This article is a follow-up to “CEF: Higgerty Law Statement of Claim Regarding the Prince of Peace Congregation and School Loan” and details
- how CEF was supposed to work,
- who the administrators and directors were,
- the state of CEF’s portfolio as of the early 1990s.
For me, the closing paragraph of this section details is the most poignant as it describes what ABC District had – and could still have had if it had stuck to its knitting.
42. As a result of the ABC District’s Church Extension Program and the implementation of the Loan Eligibility Policies, Loan Criteria and Loan Conditions, by the early 1990s the ABC District had built a diverse portfolio of mortgage loans to more than 65 congregations for the construction of churches and schools in which to carry out the ministry of the Lutheran faith. The ABC District guaranteed the investments of depositors in the CEF.
Please note that these are allegations only and this case has not been adjudicated in a court of law. As always, if you have any legal questions or need legal advice please consult appropriate legal counsel.
From Higgerty Law Statement of Claim
D. The LCC/ABC District Church Extension Fund
27. In or about 1921 and prior to its incorporation in 1944, the ABC District created a Church Extension Program (the “ABC District Church Extension Program”) to advance the Church Extension objectives and policies of its parent organization, which was then the Lutheran Church – Missouri Synod (“LCMS”) and as of its incorporation in 1959, the LCC.
28. The ABC District operates the ABC District Church Extension Program as a joint
enterprise with LCC and/or LCCFM in furtherance of a common purpose, in that:
a. The ABC District is able to maintain the ABC District Church Extension Program only with the approval of LCC;
b. The ABC District is required to operate the ABC Church Extension Program in conformity with policies established by the LCC and/or LCCFM;
c. The LCC and/or LCCFM aids the ABC District in motivating individuals, congregations and organizations to place deposits with the ABC District Church Extension Program in a systematic manner;
d. The LCC and/or LCCFM provides leadership in advance site acquisition for further expansion of the ministry of the LCC;
e. The ABC District was required to provide to the LCC and/or LCCFM, on an annual basis, a complete financial statement of the ABC District Church Extension Program, including monies borrowed and received, total amount of loans outstanding, and any amounts delinquent;
f. ABC District, LCC and/or LCCFM all receive direct or indirect financial and other benefits from the ABC District’s Church Extension Program, in that:
(i) The acquisition and erection of new churches and schools in which to carry out the ministry of the Lutheran faith increases church membership at the congregation level;
(ii) Increased church membership at the congregation level results in increased member donations to the congregation. Those donations are shared with the District, which in turn shares those donations with the LCC and/or LCCFM;
29. The ABC District, together with the LCC and/or LCCFM as set out above, established two funds:
a. The Church Extension Fund (the “CEF”) is a non-registered fund held by ABC District which offered term deposits, savings accounts and a children’s savings program; and
b. The Lutheran Church Canada, The Alberta-British Columbia District Investment Ltd. (“DIL”), is an incorporated tax-sheltered investment fund offering registered RRSP, RRIF and TFSA investments.
30. At all times material hereto one or all of the Defendants Janice Ruf, Candace Rivet, and Darla Hennig were Managers or in the alternative Administrators of the Church Extension Fund.
31. All of the funds deposited to the ABC District’s CEF were held in trust for the depositors by the ABC District as trustee (the “CEF Trust”), on the following terms:
a. that the monies on deposit in the CEF Trust would be used solely for the purpose of building churches and schools, and would be invested by the ABC District in accordance with the mandate and policies of the ABC District’s Church Extension Program; and
b. that the monies deposited to the CEF Trust would be repaid to the depositors on demand, or alternatively upon maturity if in the form of a term deposit, and with interest.
32. The ABC District and the CEF depositors intended to create, and did create, either expressly or by implication, the CEF Trust on the terms stated above. The CEF Depositors were the beneficiaries of the CEF Trust.
33. Further, or in the alternative, all funds deposited to the ABC District’s CEF were impressed with a resulting trust (the “CEF Quistclose Trust”) whereby, either expressly or by implication:
a. Funds on deposit in the CEF were to be used specifically and exclusively for the stated purpose of providing assistance in the mission and ministry of congregations and agencies of the Lutheran Church-Canada;
b. All deposits in the CEF remained the property of the CEF depositors; and
c. Deposits in the CEF would be invested by the ABC District in a safe and prudent
manner.
34. The ABC District and the CEF depositors intended to create and did create, either expressly or by implication, the CEF Quistclose Trust on the terms stated above. The CEF depositors were the beneficiaries of the CEF Quistclose Trust.
35. In the further alternative, depositors to the CEF entered into contracts with the ABC District which contained the following express or implied terms:
a. That the monies on deposit would be used solely for the purposes of investment in accordance with the mandate and policies of the ABC District Church Extension Program;
b. That the monies would be repaid to the depositors on demand, or alternatively upon maturity of the depositor’s deposit term, and with interest; and
c. That the monies on deposit with the CEF were guaranteed by the ABC District.
36. The ABC District’s Department of Stewardship and Financial Ministries (the “DSFM”) established Loan Eligibility Policies in respect of the CEF funds which conformed to the policies established by the LCC and/or LCCFM for that purpose. Those Policies limited eligibility for loans to:
a. congregations of the ABC District “in good standing,” defined as “those congregations which support the mission and ministry of the District and Synod in a responsible way, function under a district approved constitution and comply with the policy and practice established by the Lutheran Church – Canada”; and
b. institutions and entities of the LCC, whose constitutions, policies and practices are consistent with those of LCC.
37. Further, according to the Loan Eligibility Policies set by the DSFM, the LCC and/or the LCCFM, loans were to be made for capital projects only, including acquisition of land,purchase or construction of building facilities, major renovations to existing facilities or expansion of existing facilities.
38. The DSFM also set Loan Criteria for the CEF funds in conformity with policies established by the LCC and/or LCCFM for that purpose, including (but not limited to) the following:
a. The need for facilities, renovations or property in which to carry o
c. Relationship of total loan to property values and/or total assets;
d. Financial history of congregation and financial projections for future;
e. Growth potential of area and membership;
f. The existence of a pledge program for the building project;
g. Indebtedness per communicant;
h. Ability of congregation to service debt;
i. Percentage of total income for debt service; and
j. Continuity of the debtor congregation’s financial support to the ABC District and the LCC.
39. The DSFM also set Loan Conditions for the CEF funds in conformity with policies
established by the LCC and/or LCCFM for that purpose, which required debtor
congregations to provide certain items before loan funds would be disbursed, including (but not limited to) the following:
a. Security documentation appropriate to the size and conditions of the loan;
b. Loan Repayment Agreement signed by the officers of the debtor congregation;
c. Commitment to promoting Church Extension investments among the members of the debtor congregation; and
d. Financial statements submitted annually to the DSFM.
40. All loans in excess of $100,000.00 required the approval of the ABC District’s Board of Directors.
41. At times material hereto, the following Officers and Directors of the ABC District were also members of the DSFM, and were thus in an untenable conflict of interest: Jim Kentel, William Ney, Mark Ruf, Harold Schmidt, Mark Beiderweiden, Richard Lutz, Mark Sander,Greg Giese, Darla Hennig and Kurt Robinson.
42. As a result of the ABC District’s Church Extension Program and the implementation of the Loan Eligibility Policies, Loan Criteria and Loan Conditions, by the early 1990s the ABC District had built a diverse portfolio of mortgage loans to more than 65 congregations for the construction of churches and schools in which to carry out the ministry of the Lutheran faith. The ABC District guaranteed the investments of depositors in the CEF.
ANO / Lutheran Watch 
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