"You father used to gallantly call this "fallen from grace". "

This is an expression. To 'fall from grace' means to suffer a loss of respect or prestige. It originated from the Bible:

Galatians 5:4 (King James Version):

Christ is become of no effect unto you, whosoever of you are justified by the law; ye are fallen from grace.

Mr Dollengangar was mocking Mr and Mrs Foxworth's excessive piety by using the expression so gallantly.