Case against breakaway entities aired before Mo. court panel

KANSAS CITY, Mo. (BP)--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 and five breakaway entities where trustees amended their charters without convention 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 Missouri convention, under a rule which permits a few “members” of an association to represent the other members. A ruling could be announced within three to six months.

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 Missouri convention) were allowed a five-minute rebuttal.

Representing the convention at the hearing was attorney Dennis Owens, an appellate specialist in Kansas City. The five breakaway entities were represented by Laurence Tucker, a Kansas City attorney who has represented the Missouri Baptist Foundation in the underlying litigation. Tucker divided his time with an attorney from the Missouri 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 convention should be represented by churches or messengers. Convention attorneys have argued that the MBC 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. The entities’ attorneys have argued that the convention is an association of messengers, which exists only three days a year during the annual meeting.

One appeals judge asked Tucker, the entities’ attorney, 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 convention’s annual meeting. The timing also seeks to protect some claims from certain statutes of limitation.

In March 2004, Circuit Court Judge Thomas Brown III ruled that he interpreted the MBC 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. The convention 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,” MBC lead attorney Michael Whitehead said after 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.”

The suit filed Oct. 25 with the names of messengers as plaintiffs, 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 in assets.

Whitehead told the Jefferson City News Tribune in early April, “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 continued, “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.”

The MBC’s Oct. 25 messenger petition notes: “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 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 in unpaid bills.