Church Control and Nonprofit Governance: Texas Supreme Court Recognizes Enforcement and Third‑Party Beneficiary Rights Under Business Organizations Code § 22.207

Church Control and Nonprofit Governance: Texas Supreme Court Recognizes Enforcement and Third‑Party Beneficiary Rights Under Business Organizations Code § 22.207

I. Introduction

In Southern Methodist University and Paul J. Ward v. South Central Jurisdictional Conference of the United Methodist Church and Bishop Scott Jones, No. 23‑0703 (Tex. June 27, 2025), the Supreme Court of Texas addressed a high‑stakes conflict between a prominent religiously affiliated university and its founding ecclesiastical body.

At the center of the dispute is Southern Methodist University (SMU), a nonmember, nonprofit corporation organized in 1911, whose articles of incorporation for over a century expressly vested “ownership,” “maintenance,” and “control” in various Methodist conferences, culminating in the South Central Jurisdictional Conference of the United Methodist Church (the Conference). In 2019, amid escalating doctrinal disagreements within the United Methodist Church, SMU’s board of trustees unilaterally amended SMU’s articles of incorporation to remove every reference to the Conference and eliminate all Conference control rights, without seeking or obtaining the Conference’s approval, even though the 1996 articles provided that no amendment “shall ever be made” without the Conference’s prior authorization and approval.

The Conference sued, seeking declarations that the 2019 amendments were void, enforcement of its governance rights, damages for breach of contract, and statutory damages for alleged filing of a materially false corporate instrument. The case required the Court to confront several foundational questions:

  • Do Texas courts have subject‑matter jurisdiction to adjudicate a dispute about the control of a religiously affiliated university without violating the First Amendment’s ecclesiastical‑abstention doctrine?
  • Can a nonmember religious body that “controls” a nonprofit corporation under Texas Business Organizations Code § 22.207 sue to enforce that control against the corporation?
  • Can the articles of incorporation of a nonmember, nonprofit corporation create enforceable contract rights in favor of a nonmember—in particular, as a third‑party beneficiary of the corporation’s “contract” with the State?
  • What is required to establish a “materially false” filing instrument under Business Organizations Code §§ 4.007–.008?

The Court’s decision substantially clarifies how Texas corporate law operates in the context of religiously affiliated nonprofit entities, and it establishes a significant new precedent on the enforcement of control rights granted by nonprofit corporate charters under Business Organizations Code § 22.207.

II. Summary of the Opinion

Justice Lehrmann, writing for a near‑unanimous Court (with a partial dissent by Justice Bland on one issue), held:

  1. Subject‑matter jurisdiction and ecclesiastical abstention: Texas courts have jurisdiction because the dispute can be resolved by applying neutral principles of Texas corporate and statutory law to SMU’s governing documents, without wading into church doctrine, discipline, or theology.
  2. Authority to sue (statutory “standing”) – Business Organizations Code §§ 20.002 & 22.207:
    • Section 20.002(b)–(c), which generally limits who may bring ultra vires challenges to corporate acts, does not bar the Conference’s claims in this particular setting.
    • Section 22.207, a more specific provision governing religiously affiliated nonprofit corporations, recognizes and protects a religious association’s right to “elect” and “control” the board of a religious, charitable, or educational corporation.
    • Reading § 22.207 together with the Uniform Declaratory Judgments Act (UDJA), the Court held that the Conference has statutory authority to sue SMU to enforce its control and approval rights under SMU’s articles of incorporation.
  3. Breach of contract:
    • SMU’s articles of incorporation do not form a contract directly between SMU (a nonmember nonprofit corporation) and the Conference.
    • However, corporate articles do constitute a contract between SMU and the State of Texas.
    • In light of Business Organizations Code § 22.207 and the specific language of SMU’s 1996 articles, the Conference plausibly qualifies as a third‑party beneficiary of that contract and may pursue a breach‑of‑contract claim on that basis, at least at the pleading stage.
  4. False‑filing claim (Business Organizations Code §§ 4.007–.008):
    • The Conference alleged that SMU and its officer Paul J. Ward violated § 4.008 by filing a certificate of amendment that falsely stated the amendments had been approved as required by the governing documents.
    • The Court held that, as a matter of law, the certificate of amendment—viewed as a whole—was not “materially false,” because it expressly disclosed the lack of Conference approval and stated that the university relied on counsel’s advice that such approval was not required.
    • Thus, the false‑filing claim fails as a matter of law, and SMU is entitled to summary judgment on this claim.

The Court therefore:

  • Affirmed the court of appeals’ reinstatement of the Conference’s declaratory‑judgment and breach‑of‑contract claims.
  • Reversed the court of appeals’ revival of the false‑filing claim and rendered judgment for SMU on that claim.
  • Remanded for further proceedings on the validity of the 2019 amendments and the breach‑of‑contract theory.

III. Factual and Procedural Background

A. Historical relationship between SMU and the Methodist Church

SMU was organized in 1911 as a Texas corporation to establish and support an institution of higher learning “owned, controlled and managed by the Texas Conferences of the Methodist Episcopal Church South,” a predecessor to the present Conference. From the beginning, the university’s corporate charter embedded denominational control.

Key features of the charters over time included:

  • 1916 charter amendment:
    • Formally stated the nonprofit, non‑pecuniary nature of the corporation.
    • Specifically regulated the composition, election, and terms of SMU’s trustees.
    • Crucially, added a charter‑amendment approval clause: no charter amendment could “ever be made” without prior authorization and approval by the General Conference or its authorized agency.
  • 1968 amendment: Updated denominational alignment, vesting ownership and control in the South Central Jurisdictional Conference of the United Methodist Church.
  • 1996 articles (operative before 2019): With the Conference’s approval, the governing documents still provided, among other things:
    • SMU was formed for higher education “to be forever owned, maintained and controlled by the [Conference].”
    • SMU is a nonprofit corporation with no members.
    • The Conference had the right to elect and remove trustees, fix trustee qualifications, and fill vacancies.
    • Conference consent was required for the sale or lease of campus property.
    • No amendment “shall ever be made” unless first authorized and approved by the Conference or its authorized agency.

B. The 2019 amendments and the breakdown in the relationship

In 2019, due to doctrinal disputes and disaffiliations within the United Methodist Church, SMU’s board of trustees—by a 34–1 vote—adopted sweeping amendments to the 1996 articles:

  • All references to the Conference were deleted.
  • All provisions on board composition, qualifications, and election tied to Conference control were removed.
  • All Conference approval rights—including the charter‑amendment approval clause—were eliminated.

SMU did not seek or obtain the Conference’s approval, despite the 1996 articles’ “no amendment shall ever be made” clause. Nonetheless, SMU filed the amended articles, along with a certificate of amendment signed by its Vice President and Secretary, Paul J. Ward, with the Texas Secretary of State.

C. The Conference’s lawsuit

The Conference responded by suing SMU, asserting:

  1. Declaratory‑judgment claims (under the UDJA) seeking declarations that:
    • The 1996 articles remain SMU’s “effective Articles of Incorporation.”
    • The 2019 amendments and actions taken in reliance on them are void.
    • The Conference “retains all its rights” and its “long‑standing and permanent relationship with SMU” as guaranteed by the governing documents.
    • Any amendment to the 1996 articles must comply with those terms, including Conference authorization and approval.
  2. Breach‑of‑contract, alleging that SMU’s unilateral amendments breached enforceable contractual rights embodied in the 1996 articles.
  3. False filing under Business Organizations Code §§ 4.007–.008, alleging that the certificate of amendment falsely stated that the amendments had been approved in the manner required by SMU’s governing documents.

The Conference also pled additional claims (declaratory trust/fiduciary issues, breach of fiduciary duty, promissory estoppel) that were resolved against it in the trial court and court of appeals and are not before the Supreme Court.

D. Trial court and court of appeals rulings

SMU moved to dismiss under Texas Rule of Civil Procedure 91a and later moved for summary judgment on the false‑filing claim. The trial court:

  • Dismissed the declaratory‑judgment and breach‑of‑contract claims under Rule 91a, accepting SMU’s arguments that the Conference lacked statutory authority to sue and that no enforceable contract existed.
  • Initially denied dismissal of the false‑filing claim, but later granted summary judgment in SMU’s favor on that claim.

On appeal, the Dallas Court of Appeals:

  • Confirmed subject‑matter jurisdiction under the neutral‑principles doctrine.
  • Held that although § 20.002 limits who may challenge corporate ultra vires acts as such, it does not bar the Conference from suing for breach of independent legal duties (contract and statutory duties).
  • Reinstated the Conference’s declaratory‑judgment and breach‑of‑contract claims.
  • Reversed summary judgment on the false‑filing claim, concluding there was more than a scintilla of evidence that the certificate of amendment was materially false.

The Supreme Court of Texas granted SMU’s petition for review and now affirms in part and reverses in part.

IV. Detailed Analysis

A. Subject‑Matter Jurisdiction and Ecclesiastical Abstention

1. The neutral‑principles framework

The Court began by reaffirming the neutral‑principles methodology it adopted in Masterson v. Diocese of Northwest Texas, 422 S.W.3d 594 (Tex. 2013), for resolving disputes involving religious entities. Under this approach:

  • Civil courts may not adjudicate matters of “theological controversy, church discipline, ecclesiastical government, or the conformity of members to standards of morals,” (quoting Serbian Eastern Orthodox Diocese v. Milivojevich, 426 U.S. 696 (1976)).
  • Civil courts may apply neutral principles of secular law—such as property law, corporate law, and statutory interpretation—to resolve non‑ecclesiastical issues, even when religious entities are involved.

In Masterson, the Court applied neutral principles to a church‑property dispute between a local Episcopal parish and its diocese. Here, similarly, the Court found it could decide the case by examining SMU’s corporate documents and applicable Texas statutes, without making doctrinal judgments or reviewing ecclesiastical decisions.

2. Distinguishing cases requiring ecclesiastical abstention

The Court distinguished prior decisions in which judicial review would have intruded on religious governance:

  • Milivojevich: The U.S. Supreme Court barred civil courts from evaluating whether church authorities complied with internal canon law in deposing a bishop and reorganizing dioceses.
  • In re Diocese of Lubbock, 624 S.W.3d 506 (Tex. 2021): The Court found it lacked jurisdiction over defamation claims challenging a Catholic diocese’s public listing of a deacon as “credibly accused,” because adjudication would require reviewing how the diocese applied canon law and would “encroach on the Diocese’s decision to investigate its clergy.”
  • Westbrook v. Penley, 231 S.W.3d 389 (Tex. 2007): The Court held that judicial review of claims arising from church discipline and pastoral counseling would invade internal church governance.

By contrast, the SMU dispute turns on:

  • Whether SMU, as a Texas nonprofit corporation with no members, lawfully amended its articles without the Conference’s approval.
  • The meaning and effect of Texas corporate statutes (Chapters 20, 22, and 4 of the Business Organizations Code) and SMU’s filed articles.

These are purely secular, legal questions, even though the parties are religiously affiliated.

3. Response to amici raising First Amendment concerns

Two sets of amici raised competing First Amendment arguments:

  • The Becket Fund for Religious Liberty argued that the courts must enforce the Conference’s “forever” control over SMU and invalidate SMU’s unilateral amendments to avoid unconstitutional interference with the Church’s governance and mission.
  • The First Liberty Institute argued the opposite: that the dispute impermissibly implicates church governance and therefore must be dismissed for lack of jurisdiction under ecclesiastical abstention.

The Court rejected both extreme positions:

  • If the dispute genuinely required courts to resolve religious questions or second‑guess ecclesiastical decisions, the proper result would be dismissal for want of jurisdiction—not a merits ruling favoring either side.
  • But because this case can be fully resolved by neutral principles of corporate and statutory law, abstention is unnecessary and inappropriate.

The Court also noted that Becket’s arguments are best understood as a substantive First Amendment challenge to the validity or application of Texas statutes (like those authorizing the Secretary of State to file SMU’s amendments), not as a jurisdictional bar. Even to consider such a constitutional claim, the Court must first have subject‑matter jurisdiction—which, on the neutral‑principles analysis, it does.

B. Authority to Sue: Interplay of Business Organizations Code §§ 20.002 and 22.207

1. Section 20.002 and ultra vires corporate acts

The core statutory conflict concerned Business Organizations Code § 20.002, which addresses challenges to “ultra vires” corporate acts—acts beyond the scope of the corporation’s stated purposes or inconsistent with express limitations on directors’ or officers’ authority.

  • § 20.002(b): States that a corporate act or property transfer “is not invalid because” it is ultra vires.
  • § 20.002(c): Limits who can assert ultra vires objections and in what proceedings:
    1. A shareholder or member may sue the corporation to enjoin an ultra vires act.
    2. The corporation itself (directly or derivatively) may sue an officer or director for exceeding authority.
    3. The Attorney General may sue to enjoin unauthorized acts, terminate the corporation, or enforce divestiture of improperly held real property.

Because SMU has no members, the Conference is neither a member nor a shareholder. It also is not the corporation or the Attorney General. SMU therefore argued that § 20.002 categorically forecloses the Conference’s claims, because the 2019 amendments, even if ultra vires under the 1996 articles, “are not invalid” and only a narrow set of actors may sue based on their ultra vires nature.

The Court of Appeals had reasoned that the Conference could proceed if it asserted violations of other, independent legal duties—such as contractual duties—beyond the bare ultra vires label. The Supreme Court agreed that the Conference may sue, but grounded its ruling more squarely in the special statutory framework for religiously affiliated nonprofits.

2. Section 22.207: Specific statutory protection for religious control

Section 22.207 of the Business Organizations Code provides:

The board of directors of a religious, charitable, educational, or eleemosynary corporation may be affiliated with, elected, and controlled by an incorporated or unincorporated convention, conference, or association organized under the laws of this or another state, the membership of which is composed of representatives, delegates, or messengers from a church or other religious association.

This provision is crucial. It:

  • Expressly contemplates precisely the arrangement at issue: a religious conference that elects and “controls” the board of a religiously affiliated educational corporation.
  • Validates the provisions of SMU’s 1996 articles that:
    • Declare SMU “forever owned, maintained and controlled by” the Conference.
    • Give the Conference the right to elect and remove trustees.
    • Give the Conference veto power over amendments and property sales.

The Court held that § 22.207 does more than tolerate this structure; by expressly authorizing a religious association to “control” the board, it protects the Conference’s ability to assert and maintain that control. Otherwise, § 22.207 would be a hollow right, inconsisten with the basic principle that a right without a remedy is disfavored—a principle the Court invoked via Glen Oaks Utilities, Inc. v. City of Houston, 340 S.W.2d 783 (Tex. 1960).

3. Reconciling §§ 20.002 and 22.207: The specific‑over‑general canon and constitutional avoidance

The Court resolved the statutory tension in two steps:

  1. Specific over general: Section 22.207 is a specific provision narrowly focused on religious, charitable, and educational corporations and their affiliation with religious conventions or conferences. Section 20.002 is a general provision governing ultra vires acts of all corporations. Under well‑established canons (e.g., Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887 (Tex. 2000)), specific provisions control over general ones when they conflict. Thus:
    • In this particular context—an educational nonprofit controlled by a religious conference—§ 22.207 takes precedence.
    • Section 20.002 cannot be read to silently strip the controlling religious body of any ability to enforce its statutory right of control.
  2. Constitutional avoidance: Even if the text were ambiguous, the Court would adopt the reading that avoids serious constitutional tension, noting:
    • The Texas Constitution (art. I, § 6) forbids state “control or interference” with religious conscience and charges the Legislature with protecting religious denominations’ “peaceable enjoyment” of their mode of worship.
    • Section 22.207 appears to be one such protective law—facilitating religious groups’ ability to structure and control their affiliated institutions.
    • A reading of § 20.002 that left the Conference with a “right” to control but no judicial means of enforcing that right would raise potential constitutional concerns.

By harmonizing § 22.207 and § 20.002, the Court avoided those concerns and limited its holding to the specific scenario presented, explicitly reserving judgment on how § 20.002 operates in other nonprofit contexts not covered by § 22.207.

4. The UDJA as procedural vehicle

Having concluded that § 22.207 preserves the Conference’s substantive control rights, the Court pointed to the Uniform Declaratory Judgments Act (UDJA) as the procedural mechanism to enforce those rights:

  • UDJA § 37.004(a) allows any person whose “rights, status, or other legal relations are affected by a statute [or] contract” to obtain “a declaration of rights, status, or other legal relations thereunder.”
  • UDJA is “remedial” and designed to provide relief from uncertainty regarding legal rights and relations.
  • Given the Conference’s statutorily recognized control rights under § 22.207 and the charter, UDJA suits for declarations about the validity of the 2019 amendments and the continuing force of the 1996 articles fall squarely within its scope.

Thus, the Court held that the Conference is statutorily authorized to sue SMU to enforce its rights under both the Business Organizations Code and the articles of incorporation.

C. Contract and Third‑Party Beneficiary Analysis

1. Are SMU’s articles of incorporation a contract with the Conference?

The Court drew a critical distinction between for‑profit and nonprofit corporations:

  • For‑profit corporate charters do create a contract between the corporation and its shareholders. Cases like Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014), and Calvert v. Capital Southwest Corp., 441 S.W.2d 247 (Tex. App.—Austin 1969, writ ref’d n.r.e.), recognize that:
    • The charter and bylaws shape a contractual relationship among the shareholders, the corporation, and its management (as summarized in Overland Automobile Co. v. Cleveland, 250 S.W. 453 (Tex. App.—Dallas 1923, writ dism’d w.o.j.)).
    • Those documents govern the conduct of corporate affairs and the rights of shareholders.
  • Nonprofit corporations, by contrast, have no shareholders, and their income is generally not distributed to members, directors, or officers. They are formed not “for private profit” but “for the benefit of the public” (see Abbott v. Blue Cross & Blue Shield of Texas, Inc., 113 S.W.3d 753 (Tex. App.—Austin 2003, pet. denied)).

The Court agreed with SMU that its articles do not constitute a direct contract between SMU and the Conference. SMU is not required by its nonprofit nature to act for the Conference’s financial benefit, nor does the Code provide an analogue to the “shareholders’ agreement” provisions applicable to for‑profit corporations (see BOC § 21.101).

2. Corporate articles as a contract with the State

The Court reaffirmed that a corporation’s charter does form a contract between the corporation and the State:

  • Overland Automobile Co. and Santa Rosa Infirmary v. City of San Antonio, 259 S.W. 926 (Tex. Comm’n App. 1924, judgm’t adopted), recognize that by incorporating—even as a charitable corporation—a corporation contracts with the State to pursue the purposes stated in its charter and to abide by its limitations.

The Conference relied on this principle to argue that it is a third‑party beneficiary of the SMU–State contract embodied in the articles.

3. Third‑party beneficiary standards and their application

Under First Bank v. Brumitt, 519 S.W.3d 95 (Tex. 2017), and earlier cases, a nonparty becomes a third‑party beneficiary only if:

  • The contracting parties intended to secure a benefit for that third party.
  • They entered into the contract directly for the third party’s benefit.
  • The contract manifests a clear intent to give the third party the right to enforce the contract in case of breach.

It is not enough that:

  • The third party might benefit incidentally (even substantially) from performance; or
  • The third party expected to benefit; or
  • The contracting parties knew the third party would benefit.

Applying these principles, the Court examined how SMU’s 1996 articles speak about the Conference. The articles:

  • Declare SMU is to be “forever owned, maintained and controlled by the [Conference].”
  • Give the Conference:
    • The right to elect and remove trustees.
    • The right to nominate and fill vacancies.
    • The power to set trustee qualifications.
    • A veto over sales or leases of campus property.
    • An absolute veto over any charter amendment (Article XII: no amendment “shall ever be made” without Conference approval).

These are not diffuse, generalized benefits; they are specific, concrete governance powers conferred expressly and solely on the Conference. The Court analogized this to City of Houston v. Williams, 353 S.W.3d 128 (Tex. 2011), where the Court found that firefighters were third‑party beneficiaries of a collective‑bargaining agreement because it explicitly guaranteed them several concrete pay and benefit rights.

Still, the Court acknowledged a structural difference: unlike the contract in Williams, corporate articles are not typically “bargained‑for” agreements between two private parties. The State’s role is essentially regulatory: it accepts articles for filing so long as they are lawful; it does not negotiate terms like Conference control or amendment veto rights.

4. The pivotal role of § 22.207 in third‑party beneficiary status

Rather than holding that corporate articles alone always suffice to create third‑party beneficiary rights, the Court relied again on Business Organizations Code § 22.207:

  • Section 22.207 represents a statutory rule that explicitly contemplates and authorizes exactly the kind of Conference‑control arrangement embodied in SMU’s 1996 articles.
  • First Bank recognized that “a statutory or other legal rule” may alter or supplement the usual third‑party beneficiary analysis. Section 22.207 is such a rule in this context.

Considering:

  • The express statutory authorization in § 22.207, and
  • The clear and repeated conferral of concrete powers and approval rights upon the Conference in the 1996 articles,

the Court held that the Conference has plausibly alleged—and at the Rule 91a stage must be treated as having stated—a claim that it is a third‑party beneficiary of the SMU–State charter contract and may sue SMU for breach.

Importantly, the Court:

  • Did not hold that every person or entity incidentally interested in a nonprofit’s mission becomes a third‑party beneficiary of its articles.
  • Reiterated that the right to sue is available only to the specifically named third party whose rights are expressly set out in the governing documents—here, the Conference.
  • Expressly cautioned that other potential beneficiaries (such as individual church members or donors) have no such rights where they are not identified in the articles and no statute comparable to § 22.207 applies.

The Court emphasized the narrowness of its holding, leaving broader questions about nonprofit third‑party beneficiaries for future cases.

D. The False‑Filing Claim Under Business Organizations Code §§ 4.007–.008

1. Statutory framework

The Conference’s final surviving claim was based on Business Organizations Code §§ 4.007 and 4.008:

  • § 4.008(a): Makes it a criminal offense to sign or direct the filing of a “filing instrument” that the person knows is materially false, with intent that it be filed with the Secretary of State on behalf of an entity.
  • § 4.007(a)(1)(B): Creates a civil cause of action for a person who suffers loss caused by a filed instrument that constitutes an offense under § 4.008, allowing recovery of damages, court costs, and attorney’s fees.

The Conference argued that SMU’s certificate of amendment was materially false because it recited (in a preprinted portion of the Secretary of State’s form) that:

The amendments to the certificate of formation have been approved in the manner required by the Texas Business Organizations Code and by the governing documents of the entity.

Given that the 1996 articles required Conference approval and no such approval was obtained, the Conference contended this statement was false and actionable.

2. The Court’s treatment of “opinion” versus “fact”

As a background principle, the Court noted the rule from Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of America, 341 S.W.3d 323 (Tex. 2011): pure opinions are generally not actionable misrepresentations for fraud because they are not assertions of material fact.

The court of appeals had declined to import this doctrine into § 4.007, reasoning that false‑filing claims do not require proof of reliance, so the justifiable‑reliance rationale of Italian Cowboy did not apply. The Supreme Court found it unnecessary to resolve whether a statement of legal opinion can ever be “materially false” for § 4.008 purposes; it assumed for argument’s sake that such a statement might sometimes qualify, but held that no such falsity occurred here as a matter of law.

3. Why the certificate was not “materially false” as a matter of law

Crucially, the Court examined the certificate of amendment as a whole, not just the preprinted “Statement of Approval.” Immediately after the approval statement, in a section allowing additional information, SMU added language explaining:

  • The amendments were “authorized and approved by the Board of Trustees of Southern Methodist University . . . who were elected by the [Conference].”
  • “No additional authorization or approval by the UMC has been provided as none is required or permitted pursuant to Section 22.107(a) of the Texas Business Organizations Code.”
  • “Based on the foregoing and on the advice of independent legal counsel, the undersigned certifies that this Certificate of Amendment is in accordance with both the [Code] and the University's Restated Articles of Incorporation.”

Thus, the certificate:

  • Expressly disclosed that Conference approval had not been obtained.
  • Articulated SMU’s legal position—based on counsel’s advice—that Conference approval was neither required nor permitted under the Code.

The only arguable “falsehood” was therefore a legal conclusion about the interpretation of the Code and SMU’s articles. But there was no evidence that Ward did not rely on counsel’s advice or that he knew that those legal conclusions were false. The Conference’s best evidence was that SMU’s president had, in 1996, signed an earlier amendment reciting that the Conference had approved it—suggesting that, at that time, SMU believed Conference approval was required. The Court found this insufficient to create a fact issue about Ward’s 2019 mental state or the truth of his representation that he relied on legal advice.

Given the instrument’s full context, the Court concluded that:

  • There was no genuine issue of material fact that the certificate “constitute[d] an offense under Section 4.008.”
  • Without such an offense, the predicate for civil liability under § 4.007 failed.

Accordingly, the trial court correctly granted summary judgment for SMU on the false‑filing claim, and the court of appeals erred in reviving it.

V. Precedents and Doctrines Clarified or Developed

A. Ecclesiastical Abstention and Neutral Principles

  • Masterson v. Diocese of Northwest Texas: Reaffirmed as the leading Texas case adopting neutral principles to resolve church‑property and related disputes.
  • Serbian Eastern Orthodox Diocese v. Milivojevich (U.S. Sup. Ct.): Cited to reinforce the boundary against judicial review of internal ecclesiastical decisions and canon‑law compliance.
  • In re Diocese of Lubbock and Westbrook v. Penley: Distinguishing when claims truly intrude on religious governance, discipline, or doctrinal adjudication.

The SMU decision is an important application of Masterson to a complex corporate‑governance dispute involving religious institutions. It confirms that Texas courts will:

  • Exercise jurisdiction over disputes focused on secular corporate law and filed governing documents.
  • Dismiss only those matters that necessarily require doctrinal determinations or review of ecclesiastical disciplinary decisions.

B. Statutory “Standing” and Ultra Vires Challenges

  • Pike v. Texas EMC Management, LLC, 610 S.W.3d 763 (Tex. 2020): Cited for the distinction between true constitutional standing (jurisdictional) and “statutory standing” (whether a plaintiff falls within the class authorized to sue), which affects the right to relief but not jurisdiction.
  • Section 20.002: Clarified as a general limitation on ultra vires challenges, subject to more specific statutory schemes (such as § 22.207).

The Court avoided using “standing” terminology for the § 20.002 issue and treated it properly as a question of who has a cause of action under the Business Organizations Code.

C. Corporate Charters as Contracts and Third‑Party Beneficiaries

  • Overland Automobile Co. v. Cleveland: Explained the contractual nature of corporate charters vis‑à‑vis the State and shareholders, and the internal governance contract among shareholders.
  • Santa Rosa Infirmary v. City of San Antonio: Recognized that charitable corporations, by incorporating, enter into a contract with the State to carry out their stated purposes.
  • First Bank v. Brumitt: Reaffirmed as the controlling framework for identifying third‑party beneficiaries based on contracting parties’ intent and statutory modifications.
  • City of Houston v. Williams: Used as a comparative model where contract language explicitly confers concrete benefits and enforcement rights on a defined class (firefighters), analogous to the Conference’s role here.
  • Executive Board of Missouri Baptist Convention v. Windermere Baptist Conference Center (Mo. Ct. App.): Out‑of‑state authority holding that, under Missouri law, nonmembers do not ordinarily derive contractual rights solely from a corporation’s articles, underscoring that the Texas Court’s holding rests heavily on § 22.207.

The decision is notable as one of the first Texas Supreme Court cases to:

  • Apply third‑party beneficiary doctrine to a nonprofit corporation’s articles of incorporation, and
  • Do so by invoking a specific nonprofit‑corporate statute (§ 22.207) as the “statutory rule” that supplies the necessary indicia of intent and enforceability.

D. False‑Filing Claims and Statements of Law

  • Italian Cowboy Partners: Reaffirmed for the proposition that pure opinions are generally not actionable misrepresentations in fraud, while recognizing that the reliance element differentiates fraud from statutory false‑filing claims.

Although the Court did not definitively decide whether a legal opinion can be “materially false” under § 4.008, it strongly suggested that:

  • Context matters, and
  • A filing that fully discloses the contested factual circumstances and candidly states a party’s legal position, especially when based on counsel’s advice, is unlikely to be “materially false” absent evidence of knowing falsity.

VI. Simplifying Key Legal Concepts

1. Ultra vires acts

“Ultra vires” (Latin for “beyond the powers”) refers to corporate acts that exceed the scope of authority granted by the corporation’s governing documents or applicable law. Under § 20.002:

  • Such acts are not automatically “invalid.”
  • They may be challenged only in specified proceedings and typically only by particular parties (shareholders, members, the corporation, or the Attorney General).

In this case, the alleged ultra vires act is SMU’s amendment of its articles without Conference approval, in contravention of the 1996 articles’ amendment clause.

2. Nonmember nonprofit corporation

A nonprofit corporation may have:

  • Members, analogous in some respects to shareholders (though without profit distributions), or
  • No members, in which case control resides entirely in the board by default.

SMU is a nonmember nonprofit corporation. Thus, under default statutory rules, amendments to its certificate of formation ordinarily require only a majority vote of the board—unless the governing documents, as here, lawfully provide otherwise.

3. Ecclesiastical abstention and neutral principles

The ecclesiastical abstention doctrine prevents courts from deciding religious questions or interfering in internal church governance (discipline, doctrine, or polity). However, under the neutral principles approach:

  • Courts may decide disputes involving religious organizations if they can do so by applying secular legal principles (contract law, corporate law, property law) without interpreting religious doctrine.

This case illustrates that courts can adjudicate who controls a religiously affiliated institution when the dispute can be resolved solely by reading corporate charters and statutes.

4. Third‑party beneficiary

Normally, only the parties to a contract can sue to enforce it. A third‑party beneficiary is a nonparty who is allowed to enforce the contract because:

  • The contracting parties clearly intended to confer specific, enforceable rights on that third party, and
  • The contract manifests that intent with sufficient clarity.

Here, the “contract” is the charter relationship between SMU and the State of Texas. The Conference claims third‑party beneficiary status because the charter:

  • Expressly grants the Conference specific governance rights, and
  • Those rights are authorized and contemplated by statute (§ 22.207).

5. Materially false filing under §§ 4.007–.008

To establish civil liability under § 4.007 based on § 4.008, a plaintiff must show:

  1. A filing instrument submitted to the Secretary of State;
  2. A statement in the instrument that is “materially false”;
  3. The signer knew the statement was false when filed; and
  4. The plaintiff incurred a loss caused by that filing.

The Court concluded that a filing that openly discloses the disputed facts and articulates a party’s legal conclusion—especially when based on advice of counsel—will not ordinarily qualify as a “materially false” instrument, absent evidence of knowing dishonesty.

VII. Practical and Doctrinal Impact

A. Impact on religiously affiliated nonprofits and their controlling bodies

The decision has significant consequences for religious denominations and their affiliated institutions (universities, hospitals, charities) organized as Texas nonprofit corporations:

  • Control rights can be enforceable in court. When religious bodies structure their relationships through corporate charters that expressly incorporate control and approval rights—and those rights are authorized by § 22.207—those rights are not merely aspirational. They may be judicially enforceable via declaratory judgment and contract‑based claims.
  • Charter drafting is critical. Religious organizations seeking to preserve long‑term control over affiliated nonprofits should:
    • Use clear, explicit charter language granting specific rights (election, removal, amendment veto, property veto);
    • Ensure those rights fall within the scope of § 22.207 or comparable statutory authority; and
    • Recognize that such language can create enforceable third‑party beneficiary status for the controlling religious body.
  • Nonprofits cannot lightly nullify charter‑based ecclesiastical control. Boards of religiously affiliated nonprofits wishing to “go independent” will face significant legal obstacles if the existing charter explicitly vests control or approval rights in a religious conference under § 22.207.

B. Impact on nonprofit corporate law generally

Beyond the religious context, the case suggests broader themes in Texas nonprofit law:

  • Articles of incorporation as enforceable instruments: While the Court limited its holding, it confirms that corporate articles can, in some circumstances, support third‑party enforcement claims, especially when a specific statute shows legislative intent that the third party benefit.
  • Judicial resources and enforcement gap: The Court resisted a reading of § 20.002 that would create a “right without a remedy” for entities granted statutory control rights. This may influence future cases where general statutory limits on who may sue are in tension with more specific or rights‑granting provisions.

C. Litigation strategies for future disputes

For litigants:

  • Religious controlling bodies should:
    • Ground their claims in specific statutory provisions (like § 22.207), not just in general notions of ecclesiastical authority.
    • Use the UDJA to obtain clarity on the validity of governance changes and their control rights.
    • Consider third‑party beneficiary theories when charters clearly confer specific powers and statutory context supports such enforcement.
  • Nonprofit boards should:
    • Recognize that they cannot rely solely on general ultra vires limitations in § 20.002 when more specific statutes and charter provisions grant enforcement rights to third parties.
    • Exercise great care in representing legal compliance in public filings, especially when statutory false‑filing provisions may be invoked.

D. False‑filing claims: Caution and limits

The Court’s treatment of §§ 4.007–.008 serves as a cautionary note:

  • These provisions are designed to target knowing, material falsifications in corporate filings—not good‑faith legal interpretations that are fully disclosed and fairly debatable.
  • Parties contemplating such claims should focus on concrete factual misstatements and evidence that the signer knew the statement was false.
  • Reliance on legal counsel significantly complicates attempts to show a knowing violation.

VIII. Conclusion

The Texas Supreme Court’s decision in Southern Methodist University v. South Central Jurisdictional Conference marks a major development at the intersection of religious governance and nonprofit corporate law.

Key takeaways include:

  • Neutral principles prevail: Even in disputes involving religious organizations and doctrinal schisms, Texas courts will exercise jurisdiction when resolution turns on corporate documents and statutes rather than religious doctrine.
  • Section 22.207 matters: Business Organizations Code § 22.207 plays a central, perhaps previously underappreciated, role in validating and protecting the control rights of religious bodies over affiliated nonprofit corporations. Those rights can be enforced judicially.
  • Third‑party beneficiary rights can arise from corporate articles when supported by specific statutes: In this unique statutory context, a religious conference can be a third‑party beneficiary of a nonprofit university’s corporate charter, with standing to sue for breach.
  • False‑filing liability is narrow: A corporate officer does not incur civil liability under §§ 4.007–.008 for candidly disclosing a disputed legal position in a filing, especially when the underlying facts are accurately recited and the position is based on legal advice.

As the case returns to the trial court, the central issues will be whether SMU’s 2019 amendments were valid in light of the 1996 articles and § 22.207, and whether SMU breached enforceable contractual obligations to the Conference. Regardless of how those factual and legal questions are ultimately resolved, the Supreme Court’s opinion sets a durable precedent: religious conferences granted explicit control rights in nonprofit corporate charters under § 22.207 have both the right and the means to enforce those rights in Texas courts.

Case Details

Comments