptist Church; Don Molden, Trustee of Tabernacle Missionary Baptist Church, Intervenor Defendants/Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

506 F.3d 656

SCENIC HOLDING, LLC, Plaintiff/Appellant, v. The NEW BOARD OF TRUSTEES OF the TABERNACLE MISSIONARY BAPTIST CHURCH, INC.; Michael R. Thompson, trustee and representative (not individually) of the New Board of Trustees of the Tabernacle Missionary Baptist Church; Joe Givens, trustee and representative (not individually) of the New Board of Trustees of the Tabernacle Missionary Baptist Church; Vince Howard, trustee and representative (not individually) of the New Board of Trustees of the Tabernacle Missionary Baptist Church; Casey Roberts, trustee and representative (not individually) of Tabernacle Baptist Church, Defendants/Appellees, Keith Molden, Trustee of Tabernacle Missionary Baptist Church; Wilson Medlock, Trustee of Tabernacle Missionary Baptist Church; David Surratt, Trustee of Tabernacle Baptist Church; Don Molden, Trustee of Tabernacle Missionary Baptist Church, Intervenor Defendants/Appellees.

No. 06-2934.

United States Court of Appeals, Eighth Circuit.

Submitted: April 12, 2007.

Filed: November 6, 2007.

E.B. Chiles, IV, argued, Joseph R. Falasco, Benecia B. Moore, Matian M. McMullan, Kelly Halstead, on the brief, Little Rock, AR, for Appellant.

C. Richard Crockett, argued, Little Rock, AR, for Joe Givens, Michael R. Thompson, and The New Board of Trustees of the Tabernacle Missionary Baptist Church.

William L. Owen, argued, Little Rock, AR, for Casey Roberts, Keith Molden, Wilson Medlock, David Surratt and Paula McMurrian.

Before LOKEN, Chief Judge, BYE and RILEY, Circuit Judges.

RILEY, Circuit Judge.

Scenic Holding, LLC (Scenic), brought suit against the New Board of Trustees of the Tabernacle Missionary Baptist Church (New Board), as well as several trustees and representatives of the Tabernacle Missionary Baptist Church (Tabernacle), seeking to collect on a note executed by the New Board and to foreclose a mortgage on property belonging to Tabernacle. As an initial matter, the district court¹ denied Scenic's motion to recuse. After a bench trial, the district court found the note valid against the New Board, but denied Scenic's request for foreclosure because Scenic failed to prove the New Board had authority to encumber Tabernacle's property. Scenic appeals, arguing the district court erred in (1) denying Scenic's motion to recuse, (2) dismissing eight counts from Scenic's third amended complaint, (3) placing on Scenic the burden of proving the New Board's authority to bind Tabernacle, and (4) excluding certain evidence at trial. We affirm.

I. BACKGROUND

Tabernacle is a Baptist church located in Little Rock, Arkansas. Baptist churches are congregational churches in form and structure, meaning such churches determine their affairs "by the vote of the majority of the members of that church and not by some other hierarchical form of church government." Carter v. Phillips, 291 Ark. 94, 722 S.W.2d 590, 592 (1987); see also McCree v. Walker, 81 Ark.App. 281, 101 S.W.3d 276, 278 (2003). See, e.g., Elston v. Wilborn, 208 Ark. 377, 186 S.W.2d 662, 663 (1945) ("In congregational groups the affairs are determined by the vote of the majority of the members."). Similarly, Tabernacle's canons provide that Tabernacle's executive power is vested in a board of trustees consisting of three members elected at Tabernacle's annual general assembly meeting. The canons also provide the board of trustees may not mortgage Tabernacle's real or personal property without prior approval of a two-thirds majority vote of members present and voting at a Tabernacle meeting for which notice of the proposed action was given.

In 1997, Tabernacle bought real property in Little Rock for $550,000, and financed the purchase through a loan (1997 mortgage) from Superior Federal Bank (Superior). On January 15, 1999, Joe Givens (Givens), Vince Howard (Howard), and Carl Hunter, acting as Tabernacle trustees, executed a $550,000 note to Superior, secured by a first mortgage on Tabernacle's real and personal property (1999 mortgage). Tabernacle used the loan proceeds to pay off the 1997 mortgage.

Sometime during 1999 or 2000, twelve Tabernacle members met for the purpose of organizing a non-profit corporation. Tabernacle's members neither received notice of nor approved this meeting as required by Tabernacle's canons. During the meeting, Tabernacle's pastor appointed three members to serve as trustees of a newly-formed non-profit corporation referred to as the New Board. The New Board's three trustees and officers included chairman Michael Thompson (Thompson), vice chairman Givens, and treasurer Howard.

By early 2000, Tabernacle's payments on the 1999 mortgage became delinquent, and Tabernacle representatives met in June with Superior to discuss the delinquency. When Tabernacle asked for an additional loan, Superior requested the signatures of the Tabernacle's board of trustees or minutes from the trustees' meeting approving Tabernacle's loan request. On July 11, 2000, in a letter bearing Tabernacle's logo and entitled "Notice Letter of Authorization," the New Board stated it was authorized to take any action necessary to carry out the loan proposal.

On March 27, 2001, the New Board executed a loan agreement with Superior. The loan agreement was signed on behalf of the New Board by Thompson, Givens, and Howard in their official capacity as officers and trustees. The same day, Thompson, Givens, and Howard, again acting on behalf of the New Board, executed a multipurpose note and security agreement (2001 note) in the amount of $532,502.29 in favor of Superior and secured by the same Tabernacle property designated in the 1999 mortgage. The three men also signed a modification of the 1999 mortgage between the Tabernacle trustees and Superior, but signed the document as Tabernacle trustees, not on behalf of the New Board. The New Board later defaulted on its payments under the 2001 note, and on September 25, 2001, the New Board signed an extension and amendment to the 2001 note, as well as another modification of the 1999 mortgage.

On December 12, 2002, Superior and Scenic entered into an agreement for Scenic to purchase the New Board's 2001 note for $150,000. Superior assigned the 2001 note, the 1999 mortgage, and other loan documents to Scenic, and also agreed to assign "[s]uch other assignments and documents necessary to assign and transfer the Loan Documents and liens of Superior." Under the agreement, Superior warranted that the 2001 note matured on September 25, 2002, and the New Board was in default.

On July 25, 2003, Scenic filed suit in federal district court against the New Board, seeking a judgment on the 2001 note in the amount of $538,561.21 and foreclosure of a mortgage on Tabernacle's property securing the 2001 note. The New Board denied the 2001 note was secured, and also alleged the New Board lacked authority to encumber Tabernacle's property and a defect of parties. Scenic filed an amended complaint, adding Thompson, Givens, and Howard as defendants. Scenic later filed a second amended complaint adding Casey Roberts, in his capacity as Tabernacle's trustee and representative. Four other individuals later intervened as defendants in their capacity as trustees of Tabernacle (collectively, the Intervenor Trustees). The defendants argued Tabernacle and the New Board were separate and distinct entities. They further argued Tabernacle had no responsibility for the obligations incurred by the New Board because no meeting of Tabernacle's congregation had been called or held to approve either the 1999 note and mortgage or the 2001 note and modification to the 1999 mortgage.

On January 16, 2004, Scenic moved the district court to appoint a receiver to take charge of and protect the mortgaged property, a portion of which had been damaged by a fire in February 2003 and still was being used by Tabernacle. A hearing on Scenic's motion for the appointment of a receiver was held on January 27 and 28, 2005. The district court denied Scenic's motion on February 8, 2005. One week later, Scenic moved for summary judgment against the New Board and incorporated by reference its previously-filed motion for a ruling on the merits of its claims. The district court denied Scenic's summary judgment motion based on lack of mutuality of obligations in the agreement between Scenic and the New Board, and further held Scenic's motion for a ruling on the merits was moot. Scenic then moved for recusal under 28 U.S.C. § 455(a), arguing the district court's rulings and conduct demonstrated an appearance of partiality. The district court denied Scenic's recusal motion.

On March 29, 2006, Scenic filed a third amended complaint, asserting eight new causes of action.² In their answer to the third amended complaint, the Intervenor Trustees alleged as affirmative defenses that Superior had not assigned the new causes of action to Scenic, and Scenic lacked standing to sue on the new claims because Arkansas law prohibited the assignment of the claims.

A bench trial commenced on April 17, 2006. During cross-examination of Scenic's last witness on the third day of trial Scenic's representative, Sam McGee (McGee), testified Superior's assignment to Scenic in 2002 did not refer to or specifically describe the eight new causes of action. McGee then testified Superior had executed a "general assignment" of loan documents to Scenic. McGee produced a document, which had been acknowledged on April 14, 2006, purporting to assign all the contract and tort claims. The document had not been seen before by counsel for any of the parties.

The New Board and the Intervenor Trustees argued: (1) Scenic did not have an assignment of the eight new causes of action; (2) Arkansas law prohibited the assignment of claims not authorized by statute, and thus prohibited the eight new claims set forth in Scenic's third amended complaint; and (3) under Arkansas law, Superior's successor, Arvest Bank (Arvest), was an indispensable party and must be joined, which...