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Yetter Coleman Secures Texas Supreme Court Victory in Church Property Rights Case

The Texas Supreme Court provided its first analysis in more than a century on what happens to church property when a local congregation disaffiliates from a larger religious body. In Masterson v. The Diocese of Northwest Texas, the Court explained the distinction between ecclesiastical issues, on which courts owe deference to officials in a church’s hierarchy, and secular issues, which the Court ruled must be analyzed under neutral principles of law generally applicable to all organizations.

The Court agreed that the bishop of the Episcopal Diocese of Northwest Texas decided an ecclesiastical question when he determined which faction of worshipers constituted the local church recognized by the Diocese and the national church (The Episcopal Church of the United States) as part of the larger church. But the Court explained that the Texas nonprofit corporation here, which owned the local church property, has a secular existence derived from Texas law, and the question whether that corporation has properly dealt with the property it owns is secular.

While the U.S. Supreme Court has allowed state courts to use either the deference approach or the neutral-principles approach to decide non-ecclesiastical issues of property ownership, Masterson brings Texas in line with the majority of states in following the neutral-principles approach. The Texas Supreme Court rejected the Diocese’s invitation to follow the deference approach, reasoning that applying generally applicable Texas law to non-ecclesiastical issues would achieve greater predictability in the law and would better implement Texas courts’ constitutional duty to decide disputes within their jurisdiction while respecting First Amendment limits. The Court also explained that its prior 1909 opinion, cited by some as a case of deference, had in fact applied a neutral-principles analysis in relevant part. That approach “remains the appropriate method for Texas courts to address such issues.”

Because the Diocese sought summary judgment based on its overbroad view of the deference principle, the Court reversed the grant of summary judgment in its favor. The Court then explained how generally applicable principles of Texas law would apply to the dispute on remand, rejecting the Diocese’s arguments that an irrevocable trust existed on the corporation’s property.

Yetter Coleman’s appellate team was brought in to represent the local church corporation and the withdrawing parishioners in the Texas Supreme Court. Reagan Simpson appeared as lead counsel and argued the case, supported by April Farris and Cam Barker. George S. Finley of the San Angelo firm Smith Rose & Finley also represented the prevailing petitioners.