No. 04-395
IN THE SUPREME COURT OF THE STATE OF MONTANA
2005 MT 302
IN THE MATTER OF THE FAIR HEARING OF:
RITA HOFER, MARY WOLLMAN, ANNA HOFER,
BERTHA HOFER, SARAH HOFER, MARIE HOFER
and JUDITH HOFER,
Claimants, Petitioners and Cross-Appellants,
v.
THE MONTANA DEPARTMENT OF PUBLIC HEALTH
AND HUMAN SERVICES,
Respondent and Appellant.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark, Cause No. CDV 2003-380
The Honorable Thomas C. Honzel, Judge presiding.
COUNSEL OF RECORD:
For Claimants, Petitioners and Cross-Appellants:
Kent M. Kasting, Kasting (argued), Kauffman & Mersen, Bozeman, Montana; Jeff
Sveen, Siegel Barnett & Schultz, Aberdeen, South Dakota
For Respondent and Appellant:
Christine Killgore Lannan (argued), Russell E. Cater, Special Assistant Attorneys
General, Department of Public Health and Human Services Office of Legal Affairs,
Helena, Montana
Argued and Submitted: March 5, 2005
Decided: December 6, 2005
Filed:
__________________________________________
Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 The Department of Public Health and Human Services (“DPHHS”) appeals from a
Memorandum and Order of the Montana First Judicial District Court, Lewis and Clark
County, in which the court held that the net assets of King Colony Ranch, Incorporated,
(“KCR” or "Colony")--a Hutterite colony to which the seven above-named Claimants
(“Claimants”) belong--are not available to Claimants and that a trust relationship does not
exist between Claimants and KCR, nor between DPHHS and KCR. On cross-appeal,
Claimants argue that the District Court, in granting Claimants’ petition, failed to address an
allegedly erroneous conclusion of law made at the administrative level, and ask this Court
to affirm the result reached by the District Court but explicitly reverse the administrative
agency’s conclusion that KCR owes Claimants an enforceable legal duty of support. We
reverse in part and remand for further proceedings. Because we conclude that the trust
relationship analysis is dispositive of the question of whether the Colony's resources are
available for the benefit of the Claimants as beneficiaries, we need not address the related
question of whether the Colony owes a legal duty of support to its members.
ISSUES
¶2 The parties present multiple issues on appeal and cross-appeal. However, we have
determined the dispositive issues to be:
¶3 1. Did the District Court err when it concluded that an express trust does not exist
between KCR and the members of the King Hutterite Colony (“Colony members”)?
¶4 2. Are Claimants entitled to participate in the Family-Related Medicaid Program?
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FACTUAL AND PROCEDURAL BACKGROUND
¶5 Claimants are members of KCR, a Hutterite Colony located near Lewistown.
Claimants had been participants in a particular Medicaid program, called the Family-Related
Medicaid Program, since about 1991. To be eligible for this program, applicants must meet
two “tests”--an “income test,” and a “resource test.” Under the income test, an applicant
cannot have income exceeding $3,000 per year. The parties agree that Claimants have
income of less than $3,000 per year and thus the income test is not an issue in this case.
Under the resource test, an applicant cannot have resources which are determined to be both
“countable” and “available” which exceed $3,000 in value.
¶6 A few years after Claimants began receiving Medicaid benefits, DPHHS scrutinized
Claimants’ resources and income to determine if Claimants had been correctly deemed
eligible for Medicaid. After reviewing KCR’s organizational documents, DPHHS concluded
that a trust relationship exists between KCR and the Colony members, including Claimants.
Additionally, DPHHS determined that one hundred percent of the net worth of KCR--which
totals approximately $2.1 million--is available to each individual Colony member. On
December 17, 2001, DPHHS notified Claimants that their Medicaid benefits were being
terminated because the resources available to each of them exceeded the allowable resource
limit of $3,000.
¶7 Claimants requested a Fair Hearing before the Board of Public Assistance (“BPA”).
A BPA Hearings Officer presided over a four-day hearing during the summer of 2002. On
January 16, 2003, the Hearings Officer, filed a Fair Hearing Decision in which he concluded,
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based on the Colony's Articles of Incorporation and upon the testimony of the Claimants
regarding the care provided to them by the Colony, that a trust relationship existed between
KCR and the Colony members with KCR as the Trustee and the members of the Colony as
beneficiaries, and that KCR is legally obligated to support the Colony members. The
Hearings Officer further concluded that the assets of KCR were available to each individual
Colony member on a pro rata basis.
¶8 Finally, the Hearings Officer addressed the question of whether the Claimants were
entitled to the benefit of any resource exclusions, pursuant to Rule 37.78.401, ARM, when
considering what resources should be counted against them for eligibility purposes. The
Officer rejected the Department's contention that no exclusions could apply in trust
situations, concluding that a reasonable pro rata analysis of the countable resources held in
the common treasury needed to be conducted so as to determine the Claimants' eligibility for
Medicaid. The Hearings Officer accordingly reversed the closure of Medicaid to the
Claimants and ordered remand for resource determinations in accordance with its Decision.
¶9 DPHHS and Claimants both appealed portions of the Fair Hearing Decision to the full
BPA. On June 3, 2003, the BPA affirmed the Hearings Officer’s findings, and some of his
legal conclusions. Although the BPA agreed that a trust exists between KCR and the Colony
members, it reversed the conclusion that KCR’s assets were available to individual Colony
members and that each Colony member has access to a pro rata share of KCR’s assets. It
did not reach the issue of whether any of KCR’s assets would be excludable pursuant to Rule
37.78.401, ARM.
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¶10 DPHHS and Claimants both sought judicial review of this decision in the District
Court. DPHHS challenged the BPA’s conclusion that KCR’s assets were not available to
the Colony members and the conclusion that these resources, if available, would be allocated
to each Colony member on a pro rata basis. Claimants appealed the conclusion that a trust
relationship exists between themselves and KCR, and further challenged the conclusion that
KCR owes the Colony members a legal duty of support.
¶11 The District Court did not find the same language in KCR’s organizational documents
to be pertinent to its decision as did the Hearings Officer and the BPA. It concluded that
KCR’s assets were not available to individual Colony members, and furthermore, that a trust
relationship between KCR and the Colony members does not exist. The District Court did
not address the BPA’s conclusion that KCR has a legal duty to support its members. From
the District Court’s Memorandum and Order, filed March 10, 2004, both parties appeal.
STANDARD OF REVIEW
¶12 Actions brought before the BPA are subject to the requirements of the Montana
Administrative Procedure Act (“MAPA”). Kirchner v. State, 2005 MT 202, ¶¶ 8-9, 328
Mont. 203, ¶¶ 8-9, 119 P.3d 82, ¶¶ 8-9. The standard of review of an agency decision under
MAPA, set forth at § 2-4-704(2), MCA, provides in pertinent part:
The court may not substitute its judgment for that of the agency as to the
weight of the evidence on questions of fact. The court may affirm the decision
of the agency or remand the case for further proceedings. The court may
reverse or modify the decision if substantial rights of the appellant have been
prejudiced because:
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(a) the administrative findings, inferences, conclusions, or decisions are: . .
. (v) clearly erroneous in view of the reliable, probative, and substantial
evidence on the whole record; [or] (vi) arbitrary or capricious or characterized
by abuse of discretion or clearly unwarranted exercise of discretion. . . .
¶13 A three-part test is used to determine whether agency findings are clearly erroneous:
(1) the record is reviewed to determine if the findings are supported by substantial evidence;
(2) if the findings are supported by substantial evidence, it will be determined whether the
agency misapprehended the effect of the evidence; and (3) if substantial evidence exists and
the effect of the evidence has not been misapprehended, the reviewing court may still decide
that a finding is clearly erroneous if a review of the record leaves the court with a definite
and firm conviction that a mistake has been made. Total Mechanical Heating v. UEF, 2002
MT 55, ¶ 22, 309 Mont. 84, ¶ 22, 50 P.3d 108, ¶ 22 (citation omitted).
¶14 An agency’s conclusions of law are reviewed to determine if they are correct. Matter
of Kalfell Ranch, Inc. (1994), 269 Mont. 117, 122, 887 P.2d 241, 245. The foregoing
standard of review is applicable to both the District Court’s review of the administrative
decision and our subsequent review of the District Court’s decision. O’Neill v. Department
of Revenue, 2002 MT 130, ¶ 10, 310 Mont. 148, ¶ 10, 49 P.3d 43, ¶ 10 (citations omitted).
DISCUSSION
ISSUE ONE
¶15 Did the District Court err when it concluded that an express trust does not exist
between KCR and the Colony members?
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¶16 DPHHS argues that the District Court erroneously disregarded the findings made at
the administrative level and substituted its own findings in their place. DPHHS further
argues the District Court erred when it reversed the conclusion of the Hearings Officer, as
affirmed by the BPA, that KCR holds its assets in trust for the benefit of the Colony
members.
¶17 DPHHS argues that under the provisions of § 72-33-201, MCA, an express trust exists
between KCR and the Colony members. Section 72-33-201(1), MCA, states that a trust may
be created by a declaration of a property owner that the owner holds the property as trustee.
Section 72-33-201(2), MCA, states that a trust may be created by a transfer of property by
the owner during the owner’s lifetime to another person as trustee. DPHHS claims that in
the case before us, while either would suffice, both subsections (1) and (2) have been
satisfied. With regard to § 72-33-201(1), MCA, KCR’s Articles declare that one of KCR’s
purposes is to accumulate trust funds and property for its members. Satisfying § 72-33-
201(2), MCA, DPHHS argues, KCR’s Bylaws declare KCR holds all its property for the sole
benefit of its members. In this connection, DPHHS asserts that Colony members have
transferred property to KCR and KCR holds that property in trust for the benefit of the
Colony members.
¶18 Claimants maintain the District Court correctly concluded as a matter of law that an
express trust does not exist between KCR and the Colony members. Claimants dispute that
a “transfer of property” which would satisfy the requirements of § 72-33-201(2), MCA,
occurred. Relying upon McCormick v. Brevig, 1999 MT 86, ¶ 62, 294 Mont. 144, ¶ 62, 980
7
P.2d 603, ¶ 62, Claimants maintain that in order for a trust to be valid, there must have been
an actual transfer of property, and there is no evidence that property was actually transferred
to KCR either at the time of its creation or thereafter.
¶19 DPHHS disagrees. It asserts that KCR’s Bylaws declare that KCR holds its assets as
a trustee, and these assets came to be owned by KCR because members of the pre-
incorporated King Colony Ranch created the corporation and transferred the community’s
property to it. Indeed, this transfer is undisputed. DPHHS also claims that Colony members
make “transfers” to the corporation on an ongoing basis because they work for KCR without
receiving wages and the products of that labor become revenue for KCR.
¶20 In the Fair Hearing Decision, the Hearings Officer found that KCR exists as a
communal living arrangement where everyone shares his or her productivity and no one
individually owns any property. The Hearings Officer further found that all property is held
in the name of the corporation and that the financial needs of the Colony members are met
out of the community purse. Thus, a trust exists.
¶21 Disagreeing with the findings of the Hearings Officer, the District Court maintained
that only a single passage from the Articles bears any relevance to the issue. The District
Court explained:
One of the purposes for which the Colony was incorporated, as stated in its
articles of incorporation, is to "support the Church and the members thereof
and all of their dependents and to accumulate and create trust funds and
property for their dependents and successors. . . .” This is the only language
in the Colony’s articles of incorporation and by-laws that could possibly be
interpreted as establishing an express trust. However, the language is not a
manifestation of a present intention to create a trust. At most, the language
8
indicates an intention to do something in the future. An intent to create a trust
in the future is not sufficient to presently establish a trust. Therefore, the
Court concludes that the organizing documents of the corporation do not create
an express trust. (Emphasis added.)
We cannot agree with the course taken by the District Court on this issue. In reviewing an
agency decision, a court is not free to ignore the findings made at the administrative level.
Our standard is not whether there is evidence to support findings different from those made
by the trier of fact, but whether substantial credible evidence supports the trier’s findings.
Taylor v. State Compensation Ins. Fund (1996), 275 Mont. 432, 440, 913 P.2d 1242, 1246
(citations omitted). As long as substantial credible evidence exists to support the
administrative findings, the reviewing court may not overturn them. Roeber v. State, Dept.
of Institutions (1990), 243 Mont. 437, 440, 795 P.2d 424, 426 (citations omitted).
¶22 The Hearings Officer took account of several provisions of the Bylaws and the
Articles to support its finding that a trust exists, which the District Court then erroneously
disregarded. In addition to considering the clause from the Articles that the court examined,
the Hearings Officer also found pertinent a statement in the Articles that KCR is “devoted
exclusively to agricultural pursuits for the livelihood of its members,” and that KCR may
engage in agricultural enterprises “for the benefit of this corporation and the mutual benefit
of all the members.” The Hearings Officer further found pertinent passages in the Bylaws,
including, “That all the property of the Corporation . . . shall be held in the name of [KCR]
for the sole benefit of the Members,” and “That no Member . . . shall have vested in them
any real or personal property, but the same shall be held forever [as property of KCR].” The
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BPA upheld these findings. These administrative findings were supported by substantial
credible evidence. Thus, the District Court erred by entering findings to the contrary.
Section 2-4-704(2), MCA.
¶23 Reinstating the findings as made by the Hearings Officer and affirmed by the BPA,
we must next determine whether the District Court erred as a matter of law when it
concluded that no express trust exists between KCR and the Colony members. In the Fair
Hearing Decision, the Hearings Officer concluded a “trust relationship” exists between KCR
and the Colony members. The BPA agreed.
¶24 Claimants contend that no property has ever actually been transferred to KCR from
the Colony members and thus no trust may exist. However, though it is undisputed that the
pre-incorporated King Colony Ranch transferred the community's property to the KCR
corporation, we need not reach this issue. As noted above, an express trust may be created
by a declaration of a property owner that the owner holds the property as a trustee. Section
72-33-201(1), MCA. A trustee, as defined by § 72-33-108(7), MCA, means the person
holding property in trust. Black's Law Dictionary 1519 (7th ed. 1999), defines a trustee as
one who, having legal title to property, holds it in trust for the benefit of another and owes
a fiduciary duty to that beneficiary.
¶25 We have held that a court may resolve church property disputes by applying neutral,
secular principles of property, trust, and corporate law when the instruments upon which
those principles operate are at hand. We further held that no First Amendment issue arises
when a court resolves a church property dispute by relying on both state statutes concerning
10
the holding of religious property, and the terms of corporate charters of religious
organizations. Second Intern. Baha’i Council v. Chase, 2005 MT 30, ¶ 17, 326 Mont. 41,
¶ 17, 106 P.3d 1168, ¶ 17 (citation omitted) (“Chase”). It is undisputed that the
organizational documents of KCR are the Articles and Bylaws, and that we may examine
them applying neutral principles of law as we did in Chase.
¶26 Section VIII of the Bylaws states:
That all the property of the Corporation, both real and personal, shall be held
in the name of King Colony Ranch for the sole benefit of the Members of the
King Colony Ranch and for their natural heirs and successors. That no
Member of the King Colony Ranch shall have vested in them any real or
personal property, but the same shall be held foreever [sic] and perpetual as
the Cooperative properties of the King Colony Ranch in accordance with the
ordinances of the Cooperative Hutterische Church Society and its Rituals and
belief in the humility of man before his Maker and God.
¶27 Furthermore, the Constitution of the Hutterian Brethren Church and Rules As To
Community of Property ("Hutterian Constitution"), which was admitted into evidence during
the Fair Hearing, states:
36. No individual member of a Colony shall have any assignable or
transferable interest in any of its property, real or personal.
37. All property, real and personal, of a Colony, from whomsoever,
whensoever, and howsoever it may have been obtained, shall forever be
owned, used, occupied, controlled and possessed by the Colony for the
common use, interest, and benefit of each and all of the members thereof, for
the purposes of such Colony.
¶28 The language found within the organizing documents of KCR is internally consistent
and unambiguous. The intention of the Colony and the understanding of its members is that
KCR’s assets are held in trust for the benefit of the members and their heirs. Language in
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the Articles, Bylaws, and Hutterian Constitution all support this conclusion. Although
Claimants argue that there is insufficient evidence to support such a conclusion, they have
given us no evidence which contradicts the language of KCR’s organizing documents or the
Hutterian Constitution. Claimants furthermore do not dispute that this language is indeed
followed in the practices of the Colony and its members. The party who asserts the existence
of a trust has the burden of proving its existence and contents by clear, unmistakable,
satisfactory and convincing evidence. McCormick, ¶ 56. DPHHS has met this burden, and
Claimants have raised no serious challenges to the accuracy of the evidence upon which
DPHHS relies. Thus, we conclude that the Hearings Officer's conclusion that an express trust
exists was correct.
¶29 The Colony as trustee has the duty to administer the Trust in the interest of its
members as beneficiaries. Section 72-34-103(1), MCA; In re Estate of Bradshaw, 2001 MT
92, ¶ 39, 305 Mont. 178, ¶ 39, 24 P.3d 211, ¶ 39. Based upon the language of the internal
documents noted above, as well as the testimony of the Claimants and other Colony
witnesses, we conclude that the trust's resources are available for the benefit of its members,
including the Claimants.
ISSUE TWO
¶30 Are Claimants entitled to participate in the Family-Related Medicaid Program?
¶31 In structuring the Medicaid program, Congress chose to direct the limited funds
available to the most impoverished people. Ramey v. Reinertson (10th Cir. 2001), 268 F.3d
955, 958 (citation omitted). Eligibility for Medicaid is dependent upon a determination of
12
whether an applicant has “available” resources, and coverage will be denied if an applicant’s
resources exceed a statutory ceiling. Ramey, 268 F.3d at 958; 42 U.S.C.
§ 1396a(a)(10)(A)(i)(IV). Because some applicants attempted to shelter their assets by
placing those assets into irrevocable trusts, the United States Congress passed legislation
which restricts the ability of applicants to use trusts to shelter assets and gain Medicaid
eligibility. Ramey, 268 F.3d at 958. See 42 U.S.C. § 1396a(k), now replaced by 42 U.S.C.
§ 1396p(d).
¶32 Within the federal Medicaid program, each participating state develops a plan
containing reasonable standards for determining eligibility for medical assistance, and an
individual becomes eligible for Medicaid if he or she meets the state’s criteria. Schweiker
v. Gray Panthers (1981), 453 U.S. 34, 36-37, 101 S.Ct. 2633, 2636, 69 L.Ed.2d 460, 465;
42 U.S.C. § 1396a.
¶33 In its brief to this Court, DPHHS argues that per its regulations, Claimants are not
entitled to participate in this particular Medicaid program. An individual is ineligible for this
Medicaid program if DPHHS can ascribe to that individual $3,000 or more of “countable,
available resources.” It is undisputed that KCR has assets totaling approximately $2.1
million net. However, whether this ascribes $3,000 or more to each of the Claimants in this
case so as to render them ineligible for Medicaid rests upon two determinations: how much,
if any, of that $2.1 million is a “countable” (as opposed to “excludable”) asset; and whether
KCR’s countable assets are “available” to each Claimant at all, and if so, whether that
13
availability should be in toto, pro rata, or in some other proportion. Unfortunately, neither
of these determinations has yet been made.
¶34 The administrative and judicial review process has resulted in a mixed bag of
unreconcilable findings. Because the District Court concluded that no trust exists, it did not
reach the issue of whether Claimants would be eligible for Medicaid. Although the BPA
concluded that a trust exists between KCR and Claimants, it reversed the Hearings Officer’s
conclusion that KCR’s assets are available to Claimants, noting that a Colony member’s right
to be supported does not give the Colony member a property interest in KCR’s assets. The
BPA relied upon language in the Articles which state that no Colony member may hold any
special property rights in KCR’s property; language in the Bylaws which states that no
Colony member shall have vested in them any real or personal property; a superceded
DPHHS Memorandum; and the Federal Program Operations Manual System (“POMS”),
which the Social Security Administration uses to process claims for Social Security benefits,
and which the BPA concedes does not apply to Medicaid. Because the BPA concluded that
none of KCR’s assets were available to Claimants, it did not consider whether any of KCR’s
assets would be countable or excludable under the applicable regulations.
¶35 In the Fair Hearing Decision, the Hearings Officer concluded that Rule 37.78.401,
ARM, specifically allows numerous exclusions from the resource accounting which DPHHS
undertakes in determining the amount of resources available to a claimant, and that in the
situation at hand, DPHHS failed to undertake this analysis and instead argued without citable
authority that assets held in trust are automatically considered “countable” resources for the
14
purposes of DPHHS’ resource determinations. The Hearings Officer concluded that a trust
relationship does not preclude this analysis. See ¶ 8 herein. The Hearings Officer further
concluded that because KCR’s income is divided into equal shares for tax purposes, it would
stand to reason that the resources would likewise be divided and allocated on a pro rata
basis.
¶36 Pursuant to § 53-6-113(1), MCA, DPHHS shall adopt appropriate rules necessary for
the administration of the Montana Medicaid program that may be required by federal laws
and regulations governing state participation in Medicaid. Pursuant to § 53-6-113(6), MCA,
those rules may include, among other criteria, financial standards and criteria for income and
resources and treatment of resources. DPHHS argues that under the administrative rules it
has crafted, it must consider as “available” to an applicant the maximum amount distributable
from a trust of which that applicant is a beneficiary. The pertinent language in the Medicaid
Manual states, “If the trust is considered to be accessible, the value of all the resources held
by the trust must be counted in determining the household’s/individual’s resource eligibility.”
See Centers for Medicare and Medicaid Services, Federal Medicaid Agency, State Medicaid
Manual, § 3215.3. In Claimants’ case, DPHHS argues, that amount is the full value of the
trust because the trust’s organizing documents contain no limiting language.
¶37 A single sentence from DPHHS’ own manual is scant authority upon which to base
an ultimate conclusion on an issue of such importance, and yet it is the only authority
DPHHS offers. DPHHS argues that KCR could in its discretion spend the full amount of the
trust’s assets to pay for the medical care of a single Colony member. While DPHHS
15
concedes that this approach may seem unsatisfactory, DPHHS maintains it is the approach
mandated by the State’s application of the Federal government’s Medicaid regulations.
DPHHS asserts that it requires families who apply for Medicaid to spend all their assets until
the family’s countable resources total $3,000 or less; families cannot allocate resources
separately for each family member. This is so, DPHHS maintains, even if the result is that
a family is forced into bankruptcy, because the Medicaid rules simply do not permit a family
to divide resources by the number of members. While pursuant to § 53-6-131(2), MCA,
DPHHS may indeed establish income and resource limitations within the amounts permitted
by federal law, here, we do not have members of a nuclear family. Rather, we are presented
with multiple families within a community. DPHHS has failed to demonstrate that treating
an entire community as if it were a nuclear family is consistent with the applicable federal
provisions.
¶38 Throughout this litigation, DPHHS has staked its position almost entirely upon its
interpretation of its own regulations. DPHHS administers the Montana Medicaid program
and is statutorily required to follow the federal government’s mandates for administration
of the state Medicaid program. Section 53-6-101(1), MCA. DPHHS does not provide us
with any external authority to support its assertions that trust resources are automatically
deemed countable resources, and that KCR’s assets are available in toto to each Colony
member. We are simply unprepared to hold that these Claimants are ineligible for Medicaid
based upon DPHHS’ assertions that it has correctly applied its regulations, and little else.
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¶39 We are likewise reluctant to follow the BPA’s approach in declaring KCR’s assets
unavailable based upon an outdated memorandum which is disclaimed by the administrative
agency which authored it, and a federal manual which does not apply to the Medicaid
program. However, we do not fault the courts at the administrative or district court levels
for failing to provide us with the findings we require. The Medicaid program is complex,
detailed, and in a constant state of evolution. The preliminary issues of legal duty and the
existence of a trust--as well as other issues which we conclude are not relevant to the
outcome of this case--have overshadowed the determinative issue. While all parties in this
case have spent significant time and energy arguing details of peripheral importance, the
central issue of whether Claimants are eligible for Medicaid remains unresolved. Based
upon the record before us, we are unable to make a determination on this Issue and remand
to the District Court for remand to the Hearings Officer for further fact-finding and
consideration of the applicable law.
¶40 Before concluding, we turn briefly to the Dissent. The dissenting justice posits--
without supporting secular authority--that “separation (of government from religion) must
take precedence over the application of neutral criteria,” and that “separation trumps
neutrality if neutrality leads to a governmental interpretation of religious doctrine.” Dissent,
¶ 67. We respectfully disagree with this proposition.
¶41 As the Dissent notes in ¶ 66, the United States Supreme Court recently held that a
government-funded voucher system which provided students with tuition aid to attend the
school of their choice, whether public or private, was not constitutionally infirm because the
17
program benefitted “a wide spectrum of individuals, defined only by financial need and
residence in a particular school district.” Zelman v. Simmons-Harris (2002), 536 U.S. 639,
662, 122 S.Ct. 2460, 2473, 153 L.Ed.2d. 604, 623. Similarly, Medicaid benefits a wide
spectrum of individuals, who qualify for its benefits based upon financial need and their
residence in the state. The Medicaid program does not discriminate in favor of or against
claimants or anyone else on the basis of their religious beliefs. Rather, the program quite
properly--and neutrally--requires all who seek its benefits to meet the same income and
resource tests. In the words of the Dissent, when the Department does this, it is acting
“neutrally in the face of a citizen’s exercise of his or her religion.” Dissent, ¶ 66. This is as
it should be.
¶42 The Dissent also maintains that while the Department was entitled to examine
Claimants’ resources in the same manner as it would any other applicant’s, neither it nor any
civil court can reach conclusions therefrom because the organizational documents of
Claimants’ faith contain no severable secular language capable of discreet analysis. Again,
we disagree. While certainly some of the language of the Articles and By-laws is religious
in tone, much of the language is secular, incorporating bedrock legal terms and principles
that have always been amenable to legal analysis. See, e.g., ¶ 26. The fact that legal
concepts are incorporated into a document which also sets forth articles of faith should not
completely shield the document from legal scrutiny. With all due respect, and without
reference to these Claimants and this case, under the Dissent’s logic, any sect--or cult--could,
with the aid of a clever draftsman, qualify its members for benefits while insulating them
18
from any requirement for qualification. Given the dearth of Medicaid dollars and the
multitude of deserving applicants competing for those dollars, we simply conclude that all
who seek the same benefits should be subject to the same qualification analysis, irrespective
of their faith or lack of it. This is the essence of neutrality, and its principles are properly
applied here. Though the Dissent faults us for not elevating separation over neutrality, we
conclude we have properly--and evenly--applied both principles. As noted in Everson, it
is the State's obligation to extend government benefits to all citizens without regard to their
religious beliefs. Everson v. Board of Education (1947), 330 U.S. 1, 16, 67 S.Ct. 504, 512,
91 L.Ed 711, 724. Separation does not demand that we elevate a group of persons to
privileged status, above all other applicants, because of their religious beliefs.
CONCLUSION
¶43 For the above-stated reasons, we conclude that an express trust exists between the
Colony and its Members, and that its resources are available for the benefit of its
beneficiaries, including Claimants. We remand this matter to the District Court for remand
to the Hearings Officer for a determination of whether Claimants are eligible for the Family-
Related Medicaid Program. In this connection, the Hearings Officer shall make a factual and
legal determination of whether Claimants satisfy the “resource test” (see ¶¶ 5 and 33 herein),
to include a determination of what Colony resources are “countable,” (as opposed to
“excludable”), and the extent to which the countable resources are available to each
individual Claimant.
¶44 Reversed and remanded.
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/S/ PATRICIA O. COTTER
We Concur:
/S/ KARLA M. GRAY
/S/ JAMES C. NELSON
/S/ JOHN WARNER
/S/ W. WILLIAM LEAPHART
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District Court Judge Loren Tucker concurs and dissents.
¶45 I concur in the result reached by the Court and respectfully dissent regarding one
point.
¶46 I respectfully dissent from the Court's determination that conclusions drawn by the
Hearings Officer are findings. I agree that the Hearings Officer properly analyzed the
documents described in ¶ 22. I respectfully suggest that the Hearings Officer drew
conclusions from analysis of these documents rather than having made findings of fact.
Therefore, I believe the standard of review is different from that described in ¶ 22. On this
point I generally agree with the analysis in ¶ 52 of the Dissent which distinguishes between
facts and conclusions.
/S/ LOREN TUCKER
District Court Judge Loren Tucker
sitting for Justice Brian Morris
21
Justice Jim Rice dissenting.
¶47 The Court violates the Establishment Clause and the Free Exercise Clause of the
United States Constitution and of Article II, Section 5 of the Montana Constitution by
deciding matters which are governed by religious tenet. I dissent.
¶48 The crux of this case is the nature of the Colony’s obligation to its members–whether
KCR holds property in trust to meet the individual needs of the members–and whether such
a determination can be made without invoking religious doctrine. Relying on an incomplete
reference to Chase and several isolated snippets from the Colony’s organizational
documents, the Court proclaims in ¶ 28 that the “intention of the Colony and the
understanding of its members is that KCR’s assets are held in trust for the benefit of the
members and their heirs” and that “an express trust exists” between KCR and its members.
In doing so, the Court misapprehends the evidence and the applicable law, and sets a
troubling precedent for church-state relations. With a few sentences, the Court sweeps away
both the religious principles at work in the Colony’s documents and the Claimants’ religious
rights.
¶49 Below I explain how the Court misapplies Chase, and further, that the Court fails to
recognize other Religion Clause principles at issue here. Chase and the United States
Supreme Court decision on which it relies, Jones v. Wolf, represent but one part of the First
Amendment’s Religion Clause analysis. The Court ignores the remainder of the analysis,
but, clearly, violates Chase by its decision. A complete analysis demonstrates that the Court
can perform no inquiry under the facts here which would allow the conclusion that a trust
22
exists between KCR and the Claimants to meet their individual needs. The duty which flows
from KCR to support the Claimants is a religious, not a legal, one. To conclude otherwise
requires a religious inquiry which violates the Claimants’ religious freedom as protected
under the Establishment Clause and Free Exercise Clause of the United States Constitution
and of Article II, Section 5 of the Montana Constitution.1
¶50 The jurisprudence of the Religion Clauses is complex, and this dissent is not the place
to discuss its myriad nuances. It is sufficient for the purposes of this case to summarize the
Religion Clause precedent and to demonstrate how the State’s actions here are inappropriate.
Because the law in this area has developed almost exclusively under the federal constitution,
this dissent necessarily focuses thereon. Further, the Claimants’ arguments are primarily
based on federal law.
¶51 Before turning to the law of the Religion Clauses, however, I pause to explain why
such an exploration is necessary. In ¶¶ 21-22, the Court confounds the applicable standards
of review. As the Court initially notes correctly in ¶¶ 12-14 of its opinion, the District Court,
in reviewing the Hearings Officer’s and the BPA’s decisions, was required to apply a
“clearly erroneous” standard to its review of factual findings. See O’Neill v. Dep’t of
Revenue, 2002 MT 130, ¶ 10, 310 Mont. 148, ¶ 10, 49 P.3d 43, ¶ 10. The District Court was
1
The cases and literature employ inconsistent terminology when referring to the
Establishment Clause and the Free Exercise Clause, sometimes using “Establishment
Clause” as an umbrella term to refer to both. For the sake of clarity, unless in a
quotation, my references to each clause are exclusive to that clause. When referring to
both clauses jointly, I will use the term “Religion Clauses.”
23
also required to review the agency’s conclusions of law for correctness. See ¶¶ 12-14;
§ 2-4-704(2)(a)(iv), MCA; O’Neill, ¶ 10. Similarly, this Court reviews findings of fact for
clear error and conclusions of law for correctness. See ¶¶ 12-14; O’Neill, ¶ 10.
¶52 However, the majority incorrectly intimates in ¶ 21 that the District Court ignored the
findings of fact made at the administrative level, and it incorrectly holds in ¶ 22 that “the
District Court erred by entering findings” contrary to the Hearings Officer and the BPA. To
the contrary, the District Court did not “ignore” the findings of fact from the decisions
below; rather, it disagreed with the conclusions of law. Likewise, the District Court did not
enter its own findings of fact at odds with the agency orders, but instead entered its own
conclusions of law. There is no indication in the District Court’s order that it disagreed with
the factual findings; for example, that KCR is devoted to agricultural pursuits, that the
agricultural enterprises are for the benefit of the Colony, or that the Colony’s documents
contain the information that they do. Instead, the District Court drew a different conclusion
of law from this evidence–namely, that no express trust existed. Implicit in the District
Court’s conclusion of law was that it did not consider some of the factual findings as
pertinent or determinative to the ultimate legal conclusions as the Hearings Officer and the
BPA did in arriving at their contrary conclusions of law. That does not mean, however, that
the District Court ignored the agency’s findings of fact, or that it found them to be clearly
erroneous, or that it found that the evidence supported different findings of fact. The
majority’s holding thus misconstrues the District Court’s ruling and clouds the issues this
Court is to decide.
24
¶53 The task which has been placed before us is to determine if the District Court’s order
and the administrative orders contain correct conclusions of law. Because the unique facts
of this case involve distribution of government benefits to members of a religious
organization, it is necessary to examine the impact of the constitutional Religion Clauses
before the correctness of the conclusions of law can be properly determined. I now turn to
that examination.
I. The Jones-Chase Rule
¶54 The controversy in Chase centered over a schism within a Baha’i congregation
resulting in different parties claiming the right to control church property. The Court in
Chase relied heavily on the United States Supreme Court’s “neutral principles” analysis
developed in Jones v. Wolf (1979), 443 U.S. 595, 99 S.Ct. 3020, 61 L.Ed.2d 775, which
involved a Presbyterian congregation’s schism and subsequent struggle for control over
church property. The neutral principles approach is one of at least three (the other two being
deference to the church’s hierarchical authority and application of relevant state statutes) that
the United States Supreme Court has stated are appropriate for resolving church property
disputes. Jones, 443 U.S. at 602, 99 S.Ct. at 3025, 61 L.Ed.2d at 784 (citing Maryland &
Va. Churches v. Sharpsburg, Inc. (1970), 396 U.S. 367, 368, 90 S.Ct. 499, 500, 24 L.Ed.2d
582, 584 (Brennan, J., concurring)). The Jones Court described this approach:
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. In this manner, a religious
25
organization can ensure that a dispute over the ownership of church property
will be resolved in accord with the desires of the members.
Jones, 443 U.S. at 603-04, 99 S.Ct. at 3025-26, 61 L.Ed.2d at 785 (emphasis added). The
Jones Court went on to hold “that a State is constitutionally entitled to adopt neutral
principles of law as a means of adjudicating a church property dispute.” Jones, 443 U.S. at
604, 99 S.Ct. at 3026, 61 L.Ed.2d at 785.
¶55 Chase added to Jones by maintaining that states, religious organizations, and
individuals are responsible for structuring relationships “‘involving church property so as not
to require the civil courts to resolve ecclesiastical questions,’” Chase, ¶ 15 (quoting
Presbyterian Church in the United States v. Mary Elizabeth Blue Hull Mem’l Presbyterian
Church (1969), 393 U.S. 440, 449, 89 S.Ct. 601, 606, 21 L.Ed.2d 658, 665), and that “[i]f
they have not so laid the groundwork for purely secular resolution of such a dispute, the civil
court confronted with it cannot but decline jurisdiction.” Chase, ¶ 15 (emphasis added).
¶56 Both the facts of and the analysis employed in Chase and Jones illustrate that those
holdings apply to the resolution of intra-church property disputes, not simply to any kind of
dispute involving church property. In the present case, there is no controversy within KCR
about control of its property. Indeed, KCR is not a party to the dispute. Therefore, while
the “purely secular resolution” rule of Jones-Chase is a helpful principle, this precedent
alone is not controlling because it has not previously been applied to a benefit case like the
one before us, as the Court would have it do. Thus, the Court’s reliance on Chase to reach
26
its conclusion that KCR holds its property in an express trust to meet the individual needs
of its members is incomplete and, as demonstrated herein, inappropriate.
¶57 Moreover, the majority incorrectly states in ¶ 25 that “[i]t is undisputed that the
organizational documents of KCR are the Articles and Bylaws, and that we may examine
them applying neutral principles of law as we did in Chase.” As the Claimants correctly
state in their brief, “[J]udicial involvement [in apparent religious matters] is warranted only
when a case can be decided solely upon the application of Neutral Principles of Contract
Law without reference to any religious principle” (italics added). As discussed in Parts IV
and V below, neutral principles of law can only be applied to the organizational documents
if relevant secular language in them can be severed from references to religious principle or
belief.
II. The Sherbert Test
¶58 Beginning with Sherbert v. Verner (1963), 374 U.S. 398, 83 S.Ct. 1790, 10 L.Ed.2d
965, the United States Supreme Court has held that the denial of unemployment benefits to
applicants who refuse to compromise their religious principles in order to obtain work
imposes an impermissible burden on religion. Thomas v. Review Bd. of the Ind. Employment
Sec. Div. (1981), 450 U.S. 707, 101 S.Ct. 1425, 67 L.Ed.2d 624 (Jehovah’s Witness fired
because he would not participate in the production of armaments was entitled to
unemployment benefits); Hobbie v. Unemployment Appeals Comm’n (1987), 480 U.S. 136,
107 S.Ct. 1046, 94 L.Ed.2d 190 (Seventh-day Adventist fired for refusing to work shifts
scheduled on the Sabbath was entitled to unemployment benefits); Frazee v. Illinois Dep’t
27
of Employment Sec. (1989), 489 U.S. 829, 109 S.Ct. 1514, 103 L.Ed.2d 914 (Christian
turning down job that would require him to work on Sundays in contravention of religious
belief was entitled to unemployment benefits). In all of these cases, “the employee was
forced to choose between fidelity to religious belief and continued employment; the
forfeiture of unemployment benefits for choosing the former over the latter [brought]
unlawful coercion to bear on the employee’s choice.” Hobbie, 480 U.S. at 144, 107 S.Ct.
at 1051, 94 L.Ed.2d at 200. The Sherbert Court elaborated that “[g]overnmental imposition
of such a choice puts the same kind of burden upon the free exercise of religion as would a
fine imposed” on a worshiper. Sherbert, 374 U.S. at 404, 83 S.Ct. at 1794, 10 L.Ed.2d at
970-71. Mindful of this burden on religion, the Court considered whether “some compelling
state interest” nonetheless justified “the substantial infringement” of the applicant’s First
Amendment right, Sherbert, 374 U.S. at 406, 83 S.Ct. at 1795, 10 L.Ed.2d at 972, and
concluded that there was no such compelling interest. Sherbert, 374 U.S. at 409, 83 S.Ct.
at 1796, 10 L.Ed.2d at 973.
¶59 The Supreme Court has expressed reluctance about applying the Sherbert test outside
of the context of unemployment benefits, see Employment Div., Dep’t of Human Res. v.
Smith (1990), 494 U.S. 872, 883, 110 S.Ct. 1595, 1602, 108 L.Ed.2d 876, 888,2 but the test
2
Despite its expressed reluctance, the Supreme Court in fact has applied the
Sherbert test outside the unemployment benefits context. See Gillette v. United States
(1971), 401 U.S. 437, 91 S.Ct. 828, 28 L.Ed.2d 168 (incidental burdens felt by humanist
and Catholic with religious objections to the Vietnam war, but not all wars, are justified
by the substantial governmental interests in procuring the manpower necessary for
military purposes); and United States v. Lee (1982), 455 U.S. 252, 102 S.Ct. 1051, 71
28
has been nonetheless been applied elsewhere. The Eighth Circuit Court of Appeals applied
Sherbert to Medicaid and Medicare benefits in Children’s Healthcare Is A Legal Duty, Inc.
v. Min De Parle (8th Cir. 2000), 212 F.3d 1084, 1093, noting that “[t]he Supreme Court in
Sherbert v. Verner held that legislation which forces an individual to choose between
following his religious beliefs and receiving government benefits places a burden on that
person’s religious exercise.” The Court considered whether statutory accommodations for
benefit recipients with particular religious views concerning medical care violated the
Religion Clauses and, in so doing, reasoned as follows about the relationship between
religious conviction and benefit eligibility:
[T]he Medicare and Medicaid Acts place individuals who hold religious
objections to medical care in a situation similar to that contemplated by the
Sherbert line of cases. They are forced to choose between adhering to their
religious beliefs and foregoing all government health care benefits, or
violating their religious convictions and receiving the medical care provided
by Medicare and Medicaid. The pressure to violate religious convictions is
especially acute under Medicaid, which often represents the only source of
health care for indigent persons. By extending nonmedical health care benefits
to individuals who object for reasons of religion to medical treatment, section
4454 [the accommodation provision] spares such individuals from being
forced to choose between adhering to the tenets of their faith and receiving
government aid, and in doing so removes a burden that the law would
otherwise impose.
Children’s Healthcare, 212 F.3d at 1093 (emphasis added). On such reasoning, the Court
of Appeals held constitutional the federal statute that created exceptions to the Medicare and
Medicaid Acts for persons who have religious objections to the receipt of medical care,
L.Ed.2d 127 (government’s interest in assuring participation in and contribution to the
social security system requires Old Order Amish employer to pay social security taxes
despite religious objection).
29
enabling such individuals to obtain government assistance for nonmedical care. Comparing
these benefits with the unemployment benefits at issue in Sherbert, the Court of Appeals
reasoned that “[a]lthough unemployment benefits may be broader in scope than health care
benefits, both are widely available public benefits that are of great importance to personal
well-being.” Children’s Healthcare, 212 F.3d at 1094. The Court of Appeals then
concluded that, just as the burden on the unemployment benefits applicant in Sherbert
required religious accommodation, so too was the burden on applicants in the healthcare
context sufficient to permit the congressional accommodation. Children’s Healthcare, 212
F.3d at 1094.
¶60 Although Children’s Healthcare addressed the “flip side” of the Religion Clause
benefit issue, that is, a governmental accommodation of religious belief instead of a
governmental impingement of religious belief, it nonetheless addressed the core
constitutional concern of Sherbert and of this case–avoiding the imposition of a burden upon
the free exercise of religion–and provides important instruction for this matter. Under the
Sherbert cases, the federal courts will not permit a state to force a citizen to choose between
the exercise of his or her religious faith and the receipt of government benefits without a
compelling state interest. The Claimants in the instant case, like Sherbert and the parties in
the subsequent line of cases, were denied government benefits. Also as in the Sherbert
cases, the benefits were denied to the Claimants here because of their religious practice of
granting all property to the Colony and owning nothing. As found by the Hearings
30
Examiner, this practice is based upon religious tenet and is the centerpiece of the Claimants’
religious life:
The Colony exists in the form of a communal living arrangement where
everybody shares his or her productivity and nobody individually owns real
or personal property.
....
The community of goods principle is derived from the Bible, Acts 2:44-47 and
4:32-35, which reads, “And all that believed were together, and had all things
in common; and sold their possessions and goods, and parted them to all men,
as every man had need. . . . [Ellipsis in original.] And the multitude of them
that . . . believed were of one heart and of one soul, neither said any of them
that ought of the things which he possessed were his own; but they had all
things in common.”
¶61 This religious practice of divestiture, according to DPHHS, has disqualified the
Claimants from benefit eligibility because the Claimants must be considered, contrary to
their religious beliefs, to have retained a personal beneficial interest in the property owned
by the Colony. The Court approves this position, concluding that the members have a
beneficial interest in Colony property, which the Colony holds in trust to meet the individual
needs of the members.
III. Separation and Neutrality
¶62 The tension, or “incompatibility,” as we called it in Chase, ¶ 14, between the non-
establishment and the free exercise mandates of the First Amendment’s Religion Clauses are
best illustrated by the United States Supreme Court’s “separation” and “neutrality” holdings.
The general framework of this analysis can be understood from four landmark decisions:
Everson v. Board of Educ. of Ewing (1947), 330 U.S. 1, 67 S.Ct. 504, 91 L.Ed. 711; Engel
31
v. Vitale (1962), 370 U.S. 421, 82 S.Ct. 1261, 8 L.Ed.2d 601; School Dist. v. Schempp
(1963), 374 U.S. 203, 83 S.Ct. 1560, 10 L.Ed.2d 844; and Zelman v. Simmons-Harris
(2002), 536 U.S. 639, 122 S.Ct. 2460, 153 L.Ed.2d 604. Everson is the first modern
Religion Clause case. There, the Court considered the constitutionality of a New Jersey
statute that paid bus fares for children traveling to and from school, regardless of whether
those schools were government-run or parochial. In upholding the statute, the Court stated
the following:
New Jersey cannot consistently with the “establishment of religion” clause of
the First Amendment contribute tax-raised funds to the support of an
institution which teaches the tenets and faith of any church. On the other
hand, other language of the amendment commands that New Jersey cannot
hamper its citizens in the free exercise of their own religion. Consequently, it
cannot exclude individual Catholics, Lutherans, Mohammedans, Baptists,
Jews, Methodists, Non-believers, Presbyterians, or the members of any other
faith, because of their faith, or lack of it, from receiving the benefits of public
welfare legislation. While we do not mean to intimate that a state could not
provide transportation only to children attending public schools, we must be
careful, in protecting the citizens of New Jersey against state-established
churches, to be sure that we do not inadvertently prohibit New Jersey from
extending its general State law benefits to all its citizens without regard to their
religious belief.
Everson, 330 U.S. at 16, 67 S.Ct. at 512, 91 L.Ed. at 724. This passage from Everson sowed
the seeds of what would become two prominent tracks of Religion Clause inquiry, separation
and neutrality.
A. Separation
¶63 The primary purpose of the Establishment Clause is to separate government from
religion. Separation “seeks to ensure that government and religion each operate freely in
their own separate spheres, uninhibited by regulation or control by the other.” Frederick
32
Gedicks, A Two-Track Theory of the Establishment Clause, 43 Boston College Law Rev.
1071, 1072 (2002). The concept of separation is perhaps best illustrated by the school prayer
cases, Engel v. Vitale (1962), 370 U.S. 421, 82 S.Ct. 1261, 8 L.Ed.2d 601, and School Dist.
v. Schempp (1963), 374 U.S. 203, 83 S.Ct. 1560, 10 L.Ed.2d 844. In Engel, the United
States Supreme Court struck down New York’s state-approved prayer which was required
to be recited daily in public schools. The Court stated that “[t]he Establishment Clause . .
. stands as an expression of principle on the part of the Founders of our Constitution that
religion is too personal, too sacred, too holy, to permit its ‘unhallowed perversion’ by a civil
magistrate.” Engel, 370 U.S. at 431-32, 82 S.Ct. at 1267, 8 L.Ed.2d at 608. The next year,
the Court in Schempp invalidated actions by Pennsylvania and the City of Baltimore,
Maryland, which required the public schools to begin each day with a Bible reading, holding:
The place of religion in our society is an exalted one, achieved through a long
tradition of reliance on the home, the church and the inviolable citadel of the
individual heart and mind. We have come to recognize through bitter
experience that it is not within the power of government to invade that citadel,
whether its purpose or effect be to aid or oppose, to advance or retard.
Schempp, 374 U.S. at 226, 83 S.Ct. at 1573-74, 10 L.Ed.2d at 860-61.
¶64 Thus, religious belief and doctrine are subjects with which the government may not
engage, whether to advance or diminish.
B. Neutrality
¶65 In contrast, the primary purpose of the Free Exercise Clause is to ensure government
neutrality regarding the religious choices and practices of its citizens, or lack thereof.
Indeed, “[n]eutrality requires that government regulate its interactions with religious
33
individuals and institutions so that it neither encourages nor discourages religious beliefs or
practices.” Gedicks, 43 B.C. L. Rev. at 1072. Further, “the guarantee of neutrality is
respected, not offended, when the government, following neutral criteria and evenhanded
policies, extends benefits to recipients whose ideologies and viewpoints, including religious
ones, are broad and diverse.” Rosenberger v. Rector & Visitors of Univ. of Va. (1995), 515
U.S. 819, 839, 115 S.Ct. 2510, 2521, 132 L.Ed.2d 700, 722. The neutrality analysis has
typically been applied in cases of religious groups or individuals seeking benefits equal to
those afforded other groups within a school or school system. See, e.g., Good News Club
v. Milford Cent. Sch. (2001), 533 U.S. 98, 121 S.Ct. 2093, 150 L.Ed.2d 151; Rosenberger,
515 U.S. 819, 115 S.Ct. 2510, 132 L.Ed.2d 700; Board of Educ. of Kiryas Joel Vill. Sch.
Dist. v. Grumet (1994), 512 U.S. 687, 114 S.Ct. 2481, 129 L.Ed.2d 546; Widmar v. Vincent
(1981), 454 U.S. 263, 102 S.Ct. 269, 70 L.Ed.2d 440; Everson, 330 U.S. 1, 67 S.Ct. 504, 91
L.Ed. 711.
¶66 The distinction between separation and neutrality was highlighted in the recent case
of Zelman v. Simmons-Harris (2002), 536 U.S. 639, 122 S.Ct. 2460, 153 L.Ed.2d 604. In
Zelman, the Court considered the constitutionality of Cleveland’s government-funded
voucher system, which provided students with tuition aid to attend the school of their choice,
public or private. The Court acknowledged that the Establishment Clause “prevents a State
from enacting laws that have the ‘purpose’ or ‘effect’ of advancing or inhibiting religion,”
Zelman, 536 U.S. at 648-49, 122 S.Ct. at 2465, 153 L.Ed.2d at 614, but, despite the fact that
a majority of the voucher participants selected sectarian schools, the Court concluded that
34
the program was “entirely neutral with respect to religion” because it provided “benefits
directly to a wide spectrum of individuals, defined only by financial need and residence in
a particular school district” and it permitted “such individuals to exercise genuine choice
among options public and private, secular and religious.” Zelman, 536 U.S. at 662, 122 S.Ct.
at 2473, 153 L.Ed.2d at 623. Thus, neutrality seeks not to segregate government and religion
so much as it enables–and requires–the government to act neutrally in the face of a citizen’s
exercise of his or her religion.
C. Clash of Separation and Neutrality
¶67 We are left with competing mandates under the Religion Clauses. On the one hand,
neutrality requires that states use neutral criteria in determining eligibility for government
benefits that pay no regard to the applicants’ religious beliefs. On the other hand, the
separation principle requires that, if the application of neutral criteria leads to a question of
religious doctrine, then the state is prevented from interpreting that religious doctrine. The
United States Supreme Court has stated that “there is room for play in the joints between the
Free Exercise and Establishment Clauses,” Cutter v. Wilkinson (2005), _ U.S. _, 125 S.Ct.
2113, 2117, 161 L.Ed.2d 1020, 1029 (quotation marks omitted), but it has made clear that
the “Establishment Clause, at the very least, prohibits government from appearing to take a
position on questions of religious belief or from making adherence to a religion relevant in
any way to a person’s standing in the political community.” County of Allegheny v.
American Civil Liberties Union (1989), 492 U.S. 573, 594, 109 S.Ct. 3086, 3101, 106
L.Ed.2d 472, 495 (internal quotation marks omitted). Thus, in this case, if the government’s
35
examination of resources available to the Claimants requires delving into the religious beliefs
of the Claimants or the tenets of their religion–thereby taking a position on questions of
religious belief or making adherence to a religion relevant to the Claimants’ standing in the
political community–separation must take precedence over the application of neutral criteria.
In short, separation trumps neutrality if neutrality leads to a governmental interpretation of
religious doctrine.
¶68 The Court, in ¶¶ 40 and 41, disagrees with this proposition, stating that the
Department’s application of neutral criteria in the face of a citizen’s exercise of his or her
religion “is as it should be.” See ¶ 41. However, the law does not permit the inquiry to stop
there. Neutral criteria is not the universal solution to all Religion Clause issues:
Establishment Clause doctrine provides a minimum level of church-state
separation against even religiously neutral government actions. In other
words, not only has the separation of church and state not been eclipsed by
religious neutrality, but separation is actually the more fundamental
Establishment Clause value. As such, separation remains a necessary check
on interactions between religion and government that pass muster under
neutrality analysis.
Gedicks, 43 B.C. L. Rev. at 1076 (emphasis added). Thus, the neutrality principle alone,
though it may have resolved the issue before the United States Supreme Court in Zelman, as
the Court notes, cannot alone resolve the very different issue here.
¶69 DPHHS was thus entitled to examine the Claimants’ resources in the same manner
as it would those of any other applicant. Because that includes looking to resources available
to the applicants under a trust, DPHHS was correct to inquire whether a trust existed,
whether KCR was the trustee, and what provisions governed the trust. DPHHS explains that,
36
in doing so, it evaluated King Colony Articles of Incorporation, the King Colony By-Laws,
the Constitution of the Hutterian Brethren Church and Rules as to Community of Property,
statements of Hutterite leaders, and federal and state statutes. However, DPHHS also
explains that it evaluated “the teachings and tenets of the Hutterite Church as set forth in
various religious and scholarly writings . . . .” The Religion Clauses require that we
carefully scrutinize this action.
IV. The Religion Clauses: A Multi-faceted Inquiry
¶70 From these analyses, we can discern a proper application of the Religion Clauses.
First, the Jones-Chase rule, a product of the separation principle, forbids civil courts from
interpreting church doctrine or teachings to resolve intra-church property disputes. Chase
requires that courts examine church documents to determine whether “purely secular”
language can be found to resolve those disputes. Chase, ¶ 15. In doing so, Chase
admonishes that courts must “exercise great care to avoid resolving such disputes on the
basis of religious doctrine and practice.” Chase, ¶ 13. This precedent strongly suggests that
a careful review of the Colony’s documents is necessary to resolve the matters herein. That
is undertaken below.
¶71 Second, the Sherbert cases demonstrate that the government cannot force an
individual to choose between receipt of government benefits and religious convictions absent
a compelling state interest. However, DPHHS, and this Court, have concluded,
notwithstanding the Claimants’ complete divestiture of property in accordance with their
religious beliefs, that, actually, the Claimants retained a beneficial interest in such property.
37
Further, the Court concludes that the Colony does not actually own and control the property
in accordance with its religious principles, but, rather, holds the property in trust to meet the
individual needs of the Claimants, and thus, the property is “available” for Medicaid
purposes.
¶72 By such conclusions, as will be demonstrated more fully by the following discussion
of the Colony’s documents, this Court has waded so far into religious doctrine that it
purports to proclaim whether the Claimants have complied with their own religious beliefs
and whether the Colony is organized in accordance with its own theology. Like an
advancing Panzer division, the Court overrides the Claimants’ beliefs and announces, “We
will tell you the real meaning of your religious beliefs.” This Court thus declares that the
Claimants did not successfully fulfill their religious obligation to completely give up their
property interests, but, rather, retained an interest as beneficiaries. An examination of the
Colony’s documents will only further demonstrate that this is an improper and substantial
burden upon the Claimants’ exercise of religion for which DPHHS has established no
compelling governmental interest or justification.3 This Court’s decision requires that the
3
DPHHS contends that this Court’s holding in St. John’s Lutheran Church v. State
Comp. Ins. Fund (1992), 252 Mont. 516, 830 P.2d 1271 (holding that a pastor was a
church employee and not an independent contractor for purposes of the workers’
compensation system), controls and that “appropriate application of Medicaid and the
preservation of federal financial participation in the State’s Medicaid programs are . . .
‘overriding governmental interests.’” However, in St. John’s, this Court did not examine
church doctrine or practice and there was “no internal impact or infringement on the
relationship between the church and its pastor, or on their sincerely held religious
beliefs.” St. John’s, 252 Mont. at 526, 830 P.2d at 1278. Unlike St. John’s, and as
described more fully herein, religious tenet is central to the inquiry here, and there is
significant impact on the Claimants’ sincerely held religious beliefs.
38
Claimants choose between their adherence to their beliefs in the KCR community and their
eligibility for Medicaid benefits–precisely the choice forbidden under Sherbert.
¶73 Third, the separation and neutrality analyses first given life in Everson must ultimately
be resolved, in this context, through a careful analysis of the relationship between the
Claimants and KCR, without resort to an interpretation of KCR’s religious doctrine. The
separation mandate does not allow government to advance religion; however, even under the
application of neutral principles, the separation mandate prohibits the government from
taking “a position on questions of religious belief,” Allegheny, 492 U.S. at 594, 109 S.Ct. at
3101, 106 L.Ed.2d at 495, in order to determine benefit eligibility. Therefore, the
government cannot interpret religious doctrine.
¶74 The sum of these principles offers an appropriate approach to the present case. This
Court should examine, with “great care,” KCR’s organizational documents to see if they
contain severable secular language that allows, on a “purely secular” basis, a determination
whether an individual member has a claim to any church property or to church support.
Chase, ¶¶ 13, 15. Such an analysis cannot require that members make choices that burden
their religious beliefs, or which require the government to interpret religious doctrine. If a
purely secular resolution can be found, then that language can determine whether the
resources are available for Medicaid purposes. If an examination of the issue requires the
interpretation of religious tenet, then this Court must “decline jurisdiction,” see Chase, ¶ 15,
end its inquiry and assume that the Claimants’ have no property interest that is legally
enforceable.
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V. A Review of the Colony’s Documents
¶75 I submit that a complete, careful review of the Colony’s organizational documents
reveals that there is no express, secular language–severable from religious language–that
defines an individual member’s right to church property or church support. To the contrary,
as discussed herein, expressly non-secular, religious language must be considered to
determine how a member is supported by the colony. I turn to the documents, working from
the general provisions to the specific. Although the Court ignores most of these provisions,
and thus fails to satisfy the Chase methodology, they are critical to properly resolving the
case.
¶76 The “Constitution of the Hutterian Brethren Church and Rules as to Community of
Property,” provides, in pertinent part, as follows:
[A]ll the Colonies of the Church adhere to and practice the teachings of the
New Testament substantially as expounded by one Peter Rideman as set out
in a book or work entitled, “ACCOUNT OF OUR RELIGION, DOCTRINE
AND FAITH, GIVEN BY PETER RIDEMAN OF THE BROTHERS WHOM
MEN CALL HUTTERIANS”, and in accordance with the ways of the
Hutterian Brethren which includes community of goods.
Recitals, paragraph 3 (emphasis added; capitalization in original).
“Colony” means and includes a community, association, congregation or
colony, incorporated or unincorporated comprised of persons who have joined
together to have, hold, use, possess and enjoy all things in common, being all
of one mind, heart and soul, according to the ways of those whom men call
Hutterians . . . .
Article 1 (emphasis added).
¶77 I would note that the Colony’s Constitution repeatedly emphasizes, the above
provisions being two examples, that the Colony is organized to hold all property as
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community goods. The inverse principle is also emphasized, with the Constitution providing
that “[n]o individual member of a Colony shall have any assignable or transferable interest
in any of its property, real or personal.” Article 36. The Constitution makes clear that each
member undertakes what is commonly known as a “vow of poverty.” See Article 38.
Further, if a colony is dissolved, “no individual member shall be entitled to any of the assets
of the Colony . . . .” Article 44. Consistent therewith, the Bylaws provide that “no Member
of the King Colony Ranch shall have vested in them any real or personal property, but the
same shall be held foreever [sic] and perpetual as the Cooperative properties of the King
Colony Ranch in accordance with the ordinances of the Cooperative Hutterische Church
Society and its Rituals and belief in the humility of man before his Maker and God.” Article
VIII, Bylaws. Property can be held, therefore, only by the Colony and “in accordance with
. . . the belief in the humility of man before his Maker and God.”
¶78 It is clear already that the Court’s decision violates the above cited language.
Contrary to the Court’s conclusion that the Colony holds property in trust for the individual
members, “no individual member shall be entitled to any of the assets of the Colony.”
Article 44, Constitution (emphasis added). The property is held for the members as a
collective religious society, not as individuals. The individual members have no right to the
Colony’s property outside the collective interests of the group as a whole, and the Court can
cite to no such provision in the documents. As noted above in ¶ 60, this property
arrangement was found by the Hearings Examiner to be based upon the Bible.
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¶79 Distribution of the Colony’s property, also found by the Hearings Examiner to be
based on the Bible, is specifically addressed in the organizational documents:
The objects and powers of the Church are: (a) To obtain for its Colonies and
their members . . . educational and economic assistance based upon the life
and mission of Jesus Christ and the Apostles, in the spirit and way of the first
Christian community in Jerusalem and of the community re-established by
Jacob Hutter in 1533 at the time of the origin of the “Baptisers’ movement” in
such a way that the members achieve one entire spiritual unit in complete
community of goods . . . .
Article 3, Constitution (emphasis added). This provision demonstrates that economic
assistance is provided to members “based upon the life and mission of Jesus Christ and the
Apostles” and, importantly, “in the spirit and way” of the first Christian church, so that
spiritual unity in a “complete community of goods” can be achieved. The Constitution later
states that these “objects” (including providing economic assistance) must be carried out “by
following exactly the spontaneous direction of the Holy Spirit . . . .” Article 3.
¶80 Support of individual members is also expressly addressed by the documents, which
make clear that this is no promise of such individual support. “The members of a Colony
shall be entitled to . . . be supported, maintained, instructed and educated by that Colony,
according to the rules, regulations and requirements of that Colony during the time and so
long as they obey, abide by and conform to the rules, regulations, instructions and
requirements of that Colony and the Church.” Article 41, Constitution (emphasis added).
Thus, contrary to the Court’s conclusion in ¶ 29, joining the Colony, without more, does not
entitle the member to receive payment of individual expenses by the Colony. Although the
Court cites to general provisions regarding property held for the benefit of the members,
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additional, more specific language from the Colony’s Constitution demonstrates that the
benefit of such property is made expressly contingent upon “the rules, regulations,
instructions and requirements of that Colony and the Church” and, further, upon a member’s
compliance with the tenets of the Church.
¶81 Further, medical expenses or any other kind of benefit which may be provided to
members by the Colony are based upon religious-based discretion exercised by the Colony’s
governing body, a Board of Directors composed of “five (5) adult male members of
Hutterische Church Society . . . .” Article VII, Articles of Incorporation. The Board has
complete authority to dispose of and use church property, executed by the Colony’s
President, Article X, Bylaws, and must make such decisions in accordance with the tenets
of the Church. Articles 39 and 47, Constitution. Thus, the decisions about individual
support, including the kind of support to be provided, are made by church elders who decide
such matters pursuant to church doctrine and an assessment of the life of the individual
member. Articles IV and VII, Articles of Incorporation; Article 41, Constitution.
¶82 In summary, a careful review of the organizational documents leads to the clear
conclusion that economic benefits are made available to the members on the basis of
religious tenets. In this respect, the majority–though it draws the wrong conclusion from
it–is correct when it states in ¶ 28 that the “language found within the organizing documents
of KCR is internally consistent and unambiguous.” Indeed, the language is carefully
constructed to convey the religious purposes with which the Colony acts in all that it does.
It is not possible to sever purely secular language from the documents in order to determine
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the legal relationship between the Colony and its members, at least, without doing violence
to the religious meaning therein. All property is held for the “common” or “community”
good, in accordance with the belief in God. The claimants have no individual property rights
in any Colony property; they have taken a vow of poverty. While they are entitled to look
to the Colony for support, decisions regarding financial benefits are discretionarily made by
the Colony Board in accordance with Church tenets. The Board’s authority includes the
right to withdraw support from a member who does not comply with Church tenets or
instructions, to expel a member without compensation, or to determine what kind of support
shall be provided. Even to members in good standing, economic assistance is provided
“based upon the life and mission of Jesus Christ and the Apostles, in the spirit and way of
the first Christian community in Jerusalem” and “following exactly the spontaneous direction
of the Holy Spirit.” I respectfully ask the Court: How can an obligation conditioned upon
“following exactly the spontaneous direction of the Holy Spirit” be interpreted by
application of trust law?
¶83 I submit that this is a question civil courts are not to answer. There is no express,
legal trust, in favor of individual member needs, as the Court concludes. A review of the
documents requires the conclusion that a member’s support is a matter of faith and doctrine,
including the member’s good works which the organizational documents illustrate are a part
of the Hutterite faith. All of the Colony’s property has been donated to further these
religious purposes and no express or constructive trust can be imposed by this Court to alter
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those purposes. To so order is a direct contamination of the personal beliefs of the members
and of the religious tenets of the Colony.
¶84 These are religious decisions, not secular. A member’s support is premised upon
religious principle, not secular legal obligations. This is, no doubt, why other governmental
entitlement programs have already concluded that the property of Hutterite Colonies is not
to be considered in determining benefit eligibility. After an examination of the
organizational documents and considering the evidence herein, I would reach the same
conclusion about the Montana Medicaid program. It is not the province of the civil courts
to determine the Colony’s obligation, founded as it is on religious principles, to the members.
VI. A Simple Construct
¶85 This dissent inadequately captures the law of the Religion Clauses. It would take
another hundred or so pages to come close to fully explaining the additional precedent and
to apply the principles therefrom. This is but a summary of those principles. However, I
believe the entire law of the Religion Clauses as it applies to this case can be condensed,
albeit with the risk of oversimplification, to a simple construct, as follows:
¶86 A decision by this Court permitting the Claimants to collect Medicaid benefits could
be said to indirectly advance religion because the Colony’s beliefs will be respected and its
financial status will not be affected by subjecting its assets to review for purposes of medical
claims. Such a result is a constitutional evil because the separation principle does not permit
government to advance the cause of religion. However, the alternative resolution, which the
Court has chosen, is the greater constitutional evil. The Court determines that the Colony
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has an obligation to support the Claimants individually by interpreting religious documents
and doctrine, thereby taking on the role of theologian. The Court thus violates the separation
principle directly and in greater measure by invading what is clearly the exclusive province
of religion. The first and greatest purpose of the Establishment Clause is to prevent such
governmental interference. Thus, an indirect benefit to religion must be tolerated when the
alternative is entanglement with and interpretation of religious doctrine.
VII. Conclusion
¶87 The Court applies the Jones-Chase formulation for intra-church property disputes
inappropriately and without necessary analysis. An appropriate examination of the KCR
organizational documents required by Chase demonstrates that they contain no severable,
secular language by which the Court can rightly conclude a trust exists between KCR and
the Claimants as individuals, nor does such an examination demonstrate that the Claimants
have failed to fulfill their religious obligation to divest all of their property interests to the
Colony. Thus, the Court’s pronouncement in ¶¶ 28-29, that an express trust exists such that
KCR’s “resources are available for the benefit of its members” for purposes of Medicaid is
incorrect. As a result, this Court violates the Claimants’ religious freedom as protected under
the Establishment Clause and the Free Exercise Clause of the United States Constitution and
of Article II, Section 5 of the Montana Constitution.
¶88 The Court responds by raising alarm about the logical conclusion of the dissent–that
“any sect–or cult–could, with the aid of a clever draftsman, qualify its members for benefits
while insulating them from any requirement for qualification.” See ¶ 42.
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¶89 As an initial point, there is no indication whatsoever in the record that the Claimants,
by use of a “clever draftsman” or otherwise, have fraudulently conspired to obtain Medicaid
benefits by organizing a religious-based community. Some future case may involve an
assertion of fraud, but this one does not. The more important point, however, is that my oath
to “support, protect and defend” the Constitution does not allow me to avoid enforcement
of constitutional provisions out of fear that individuals with views very different from mine
may be prompted to seek those same constitutional protections.
¶90 Then, the Court, with one sentence, dismisses the content of the Colony’s
organizational documents by simply pronouncing that “[w]hile certainly some of the
language of the Articles and By-laws is religious in tone, much of the language is secular,
incorporating bedrock legal terms and principles . . . .” See ¶ 42. Instead of actually
analyzing the documents, the Court attempts to give the impression it has done so. In this
way, the Court can avoid the reality of the evidence. However, it remains clear that the
Court has failed in its duty to conduct a careful review of the Colony’s documents and to
establish that “purely secular” language exists to resolve the issues herein. Chase, ¶ 15.
What is the significance of the requirement, set forth in the Colony’s documents, that
economic assistance is to be provided to the Claimants “based upon the life and mission of
Jesus Christ and the Apostles, in the spirit and way of the first Christian community?” The
Court does not answer. What is the significance of the provision that support decisions are
made by the Colony “following exactly the spontaneous direction of the Holy Spirit?”
Again, the Court does not answer. What analysis must we provide when the documents
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require all Colony decisions to be made in accordance with church doctrine? What “purely
secular” language here separates the Colony’s trust obligation from these religious tenets?
The Court offers nothing, but simply brushes all of these issues away, without even
acknowledging the significant constitutional issues that they present.
¶91 Finally, the Court references a reason for its decision that I find to be very disturbing:
“the dearth of Medicaid dollars.” See ¶ 42. I submit that we will rue the day in which we
traded religious freedom in exchange for the health of a government program.
¶92 How can an obligation which is conditioned upon “following exactly the spontaneous
direction of the Holy Spirit” be interpreted by application of trust law? I submit that a civil
court cannot answer because of the pre-eminent principle of the Religion Clauses–
separation–and I would not.
¶93 I would affirm the District Court.
/S/ JIM RICE
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