Organizations offer struggling churches resources for the future
LA MESA, Calif. — When The Christian Chronicle staff met…
Dissolving a church or merging congregations can be complicated, not just emotionally or doctrinally, but financially and legally.
Unlike selling a home, where the seller completes the sale to a willing buyer and, after paying off any debts, can pocket the money, church property proceeds cannot be distributed to church members, leaders, founders or donors. And sometimes the decision about who gets what was made decades earlier.
That’s just one of numerous legal issues closing churches may face, according to Mike O’Neal, chairman of Heritage 21 Foundation, who has worked with more than two dozen congregations in at least seven states.
O’Neal, a member of the Memorial Road Church of Christ in Oklahoma City, earned his law degree from Stanford University and maintains a law license in California. Heritage 21 Foundation works to help struggling congregations make sound decisions about their future while protecting their resources.
“Federal and state tax laws dictate that proceeds of a church property sale must be used for nonprofit purposes,” O’Neal explained. “They cannot go to a for-profit enterprise or to individuals.”
Even that isn’t as simple as it sounds, especially for churches that are unprepared or lack legal counsel.
When O’Neal, a former Oklahoma Christian University president, begins work with a church, he asks first to see the articles of incorporation and bylaws, “because sometimes they were written 50 or 75 years ago, and sometimes they can’t even find them and haven’t really followed them.”
Poorly drawn bylaws can have unintended consequences. O’Neal recalls a church in California being taken over by a large family because the bylaws only required a majority vote rather than a super majority (typically two-thirds).
“The church had declined to about 10 to 15 people,” O’Neal said. “A very large family came in and placed membership and became a majority.”
The newcomers may not be bad people, he added, but may differ entirely from the Restoration heritage. And the resulting changes may create a very different kind of church.
“There’s no absolute protection,” the attorney said, “but you can do a number of things that make it harder for a takeover by people who have nefarious intentions.”
Bylaws determine who can serve as directors. Most states have few or no requirements. O’Neal typically recommends that directors and anyone who can vote be members in good standing for no less than 12 months.
Church members sometimes struggle with the concept of bylaws and electing directors because they fear that they somehow usurp spiritual church leadership.
“A concept I find extremely difficult to communicate is that the church corporate entity is not a substitution for church leadership,” O’Neal said. “If there are elders at a congregation, then I usually provide that elders trump whatever directors decide if there’s a disagreement.
“Decisions about how the church spends its money, who it hires, how it conducts services — those are the spiritual side. We only have corporations because we want to protect the members from liability.”
“Decisions about how the church spends its money, who it hires, how it conducts services — those are the spiritual side,” he added. “We only have corporations because we want to protect the members from liability.”
If a person is injured on church property and the church is not incorporated, every member is liable for whatever damages might occur, O’Neal explained. “I’m a great advocate for incorporating.”
The IRS determines how proceeds of a church property sale must be used. But state laws, O’Neal said, dictate, “If you’re incorporated, you have to act like a corporation.”
That includes annual meetings, in which directors and officers are elected. They don’t have to be sophisticated meetings but must comply with the standard ways corporations are required to behave. “Many churches have never done that,” O’Neal said.
Bylaws should also specify how assets will be disbursed in the event a church dissolves.
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But when bylaws are old, they may include restrictions that, depending on the congregation, are no longer relevant, desired or even legal, such as restrictions about race, instrumental music or other matters.
“Some states have passed laws saying those restrictions are no longer applicable if they violate other state laws,” O’Neal said. “Many of those restrictions are to assure that assets are used by an entity that looks just like a church in 1950.”
He recommends language such as “upon dissolution remaining assets will go to another nonprofit entity that is related to or serves Churches of Christ or the Restoration heritage.”
“It has to be their choice,” O’Neal said. “You have to use language they are happy with. Churches are different — there’s no one way I do it.”
He has seen bylaws that say a state court can determine where assets go. And if a church does not have good bylaws or can’t find them, then a state court would decide. “And that’s not what any of us want,” he said.
Conversely, churches that dissolve can plan for much good to be done with their assets to support ministries meaningful to the church members and perpetuate a congregation’s legacy.
When the Harvey Drive Church of Christ in McAllen, Texas, closed and sold its property, about $600,000 went to provide scholarships at Abilene Christian University for students from the Rio Grande Valley and to provide an operational fund for diversity efforts at the West Texas university.
Jim Orr, executive director of ACU’s office of gift planning, said the gift was “a great example of a church closing its doors but using its resources to further the work of the church in some respects relative to diversity efforts.”
O’Neal recalled similar stories from his years as vice chancellor at Pepperdine University in Malibu, Calif. Church buildings given to the university were sold and proceeds used for scholarships for Church of Christ students.
When the Mountain Avenue Church of Christ in Tucson, Ariz., dissolved, it gave Heritage 21 Foundation, which O’Neal leads, property worth about $1.3 million. After the property sold, proceeds went to support a campus ministry at the University of Arizona and a church camp. Remaining funds were given to Heritage 21 for church planting, including a congregation in Tucson.
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“That was a very good story,” O’Neal said.
Sherri Statler, president of Christian Homes and Family Services, remembers a call from the grandmother of a child adopted through the Texas agency — a call that led to a $50,000 check.
The woman had learned that her congregation, the Mainland Church of Christ in Texas City, had sold its property and that the proceeds were to be given to a nonprofit.
“She asked them to consider Christian Homes. … I sent her a letter just telling her more about Christian Homes that she shared with elders at the church,” Statler said. “We got back a letter three months later with a ‘prayerfully considered’ check for $50,000.”
Similarly, Mount Dora Children’s Home in Florida benefitted from two of that state’s congregations — the Oxford Church of Christ and the Bradenton Church of Christ — after those churches closed, church relations officer Dave Hogan said.
Members may change restrictions in the bylaws to designate such good works. Modifying deed restrictions, which may limit who can use the property and for what purpose, can be more difficult.
Joel Nichols, interim dean of the law school at the University of St. Thomas in Minnesota, is an ACU graduate and scholar on church and state issues.
He said that while “deed restrictions are going to feel super binding by people who are reading them — the realities of life are that it’s less likely someone will be able and willing to enforce them.”
In other words, he said, “Someone has to have legal standing to come in and enforce the deed,” and courts are reticent to become involved in church disputes, which Nichols thinks is a good thing.
If people believe a conflict is a theological issue, “we don’t want courts telling them how to believe, what to believe.”
“The reality is people are pretty sinful, and it’s easy to name things as theological when in fact it’s a power grab, and they may well be looking to advance power and position.”
But he added, “The reality is people are pretty sinful, and it’s easy to name things as theological when in fact it’s a power grab, and they may well be looking to advance power and position.”
Two very different congregations in vastly different circumstances are among many that have encountered challenges because of deed restrictions. One wound up in court. The other just ceased to exist.
The Otter Creek Church of Christ in Brentwood, Tenn., a suburb of Nashville, faced a deed restriction when it merged with the West End congregation in September 2020. West End’s membership had declined to a point where maintaining its large campus was unsustainable. West End leadership approached Otter Creek about becoming one, and the property was acquired by Otter Creek, which uses instrumental music in its worship services.
With the property came a deed, crafted in 1943, that states the property owner must “work and worship only as required in the New Testament, rejecting all the innovations and inventions and devices of men, and instruments of music, and societies, other than the Church of Christ carrying out the work of God.”
John Mark Hicks, professor of theology at Lipscomb University in Nashville, said the language in such deeds originated in the previous century and at the time had less to do with what happens after a property is sold and more about control while it exists. The practice, which came to be referred to as “creed in deed,” originated in the 1870s when David Lipscomb and E.G. Sewell contributed to planting the Woodland Avenue Church of Christ where Sewell preached for many years.
“In the 1880s a group became the majority that brought in instruments and societies, and Sewell was forced out,” Hicks explained. “The intent of these ‘creed in deed’ restrictions was to prevent something like that from happening again — that the founder and community that began a church and invested in it … could resist a hostile takeover.”
Otter Creek filed suit to be relieved of the deed restrictions, arguing in part that no defendant could be identified, that the West End congregation already had abandoned the deed restriction when it purchased six additional plots of land for which no similar restrictions were included, and because it “had used in the past a sound system, projector screen, and projector in worship as well as musical instruments during some worship services,” to which no defendant had risen in objection.
Further complicating matters, only two-fifths of West End’s land was in the portion affected by the deed restriction.
A series of filings in Davidson County led to Chancellor Anne Martin ordering that notices be published for four consecutive weeks in an attempt to identify as the defendant “the nearest congregation of a Church of Christ to 3534 West End Avenue, Nashville, Tennessee 37205, whose members oppose and do not use innovations and inventions and devices of men, including instrumental music in their worship, or organized societies of any nature whatever,” and giving them 30 days after the last publication to file as defendant in the matter.
Weekly notices began running in The Tennessean on July 22, with the 30-day period to conclude on or about Sept. 5. As of mid-September, court filings did not reflect that any objection had been filed by a defendant to Otter Creek’s request.
Otter Creek ministers Joshua Graves and Eric Livingston declined to comment while matters are pending, but Graves said in an email that they hope it will be resolved by Thanksgiving.
Nine hundred miles from Nashville, a similar yet painfully different scenario evolved.
Edna, Texas, with its population of less than 6,000, is as different from Nashville as the two church properties in dispute.
The Peabody Street Church of Christ used to meet in a plain white building at the corner of Peabody and Third Street in Edna. The tiny South Texas town sits midway between Houston and Corpus Christi, just 30 minutes inland from the Gulf Coast.
While West End’s two-story brick building has more than 63,000 square feet and is valued on the tax rolls at over $8.5 million, the Peabody parsonage and church building combine for less than 5,000 square feet and a market value of around $100,000.
The story of Peabody Street first reached The Christian Chronicle in the late spring of 2021, and ultimately it inspired the “Where have all the churches gone?” series.
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Membership had dwindled over time. The minister became ill and died. At some point in 2017, or 2019, or 2020, depending on which version of the story one believes, the church ceased to exist. Or it was taken over by a nearby congregation. Or something.
Eighty-plus years ago, before the congregation was Peabody Street, legal documents described it as the “Church of Christ (Colored).” That congregation was begun in the 1940s, originally meeting in the Masonic Hall.
According to retired Houston minister Bruce Brigham Sr., the church was built by his grandfather, Will Brigham, and his family after members of Robison Street Church of Christ required him to stand outside the building or sit under a tree rather than worship inside with White church members.
Sherrel Mercer, an elder at Robison, a nearby noninstitutional congregation, tells that same story and said some of its members worked “behind the scenes to acquire some property in the Black part of town” and arranged financing to sell it to the Black church.
Mercer said “individuals involved at that time were farsighted enough to realize that history changes, and included language in the deed that if the property ceased to be used for worship services, the ownership would be transferred to the nearest congregation of the Church of Christ,” which was Robison, he added.
Mercer said his grandfather’s construction company built the church, and Black members fired the bricks. Brigham recalls hearing his grandfather talk about making bricks in his backyard.
Mercer maintains the Peabody congregation ceased to exist when it stopped having worship services in 2017, but because the minister was ill with cancer, Robison elders delayed transferring the property.
Brigham said he and the deceased minister had an agreement that he would move back to Edna and reestablish the congregation his grandfather began to serve the town’s Black community. Then a pandemic intervened.
But Robison elders said they were the rightful owners of the property because of the restriction in the 1946 deed to one of three parcels Peabody had acquired through the years. The other parcels contained no such restriction.
In November 2020, three former Peabody members who had placed membership at Robison signed over the deed to the congregation. Robison elders asserted in a court filing that the former members had the authority to make the transfer because all of the Peabody trustees listed on the original deed were dead, “except for one preacher who has lived in Houston for at least 40 years.”
In a letter to Brigham, the elders cited a funeral meal served in the building as an example of how the Peabody congregation had allowed an activity that was “not Scripturally authorized.” They told Brigham not to enter the old Peabody Street property “at any time” and added, “We are changing the locks immediately.”
Brigham offered to buy the property back. Robison elders declined, saying, “There is no Scriptural reason to establish a racially separated congregation in Edna (or anyplace else) in the year 2020. You would be well advised to encourage your contacts in Edna who were once part of the Peabody Street congregation in the past to seek to join the brethren at Robison Street.”
Two of the five Peabody members who placed membership at Robison remain there. One died. Two moved away.
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Mercer and his wife subsequently purchased the property from the Robison congregation. He said they are improving the property and plan to lease it. They also own the property of another defunct Edna congregation, the Apollo Road Church of Christ, where Mercer’s business is now located.
O’Neal has heard stories like Peabody’s before. And while he was quick to say he couldn’t evaluate all that happened there without more information, he said variations of the Peabody story, “some marginally better and some even worse,” are happening all over the fellowship.
“One of the greatest tragedies unfolding before our very eyes is that these resources, which could be used to bless other ministries, are allowed to atrophy or be misappropriated. Implementing good legal protections is not that difficult.”
Churches have a life cycle, he said, and leaders should make a plan while the church is still healthy. Stewardship of resources contributed by generations of faithful members requires leaders with foresight.
“One of the greatest tragedies unfolding before our very eyes is that these resources, which could be used to bless other ministries, are allowed to atrophy or be misappropriated,” O’Neal said. “Implementing good legal protections is not that difficult. I fear that our Father will hold us accountable for burying our talents.”
EDITOR’S NOTE: Mike O’Neal is the chairman of The Christian Chronicle’s board of trustees. His role with Heritage 21 Foundation is separate from his volunteer position with the Chronicle, and he had no role in this story except for the interviews he gave.
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