The Church as a Corporation: Part III

April 29, 2004 | 10 comments
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Here are a few more odds and ends about the Church as a corporation that I was able to find out. First, I wanted to correct two mistakes in my earlier posts. I recently found out that after Joseph Smith was murdered, it was not Brigham Young and the Twelve who succeeded to the office of trustee-in-trust. Rather, Bishop Newel K. Whitney was appointed, which means that he was the legal agent in charge of Church property during the City of Joseph period. Second, upon rereading the corporate charter granted to the Church by the State of Deseret, I noticed that it did contain a rather watered down mortmain provision, which stated that the Church could receive donations of real and personal property “for the benefit, improvement, erection of houses for public worship, and instruction, and the well being of said church.” Obviously, “well being of said church” provided a much larger grant of power than that available under the previous Illinois statute.

What about the Church today?

The Church today no longer exists as a special charter corporation that way that it did during Utah’s pioneer period. Rather, as near as I can tell its core corporate existence is organized around two corporations sole: The Corporation of the First Presidency of the Church of Jesus Christ of Latter-day Saints and the Corporation of the Presiding Bishopric of the Church of Jesus Christ of Latter-day Saints.

The corporation sole is one of the oldest corporate forms. It incorporates a particular person, or more precisely a particular office. In Anglo-American law the oldest corporation sole is probably the King of England. The King, in contemplation of law, is a corporation composed of all of the people that have ever occupied the office. Hence, Elizabeth Winsor does not personally own the property of the English monarchy. Rather, that property is held by a corporation sole – the king or queen – which existed long before her coronation and will (presumably) exist long after her death. Other examples of corporations sole would be bishops of the Church of England, parsons, and the mayors of many towns. As early as 1786 parsons in Massachusetts were treated as corporations sole. What is interesting, is that the corporation consists of the office holder not of the organization in which he or she holds office. Thus, while the State of Deseret charter of the Church incorporated “all that portion of the inhabitants of said State, which now are, or hereafter may become residents therein, and which are known and distinguished as ‘The Church of Jesus Christ of Latter-day Saints’,” the Corporation of the First Presidency incorporates only those who do and have held the office.

In addition to these two corporations, there are two other main corporate entities of which I am aware. The first is Intellectual Reserve Inc., which holds all of the Church’s copyrights and other intellectual property. The second is Deseret Management Corporation. This corporation is a holding company which owns all of the Church’s stock in for profit businesses, such as KSL or the Deseret News. I don’t know what form either of these corporations take, although I am assuming that Deseret Management Corp. is a regular joint-stock business company. Also, in addition to these four Utah based corporations, my understanding is that there are dozens of other Church corporations organized under the laws of other countries to hold and manage Church property in those nations and act as the Church’s legal personality there.

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10 Responses to The Church as a Corporation: Part III

  1. Adam Greenwood on April 29, 2004 at 11:55 am

    Nate,
    Any speculation as to why, if the Church Corporation was allowed to own property, so much of was in Joseph’s name or otherwise tangled legally?

  2. Nate Oman on April 29, 2004 at 12:57 pm

    Adam: I touched on this in my earlier post. The short answer is that the Church did not have a seperate legal personality until quite late, and in Nauvoo in particular the Church did not have a legal personality until after Joseph had become personally libable for huge debts associated with the purchase of land etc. for the town.

  3. Frank on April 29, 2004 at 2:21 pm

    As you would suppose, the church schools are also incorporated. They have interesting charters.

  4. Dave on April 29, 2004 at 4:53 pm

    Nice info, Nate. I’ve really enjoyed this series of posts, sharing informations that is interesting but tough to come by.

    So does the Corp. of the FP hold Mormon buildings (temples, stake centers, visitor’s centers, the MTC) while Corp of the PB holds investment property (real estate and securities)? And I take it the Corp of the FP rather than Intellectual Property has legal ownership of the actual manuscripts in the Church archives?

  5. Chad too on April 29, 2004 at 5:37 pm

    I know I’ve run across Hawaii Reserve, Inc (HRI) as the entity that oversees the Church properties in Hawaii (BYUH, PCC, etc.)

  6. Nate Oman on April 29, 2004 at 5:57 pm

    Dave: I don’t know. My understanding is that the physical facilities of the church (ie chapels, MTC, chapels, etc.) are owned by the Corp. of the Presiding Bishopric. I don’t really know how Church investments are structured. My understanding is that they take two forms. First, there are assets (mainly businesses, land, and chunks of stock) which are held as a form of long term savings. Second, my understanding is that the current “cash reserves” of the church are invested in a diversified stock portfolio which they move in and out of quite frequently as expenses become due and revenue comes in. I believe that that long term investments are held by Deseret Management Corp., but I have to confess that I don’t really know.

  7. Steve Evans on April 29, 2004 at 6:25 pm

    I thought that it was the Corporation of the President of the Church, not of the First Presidency. Correct me if I’m wrong.

    Also, my understanding is that the Corporation of the President is the parent of the others.

  8. Nate Oman on April 29, 2004 at 7:03 pm

    Steve: I don’t know on the name. You could be right. I am not sure what you mean by “parent.” A corporation sole can own stock in another corporation, but it cannot be owned by someone else. Thus, while I am assuming the Corp. of the Pres. owns the stock of Deseret Managment Corp., I don’t think that it could own the Corp. of the Presiding Bishopric.

  9. Pete on April 30, 2004 at 5:05 am

    I too enjoy this kind of rare information.

    Property Reserve Inc. is probably another main corporation worth mentioning. I understand it is the primary real estate holding and development arm of the church, including all of the significant church properties in downtown SLC (Crossroads/ZCMI, etc.).

    IIRC, the media reports I have seen in the past (Time, Newsweek, etc.) have highlighted real estate as the most significant asset in the church’s portfolio.

  10. Ryan Wares on May 7, 2004 at 6:19 am

    This was written by the now president of DMC.
    At the beginning of 1990, major commercial businesses owned by the Church included Beneficial Development Company, Beneficial Life Insurance Company, Bonneville International Corporation, Deseret Book Company, Deseret News Publishing Company, Deseret Trust Company, Farm Management Company, Temple Square Hotel Corporation, Utah Home Fire Insurance Company, and Zions Securities Corporation. The Church also owns Laie Resorts, Inc., a small motel, restaurant, and service station located adjacent to the polynesian cultural center in Hawaii. These businesses come under the umbrella of Deseret Management Company, a holding company that receives and distributes profits, performs internal audits, generates consolidated financial statements, files consolidated income tax returns for the group, coordinates activities, and reviews business operations and plans.

    Thought you might liek to know!!

The Church as a Corporation: Part III

April 5, 2004 | 3 comments
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This is Part III (see Part I and Part II) of my post on the legal history of the Church as a corporation.

After Joseph’s death, the Quorum of the Twelve took over control of the Church. I don’t know the precise corporate status of the Twelve-led church of 1844-48. The Illinois statute provided that “The trustees elected or appointed under the provisions of this act, and their successors, shall have perpetual succession and existence” (emphasis added). In 1848, Brigham Young was made President of the Church at a conference in Winter Quarters (prior to that he had been operating as president of the Quorum of the Twelve), which also made him Trustee-in-Trust of the Church.

One of the things that the Church did when it arrived in the Great Basin was to try to sort out is legal status more effectively. In 1851, the legislature of the Provisional State of Deseret passed a law granting to the Church a corporate charter. There are a couple of interesting facets of this charter. First, it vested control over Church property in a Trustee-in-Trust, a clear echo of the Illinois statute used in Nauvoo. Second, the charter contained no mortmain provisions and thus allowed the Church to acquire and hold unlimited amounts of property. Third, the charter did not contain any limitations on the purposes for which the Church could hold property. Thus, unlike the Illinois statute used in Nauvoo, church property was not limited solely to property used for worship services. Fourth, the charter gave the Church the power to solemnize marriages and provided any marriages solemnized by the Church could not be questioned in any other forum. After Congress refused to admit Deseret to the Union as a state and organized the Territory of Utah in its stead, an identical version of the Church’s charter was re-enacted by the Utah Territorial Legislature in 1855.

In many ways, the corporate charter granted to the Church by the Territorial legislature had more in common with the Charter granted to the City of Nauvoo than it did to the Illinois ecclesiastical corporation created by Joseph Smith in 1841. (Interestingly, the Illinois church corporation was created on the same day that the Nauvoo Charter went into effect.) Like the Nauvoo Charter, the Utah Church Charter was a special act of the legislature, and my understanding is that its provisions were in some sense extraordinary, in particular its unlimited ability to own and use property was quite different from that of most other ecclesiastical corporations.

This legal solution, however, was short lived. In 1862, Congress passed the Morrill Anti-Bigamy Act. This law did three things to the Church’s legal status. First, it specifically revoked the laws passed by the Provisional State of Deseret and the Territorial legislature. Second, it provided that any property held by an ecclesiastical corporation in the territories in excess of $50,000 was escheted to the United States government. Third, it provided that any laws that the territorial legislatures might seek to pass that would shield or promote polygamy were void.

The Morrill Act did not have any immediate impact. It contained no effective enforcement mechanism and the law was completely ignored for about ten years. I do think, however, that it had two impacts. First, it removed any legal incentive that there might have been to sharply distinguish between Brigham Young’s personal property and Church assets. Second, it created an incentive to fragment the Church’s legal personality into more local units, e.g. stakes, etc. I don’t know the precise legal status of these local units, however.

More importantly, the Church started to create joint-stock companies to carry out many of its activities. It is important to understand that not all corporations are joint stock companies and not all joint stock companies are corporations. In other words, organizations that have a legal personality via incorporation don’t necessarily have to issue stock, and organizations that issue stock don’t necessarily have to have a separate legal personality. The 17th century saw the rise of some huge, incorporated, joint-stock companies like the British East India Company. However, most joint stock companies operated without a corporate charter. They were simply contractual arrangements for dividing up the assets and liabilities of a business venture. After one of these unincorporated joint-stock companies created a huge financial panic in the second decade of the 18th century ? the so-called South Seas Bubble ? Parliament passed the Bubble Act of 1720, which made unincorporated joint stock companies illegal. The act, however, seems to have been more honored in the breach than in the observance. The result is that up until the 1860s there were lots of joint stock companies, but their legal status was ambiguous at best. At almost the same time, the Church starts forming lots of joint stock companies to carry on activities designed to foster economic development and other Church missions ? e.g. the Deseret News Company. The Church ? or more often individual general authorities or loyal church members ? then owned this stock. One interesting question to which I do not have the answer is the precise status of these companies. Arrington’s Great Basin Kingdom, which is an economic history of the 19th century church, talks a lot about the formation of church companies from about 1860 until about 1890. What he doesn’t talk about ? or even seem aware of ? is the revolution that was going on in corporate law at the time, as the previously “contractual” joint stock companies were transformed into formal corporations. I don’t know what the Utah Territorial law of business corporations looked like.

In 1887, Congress passed the Edmunds-Tucker Act, which included a corporate disollution provision almost identical to the Morrill Act. There were a couple of differences. First, the escheted property was to be sent to the territorial public schools, rather than the United States Treasury. Second, and more importantly, the Edmunds-Tucker Act contained a detailed enforcement provision under which a government receiver was appointed to institute an action in territorial court to take possession of Church property. By the time that this action was instituted, however, the “Church” didn’t own much property. There was temple square and its adjascent property, some cattle herds, and stock in a bunch of corporations. In anticipation of the Act, most of the Church’s property had been conveyed to local leaders or local ecclesiastical units. The reciever began instituting actions to void these transfers. However, everyone wanted to get a case testing the constitutionality of the Edmunds-Tucker Act in front of the Supreme Court as soon as possible. Accordingly, the reciever and the Church’s lawyers reached a deal whereby the reciever stopped trying to void pre-Edmunds-Tucker Act transfers in return for $155,000 in cash. In due time, the Edmunds-Tucker Act was upheld by the Supreme Court in the case of The Late Corporation of the Church of Jesus Christ of Latter-day Saints v. the United States (although it produced one of the few vigorous Supreme Court dissents of the anti-polygamy crusades. Justice Field objected to the revocation of the corporation charter, which he though violated due process.) Almost immediately after the Supreme Court issued its opinion, President Woodruff issued the Manifesto. By this time, the previous reciever had been dismissed under a cloud of accusations of mismanagement of escheted assets. The new reciever backed off, and eventually the Church’s property ? less thousands of dollars of attorneys and administrative fees ? was returned.

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3 Responses to The Church as a Corporation: Part III

  1. Nate Oman on April 5, 2004 at 3:18 pm

    Erratta: The South Sea Company actually did have a corporate charter.

  2. Dan on April 5, 2004 at 5:00 pm

    This is great stuff. What are your sources besides “Great Basin Kingdom”? And what subsidiaries does the current church corporation have? Are parts IV-??? forthcoming?

  3. Nate Oman on April 5, 2004 at 6:43 pm

    My sources are Arrington, Firmage & Mangrum _Zion in the Courts_, and Sarah Barringer Gordon, _The Mormon Question_ on the Mormon stuff. Dale Morgan, _The State of Deseret_ has the text of the 1851/1855 charter, which was also published in Utah Historical Quarterly. I tracked down the Illinois law on my own using information from Joseph Smith’s multi-volume History of the Church. For the evoluation of corporate law, there are a couple of places to go. Gerald Frug, “The City as a Legal Concept” is an interesting article. Lawrence Friedman and Morton Horwitz both give (very leftist) over-views of the history of corporate law in America. Also, Paul G. Mahoney, “Contract of Concession? An Essay on the History of Corporate Law,” 34 Ga. L. Rev. 873 is where I got a lot of the basic history. Right now I am reading William W. Bratton, Jr., “The New Economic Theory of the Firm: Critical Perspectives from History,” 41 Stan. L. Rev. 1471, which also covers a lot of this history.

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