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The West Baptist Church v. Church of God of the Garden State, Inc.

A-5428-07T1 (N.J. Super. App. Div. 2010) (Unpublished)

DEEDS; FRAUD —If a grantor is fraudulently persuaded by a grantee to execute a deed in a grantee’s favor, the court may invalidate the transaction by reason of the fraud.

A church with a congregational form of governance acquired property including a tabernacle and parsonage. Over time, membership in the church declined until only five members remained including the pastor and his wife. Because the church had high debt, the members voted unanimously to sell its property to a church that needed a permanent place of worship. Under the resolution adopted by the congregation, its pastor was authorized to sign and execute any documents for the church. A contract of sale was entered into by the respective clergy on behalf of each church. The buyer church had difficulty in securing a mortgage. Successive amendments between the parties permitted the buyer to take possession of the property and be responsible for carrying costs until title closed. The sale never took place, but the buyer church remained in possession. The pastor of the seller church refused to pursue eviction under any circumstances. In the following years, the buyer church made effort to amass funds necessary to purchase the property, and also challenged its own minister’s financial practices. That minister eventually quit the parsonage, but refused to relinquish the church’s books. He moved away, but later returned to New Jersey and established a small unaffiliated church congregation. With his new church, he sought to acquire the church property occupied by his former church and had support from the seller’s pastor.

One day, the minister appeared unannounced at the door of the seller’s pastor, who was now old and sickly. The minister advised he was tending to a new congregation and not the church in possession. The minister gave the pastor the mistaken impression that he wanted to merge both congregations, old and new, and revitalize the older church; he pointed out the poor condition of the property and that the current congregation was weak in numbers. He did not disclose his true intention to either evict the church in possession or charge it rent. The pastor drew up a letter in which he appointed the minister as pastor of the landowner church and trustee of its assets. The agreement was signed by the pastor and notarized. The minister then drafted a letter to the church in possession, terminating the contract for sale, charging rent for continued use. The sick pastor was contacted about these developments, and he rescinded his appointment of the minister once he realized the minister had misrepresented facts to him. He then transferred title of the property, by deed, to the church in possession.

A suit followed in which the lower court found the sick pastor’s initial transfer document to be invalid because it had not been executed on adequate information and was based on misrepresentations. The Appellate Division affirmed, holding that the selling church never dissolved itself under law, remained owner of the church property, and that the sick pastor had the authority to ultimately transfer title to the church in possession. The Court affirmed the lower court’s conclusion that any agreement with the misrepresenting minister was void as the result of the commission of equitable fraud in which the minister failed to correct the impression the sick pastor had of the church in possession and its role going forward.

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