In a decision that came as good news for Spokane parishes, U.S. District Judge Justin Quackenbush on Thursday reversed an earlier judge's ruling that the Spokane Diocese owns individual parish properties and thus could sell them to cover settlements for abuse victims.

Quackenbush said that while the Spokane bishop held the deeds to individual parishes, the parishioners paid for the properties and, therefore, the bishop was only holding the properties in trust, attorneys said.

Quackenbush said U.S. Bankruptcy Court Judge Patricia Williams erred in her decision in August that the properties were not held in trust. Quackenbush turned the final decision of who owns the parish property back to Williams.

"The practical result of the decision today was that parishes own their own properties," and therefore the diocese cannot sell them to cover payments, said Shaun Cross, attorney for the diocese. "It was kind of a tour de force decision."

For months, the Spokane Diocese has been in turmoil, with some parishioners anguished over the prospect of losing their churches and schools, and abuse victims feeling as if they were being cast as villains who didn't care about the parishes. Ford Elsaesser, an attorney for an association of Spokane parishes, said he was pleasantly surprised by Quackenbush's ruling. "We think he made the right decision."

Mark Mains of Edmonds, an abuse victim, said, "I'm just sad. Not necessarily because they win this one or we win this one ... . I just wish we were closer to the end."

James Stang, an attorney for the victims, said he came away with the impression that Quackenbush would instruct Williams to conduct a trial on the issue of who owns the property. Stang's position is that money used by parishioners to purchase property was a gift, not payments toward ownership.

Parishioners were especially fearful of losing their churches and schools after the diocese announced a $45.7 million settlement proposal with 75 abuse victims. That proposal was rejected by Williams last month. She said it would be unfair to specify an amount for those 75 victims but not for others who haven't filed lawsuits or come forward.

All sides are scheduled to start mediation talks July 7 in Reno, Nev. Cross said the decision means people who thought that parish property "was a blank check to be drawn on during mediation — I think this decision disrupts that quite a bit."

Spokane Bishop William Skylstad thinks the $45.7 million settlement proposal for that group of victims is reasonable, Cross added.

Quackenbush's decision could have ramifications beyond Spokane. The Portland Archdiocese also is going through bankruptcy, and a judge there ruled in December that the archdiocese owns the parish property. That ruling is in appeal.

Portland Archdiocese attorneys attended the Spokane hearing Thursday, Cross said.

Fred Naffziger, professor of business law at Indiana University South Bend, expressed surprise about the ruling. "I thought previous court decisions and the law pointed them down the road that there was no trust."

Although he expects the decision to be appealed and courts in other jurisdictions are not bound by it, the ruling could have persuasive value, Naffziger said. "Certainly, you can expect the church in Portland to now make kind of a parallel argument."

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

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