The members of the Falls Church voted to secede from the Episcopal Diocese of Virginia and The Episcopal Church (TEC) in December 2006. Subsequently, the Falls Church and six other seceding congregations of the Diocese of Virginia joined the Convocation of Anglicans in North America (CANA), a branch of the Church of Nigeria (Anglican Communion). The seven churches filed petitions seeking declarations that they were the legal owners of the real and personal property associated with the parishes. The diocese and TEC responded by filing complaints asserting that all parish properties were held in trust for the diocese and TEC. The first instance court granted the congregations' petitions and dismissed the complaints filed by the diocese and TEC. The Supreme Court of Virginia overturned the lower court's ruling, ordering that the claims by TEC and the diocese, and related counterclaims by the seceding parishes, be reinstated and resolved by the lower court ‘under principles of real property and contract law’. The lower court subsequently ruled in favour of the diocese and TEC. The Falls Church appealed against this latter ruling.

At stake in the appeal were two substantive issues. The first, and most significant, issue concerned TEC Canon I.7.4 (commonly referred to as the ‘Dennis Canon’), which states that ‘all real and personal property held by … any Parish … is held in trust for this Church and the Diocese’. The appellants argued that the canon was invalid under Virginia law and thus was incapable of creating a trust under which the relevant property belonged to TEC and the diocese. The court agreed, noting that Virginia law in effect at the time that the canon was adopted in 1979 (Code, section 57-7) provided only for ownership of property by local congregations and not by ‘general’ or ‘hierarchical’ churches. Nevertheless, the court went on to hold that a constructive trust existed, basing its decision on the existence of the Dennis Canon, which ‘merely codified in explicit terms a trust relationship that has been implicit in the relationship between local parishes and dioceses since the founding of [TEC] in 1789’. Thus, although the court held that there was no express trust, because the canon was adopted at a time when such a trust was not possible under Virginia law, the court imposed a constructive trust and on that basis awarded ownership of the property to the diocese and TEC.

The second issue related to the time from which personal property acquired by the congregation (including donations) would be excluded from the present decision. The lower court had used the date when the diocese and TEC had filed their complaint, 31 January 2007, as the relevant date, and thus awarded all personal property acquired prior to that date to the diocese. The Supreme Court ruled that the proper date was the date of the congregation's vote to secede from the diocese, 17 December 2006. Thus the Supreme Court affirmed the lower court's order requiring that the Falls Church convey all property to the diocese and TEC, and returned the case to the court below to deal with personal property acquired after 17 December 2006. [Alan Perry]