APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT BROWN COUNTY, SOUTH DAKOTA THE HONORABLE JACK R. VON WALD Judge
The opinion of the court was delivered by: Konenkamp, Justice
CONSIDERED ON BRIEFS ON NOVEMBER 14, 2011
[¶1.] This dispute is the latest in a continuing struggle between two factions in a Hutterite colony. Mirroring the larger North American schism between Group 1 and Group 2 in the Schmiedeleut Hutterian Church, the factions here cannot agree on which Group to join. One faction purported to excommunicate members of the other, and eventually the other faction sought court dissolution of the corporation. Denying a motion to dismiss for lack of subject matter jurisdiction, the circuit court found one faction's conduct oppressive and concluded that the corporation was not functioning as a communal organization in accord with its articles and bylaws. Thus the court ordered the appointment of a receiver to collect all the assets and divide the proceeds among the colony members. But to decide which members were entitled to distributed assets, the court was obliged to determine which members were eligible. On appeal, we conclude that to resolve competing claims over communal property requires an unconstitutional entanglement in a religious dispute on who are true church members and directors. We reverse and remand for entry of an order of dismissal.
[¶2.] Hutterville Hutterian Brethren, Inc. (Hutterville) is a nonprofit religious corporation organized under South Dakota law. It is one of fifty-four Schmiedeleut Hutterian colonies in South Dakota. The Hutterite Church originally arose out of the Anabaptist reformed church movement following the Protestant Reformation. "The distinguishing feature of Hutterites, among Anabaptists, was their practice of sharing all earthly goods in common, called 'community of goods.'"*fn1
Indeed, according to Hutterville's articles of incorporation, its purpose is to promote the Hutterian faith and church through communal living. Its bylaws identify corporate members as those at least eight-years-old who reside on the corporate property and are dependent upon the community fund. The bylaws also provide that members must live a communal life and follow the teachings and tenets of the Hutterian Church. Members have no individual property rights, and no member, officer, or director may receive compensation or corporate assets. [¶3.] After a 1992 schism in the North American Hutterian Church, many Schmiedeleut Hutterite colonies adopted a new constitution and affirmed their allegiance to a new Elder, since deceased. This branch is known as the Group 2 Hutterites or Committee Hutterites. The other colonies remained loyal to Elder Jacob Kleinsasser, forming the Hutterian Brethren, Group 1.*fn2 Each Group maintained that it was the "true Schmiedeleut."*fn3 [¶4.] Hutterville's members split on which Group to join. Some, forming the Wipf faction, wanted Hutterville to join Schmiedeleut Group 2. Others, forming the Waldner faction, headed by the colony minister, George Waldner, Sr., wanted to remain loyal to Elder Kleinsasser in Schmiedeleut Group 1. In 2008 and 2009, the Wipf faction attempted to replace Waldner and his followers as corporate leaders. To prevent this change in governance, the Waldner faction sought to remove a few of the Wipf faction members from officer and director positions. Eventually, however, after several meetings and elections, the Wipf faction obtained some control of Hutterville. Even so, the Waldner faction refused to recognize the new leaders or surrender control of the corporation. George Waldner, Sr. remained the colony minister and sought to excommunicate some of the Wipf faction members and disenroll them as members of Hutterville. These ongoing disputes over corporate governance and leadership sparked two lawsuits.
[¶5.] In the first action, Johnny Wipf, Alvin Hofer, and Jake Hofer, Sr. (some of the Wipf faction members) brought suit against John G. Waldner, George Waldner, Sr., Tom Waldner, and Kenneth Waldner (some of the Waldner faction members) seeking a declaration that Wipf and the Hofers were the directors of Hutterville. Each faction applied for a temporary restraining order against the other. The circuit court initially granted the Wipf-Hofer application and denied the Waldners' counter motion. The court examined Hutterville's articles of incorporation and bylaws and determined the identity of Hutterville's officers and directors. After the trial court's decision, however, the Waldners moved to dismiss the case for lack of subject matter jurisdiction. The Waldners argued that the circuit court was unconstitutionally entangled in a religious controversy. After a hearing, the court granted the Waldners' motion and dismissed the case in its entirety.
[¶6.] Wipf and the Hofers appealed, arguing that the case presented only secular issues of corporate governance. In a unanimous decision, we affirmed the dismissal. Hutterville Hutterian Brethren, Inc. et al. v. Waldner et al., 2010 S.D. 86, 791 N.W.2d 169. We concluded that religious disputes over church leadership and membership so pervaded the corporate governance issue that it placed the cause of action outside a secular court's subject matter jurisdiction.
[¶7.] In the second suit, commenced while the first appeal was pending, the Wipf faction alleged that members of Hutterville were deadlocked over the management and control of corporate affairs. And the deadlock was preventing the members of Hutterville from carrying out the corporate purpose and causing irreparable injury to the corporation's financial status. The Waldner faction was accused of misapplying corporate assets and threatening the health and safety of Hutterville's members. The complaint requested the dissolution of Hutterville and the appointment of a receiver to carry out the business of the corporation while it wound up its business.
[¶8.] Waldner faction members moved to dismiss for lack of subject matter jurisdiction. They argued that the United States Constitution and the South Dakota Constitution precluded the court from dissolving Hutterville and appointing a receiver because the proceeding would require the court to identify genuine church members of Hutterville for purposes of standing under the dissolution statute and for purposes of asset distribution following liquidation. They believed the court's task of effectively certifying genuine membership would have required ascertaining the true identity of the local church, violating the constitutional protections against government entanglement with religion.
[¶9.] In denying the Waldner faction's motion to dismiss, the circuit court concluded that Hutterville's "directors" were deadlocked. The court also found that much of the Waldner faction's conduct was oppressive, including locking up fuel and fire equipment and refusing to pay medical bills or to provide clothing and material for clothing. In addition, the court found that Hutterville was not functioning as a communal corporation and was therefore unable to carry out its corporate purposes. Finally, the court ruled that "[a]ll persons of the age of 8 and older who resided upon the real property of [Hutterville] on November 17, 2010 are members of [Hutterville] for purposes of dividing the proceeds from the sale of assets. This avoids any impermeable [sic] entanglement in religious issues." The court ordered Hutterville dissolved and appointed a receiver to divide the corporate property among all "members" as determined by the court's finding.
[¶10.] On appeal, the Waldner faction argues that the court erred in denying its motion to dismiss for lack of subject matter jurisdiction. It also contends that the court erred in dissolving Hutterville under SDCL 47-26-22 and challenges the court's ruling on corporate membership.*fn4
[¶11.] "The First Amendment to the United States Constitution and Article 6, Section 3 of the South Dakota Constitution preclude civil courts from entertaining religious disputes over doctrine, leaving adjudication of those issues to ecclesiastical tribunals of the appropriate church." Hutterville, 2010 S.D. 86, ¶ 22, 791 N.W.2d at 175 (quoting Decker ex rel. Decker v. Tschetter Hutterian Brethren, Inc., 1999 S.D. 62, ¶ 16, 594 N.W.2d 357, 362). "The fact that a portion of the dispute involves secular claims does not override this constitutional protection." Id. "[A] civil court may only adjudicate a church controversy if it can do so without resolving underlying controversies over religious doctrine." Id. Secular courts lack subject matter jurisdiction over lawsuits involving "theological controversy, church discipline, ecclesiastical government, or the conformity of the members of the church to the standard of morals required of them." Id. ¶ 31 (quoting Serbian E. Orthodox Diocese for the U.S. and Can. V. Milivojevich, 426 U.S. 696, 714, 96 S. ...