COLORADO: Final agreement reached in Grace-St. Stephen's dispute

June 3, 2009

The Episcopal Diocese of Colorado and a breakaway congregation have reached a final agreement in a two-year dispute over rightful ownership of Grace and St. Stephen's Episcopal Church in Colorado Springs.

"We are very pleased with the court's ruling which awarded the property to the Episcopal Church, but it is clearly time to relinquish our remaining claims and bring peace to our respective communities," said Bishop Robert J. O'Neill of Colorado in a statement released June 2.

A few items, including eight disputed trusts and property claims, remained even after El Paso District Judge John Schwartz's March 24 ruling that the $17 million church property was held in trust for the wider mission and ministry of the diocese and the Episcopal Church, said Lawrence Hitt II, chancellor for the Denver-based diocese in a June 4 telephone interview.

He said the final resolution "is a pretty big deal," and returned proceeds from the trusts, which had been by the court during litigation, to the church. He declined to disclose the value of those trusts. The agreement also clarified that the rectory, school and church properties also belong to Grace and St. Stephen's Church and not to the disaffiliated congregation, now aligned with the Church of Nigeria and renamed St. George's Anglican Church. Both sides agreed to uphold Schwartz's ruling.

St. George's Anglican Church agreed "that it will not appeal the court's decision … (and) both sides agreed to the dismissal of all remaining claims, including damages, with each side to pay its own costs and attorneys' fees," according to the statement.

St. George's is also "pleased with the settlement, particularly since it relieved our staff and vestry members of the burden and expense of defending against $5 million in unjustified claims brought against them personally by the Diocese of Colorado and the Episcopal Church," according to a statement posted on the church website.

"The settlement reached also means that all the costs associated with maintaining the property of Grace Church and St. Stephens, including payment of the $2,500,000 mortgage, belong to the Episcopal congregation and the Diocese of Colorado.

"Our only remaining obligation is to pay final operational expenses we had incurred during our possession of the property, but were unauthorized to pay until this settled agreement was reached. We look forward to fulfilling God's call to us for mission and ministry."

The dispute arose in December 2006 after O'Neill placed the Rev. Donald Armstrong, then-rector of Grace and St. Stephen's Church, on administrative leave amid allegations of financial impropriety. A year later, after an investigation, an ecclesiastical court judged him guilty of six counts of financial and ecclesiastical misconduct involving the theft of about $400,000. Armstrong was subsequently deposed.

Meanwhile, he led about one half of the 2,400-member congregation to split from the Episcopal Church. The group realigned with the Convocation of Anglican Churches in North America, or CANA, a self-described mission of the Anglican Church of Nigeria. They refused to leave the 135-year-old Gothic-tyle church, displacing a continuing Episcopal congregation.

After Schwartz's March 24 ruling, the disaffiliated congregation was ordered to return the church property to the diocese and the Episcopal Church. The Episcopal congregation returned to worship at the downtown landmark church on Palm Sunday, April 6.

On May 22, Armstrong was indicted by a grand jury on 20 felony charges alleging he stole about $392,000 from the church to pay for, among other things, his children's college education. Armstrong, 60, has maintained his innocence. Each charge carries a possible four-to-12 year sentence. A trial date has not been set.

However, Hitt said that with the June 2 agreement the diocese is looking ahead. He declined to comment on the charges against Armstrong except to say the matter is now up to secular courts.

"This has been a long, difficult and distressing dispute and we believe that this settlement is the first step towards reconciliation and healing," he said.

O'Neill added: "We look forward to giving our undivided attention to the mission of the church."

The Rev. Martin Pearsall, priest-in-residence at Grace and St. Stephens, said: "I'm glad that this dispute is over and we can now focus completely on building up the church and meeting the needs of our neighborhood."

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