June 16, 2006 in City

Parish assets protected

By The Spokesman-Review
 

The ruling at a glance

What happened: A senior U.S. District Court judge overturned the U.S. Bankruptcy Court’s ruling on who owns Catholic schools and churches in Eastern Washington. The ruling could have national implications for other Catholic dioceses embroiled in sex-abuse litigation.

What’s next: An attorney representing sex-abuse victims says he hasn’t decided whether to appeal the ruling to the U.S. Ninth Circuit Court of Appeals. Federal mediation is scheduled to begin in Reno on July 7.

Catholic parishes in Eastern Washington – not the Spokane Catholic Diocese – own their churches and schools, a federal judge ruled Thursday morning.

The ruling by Senior U.S. District Court Judge Justin Quackenbush reversed a bankruptcy court decision that could have led to the sale of parish properties to pay victims of clergy sexual abuse.

Though the appeal ruling was a clear victory for parishes and the diocese, Quackenbush urged all parties to quickly settle the diocese’s bankruptcy case and curb legal fees that are costing the diocese more than $300,000 a month. His comments pushing a settlement echo those made recently by U.S. Bankruptcy Court Judge Patricia Williams, the magistrate whose decision he overturned on appeal.

Quackenbush told a courtroom packed with lawyers, priests and victims that everyone has made serious mistakes in their lives.

“It’s not a perfect world,” the judge said, adding that those with oversight roles need to be aware of human failings and make decisions that protect the vulnerable.

His comments were directed at the diocese, which allowed priests who committed sexual abuse to remain in the clergy and even moved some offenders from parish to parish when complaints arose. Such decisions made decades ago have triggered a modern-day crisis in the Catholic Church.

Quackenbush also hoped that victims could sit down with parishes and the diocese and find appropriate resolution. Mediation is scheduled to begin in Reno on July 7.

The ruling could have national implications, with other Catholic dioceses beset by sex-abuse litigation watching closely to see how the Spokane Diocese’s Chapter 11 bankruptcy case unfolds.

Diocese attorney Shaun Cross called the ruling an important development that should speed resolution of the case.

James Stang, an attorney representing creditors in the bankruptcy, declined to say whether Quackenbush’s ruling would be appealed to the U.S. Ninth Circuit Court of Appeals.

Quackenbush’s ruling recognizes that parishes, though unincorporated, are legal entities – much like homeowners associations.

The diocese has claimed that it doesn’t own parish property and thus can’t sell it to settle bankruptcy claims. In a setback last summer, Williams ruled that the diocese holds title to parish property.

“The ruling leaves us with a high degree of optimism,” said Ford Elsaesser, the attorney for the Association of Parishes, a group of priests and Catholic laity.

Bishop William Skylstad, head of the Spokane diocese, announced in January that he had reached a $45.7 million settlement with 75 abuse victims. Because Williams had ruled that parish assets were controlled by the diocese, those assets were considered available to help fund the settlement. Other moneys would come from insurance settlements, other property sales and gifts.

But the settlement offer was rejected by the bankruptcy court last month. And now, with Quackenbush’s ruling, the parishes enter mediation next month in a far stronger bargaining position.

“Fundamentally, the judge said that the bishop didn’t have the right to deal with other people’s money,” Elsaesser said. “It’s that simple.”

During the hearing, Quackenbush repeatedly referred to St. Aloysius Parish. The majestic church on the Gonzaga University campus – built for about $176,000 beginning in 1909, and now appraised at $2.9 million – was conveyed to the Spokane diocese in the mid-1930s.

Of particular interest to the judge was a Nov. 30, 1935, letter from the late Bishop Charles White to the Rev. W.J. Fitzgerald in which the bishop stated he was merely a trustee for the parishes, not the owner of their property. Quackenbush noted that at the time, “each parish raised and budgeted its own money independent of the diocese” – a practice that continues today.

Quackenbush’s ruling likely cuts the amount of money that will be available to pay sex-abuse victims.

On a somber note for parishes, Quackenbush said that it also means individual Catholic parishes may be sued by victims for negligence.

At least 20 of the 82 Catholic parishes in Eastern Washington once housed priests who have been accused of sexual abuse, according to the diocese.

Abuse victim Mike Shea said he hopes all sides can work out an agreement and end the bankruptcy case.

“The legal bickering needs to stop,” he said.

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