June 28, 2005 in City

Fate of diocese could rest on property ruling

By The Spokesman-Review
 

Lawyers argued Monday whether churches and schools should be sold or mortgaged to settle sex abuse claims that have sunk the Roman Catholic Diocese of Spokane into bankruptcy.

U.S. Bankruptcy Judge Patricia Williams plans to rule within six weeks, deciding whether parishes are stand-alone organizations or belong to the diocese.

With many victims, 18 lawyers, a half dozen priests and others in the courtroom looking on, attorney James Stang argued decades of tragedy were a compelling reason to rule in favor of more than six dozen victims.

He asked the judge to apply secular law rather than allow religious doctrine and dogma to dictate the laws of the United States. Doing so would dismiss the notion that the diocese holds the most valuable assets of the church in trust and therefore should be out of the reach of victims.

“This is about protecting the community from child sexual predators,” Stang said, stating that the diocese had breached its fundamental duty to stop pedophile priests and has yet to be held accountable.

Diocese attorney Shaun Cross said there is no current danger to children from Catholic priests and warned a ruling in favor of victims could destroy a Catholic ministry of 97,000 people in Eastern Washington.

He said relationships between the diocese and parishes are rooted in church laws – called canons – and were adopted by the Washington Legislature in 1915.

Spokane Bishop William Skylstad could not sell or mortgage assets to settle claims even if he wanted to, Cross said. “He can’t. He doesn’t own the parishes.”

The hearing was the first of its kind in the United States, and the ruling could affect how the U.S. Catholic Church handles the settlement of sexual abuse claims. Skylstad, also serving as president of the U.S. Conference of Catholic Bishops, was not at the hearing.

Across the country the Catholic Church has spent more than $1 billion to settle abuse lawsuits. Spokane is the third diocese to file for bankruptcy protection. The others are in Tucson, Ariz., and Portland.

Though settlement may be the most appealing way to resolve claims, the Spokane Diocese says it does not have the cash for the sort of payouts reported in other cities.

Stang argued the church does have access to cash but simply chooses not to include parishes in its financial holdings.

Ford Elsaesser, an attorney for the Association of Parishes, said the sides have plenty of room to negotiate.

Yet Stang and Cross said negotiations have been at a standstill for many months, and hopes of rekindling them may rest with a ruling that better defines the worth of the diocese.

The diocese may be able to cobble together $25 million for settlements. That includes $10 million in property and cash, along with another $15 million that could be available from insurance policies.

The parishes, including 82 churches, 16 parochial schools and other assets may be worth several times that amount. No recent appraisal has been completed.

During a spirited question and answer session, Williams zeroed in on the diocese arguments, telling Cross at one point that he “can’t cherry-pick bankruptcy law.”

The judge called the diocese arguments “circular” at one point, saying it has asked her to apply canon law, but then implying that her doing so would violate the First Amendment’s guarantee of church-state separation.

Cross disagreed and said the judge does have jurisdiction, albeit narrow, in this unfolding case.

Williams, waving diocese documents above her head, challenged Cross to show where in state law parish properties are held in trust for the benefit of the parishioners. He said he couldn’t, telling her that the trust relationship specifically naming parishes were not in the deeds, nor was it to be found in the diocese’s own articles of incorporation, or even in its policy manual.

“It sure sounds to me like the diocese is the beneficiary of the trust,” she told Cross.

The arguments over parish assets have cost an estimated $500,000 to date. Lawyer fees are now running more than $300,000 a month in the complicated case.

Victims stayed for the entire hearing.

At one point, Cross told Williams that there was no compelling interest to rule for victims because children are no longer being abused. He said the nature of such claims, while tragic, is now legally irrelevant and shouldn’t pull down the parishes.

His comments drew the ire of victims.

“More than anything, we think it’s time this diocese was held accountable for something,” said Mark Mains. “I take great exception to being referred to as legally irrelevant.”

Victims lawyer John Campbell argued that the diocese was failing its duty to creditors. Rather than seeking all available assets to satisfy claims as is the case in corporate bankruptcies, the diocese is attempting to scuttle recovery efforts.

“We the creditors,” he said, “would like to know what the property of the estate is.”


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