Ruling Backs Diocese on Assets

By Carol McGraw
Oregonian [Bend OR]
May 15, 2003

BEND -- In a decision that could complicate efforts by sexual abuse victims to collect damages from the Roman Catholic Church, an Oregon judge on Wednesday ruled that the Diocese of Baker can transfer millions of dollars in property and cash to its parishes and missions.

Deschutes County Circuit Judge Michael Adler said the plaintiffs had not shown the planned transfer to be a fraudulent attempt by the diocese to limit its ability to pay damages in a pending $60 million sexual abuse case.

The ruling could leave the individual parishes open for lawsuits, a course the plaintiffs intend to pursue if necessary, their lawyer said Wednesday.

Holding individual parishes liable for the misdeeds of priests presents legal challenges, said David Skeel, a Pennsylvania law professor and expert on bankruptcy and fraudulent conveyances.

"You'd have to prove that in some way each parish was responsible for the actions of the priest," he said. "What you'll probably find in these sorts of cases is that maybe one or two parishes might be, but not all of them."

Despite that challenge, Skeel thinks Wednesday's ruling will cause other dioceses across the United States to consider incorporating their parishes.

The ruling left David Clohessy, national director of Survivors Network of Those Abused by Priests, nervous.

"Certainly our fear historically has been that churches have been very creative in using every legal roadblock or delay tactic," he said. "This new structuring is one more impediment to victims seeking justice. I fear we'll see a lot more transferring of assets, which will make it more difficult."

The plaintiffs in Deschutes County case are 18 men who have accused the Baker and Portland dioceses of covering up the sexual transgressions of the late Father David Hazen. In their lawsuit against the Diocese of Baker, the men asserted that any movement of funds from the diocese to individual parishes during litigation is illegal under Oregon's Fraudulent Transfers Act.

In his Wednesday ruling, Judge Adler dissolved a temporary restraining order he had issued in February freezing the diocese's assets and denied a preliminary injunction that would have made permanent the earlier ruling.

The Most Rev. Robert Vasa, bishop of the Diocese of Baker, lauded the ruling. "I think that the parishes will be relieved to know that what their fathers and grandfathers built is considered theirs and will now remain in their hands as their property," Vasa said after court Wednesday.

In testimony last week Vasa said he had created individual corporations for some 60 parishes and missions in order to bring them in compliance with the church's canon law, the ancient ecclesiastic regulations of the church. He said he started work on incorporating the parishes when he began serving as Baker bishop three years ago.

The property being transferred to the parishes is valued at $19 million. That would leave the diocese with about $5 million in cash, potential insurance and its own property, totaling maybe $11 million, church officials have estimated.

Vasa incorporated the parishes in October 2002. The sexual abuse lawsuit against the diocese had been filed in 2001.

Vasa said he had made similar changes in the Lincoln, Neb., diocese where he previously served. But in that instance there was no ongoing litigation. Originally, the diocese, along with most dioceses in the West, was organized as a corporation sole, meaning it had control and ownership of the assets of the parishes and missions.

Legal experts said Wednesday's ruling is only a partial victory for the church because the judge rejected the bishop's contention that the diocese was never the legal owner of any property but merely holding the property in trust for the parishes.

Some dioceses around the country have floated the idea that the church property did not belong to the dioceses but to the parishes in trust, and thus they could potentially prevent bleeding of the church assets by transferring property to the parishes. Adler knocked that argument down in this particular case, saying the diocese was the owner of the property, legal experts say.

"Under Oregon law, the property initially was not owned by the individual churches, but the diocese as a corporate sole," Adler said in his ruling.

That ruling is significant, said David Slader, Portland attorney for the plaintiffs, because it means the Baker diocese cannot protect its resources from lawsuits merely by transferring the resources to parishes.

So far, the U.S. Catholic Church owes more than $1 billion in legal expenses, court settlements and judgments in the nationwide sexual abuse scandal. Some underinsured dioceses have contemplated bankruptcy.

The dioceses have been the vulnerable entities and the target of most of the sexual abuse lawsuits nationally not only because they have retained financial control in most areas of the country, but as employers they had responsibility for the conduct of the priests they hired.

Gregory Lynch, Bend attorney for the diocese, said the church will transfer title for the disputed properties to the parishes if there is no appeal. He said it would be in bad faith for the plaintiffs to now sue the parishes since they didn't in the first place. Carol McGraw: 541-317-4619;


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