Local Catholic Churches, Schools May Be at Risk after Ruling
A Judge Says the Spokane Diocese Owns Churches and Schools and Can Sell Them to Pay Victims

Associated Press, carried in Walla Walla Union-Bulletin [Washington]
August 27, 2005

A federal bankruptcy judge has ruled that all the parish churches, parochial schools and other property of the Catholic Diocese of Spokane can be liquidated to pay victims of sexual abuse by priests.

The decision - which includes six parishes in Columbia, Garfield and Walla Walla counties and two Catholic schools in the region - may prompt other dioceses across the nation to avoid filing for Chapter 11 protection.

But Spokane Bishop William Skylstad, president of the U.S. Conference of Catholic Bishops, said he will appeal the decision announced Friday.

"We appeal this decision because we have a responsibility, not only to victims, but to the generations of parishioners...who have given so generously of themselves in order to build up the work of the Catholic Church in Eastern Washington,' Skylstad said in a prepared statement.

"Let me assure everyone that ministry will continue in Eastern Washington,' he said.

The decision is considered a defeat for Skylstad, who had argued that he did not control and

could not sell individual parishes to pay victims.

The Rev. Pat Kerst of St. Patrick Catholic Church in Walla Walla said Saturday operations at the church will continue as usual through the appeal process.

"There's no `For Sale' sign yet on the church,' he said.

"Practically nothing's going to change for us until something is decided.'

The Spokane Diocese serves about 90,000 Catholics in 13 Eastern Washington counties, from Metaline Falls on the Canadian border to Walla Walla on the Washington-Oregon line. It filed for Chapter 11 protection in December, listing assets of $11.1 million and liabilities of $81.3 million. Most of the liabilities are sexual abuse claims.

Skylstad has repeatedly apologized to victims of past sexual abuse by priests and said he wants to compensate them fairly, but he has also insisted the Catholic Church must survive in Eastern Washington and continue its ministry.

"That goal, that responsibility, has not changed,' he said.

Arthur Mertens, a former pastor of St. Patrick Church in Walla Walla, is among the priests whose names have been released by the diocese for alleged sexual abuse of children. Mertens was assigned to St. Patrick Church from 1981-89, and allegations surfaced in 1989. He subsequently retired from the priesthood.

Additionally, the diocese settled claims of abuse by then Brother August Ludwig, who served as principal at DeSales Catholic School in the 1970s. At least five abuse claims were filed against Ludwig. All the subsequent settlements were sealed.

David Clohessy of St. Louis, Mo., the national director of Survivors Network of those Abused by Priests, said the decision should make other bishops think twice about trying to protect assets by filing for bankruptcy, as the Spokane, Tucson, Ariz., and Portland, dioceses have done.

"We applaud this decision and hope it speeds the day when hundreds of deeply wounded and still hurting abuse victims get some relief and healing,' Clohessy said, adding he hoped "bishops will act more like caring shepherds and less like cold-hearted CEOs.

With many Catholic dioceses across the nation facing lawsuits from victims of sex abuse, this decision was being closely watched.

Lawyers for the Spokane Diocese had argued the bishop holds in trust legal title to individual parish churches and other Catholic assets, but does not actually control those assets and cannot sell them. They based their claim on church law.

Skylstad contended about $10 million in assets directly under his control was available to settle lawsuits brought by 58 victims of sexual abuse.

But attorneys for the victims argued the bishop actually controls more than 82 parish churches, 16 parochial schools, Catholic cemeteries and other property. Victims contended the diocese's financial assets totaled more than $80 million, and that it should be treated like other businesses.

U.S. Bankruptcy Judge Patricia Williams ruled in favor of the victims, noting she expected her decision to be appealed.

"It is not a violation of the First Amendment to apply federal bankruptcy law to identify and define property of the bankruptcy estate even though the Chapter 11 debtor is a religious organization,' Williams wrote in a 50-page decision.

It is also proper to use state law, rather than church law, to determine the size of the estate, Williams said. "The disputed real property constitutes property of the estate.'

The Spokane Diocese has 10 days to appeal, and likely will go to U.S. District Court, attorney Shaun Cross said.

No church property will be sold while the case continues, Cross said.