The Right Coast

July 07, 2004
Bankruptcy law and canon law
By Tom Smith

This is interesting, at least to law professors: for purposes of federal bankruptcy law, are the assets of a Roman Catholic parish assets of the diocese, or of the individual parishes? If parish assets are counted as assets of the diocese, then the diocese is not insolvent and so should not be entitled to bankruptcy protection, very bad news for the church, but good for plaintiffs' lawyers and maybe even plaintiffs. If these assets belong to the parishes and not to the diocese, then bankruptcy protection is available, presumably. The argument that the assets really do belong to parishes I should think is pretty good. Parish control of certain assets is provided for by a law older than that of the United States. It's not merely custom, nor anything that could be called a fraudulent transfer. All the incidents of ownership are there, I would guess. But the only actual corporate entity in sight is the diocese, the corporation sole represented by the bishop. Surely the courts will have to sort this out, with the help of some law professors.

This all relates to what you might call the political economy of child abuse. A principal reason why the Catholic Church is singled out as a hotbed of child abuse, when there is no good reason to think priests abuse children any more frequently than Protestant pastors, Mormon bishops or Communist summer camp commisars, is that the organization of the Church makes it a much more desirable target for plaintiffs' lawyers. If each parish were a separate corporation, the course of this scandal would have run very differently. Mysteriously, shallow pockets are must less prone to the evils policed by lawyers. The American Catholic Church really should hire some big, deep thinking firm to consider incorporating every parish separately. Each could be a not-for-profit and they could be structured so that the bishop controlled each parish corporation. You could, I should think, do it all in a way consistent with canon law. Easy to say in hindsight, I know, but if that had been done twenty years ago, things would be much better now for the Church.