Update: Six years on the Eighth Circuit Court of Appeals has come to the same conclusion with respect to the relationship between the parishes and the Archdiocese of Minneapolis: parish assets are not available to pay claims against the Archdiocese. Read about it in the Minneapolis Star Tribune here.
I'm confident that folks are aware that a number of (arch)dioceses of the Roman Catholic Church have sought relief under the Bankruptcy Code. To the best of my knowledge, all of these filings have arisen from claims of persons (mostly now adult men) who as children were sexually abused by priests. Bankruptcy provides a forum for payment of at least part of those claims; they generally cannot be paid in full because there are not enough assets or money in the diocesan coffers. But what about other assets such as the real estate of local parishes; are they a resource to pay a greater portion of the claims against the diocese?
The answer is "no" according to the Bankruptcy Court for the Eastern District of Wisconsin. The archdiocese of Milwaukee filed under Chapter 11 on January 4, 2011 and, not surprisingly, didn't volunteer parish assets to fund a plan of reorganization. The creditors' committee, which represents the interests of all unsecured creditors, filed several motions to the effect that parish assets should be part of the pot distributed to creditors; a "reverse" piercing of the corporate veil, so to speak. The Committee lost on all counts.
In short, Judge Susan V. Kelley held that
As one thoroughly unfamiliar with Roman Catholic canon law, I had thought--mistakenly as it turns out--that the bishop held all property of a diocese as a "corporation sole." It is in fact the case that there are 210 parishes in the archdiocese of Milwaukee, and each is separately incorporated. Indeed most had been incorporated since the nineteenth century. A prudent move, it seems, in light of the events of the twentieth.
I'm confident that folks are aware that a number of (arch)dioceses of the Roman Catholic Church have sought relief under the Bankruptcy Code. To the best of my knowledge, all of these filings have arisen from claims of persons (mostly now adult men) who as children were sexually abused by priests. Bankruptcy provides a forum for payment of at least part of those claims; they generally cannot be paid in full because there are not enough assets or money in the diocesan coffers. But what about other assets such as the real estate of local parishes; are they a resource to pay a greater portion of the claims against the diocese?
The answer is "no" according to the Bankruptcy Court for the Eastern District of Wisconsin. The archdiocese of Milwaukee filed under Chapter 11 on January 4, 2011 and, not surprisingly, didn't volunteer parish assets to fund a plan of reorganization. The creditors' committee, which represents the interests of all unsecured creditors, filed several motions to the effect that parish assets should be part of the pot distributed to creditors; a "reverse" piercing of the corporate veil, so to speak. The Committee lost on all counts.
In short, Judge Susan V. Kelley held that
The Committee has failed to state a plausible claim that the Debtor and Parishes failed to observe corporate formalities, that funds were siphoned, that officers or directors of the Parishes were nonfunctional, or that there was an absence of corporate records. Absolutely no facts were alleged to make plausible a claim that the Debtor and the Parishes “egregiously ignored” corporate formalities or that control was so “pervasively exercised” to apply the alter ego doctrine in this case.This is the case even though "canon law requires the Debtor to provide some financial guidance to the Parishes."
As one thoroughly unfamiliar with Roman Catholic canon law, I had thought--mistakenly as it turns out--that the bishop held all property of a diocese as a "corporation sole." It is in fact the case that there are 210 parishes in the archdiocese of Milwaukee, and each is separately incorporated. Indeed most had been incorporated since the nineteenth century. A prudent move, it seems, in light of the events of the twentieth.
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