updated 6/15/2006 8:21:21 PM ET 2006-06-16T00:21:21

A federal judge ruled Thursday that individual parishes of the Catholic Diocese of Spokane are not owned by the bishop and thus cannot be sold by him to pay claims by sex abuse victims, lawyers for both the diocese and the victims said.

The ruling, which overturned a key bankruptcy court decision, may have national implications in other clergy sex abuse cases.

It was a huge victory for some 80 parishes that risked losing churches, schools and other facilities to pay the claims of victims. It was a loss for the abuse victims, who are left with the much smaller assets of the bishop to divide in any settlement.

In his oral ruling, U.S. District Judge Justin Quackenbush reversed a ruling last August by U.S. Bankruptcy Judge Patricia Williams, who had held that the bishop held title to all parish assets.

Quackenbush remanded the case back to Williams.

"It reduces the pot at this point," said Gayle Bush, one of numerous lawyers representing victims. "The judge strongly encouraged the parties to settle their differences."

Diocese’s lawyer: Huge victory
Shaun Cross, a lawyer for the diocese, called the decision a huge victory and predicted it would lead to serious settlement talks during a mediation session set for July 7.

"The parishes paid for the land of the individual parishes, paid for the operation of the parishes and held a resulting trust," Cross said. "Yes, the bishop has legal title, but the beneficial interest is held by each of the parishes."

In the past, Spokane Bishop William Skylstad has said the bishop's office has assets of some $11 million. But the pot of money, counting assets of individual parishes, had been estimated at more than $80 million.

The diocese filed for bankruptcy protection in 2004, citing claims by abuse victims of about $81.3 million against assets of about $11 million. About 185 individual claims of sex abuse have been filed against the diocese.

Skylstad, president of U.S. Catholic bishops, was among clergy accused of sexual abuse in the bankruptcy claims. He has vehemently denied the allegation.

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