Catholics seek way to protect parishes' assets

By Janet I. Tu and Jonathan Martin
Seattle Times staff reporters

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In the wake of the decision by the Spokane Roman Catholic Diocese to declare bankruptcy, local parishes are banding together to protect their assets and the money donated to them.

Spokane parishes have formed a Parish Rights Association, similar to parish groups that formed in Portland and Tucson, Ariz., after those dioceses declared bankruptcy earlier this year.

The major concern facing these groups is whether assets belonging to individual church congregations can be considered diocesan assets and thus seized to pay creditors.

Under Catholic Church law, facilities and assets of an individual parish belong to the parish, not the diocese. But once a diocese declares bankruptcy, such matters are subject to civil law, and civil law may not agree with church law.

In Portland, creditors are asking a bankruptcy judge to rule on that very issue.

Creditors have filed an adversary proceeding — a minilawsuit of sorts within the bankruptcy case — saying that assets owned by the Portland Archdiocese include all parish assets, properties, buildings and funds held by the archdiocese in trust for the parishes. U.S. Bankruptcy Judge Elizabeth Perris has not indicated when she would rule on the issue.

"The big risk [of bankruptcy] — and this will really scare the bishops if it turns out — is if in Portland the court rules that all the diocese's assets [including the parishes'] are available to the creditors," said Fred Naffziger, an expert in Catholic Church finances at Indiana University South Bend.

The Spokane Diocese announced Wednesday it would file for Chapter 11 bankruptcy on or before Nov. 29. Bishop William Skylstad said the diocese was facing a number of pending and potential lawsuits over sexual abuse by clergy that would cost more than it could afford. It is the nation's third diocese to declare bankruptcy.

In Spokane, talk of parishes banding together started about two weeks ago at a gathering of some 30 priests and parish administrators.

In advance of the meeting, the Rev. Tom Caswell consulted priests in the Portland and Tucson dioceses to hear how they'd responded to bankruptcy filings there. In both dioceses, parishes had banded together and hired lawyers.
 
"There was some concern before. And after talking to Portland and Tucson, that concern went up," said Caswell, pastor of St. Rosa of Lima parish in Cheney, Spokane County.

The association, which will hire a lawyer, is not meant to be adversarial to the bishop but to protect the mission of the parishes, Caswell said. "The people gave money not necessarily to the bishop, but to the local parish or school."

The Rev. Leonard Forsmann, pastor of Holy Family parish in Clarkston, Asotin County, said people in the group have many unanswered questions about what role the parishes would have in bankruptcy proceedings.

"If the diocese does [go] bankrupt, one question is to what extent do parishes have legal claims against them," he said. "The questions are up in the air right now."

Forsmann said his parishioners are anxious about the uncertainty of bankruptcy, but not about losing their church. "My sense is that [sale of churches] is not a strong possibility."

In the Portland Archdiocese, about 45 parishes out of 124 have joined the Committee of Parishes and Parishioners to make sure they have a voice in the bankruptcy negotiations.

The committee was formed because parishioners want to "make sure we can continue our ministries, have a place to worship, educate our children, provide great community services," said Johnston Mitchell, a committee steering member and parishioner at St. Mary Magdalene parish in northeast Portland.

The committee has hired two bankruptcy attorneys who, so far, are working for free. It recently formed a separate nonprofit to hold donations from individuals.

The group also is considering filing as a creditor if need be, said one of its attorneys, Douglas Pahl.

In Tucson, all 75 parishes banded together months before the bankruptcy filing and hired two attorneys. One option they're pondering, according to The Associated Press, is whether the parishes legally can be made independent nonprofit entities.

Tucson Bishop Gerald Kicanas has proposed selling diocesan property and asked parishes to contribute to a fund that would be used to pay off creditors.

Parishes have not decided whether they would contribute to such a fund, instead waiting for the April 15 deadline for creditors to file claims, said Michael McGrath, one of the attorneys representing the parishes.

"I think everyone will look at how large the universe of claimants is and determine if parish contributions are needed and, if so, at what amounts," McGrath said.

Janet I. Tu: 206-464-2272 or jtu@seattletimes.com