Attorneys for MBC, 5 renegade agencies quizzed by state appeals court panel
By Don Hinkle
April 25, 2005
KANSAS CITY – Three judges of the Missouri Court of Appeals questioned three attorneys for just 35 minutes on April 20 about the 33-month old dispute between the Missouri Baptist Convention (MBC) and five breakaway agencies where trustees amended their charters without MBC approval, allowing them to become self-perpetuating and take control of more than $240 million in assets.
The hearing in the Western District Missouri Court of Appeals in Kansas City focused on whether churches or messengers could be legal representatives for the Convention, under a rule which permits a few “members” of an association to represent the other members. Close observers of the court of appeals said a ruling could be announced within three to six months.
Attorneys learned just prior to the hearing that Judge Patricia Breckenridge – who had originally been assigned to the case — would not be on the panel. She was replaced by Judge Harold Lowenstein, who has served on the court since 1981. The other judges included presiding Judge Edwin H. Smith, a 10-year veteran of the court and Judge Robert G. Ulrich, a 16-year member of the court.
Under the rules of the court, both sides filed briefs with the court in December and January. At the April 20 hearing, each side was allowed 15 minutes to summarize the case and answer questions from the court. Then the appellants (in this case, the MBC) were allowed a five-minute rebuttal.
Representing MBC at the hearing was attorney Dennis Owens, an appellate specialist in Kansas City. Representing the five breakaway agencies was Laurence Tucker, Kansas City attorney who has represented Missouri Baptist Foundation in the underlying litigation. Tucker divided his time with an attorney from the Attorney General’s office, who spoke for the Secretary of State for three minutes.
Most of the questions by the appeals judges focused on whether the MBC should be represented by churches or messengers. The MBC attorneys have argued that the Convention is an association of churches. The churches send messengers to an annual meeting three days each year, but the association of churches exists year round, to do the work of the Convention. Agency attorneys argue that the Convention is an association of messengers, so that the association only exists three days a year, during the annual meeting.
In fact, one appeals judge asked Tucker his view about when the messengers must file their petition, if the messengers are plaintiffs, and Tucker replied, “while the annual meeting is in session.” The judge seemed somewhat incredulous and asked if Tucker was really saying that a petition by the Convention could only be filed by messengers during the three day meeting. Tucker insisted that was his view.
In anticipation of this argument, MBC attorneys filed the new petition on Oct. 25, the first day of the new annual meeting.
In March 2004, Circuit Court Judge Thomas Brown, III, ruled that he interpreted the Convention constitution to mean that the Convention is an association of messengers, not churches, so that churches cannot represent the Convention under court rules. The same issue was raised before Brown in 2002, at the start of the case, and he had ruled in favor of the MBC, and allowed the case to proceed with churches as representative plaintiffs. Two years later, Brown changed his mind and ruled that churches could not proceed as plaintiffs. MBC was willing to amend its petition to add messengers – but Brown dismissed the case rather than permitting an amendment. It is that dismissal which is before the court of appeals.
“We were very pleased with the way the oral argument went,” said MBC lead attorney Michael Whitehead, following the hearing. “The judges asked good questions to both sides, and I felt we were able to answer their questions well.
“You cannot always tell how a judge is leaning by his questions, but you can tell when he understands the issues, and these judges seemed to understand the issues before them.
“You cannot cover much ground in 15 minutes, and the purpose of oral argument is not to re-hash the briefs. The purpose is to clarify issues for the court, and I believe we did that.”
Because of Brown’s dismissal, and in order to protect some claims from certain statutes of limitation, the MBC filed a separate lawsuit on Oct. 25, that names messengers as plaintiffs. The suit, now before Cole County Circuit Court Judge Richard Callahan in Jefferson City is proceeding with some limited discovery and procedural motions while waiting for a ruling by the court of appeals as to the proper plaintiffs.
MBC attorneys have noted that there is far more at stake in this case than $240 million worth of assets.
“Numerous non-profit organizations (such as) nursing homes operate in a parent-subsidiary model, where each (nursing home) is a separate, non-profit corporation controlled by a parent organization," Whitehead told the Jefferson City News Tribune in early April.
“If the subsidiary can simply change its charter and walk away with all the assets the parent gave to it, then no parent organization has any protection. Every corporation that operates in the subsidiary-parent model could be affected by the ruling in this case.”
MBC’s messenger petition, filed Oct. 25, alleged: “This case involves the fundamental right of a religious denomination to maintain authority over its subordinate ministry corporations by reserving the rights to elect trustees and to approve charter amendments. The Plaintiffs (the MBC) seek a declaration that the dishonest and deceptive breakaway of five subsidiary corporations, with ministry assets totaling about a quarter of a billion dollars, violated contract promises, statutory rights and fiduciary duties owed to the Missouri Baptist Convention and its Executive Board.
“The Baptist Home, Missouri Baptist University, formerly known as Missouri Baptist College, Missouri Baptist Foundation, Windermere Baptist Conference Center and the Word and Way are agencies of the Convention. Each of the defendant corporations had a corporate charter expressly approved by the Convention that guaranteed the Convention’s exclusive right of the Convention to approve all charter amendments.”
The petition is particularly pointed about the Windermere trustees, who control the popular retreat facility featuring miles of pristine timberland and priceless waterfront property along the shores of the Lake of the Ozarks in central Missouri.
The petition naming messengers asks the trial court to stop the massive construction work at Windermere which is being funded by an $18.75 million loan secured at Allegiant Bank (now National City Bank) in St. Louis. MBC also asks the court to “rescind and cancel the promissory note and deed of trust from Windermere to Allegiant Bank or any other lender or creditor with notice of the legal dispute … .”
The MBC petition seeks to prevent Windermere from defaulting on the loan, only to have the lender foreclose the mortgage by “power of sale” on the courthouse steps, perhaps at a distressed price to a buyer sympathetic to the renegade Windermere trustees.
“The court should rescind or cancel the corporation warranty deed and other assignment of assets to (Windermere), due to failure of consideration, constructive fraud, misrepresentation, fraudulent concealment or mistake of fact, or otherwise order the return of the real estate and personal property to the Convention; and cancel all promissory notes and deeds of trust from Windermere to Allegiant Bank, who was not a bona fide purchaser; and certain mechanics’ lien claims against Windermere,” the petition states.
Windermere has had liens filed against it by contractors working on the project, who say they are owed thousands of unpaid dollars.