UNITED STATES
National
By JOE FEUERHERD
The decision of three U.S. dioceses to seek protection from creditors through the federal bankruptcy courts was always a gamble. One has already lost the gamble in a first round in court, one has sidestepped the issue, and the third awaits its fate. At the heart of these proceedings is the question appearing with increasing frequency as dioceses face financial crises: Who owns the church?
Facing hundreds of millions of dollars in potential awards to victims of clergy sexual abuse, the bishops of Tucson, Ariz., Spokane, Wash., and Portland, Ore., were convinced over the past year that Chapter 11 provided the best means to put their dioceses on sound financial footing. Critics say the dioceses hoped to avoid the scrutiny of civil trials. The bishops contend that the relatively orderly bankruptcy process affords the best measure of justice to both abuse victims and innocent parishioners.
Everyone agrees, however, that key to the success of the high stakes strategy was the hope that no court would make all diocesan holdings -- churches and parish halls, schools and cemeteries, social service centers and retreat houses -- part of the pot of available assets that could be sold to pay off creditors. Church lawyers argue that diocesan assets do not extend beyond the central administrative office of the diocese, the chancery. The idea, said Marcie Hamilton, an attorney advising abuse victim claimants, is “to reduce the size of the bankrupt estate so that much less money” is available to creditors.
The Tucson diocese, which filed for bankruptcy a year ago, won its bet. It avoided the question of ownership in a $22.2 million agreement reached earlier this summer with sex abuse victims.
Next month, a bankruptcy court will hear arguments in which the Portland archdiocese seeks to limit the reach of creditors. In announcing the bankruptcy filing in July 2004, Portland Archbishop John Vlazny said, “Under canon law, parish assets belong to the parish. I have no authority to seize parish property.” Whether civil law will require him to do just that will be decided by a federal bankruptcy court.