updated 8/26/2005 9:49:37 PM ET 2005-08-27T01:49:37

A federal bankruptcy judge ruled Friday that all the parish churches, parochial schools and other property of the Catholic Diocese of Spokane can be liquidated to pay victims of clergy sexual abuse.

The decision, expected to have ramifications for dioceses across the nation, is a major defeat for Spokane Bishop William Skylstad, who had argued he did not control individual parishes and thus they were not available to cover settlement costs.

“It is not a violation of the First Amendment to apply federal bankruptcy law to identify and define property of the bankruptcy estate even though the Chapter 11 debtor is a religious organization,” U.S. Bankruptcy Judge Patricia Williams wrote.

Skylstad said he will appeal the decision “because we have a responsibility, not only to victims, but to the generations of parishioners ... who have given so generously of themselves in order to build up the work of the Catholic Church in Eastern Washington.”

David Clohessy, national director of Survivors Network of those Abused by Priests, said the decision should make other bishops think twice about trying to protect assets by filing for bankruptcy.

The dioceses of Portland, Ore., and Tucson, Ariz., also have filed for bankruptcy.

‘Like cold-hearted CEOs’
“We applaud this decision and hope it speeds the day when hundreds of deeply wounded and still hurting abuse victims get some relief and healing,” Clohessy said, adding he hoped “bishops will act more like caring shepherds and less like cold-hearted CEOs.”

Skylstad, head of the U.S. Conference of Catholic Bishops, had argued that only about $10 million worth of real estate and other assets directly under his control were available to settle lawsuits brought by 58 victims of sexual abuse. The cases forced the Spokane Diocese to declare bankruptcy in December.

But attorneys for the victims argued that the bishop holds title to and controls more than 82 parish churches, 16 parochial schools, Catholic cemeteries and other property in eastern Washington state. Victims contended the bishop’s financial assets total more than $80 million.

The Spokane case is the first in which the issue of parish ownership has been decided by a judge.

The Spokane Diocese has 10 days to appeal the decision, and likely will go to U.S. District Court, attorney Shaun Cross said.

Issues in appeal
The appeal will focus on issues of religious freedom and argue the judge’s decision improperly pits the diocese against its parishes, Cross said.

In the bankruptcy case of the Archdiocese of Portland, Ore., lawyers for members of 124 parishes last month argued that they, not the archdiocese, owned $600 million in church assets and property. More than 240 abuse claims are pending against the Archdiocese of Portland, seeking at least $400 million in damages. The archdiocese has said it has only about $19 million in assets.

The Spokane decision does not automatically apply to the Portland case, Cross said, but it could influence that judge.

In the other bankruptcy case, a federal judge last month approved a reorganization plan for the Diocese of Tucson, paving the way for it to become the first in the nation to emerge from bankruptcy.

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