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	Judge Ponders Who Owns Church Property Sex-Abuse Suits - with $500 Million at Stake, the Federal Case Pits Bankruptcy Law and Catholic Church Law By Steve Woodward The Oregonian [Oregon] December 7, 2005 After hearing more than three hours of sometimes heated debate Tuesday, a U.S. bankruptcy judge will now decide who owns the pews that Catholics in Western Oregon sit in each Sunday. The issue before Judge Elizabeth Perris is whether parish property belongs to individual parishes or to the Archdiocese of Portland, which encompasses 124 parishes, three high schools and about 400,000 parishioners. The ruling could determine whether the parishes' estimated $500 million in real estate, cash and investments is available to pay millions of dollars in child sexual-abuse claims. Perris has set no timetable, although she is expected to rule within the next several weeks. It's also possible that she will skip a ruling and order a trial instead. A trial would enable her to consider factual evidence, in addition to the purely legal arguments that lawyers have presented so far. Sexual-abuse plaintiffs first posed the property ownership question to Perris in August 2004. That was one month after the Archdiocese of Portland became the nation's first Roman Catholic diocese to file for Chapter 11 protection in the wake of multimillion-dollar sex-abuse lawsuits. The bankruptcy came the same day that the archdiocese was scheduled to go to trial in a $135 million sex-abuse lawsuit involving the late Rev. Maurice Grammond. The archdiocese had already made settlements totaling $53 million for more than 130 previous claims. The bankruptcy froze dozens more claims seeking hundreds of millions more in damages. Tuesday's hearing covered ground from obscure real estate law to broad constitutional questions of religious freedom. "This is a purely secular dispute," declared Albert N. Kennedy, lawyer for the committee that represents sex-abuse plaintiffs in the bankruptcy. Kennedy said key issues included whether parishes have independent legal standing or whether they are, in his words, merely divisions of a single corporation. "Those issues," Kennedy said of the property fight, "do not include religion. They do not include religious doctrine, religious freedom, religious rules." Martin Nussbaum, a constitutional lawyer for the archdiocese, called Kennedy's arguments "rhetoric." "We're asking the court to pay attention to canon law (church law)," Nussbaum said, "because Oregon law requires it." Constitution issues One issue Perris is being asked to decide is whether the very attempt to rule on the case will entangle the court inappropriately in constitutional issues of religious freedom. Kennedy and Marci Hamilton, the plaintiffs' committee's constitutional lawyer, argued in court and in written memoranda that the court is not being called on to rule on religious beliefs. Instead, they suggested, the court can rely on neutral principles of law. That means the court can rely on traditional bankruptcy, real estate and trust law, as long as those laws don't unduly burden a person's practice of religion. Lawyers for the archdiocese, parishes and parishioners agree that the court should use neutral principles of law. But they contend that means taking church law into account when deciding issues that may affect church governance and structure. Portland Archbishop John G. Vlazny, for example, made a sacred vow to uphold canon law, which prohibits him from seizing assets that church law says belong to the parishes. If Perris rules that the parish assets belong to the archdiocese, the church's lawyers say, Vlazny would be forced to look at ignoring canon law in violation of his vow. Under Roman Catholic canon law, the archdiocese and individual parishes are all considered public juridic persons. Such "persons" are independent entities, like corporations, and they each hold their own property. The head of a parish, however, is a priest who is appointed by and directly responsible to the archbishop, not parishioners. Questions of title Perris's decision on the property issue could be complex. The question of whether the archdiocese holds free and clear title to the property, for example, can't be answered simply by reading the deed. Nearly all parishes' real estate deeds are in the name of the archdiocese, which argues that it is holding the property in trust for the parishes. To get around that argument, the plaintiffs' committee has asked Perris to eliminate any legal interest in parish or school property that is not recorded in a formal real estate document. In this case, the parishes and schools themselves claim they have the legal interest. If such interests are eliminated, then the archdiocese would hold title to the property free and clear, the plaintiffs argue. To make its argument, the committee must prove that no reasonable, prudent buyer could have known the property had ownership questions at the time the archdiocese filed for bankruptcy. The plaintiffs' committee's Kennedy said the public record -- deeds, the archdiocese's articles of incorporation and Oregon nonprofit corporation law -- would have led a buyer to the inevitable conclusion that the archdiocese was able to sell its properties free and clear. Thus, the parishes' interests would be declared null and void. The archdiocese's and parishes' attorneys, on the other hand, said a prudent buyer would have questioned the validity of a deed in the archdiocese's name. Doubts would have been raised by the fact that the archdiocese's name did not appear on the church sign or the extensive media publicity about the murky ownership of parish property. Thus, the plaintiffs' committee's legal argument about unrecorded interests would fall short. In the main bankruptcy case, the archdiocese last month filed its reorganization plan, which asks Perris to set aside $40 million to pay the remaining sex-abuse claims. Many plaintiffs argue that the figure should be significantly higher. Perris has set Feb. 14 as the hearing date for arguments on the plan.