Flurry of real estate transactions found in diocese bankruptcy case

By Elizabeth Hardin-Burrola
Gallup Independent
March 31, 2014

http://gallupindependent.com/

GALLUP — When Bishop James S. Wall announced the Diocese of Gallup was filing for Chapter 11, he promised to be “open and transparent” during the reorganization process.

“In the coming weeks, the process of Chapter 11 will open our Diocese to unprecedented public scrutiny,” Wall stated in his announcement released over the Labor Day Weekend. “I believe that is a good thing. We will be open and transparent in this process, and I will do my best to keep you informed as the process continues. I invite you to e-mail and write me to share your reactions to this decision and the process all along the way.”

Since then, Wall has posted a small number of legal documents filed in U.S. Bankruptcy Court on the Diocese of Gallup’s website, but members of the public are left to their own devices to wade through the documents’ legalese to try to understand their content.

Wall and his bankruptcy attorneys have not been answering questions from the media, however.

In late January, an extensive list of questions was submitted to Wall. The bishop then transferred the questions to Susan G. Boswell, the diocese’s lead bankruptcy attorney, to answer.

“While I appreciate you raising these matters, I want you to know that it is our policy that we do not comment in the press on the matters that are before the Court or that may come before the Court,” Boswell replied in a letter.

Although she didn’t provide answers, Boswell instructed all future media questions about the Diocese of Gallup’s Chapter 11 case be directed to her rather than to Wall and the diocese.

Deacon Hoy’s house

A variety of subjects were raised, including questions about the accuracy of the list of confidential claimants compiled by the Gallup Diocese, the possible legal liability of other Catholic dioceses and religious orders, the reported underfunding of the Priests’ Retirement Fund/Pension Plan, and property reportedly owned by the late Bishop Donald E. Pelotte. A number of other questions pertained to real estate transactions involving the Gallup Diocese.

Several questions concerned a house recently owned by Deacon James P. Hoy, the diocese’s former chief financial officer who resigned two months before Wall’s Chapter 11 announcement. In the diocese’s first Monthly Operating Report to U.S. Bankruptcy Court, submitted for the period of Nov. 13-30, 2013, two documents indicated the Gallup Diocese might have been paying the insurance on Hoy’s personal home, listed with his address as “clergy housing.”

A subsequent records search of the property at the McKinley County Courthouse indicated real estate transactions involving that particular property, Hoy and the Gallup Diocese. A more in-depth title search and report offered information. According to the report:

-Hoy and his wife obtained the house, which had been offered for sale by another couple. The transaction is documented in a joint tenancy warranty deed dated Nov. 18, 1999. However, there is no record of the Hoys obtaining a mortgage to finance the purchase of the house.

-Less than four months later, on March 2, 2000, the Hoys transferred the property over to the “Roman Catholic Church of the Diocese of Gallup” with a quitclaim deed. The quitclaim deed was notarized by longtime Gallup chancery staffer Anna DiGregorio.

-The following year, on Nov. 30, 2001, the Gallup Diocese transferred the property back to the Hoys with a joint tenancy special warranty deed, signed by Bishop Pelotte. For this real estate deal, the Hoys did obtain a 30-year mortgage for $133,200.

-The Hoys sold the property to another couple in July 2013, after Hoy resigned from the diocese. However, in the Nov. 13-30, 2013, Monthly Operating Report filed with the U.S. Bankruptcy Court, the property is included as “clergy housing” in what appears to be a list of diocesan property insured with the Catholic Mutual Relief Society of America.

The Gallup Diocese was asked a number of questions about these unusual real estate and insurance transactions involving its former chief financial officer. Boswell declined to answer any of the questions, citing the policy not to comment in the press on matters that may come before bankruptcy court.

Bishop’s private residence

Other questions concerned the Gallup property where the bishop’s private residence, his private chapel and the diocese’s “House of Discernment” are located.

In documents submitted to U.S. Bankruptcy Court, those pieces of property were not included in a list of property owned by the Diocese of Gallup. In December 2013, in testimony given at the Creditors Committee meeting, Wall stated his private residence is owned by the Catholic Peoples Foundation, a nonprofit fundraising organization of the diocese, and Wall stated the diocese owes back rent to the Foundation for his residence’s rent.

Again, a records search of the property at the McKinley County Courthouse indicated more real estate transactions. According to courthouse records:

-The property used to be owned by the Franciscan Missionary Sisters of Our Lady of Sorrow of Oregon.

-The Southwest Indian Foundation gave the Franciscan Missionary Sisters a grant of $250,000 in 1984 to improve a girls’ group home on the property. The Sisters agreed “the residence, real estate and proposed improvements” would revert to the Gallup Diocese if the Sisters ever abandoned their girls’ group home, which they later did.

-On Jan. 23, 2009, Bishop Thomas Olmsted, then the temporary apostolic administrator for the diocese, transferred the property over to the Catholic Peoples Foundation with a quitclaim deed.

-On April 15, 2009, the Franciscan Missionary Sisters signed an identical quitclaim deed

-On Oct. 7, 2009, the Sisters transferred additional neighboring property to the Catholic Peoples Foundation with a quitclaim deed, rather than allow the property to revert to the Gallup Diocese.

Because part of the Chapter 11 process involves identifying assets of the Diocese of Gallup, the diocese was asked why property that was supposed to revert to diocesan ownership was transferred to the Catholic Peoples Foundation, and why the diocese signed a lease to rent property for the bishop’s residence that it once had a legal right to own.

Boswell declined to answer questions for this story.