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A Spokane, Wash., judge will hear arguments in June on one of the most basic, highly charged and judicially thorny questions facing the U.S. Catholic Church and its use of bankruptcy protection—namely, when a diocese is in Chapter 11 protection, what’s the legal standing of an individual parish? Judge Patricia Williams of the U.S. Bankruptcy Court for the Eastern District of Washington has set June 27 as the date for a hearing on a partial summary judgment motion against the bankrupt Spokane diocese and the 81 parishes within its territory. Williams said she would rule on the parish-standing question at that hearing. When she does, Catholic dioceses across the nation will hang on her words because plenty still face potentially crippling litigation associated with sexual abuse by priests. The Spokane diocese claims that it holds parish property in trust for individual parishes and, as such, should exclude from its estate dozens of churches and schools. If Williams determines that parishes do not exist as separate legal entities, then the diocese would have a much tougher time establishing a trustee relationship. A committee of tort litigants in February brought the adversary motion against the diocese and named 131 parishes, schools and other church entities as co-defendants. The motion demands that the parish properties be included as part of the debtor’s estate, something that could potentially increase the value of the holdings several times over. The parishes have responded that they aren’t part of the estate, aren’t debtors, and are therefore outside the reach of the bankruptcy court and the tort committee. In fact, the parishes say in legal briefs, several have claims as unsecured creditors. As a result, the parishes have filed cross-motions asking for summary judgment in their favor. They also filed on May 2 a motion asking Williams to dismiss them as defendants in the committee’s complaint. (The diocese and the parishes must file their response to the summary judgment motion brought by tort litigants by May 27.) Williams can decide for one side or the other, or order them on to trial. Sexual abuse suits The diocese filed for Chapter 11 protection on Dec. 6, 2004, in the face of 19 lawsuits involving nearly 60 plaintiffs that accuse the diocese of neglect in supervising sexually abusive priests. The first lawsuit was scheduled for trial in January. The bankruptcy filing stayed the lawsuits, but not the legal issues regarding what the assets of the Spokane diocese-or other Catholic ones like it throughout the nation-are. Like the two other bankrupt dioceses in the United States-in Tucson, Ariz., and Portland, Ore.-Spokane maintains that it owns no parish property, even if it holds legal title under a nonprofit designation called “corporation sole.” In corporation sole, the office of the bishop is the lone holder of deeds to various parish churches and schools. The dioceses all claim that their role is that of trustees to the parishes, which are the ultimate beneficiaries under a religious code called canon law. Under this code, parishes have standing as “juridic persons,” an ecclesiastical designation that translates roughly as “fictional” persons. The dioceses steadfastly reject any other interpretation of the relationship between them and parishes as both misplaced and an infringement on religious freedom. “We’re arguing that civil courts must defer to the church in its recognition of parishes as separate legal entities,” said the diocese’s lead debtor counsel, Shaun Cross of Spokane-based Paine, Hamblen, Coffin, Brooke & Miller. Juridic person “is a separate legal entity and recognized as such within the Catholic Church,” he said, adding that canon law is a legitimate legal code that predates civil law. The Spokane diocese is also expected to argue that Washington state law recognizes the relationship between the diocese and parishes as an expressed trust. Under the Washington state law definition of corporation sole, Cross argues, the bishop holds property in trust for the church’s use. But tort litigants’ counsel reject canon law as a legal benchmark, arguing that the court shouldn’t look to the church’s regulations for guidance on the legal relationship between the diocese and parish when it applies to outside parties.

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