Episcopal Church can't seize breakaway diocese's funds - and it must pay their legal fees, too

By Dan Churney | May 17, 2016

An Illinois appeals panel has upheld a lower court’s ruling that the Episcopal Church must pay penance, by picking up the tab for the legal fees of a breakaway downstate diocese fighting a frivolous suit by the church and further refraining from making any further claims on the diocese’s $3.6 million treasury.

The May 13 ruling was delivered in Fourth District Illinois Appellate Court in Springfield by Justice M. Carol Pope, with concurrence from justices Lisa Holder White and James Knecht. The decision favored the Episcopal Church’s former Quincy Diocese. Quincy is in Adams County in western Illinois.

St. John's Cathedral, Quincy, IL  

The case began in 2008 when the Quincy Diocese withdrew from the mother church, citing doctrinal disputes, and aligned with the Anglican Church. Some members of the diocese remained with the Episcopal Church.

The Episcopal Church then contacted PNC Bank, which held $3.6 million in a diocesan account, telling the bank the money belonged to the larger Episcopal Church, and not to the diocese that seceded, according to court documents. The bank froze the account pending a resolution of the matter, which prompted the diocese to go to court in Adams County, asking a judge to declare the money belonged to the diocese.

In 2013, Associate Judge Thomas Ortbal agreed with the diocese, concluding the church was not a party to the agreement between the diocese and the bank, regarding control of the money. On top of this, the judge found the church had never previously exercised any authority over the money or made withdrawals or deposits.

Ortbal ordered the bank to release the account to the diocese. The church appealed, lost and asked the Illinois State Supreme Court to consider the matter, but that body declined.

In the meantime, the church filed an action 100 miles away in Peoria County Circuit Court, contending the Adams County court order did not apply to 18 percent of the money – $774,599 – that was in certain funds contained in the account. Consequently, the church argued the bank should withhold that amount from the diocese. The church also sent a letter to the bank – one day before the money was to be released – telling the bank not to disburse the 18 percent or else the church might sue the bank for the amount in question, court papers said. The bank kept the money frozen.

The diocese responded with a request that the Adams County order be enforced, maintaining that order applied to the entire bank account, not 82 percent. The diocese also asked the judge to command the church to pay the diocese’s legal bill as a sanction for filing a frivolous action and trying to meddle with the order.

Circuit Judge Mark Drummond, who replaced the now-retired Ortbal, ruled against the church, saying the church should have brought up the matter of the 18 percent before Judge Ortbal or, failing that, on appeal. Drummond directed the church to never again “attack” the Adams County order. In addition, Drummond ordered sanctions, noting he was not impressed with the church’s behavior.

“I find the (the Church’s) position in this case to be so lacking in merit that I am assessing sanctions in this case,” Drummond decided.

The church returned to appellate court, contesting Drummond’s rulings, but found no sanctuary.

The appellate justices cast out the appeal, noting that in proceedings before Ortbal, the church argued the case involved 100 percent of the account, then lodged a new case one-and-a-half-years later in another circuit and another appellate district, introducing the new 18 percent argument.

As far as sanctions, the church contended Judge Drummond was wrong to impose a penalty in connection with a case outside his circuit. However, Pope found Drummond was within his power, because the church had asked a Peoria County judge to interfere with the Adams County case and sent the letter to the bank, both of which for all purposes brought the Peoria County matter into Drummond’s domain.

The Boston-based international firm of Goodwin Proctor represented the Episcopal Church. Quincy lawyer Kent Schnack represented the Quincy Diocese.

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