Church of God of Prophecy v. Fourth Church of Christ, Scientist, of Brooklyn, 54 N.Y.2d 742 (1981)

A religious corporation must obtain both leave of the court and appropriate denominational authorization as required by section 12 of the Religious Corporations Law before selling any of its real property; a contract to sell is valid only if conditioned upon obtaining such court approval, and a court of equity can inquire into the fairness of the contract and its advantage or disadvantage to the religious corporation.

Summary

The New York Court of Appeals affirmed the Appellate Division’s order, holding that a religious corporation cannot sell its real property without court approval and denominational authorization, as stipulated by Religious Corporations Law § 12. While the corporation can enter a contract contingent on obtaining court approval, the court has the power to evaluate the contract’s fairness and its benefits to the corporation. The court found that the sale would not benefit the religious corporation, and therefore, judicial consent was appropriately withheld, invalidating the purported agreement and precluding specific performance or monetary damages.

Facts

The Church of God of Prophecy sought to purchase real property from the Fourth Church of Christ, Scientist, of Brooklyn. The Fourth Church of Christ entered into a contract to sell the property. The lower court determined the sale was not in the best interest of the Fourth Church and denied the sale. The Church of God of Prophecy then sued for specific performance.

Procedural History

The Supreme Court initially ruled against specific performance. The Appellate Division affirmed, finding that the sale would not benefit the religious corporation or its members. The Church of God of Prophecy appealed to the New York Court of Appeals.

Issue(s)

Whether a religious corporation can be compelled to specifically perform a contract to sell its real property when it has not obtained the required court approval and denominational authorization, and when the court determines the sale is not in the best interest of the corporation.

Holding

No, because the religious corporation did not obtain the necessary court approval and denominational authorization, and the court determined that the sale was not in the best interest of the corporation.

Court’s Reasoning

The court emphasized the requirement of Religious Corporations Law § 12, which mandates both court leave and denominational authorization for a religious corporation to sell real property. While a religious corporation may enter into a contract to sell conditioned upon obtaining court approval, the court retains the power to evaluate the fairness and advantage of the contract to the religious corporation. Citing Muck v. Hitchcock, 149 App. Div. 323, 328-329, the court noted that it has ample power to inquire into the fairness of the contract. The court found that the Appellate Division’s determination that the sale would not promote the purposes of the respondent religious corporation or the interests of its members was supported by the evidence. Because judicial consent was properly withheld, the agreement was invalid, and the plaintiff was not entitled to specific performance or monetary damages. The court stated, “in an action for specific performance, a court of equity “has ample power to inquire into the fairness of the contract and as to its advantage or disadvantage to the religious corporation, and to approve the proposed conveyance and direct it to be made where, upon all the facts, no valid reason appears for refusing such relief.” The court distinguished cases where the requirements of section 511 of the Not-For-Profit Corporation Law were met, but declined to rule on the propriety of granting permission in a proceeding like the present one where all the requirements of section 511 would have been met because approval was not granted.