The Pacific Homes Case: Spiritual Connection, Material Liability

The United Methodist Church (UMC) can be sued as a denomination for actions involving any of its affiliated units, according to a state court of appeals ruling last month in California. Attorneys and church leaders across the United States are buzzing about the implications of the ruling for the nation’s religious bodies.

“You are dealing here with a landmark case,” said Chicago lawyer Samuel W. Witwer, who is representing the UMC in an ongoing legal battle that prompted the ruling. “It would mean that every religious denomination could be sued for anything that might happen in a local church or local parish hall of a unit bearing that name.”

The ruling involves one of several bankruptcy cases facing Pacific Homes, a network of fourteen retirement and health care facilities that had been affiliated with the UMC’s Pacific and Southwest Conference. The Los Angeles based Methodist conference “had placed millions of dollars” into Pacific Homes for “the help of the elderly,” said Witwer.

Elderly residents living in Pacific Homes facilities had sued the conference, the denomination’s central funding agency (the General Council on Finance and Administration), and the UMC itself, on grounds that residents who had bought lifetime care memberships were defrauded by being asked to pay additional fees after Pacific Homes ran into money difficulties. (A court-appointed trustee took over Pacific Homes management in November 1977, and soon after the trustee and residents and bondholders of Pacific Homes filed several multi-million dollar suits that allege, among other things, breach of contract and mismanagement [Dec. 1, 1978, issue, p. 47].)

The UMC has argued that it cannot be sued for the actions of its relatively autonomous affiliate units—114 separate annual conferences, 43,000 churches, and thousands of institutions that bear the name Methodist. Under its “connectional” system of government, the UMC holds that the denomination and its member agencies cannot be held responsible for organizations not under their control. For the government to demand otherwise, the UMC has argued, would alter the denomination’s system of government and thereby be an infringement of First Amendment freedoms.

Witwer complained that the ruling failed to “describe what is the United Methodist Church as distinguished from its thousands of corporate units, which have their own assets … and are available for being sued.”

“We have thousands of units that are capable of being sued and which will answer for their own actions,” he said. “But we are saying that you can’t take them collectively, throw them into a conglomerate to seek an overriding judgment.

The three-judge panel in San Diego perceived the matter otherwise. In a twenty-three-page opinion, the court indicated that “a religious organization should not be relieved of its lawful obligations arising out of secular activities because the satisfaction of those obligations may, in some tangential fashion, discourage religious activities.”

Justice Howard Weiner said the UMC should be amenable to suit as part of its commitment and involvement in society, since it has “elected to involve itself in worldly activities.”

The ruling by the Fourth District Court of Appeals overturned an earlier ruling by San Diego Superior Court Judge Ross Tharp, who had declared the United Methodist Church was a “spiritual confederation” and not subject to suit under California law. He warned that if the UMC could be sued, such action “could effectively destroy Methodism in this country.”

Speculation has been that individual church members could be held liable for any judgment against the denomination. Attorney Witwer discounted that possibility. However, he said that contributions of individual members to UMC units (local church, annual conference, for example) might be tapped should one of those UMC units be forced to pay damages in a class action suit.

Church attorneys applied for a rehearing in the most recent decision. If that attempt fails, the UMC will take its case to the Supreme Court of California. “We will exhaust every conceivable legal right for review,” said Witwer.

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