Judge asked to halt abuse victims’ church properties lawsuits

By Colleen Heild
Albuquerque Journal
December 6, 2020

https://www.abqjournal.com/1524029/judge-asked-to-halt-abuse-victims-church-properties-lawsuits.html

The century old St. Patricks Catholic Church, Raton, NM.

The century-old, shuttered St. Patrick’s Catholic Church in downtown Raton is up for sale. And what a “great value,” a real estate listing touts, with an asking price of $199,500.

Wendy Mileta went to Mass there years ago. Her parents paid for its stunning stained-glass window in honor of her great-grandparents. Now she is the listing agent for the historic former church that Colfax County records show is owned by the Archdiocese of Santa Fe. Also for sale is a vacated Catholic school in the northeastern New Mexico city of about 7,000.

A dispute over St. Patrick’s and hundreds of other church properties is at the crux of three new lawsuits pending as the archdiocese’s Chapter 11 bankruptcy reorganization enters its third year without a settlement.

The lawsuits allege that more than an estimated $245 million in property owned by the archdiocese was fraudulently transferred to its parishes or their trusts and should be available to help pay claims filed by nearly 380 victims of clergy sexual abuse.

Lawyers for the archdiocese and its 94 parishes deny any fraud and argue in one court filing that the litigation is intended to strip parishes of assets that have “always been beneficially or legally owned by the Parishes.”

A hearing set for Monday could decide whether the lawsuits, filed by attorneys for the victims, should be halted pending an appeal to the 10th Circuit Court of Appeals.

One of the victims’ lawsuits lists the St. Patrick’s parcel in Raton as among more than 400 properties purportedly held by the archdiocese for the “beneficial interest” of its parishes.

But the lawsuit says that the parishes’ interests weren’t recorded in title or county real estate records and that the $59 million worth of property should be part of the archdiocese bankruptcy estate. Lawyers for the parishes say the properties are held in trust “under canon law.”

The archdiocese and parishes are appealing U.S. Bankruptcy Court Judge David Thuma’s Oct. 9 ruling that permitted the victims’ attorney to file the lawsuits.

Thuma, in his ruling, concluded that more “clarity about the rights of the parties and what is estate property” could help efforts to reach a settlement in the case.

“We are not seeking to close any church buildings,” said James Stang, a Los Angeles attorney representing victims in the case. “We are trying to get the archdiocese and the parishes to be serious about selling assets that are not … ‘mission critical.’ ”

For instance, Stang said, the archdiocese has income-producing leases of prime real estate near the Santa Fe Plaza and elsewhere. Some church property is being leased to a Santa Fe jewelry store, a coffee roaster business, and to the city of Santa Fe for a parking lot.

Stang said the archdiocese has insurance policies that do not cover all of the victims’ claims, so “there’s a dynamic going on between what the diocese and parishes can raise and what the insurance companies will pay.” Liquidating property could bridge that financial gap, he said.

“These people (the abuse survivors) who are in their 60s today were the children of this archdiocese,” Stang said. “They (archdiocese officials) want to talk about healing, but they never want to talk about compensating. I sometimes take a step back and wonder, why have these people been abandoned?”

The lead attorneys representing the archdiocese and the parishes didn’t return Journal requests for comment. Neither did the pastor of the current Catholic church in Raton – St. Patrick’s-St. Joseph’s.

St. Patrick’s merged with Raton’s other Catholic parish, St. Joseph’s, in the late 1980s, and church functions moved to the larger St. Joseph’s, a mile away.

In filing for bankruptcy in December 2018, the archdiocese reported owning nearly $50 million in real estate, cash and investments.

The additional $245 million or more in other assets had been transferred out of the estate before the bankruptcy filing as part of a financial restructuring plan to benefit parishes and shouldn’t be available to victims, the archdiocese has maintained.

“These issues are weighty and enormously significant for tens of thousands of parishioners as well as the creditors,” Charles Robert, a Tucson attorney representing parishes, wrote in a court filing seeking a stay of the pending lawsuits.

Archdiocese attorneys contend that putting the lawsuits on hold “would also preserve estate and parish assets which would otherwise be spent and forever lost on litigation and defense costs.”

Court records show that attorneys in the case have billed at least $2.4 million in fees and costs.

Last month, the archdiocese announced a cost-cutting measure to lay off 20 people at its Albuquerque headquarters and cease publication of the Archdiocese of Santa Fe’s magazine, citing the bankruptcy and the COVID-19 pandemic.

News clippings show the original St. Patrick’s Catholic Church in Raton, dedicated in 1907, cost $13,000 to build and furnish. The Catholic community in the area and the parish pastor were credited with raising money to help establish the church.

“What a beautiful piece of history you can own!” the online real estate description of the property says.

Mileta said she is still a practicing Catholic but doesn’t know much about the bankruptcy case unfolding 230 miles away in Albuquerque.

“I haven’t heard that anybody (in Raton) even knows it’s in bankruptcy,” she said.

The old church and school parcels have been on the market since September, and now there’s “somebody interested (in buying) both,” Mileta said.

But it wasn’t clear last week where the proceeds will go if the property is sold – to the archdiocese or to the St. Patrick-St. Joseph parish.

The old church, adjacent rectory and closed school are listed in Bankruptcy Court filings as being part of a $5.8 million property in Raton being “held in trust for parishes.”

Other small-town parishes, such as those in Questa, Chimayó and Española, also have multimillion-dollar real estate assets held in trust for them by the archdiocese, the filings show.

The victims’ lawsuits also take aim at other properties transferred into a deposit and loan fund administered by the archdiocese, and an archdiocese real estate corporation.

The archdiocese contends in one court filing that if victims’ lawsuits are allowed to proceed during the appeal, the archdiocese, the parishes and the trusts will be “irreparably harmed.”

While the creditors’ committee of victims “no doubt believes that it will eventually recover substantial assets … the fact is that the litigation will be vastly expensive, with no guarantee of success,” the archdiocese motion says.

Stang, who has represented more than 2,500 victims in sexual abuse claims against the Catholic Church in a dozen bankruptcy cases nationwide, said the Santa Fe archdiocese case is one of a few in which he believes assets were transferred “intentionally to keep property away from abuse survivors.”

“We believe these transfers were made with the purpose of delaying creditors,” he said. “It was a fraud … to delay creditors and abuse survivors in particular.”

“We recognize the archdiocese is going to continue serving Catholics, both religiously and in a social service way,” Stang said. “We are trying to find a balance between the church continuing its mission and fulfilling its mission to these survivors. The sad part of this case is it doesn’t seem like getting these people compensation is part of the church’s mission. I’m not even sure it’s secondary to them at this point.”