The Virginia Supreme Court avoided that issue by finding that the statute's implicit prohibition of trusts in favor of a diocese or a national church had been legislatively repealed, and that the Falls Church, the Diocese and TEC had created such an implicit trust. While I agree with the court's analysis to the extent that the course of conduct between the parties clearly established a trust relationship, the Supreme Court assumed, as noted by the excellent concurrence by Justice McClanahan, that under the prior statute "any express trusts purportedly created by the Dennis Canon were ineffective in Virginia." (Id. at 36, McClanahan concurring).
As Justice McClanahan noted, though--far more eloquently than my own formulation in 2008--that "the manifest problem with former Code 57-7, as construed and applied to hierarchical churches, was that it treated those churches differently than local congregational churches by allowing only the latter to hold property in trust in Virginia." (Id. at 38) As Justice McClanahan explains, "Virginia's historic animus toward the accumulation of wealth by churches generally and hierarchical churches in particular, was the origin of that disparate statutory treatment." (Id. at 39) As a result, "[s]uch application of former Code 57-7 violated the Establishment Clause of the First Amendment by conferring a religious preference to local congregational churches." (Id.) By doing so, Virginia had itself violated the "fundamental limitation of the Establishment Clause, [that] neither a state nor the Federal Government can pass laws which prefer one religion over another." (Id.) By allowing one form of denomination (congregational) to possess property in a manner barred to another form (hierarchical), the State unlawfully discriminated against hierarchical churches.
Justice McClanahan goes on to note that the statute as applied therefore frustrated the efforts of the Episcopal Church to avail itself of the constitutional right guaranteed in Jones v. Wolf, which held that:
Through appropriate reversionary clauses and trust provisions, religious societies can specify what is to happen to church property in the event of a particular contingency, or what religious body will determine the ownership in the event of a schism or doctrinal controversy.Because its polity was of a kind legally disadvantaged under Virginia law, the Supreme Court found yesterday, the trust was "ineffective" until the legislature repealed that statute; as Justice McClanahan writes in her frankly unanswerable concurrence, that interpretation was unconstitutional before the repeal, and remains unconstitutional now.
By finding in TEC's favor on the implied trust theory, of course, the Virginia Supreme Court has insulated this finding from further review; the Diocese and TEC are not aggrieved, although they won on a subsidiary legal theory and not on the most plain and simple theory. Ultimately, they will be made whole, as they should be. The exhaustive majority opinion does a very good job of explaining why, even if one did not credit that an express trust was effectively created, the circumstances clearly established a constructive trust.
But all that is (or rather should have been) unnecessary. In Jones, at p. 618, the United States Supreme Court emphasized the minimal burden of establishing a trust:
Under the neutral principles approach, the outcome of a church property dispute is not foreordained. At any time before the dispute erupts, the parties can ensure, if they so desire, that the faction loyal to the hierarchical church will retain the church property. They can modify the deeds or the corporate charter to include a right of reversion or trust in favor of the general church. Alternatively, the constitution of the general church can be made to recite an express trust in favor of the denominational church. The burden involved in taking such steps will be minimal. And the civil courts will be bound to give effect to the result indicated by the parties, provided it is embodied in some legally cognizable form(emphasis added)
TEC followed that decision to the letter. That should have been an end of the matter, whatever one thinks of the theological issues dividing the parties. The fact that Virginia purported to nullify that action, when the Supreme Court of the United States had held that "the civil courts will be bound to give effect to the result indicated by the parties," choosing one of the forms specified by the High Court, shows that even this opinion did not go far enough in its reasoning, although it ultimately reached the right result. It is a paradigmatic case of T.S. Eliot's dictum that "[t]he last temptation is the greatest treason: To do the right deed for the wrong reason."