RALEIGH, N.C. — A lawsuit against the Catholic Diocese of Raleigh over an allegation of child sexual abuse against a priest can move toward a trial, a three-judge panel ruled Tuesday.

The North Carolina Court of Appeals rejected arguments made by lawyers representing Bishop Michael F. Burbidge and the Raleigh diocese that allowing the lawsuit to advance would violate the constitutional separation of church and state.

The case involves allegations that the Rev. Edgar Sepulveda of Santa Teresa Mission in Beulaville engaged in sex acts with a 16-year-old boy who spent a night in his home. The priest, who traveled between several small parishes in the southeastern part of the state, also stayed overnight with the boy's family, according to court documents.

Sepulveda, 52, denied the accusations. Records show he was arrested in 2010 and charged with second-degree sexual offense and sexual battery, but Brunswick County prosecutors dropped the case two years later citing a lack of evidence.

Efforts to reach Sepulveda by phone and email on Tuesday received no response.

Billy Atwell, a spokesman for the Raleigh diocese, would not comment on Sepulveda's whereabouts, other than to say he is still in the state but not living on church grounds. The priest is also prohibited from visiting any parish or school.

Atwell stressed that church officials first reported the abuse accusations to law enforcement in 2009, the same day the boy's family contacted the diocese.

"Father Sepulveda continues to be on administrative leave from all public priestly ministry," Atwell said. "The Diocese of Raleigh takes every accusation of sexual abuse with absolute seriousness and remains fully committed to the ongoing protection of children and young people."

The Catholic church is grappling with what officials now concede is a long history of bishops and cardinals covering up instances of child sexual abuse by priests. Pope Francis has apologized for the church's past conduct and has pushed to punish high-ranking officials who fail to report pedophile priests to police.

Sepulveda's accuser, now a 22-year-old on active duty with the U.S. Marine Corps, is identified in court records by the pseudonym John Doe 200. His lawsuit seeks financial compensation from the church.

Lawyer Gregg Meyers said his client will seek a court order requiring the Catholic church to hand over any results of its internal investigation into Sepulveda, as well as personnel records that might reveal whether Burbidge or other officials had prior knowledge that the priest might pose a threat to children.

"We contend that it is unlikely a priest would haul off and molest a child without having some prior indication of difficulty complying with his vow of chastity and his orientation of a sexual attraction to children," said Meyers, who works at a Minnesota law firm that specializes in cases involving sexual abuse by Catholic clergy.

The lawsuit also claims that Bishop Burbidge was negligent and inflicted further emotional distress on the accuser by refusing to order Sepulveda to undergo testing for sexually transmitted diseases and then share those results with the family.

In court filings, lawyers for the bishop and the diocese "express their great sorrow" for what the accuser said he endured, but deny that church officials had any knowledge of Sepulveda's alleged actions and asked that they be removed from the case.

In their decision, the judges ruled it would be unconstitutional to consider the claims involving the bishop's ecclesiastical authority to order a priest to undergo testing for sexually transmitted diseases. However, the judges denied the diocese's contention that it would be improper for a civil court to weigh whether church officials knew or should have known that Sepulveda presented a risk to children.

Since the ruling was unanimous, the diocese has no automatic right of appeal to the North Carolina Supreme Court. However, the church could still petition the state's highest court to review the case.

Drew Erteschik, the lead lawyer representing the bishop and the Raleigh diocese, said his team is still in the process of fully analyzing the ruling and has not yet decided whether they will appeal.