Court weighs what church assets are vulnerable in sex-abuse suits

PORTLAND — In the seaside town of Florence, parishioners at St. Mary's Catholic Church have pledged $1.9 million toward a major building expansion.

But attorneys for at least 72 men and women who say they were sexually abused by the church over the years have their eye on that money and much more elsewhere to help settle lawsuits totaling $534 million against the bankrupt Archdiocese of Portland.

So St. Mary's, 123 other parishes, 24 missions and 44 Roman Catholic schools in Western Oregon are moving fast to prove that parishioners intended their money only for building and running their parishes and schools.

By today, the archdiocese must present the Bankruptcy Court with a list of 10 parishes it wants for test cases and to argue eventually that those parishes can claim a right to their own assets. A court hearing is scheduled for May 9.

If they fail, Bankruptcy Judge Elizabeth Perris could rule that all assets registered in the archdiocese's name belong unequivocally to the archdiocese, making them available to claimants.

If that happens, the archdiocese could continue to argue that it holds those assets in trust not for the parishes, but for individuals or organizations that donated toward specific purposes.

The archdiocese in August became the first in the country to declare bankruptcy. It acknowledges holding titles to vast assets, but only in trust. Roman Catholic law recognizes parishes as separate entities, and the archdiocese contends the court can't rule on the issue without illegally becoming entangled in religious law.

"Does the Catholic Church have the right to impose its internal rules on the state of Oregon and the United States of America?" Albert Kennedy, attorney for the committee that represents plaintiffs, asked in December. "That really is the threshold issue here."

Kennedy said the archdiocese has argued three times since 1979 that its schools have no separate civil legal existence.

In 1979, for example, the archdiocese won a dispute with the Oregon Employment Department, arguing that its school employees were exempt from unemployment taxes because the schools were intertwined with the archdiocese's corporate structure. And in 1990 it argued that its schools, as arms of the church, were not subject to Oregon employment law. It lost the latter case in the U.S. Supreme Court.

In December the archdiocese's expert on religious law, attorney Martin Nussbaum, said federal case law required the judge to consider all evidence, including internal church law, in determining the issue.