The Church as a Corporation: Part I

I have been doing a bunch of research of late on the history of corporate law. As I was doing so, I was struck by how much of early Mormon history could be illuminated by the evolution of corporate law. What follows in this and subsequent posts are essentially my research notes. We have enough lawyers and law geeks visiting this site, that I hope there will be at least some audience for this stuff. I even think that this stuff could be interesting to non-lawyers, and none of what follows is technical.

Today, the Church is a corporation, or rather a set of interlocking corporations. What this means is that it is a “legal person” independent of its members or officers, which is capable of holding property, entering into contracts, suing in court, or being sue. How did this come about?

Churches are some of the oldest forms of corporations in Anglo-American law. Traditionally, the main what the a church became a corporation was by a grant from the king or parliament. There was also a doctrine called “corporation by prescription,” under which a collective body that had acted as a corporate body without a charter from “time immemorial” would be recognized as a legal corporation by the courts. Corporations by prescription, however, were disfavored by the law (largely because the king could make good money off of charging folks for the privilege of incorporation) and they by definition required a long time to form. After the revolution, America basically carried forward the English law of corporations. What this meant is that there were a number of corporations by prescription recognized by the American courts (generally these were cities), but the main avenue for gaining corporate status during the first two thirds of the 19th century was via a special act of the legislature. Thus, you would have to get the legislature to pass a law declaring that your church was a corporation.

The Church was organized under the laws of New York in 1830. I have not been able to find a copy of the New York law invoked and I don’t know whether it granted corporate status on the church. Joseph Smith and the other leaders of the Church, however, did not carry out its legal and economic affairs through the Church as a corporation. Rather, they formed a series of “corporations” to carry out these affairs. The earliest was an organization called “The United Firm,” which was responsible for church publishing and other economic affairs. With the rise of the law of consecration, the consecrated property was deeded to a “corporation” called “The Central Board of the United Order.” When the Church was driven out of Jackson County, it organized a set of “Agricultural Companies” that “owned” the land farmed by Mormons around Far West, Missouri.

You’ll notice all the scare quotes in the paragraph above. That is because these were not “real” corporations. What this means is that legally speaking they did not exist as a separate entities. One result of this is that Joseph Smith (and other leaders) who were the “officers” of these “corporations” were personally liable for all of the companies’ debts and were the objects of person lawsuits by every disaffected Mormon who wished to get his consecrated property back. The same was true for the ill fated “Kirtland Safety Society.” Conceived as a bank which would stimulated economic growth in the Kirtland area, Joseph and other leaders tried desperately to get a corporate charter from the state legislature. When they failed, they organized anyway as an “anti-banking” society, which functioned more or less like a bank. This “society” however, lacked any legal personality. So when it failed, Joseph and the other officers were personally liable for all of the debts of the “bank.”

Next up, how the Church tried to solve this problem in Nauvoo…