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Intent of the Donor: Can a Court Order a Refund?

Written by Zana Tomich on October 27, 2017 Category: Church Property Disputes/Denominational Splits

Churches are non-profit organizations that rely on the generosity of the public and their members, through stewardship, volunteerism, and donations in order to operate. Beyond day-to-day operations, typically churches will create a fund when raising money for a particular purpose. It seems as if every church has a “building fund” that members are asked to fund. But what happens when those funds are not used for the donor’s intended purpose? Does the donor have any recourse in a court of law?

Two donors in Oakland County, Michigan filed suit to address this particular issue, in Rogers v. St. John United Methodist Church, et al. Mich App, Unpublished No. 331969, June 27, 2017. In Rogers, one of the Plaintiffs served as the former chair of the board of trustees for the church, and held the position for over twelve years. During that time, the donors donated over $41,000 to a church fund the purpose of which was to “raise money to expand the church and build a fellowship hall.” In their Complaint, the donors alleged the money was not used for the purpose for which it was donated, and instead used for other purposes without the donors’ permission. The allegations state that the donors asked for their money to be returned several times. They alleged counts for common law conversion, statutory conversion, breach of contract, breach of quasi-contract, fraud and misrepresentation, and civil conspiracy.

The trial court dismissed the case at the Summary Disposition stage, stating that it lacked jurisdiction because it concluded the matter was a “question of religious doctrine or ecclesiastical polity.”   The Michigan Court of Appeals, however, reversed and remanded the case. The Court of Appeals found that the case did not require a court to analyze questions of religious doctrine or ecclesiastical polity. It looked past the fact that one of the parties was a church, and to the substantive issues of the specific claims of conversion, breach of contract, and fraud, and found that it had jurisdiction over issues, which involved property rights and applying civil law.

Moreover, the Defendants did not offer any proofs or an affidavit showing the money was used within the restricted purpose of the fund, or otherwise. Defendants failed to contradict the Plaintiff’s pleadings, which the court of appeals found was sufficient enough for the claims to survive summary disposition.

The Court of Appeals reversed and remanded the case, and now the matter is set for trial in Spring of 2018. Interest in this case is two-fold: (1) we learned Michigan courts continue to have jurisdiction over churches when the legal issues are contractual in nature, relate to property, or are tortious claims; and (2) the issue of whether a donation is essentially refundable is set to be decided by a court of law. The result of this case could have a very significant impact on how churches operate, as well as create new internal compliance over church funds for a particular purpose, and internal goal setting. There is more to come and the result of the case will be followed closely.

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