In Committee of Tort Litigants v. Catholic Diocese of Spokane, (US Bkrpty. Ct., ED Wash, Aug. 26, 2005), the court found that parish churches, schools and similar properties are all assets that can be liquidated to pay off Diocese creditors in the Spokane Diocese’s pending bankruptcy proceedings. The Diocese filed for bankruptcy because of mounting liabilities from clergy sexual abuse cases. The Bankruptcy Court rejected the argument that it should apply Canon law that treats church and school properties as belonging to individual parishes. (See prior posting.) It held that it must apply normal civil rules of law and that doing so does not interfere with the churches' free exercise of religion.
The court found that the legal titleholder of all the properties is the “Catholic Bishop of Spokane”. The Bishop is a “corporation sole” under Washington law, and the corporation’s articles provide that all of its property is held by it “in trust for the use, purpose, and benefit and behoof of the Roman Catholic Church of the Diocese of Spokane….” The court also found that even though most of the property had been acquired, improved and maintained from gifts of parish members who thought that their gifts were for the benefit of the individual parish, this does not change the result. The deeds were not in the names of the parishes. [The case has been discussed in media reports by the Associated Press, and is also discussed on Mirror of Justice blog.]
UPDATE: Catholic News Service reports on Aug. 29 that the Bishop of Spokane will appeal the Bankruptcy Court's ruling.
