Judge rules church property subject to bankruptcy settlement
By WILLIAM McCALL
AP Business Writer
PORTLAND, Ore. (AP) -- A bankruptcy judge ruled Friday that the Archdiocese of Portland, not its parishes, owns church assets, dealing a major blow to its efforts to protect church property from lawsuits filed by alleged victims of priest sex abuse.
The Portland archdiocese became the first in the nation to declare bankruptcy when it filed for protection from creditors in July 2004, just before the scheduled start of jury trials for victims seeking more than $155 million in damages.
Since then, the archdiocese has been trying to protect church buildings throughout Western Oregon from being included in settlements with alleged victims, arguing that the properties are owned by individual parishes, and not the archdiocese.
Dozens of abuse claims are still pending against the archdiocese, seeking at least $400 million in damages.
The ruling by U.S. Bankruptcy Judge Elizabeth Perris settles one of the main questions on the bankruptcy - whether accepting the jurisdiction of a federal court might violate the First Amendment rights of the church to the "free exercise" of religion by forcing it to ignore church law on ownership.
"There is no First Amendment impediment to this court's jurisdiction," Perris wrote.
The ruling means that in principle, church real estate can be used for settlements with sex abuse victims.
However, Perris left open the question of whether the sale of individual church properties could pose an unfair burden on the practice of religion under the Religious Freedom and Restoration Act of 1993.
Her ruling supports an earlier decision in the bankruptcy of the Diocese of Spokane in Washington state, which sought protection from creditors shortly after the Archdiocese of Portland.
In the Washington case, U.S. Bankruptcy Judge Patricia Williams said Spokane Bishop William Skylstad agreed to abide by federal law when he voluntarily entered the diocese into bankruptcy, and cannot claim that ownership must decided by church law.
Perris also rejected archdiocese arguments that church law - canon law - should trump federal law when determining ownership of assets.
The archdiocese had claimed that applying federal law could violate the First Aendment by disrupting the internal governance of the church.
Perris wrote that the archdiocese "argues that, if this court does not apply the church's canon law view of property ownership in the civil bankruptcy arena, the result will be a realignment of the church's polity in violation of the First Amendment."
"I disagree," she wrote.