In re Roman Catholic Archbishop of Portland in or.

335 B.R. 842

In re ROMAN CATHOLIC ARCHBISHOP OF PORTLAND IN OREGON, and Successors, a Corporation Sole, dba the Archdiocese of Portland in Oregon, Debtor Tort Claimants Committee, Plaintiff, v. Roman Catholic Archbishop of Portland in Oregon, and Successors, a Corporation Sole, dba the Archdiocese of Portland in Oregon, et al., Defendants.

Bankruptcy No. 04-37154.

Adversary No. 04-3292.

United States Bankruptcy Court, D. Oregon.

December 30, 2005.

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Thomas V. Dulcich, Susan Stevens Ford, Margaret Hoffman, Teresa H. Pearson, Thomas C. Sand, Thomas W. Stilley, Portland, OR, L. Martin Nussbaum, Colorado Springs, Co, James L. Phillips, Seattle, WA, for Debtor.

MEMORANDUM OPINION (TORT CLAIMANTS COMMITTEE'S SECOND RESTATED MOTION FOR PARTIAL SUMMARY JUDGMENT)

ELIZABETH PERRIS, Bankruptcy Judge.

The Roman Catholic Archbishop of Portland in Oregon, and Successors, a Corporation Sole, dba the Archdiocese of Portland in Oregon ("debtor" or "the Archdiocese") filed a chapter 11¹ case in 2004. The Archdiocese has taken the position that, although it holds legal title to approximately $98 million in deposits and investment accounts² and an extensive amount of real estate, most of that property is held in trust and, thus, is not available to be used to pay the claims of creditors. The Tort Claimants Committee ("TCC") seeks a determination in this adversary proceeding that the property is property of debtor's bankruptcy estate and is not subject to any interests of anyone else, and to use the bankruptcy trustee's powers as a hypothetical bona fide purchaser to avoid any unrecorded interests of third parties in the disputed real property.

The TCC has filed a series of motions for summary judgment, seeking a determination of various aspects of the pending proceeding. It seeks in this Second Restated Motion for Partial Summary Judgment a determination that debtor's and other defendants' affirmative defenses of lack of subject matter jurisdiction and religious freedom are without merit. It also seeks a declaration that debtor's "parishes and schools have no legal existence separate from or independent of Debtor and do not have the capacity to sue or be sued." Tort Claimants Committee's Restated Second Motion for Partial Summary Judgment ¶ 4. Responses to this motion were filed by associations or groups representing the interests of Marist High School, Central Catholic High School, Regis High School, and the Committee of Catholic Parishes, Parishioners and Interested Parties ("Parish Committee").³ Where those non-debtor defendants' arguments align with debtor's, I will not separately address them, but will consider the arguments made by debtor as including the arguments made by the other defendants.

Debtor in turn filed a cross-motion for partial summary judgment, in which it seeks summary judgment on certain issues. At bottom, its cross-motion seeks a determination that the debtor and the parishes are separate entities.⁴

I. PRELIMINARY MATTERS

There are a number of preliminary matters raised by the parties. I have ruled on those matters in a separate order, entered this date.

II. STANDARD FOR SUMMARY JUDGMENT

The court shall grant a party summary judgment on all or part of a claim or counterclaim "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Fed. R. Bankr.P. 7056.

III. UNDISPUTED FACTS

Debtor is a corporation sole organized under Oregon's nonprofit corporations laws. It does business as the Archdiocese of Portland in Oregon.

The Archdiocese is an ecclesiastical province of the Roman Catholic Church, which is a hierarchical church headed by the Pope. The Archbishop of the Archdiocese ("the Archbishop") has legislative, executive and judicial power within his Archdiocese. Within the Archdiocese of Portland are 124 parishes. The parishes operate with some autonomy from debtor, although the Archbishop has ultimate say over administrative matters of the parishes. Only one parish in the Archdiocese, St. Elizabeth Parish, is separately incorporated as a nonprofit corporation. The rest of the parishes are not separately incorporated. The Archbishop has the authority to and has suppressed parishes within the Archdiocese.

The Archdiocese also has three high schools, which are not connected to any parish and are not separately incorporated ("the Archdiocesan schools").⁵

The TCC filed this adversary proceeding to obtain a determination of whether the disputed personal and real property is property of the bankruptcy estate, and to avoid the interests of others in the disputed real property. In debtor's and the other defendants' answers, they raised affirmative defenses, including claims that this court lacks jurisdiction over the proceeding, and that adjudication of this complaint could entangle the court in religious matters in violation of state and federal law. This summary judgment motion and cross-motion addresses First Amendment and other religious freedom defenses, as well as whether the parishes and schools are legal entities separate from debtor. It does not address whether anyone other than debtor holds any interests in the disputed property.

IV. DISCUSSION

1. Jurisdiction

Debtor alleges as an affirmative defense to the TCC's complaint that, "[t]o the extent this Court does not have jurisdiction over one or more of Plaintiffs claims, such claims should be dismissed for lack of jurisdiction." Defendant Debtor's Answer and Affirmative Defenses at ¶ 50.⁶ Debtor argues that it does not dispute the court's authority to determine what is property of the bankruptcy estate, but raises the defense as a precaution against the court's exceeding the limitations on its jurisdiction that, are imposed by the First Amendment.

The Parish Committee argues that I should not resolve this issue now, because the court could at some time in the future exceed its jurisdiction, so the defense is not ready for determination. It argues that the court has an obligation not to decide constitutional questions if it need not do so, and that the parties agree that the court can apply neutral principles of law to decide this case, without implicating constitutional questions.

Although the parties seem to agree that I can apply neutral principles of law to determine questions about what is property of the estate, they disagree about what that means. Because this jurisdictional question will continue to be an issue if I do not decide it, I will address it now rather than later in order to move this case toward a resolution.

A. Bankruptcy court's jurisdiction to determine property of the estate

The filing of a bankruptcy petition creates an estate, which is made up of "all legal or equitable interests of the debtor in property as of the commencement of the case." § 541(a)(1). Property of the estate does not include property "in which the debtor holds, as of the commencement of the case, only legal title and not an equitable interest . . . ." § 541(d).

District courts are granted original and exclusive jurisdiction over bankruptcy cases, and original but not exclusive jurisdiction over civil proceedings arising under the Bankruptcy Code. 28 U.S.C. § 1334(a) (b). As allowed by statute, the United States District Court for the District of Oregon has referred its bankruptcy cases and related proceedings to the bankruptcy court. U.S. District Court of Oregon Local Rule 2100.1; 28 U.S.C. § 157(a). Bankruptcy judges may hear and determine matters concerning the administration of the bankruptcy estate. 28 U.S.C. § 157(b). There is no question, and the parties do not seem to dispute, that this court has jurisdiction to determine whether property for which debtor holds legal title but claims not to hold equitable title is property of the estate.

The issue arises with regard to limitations on that jurisdiction. The parties dispute the extent to which the First Amendment's religion clauses Emit the bankruptcy court's jurisdiction to determine what is property of the bankruptcy estate when the debtor is, as in this case, a religious organization.⁷

B. First Amendment limitations on jurisdiction

The First Amendment to the United States Constitution provides that "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof. . . ." These protections have two aspects: the law may not require a person to accept any particular creed or form of worship, nor may it restrict a person's right to exercise a chosen form of religion. "Thus, the Amendment embraces two concepts,—freedom to believe and freedom to act." Cantwell v. State of Connecticut, 310 U.S. 296, 303, 60 S.Ct. 900, 84 L.Ed. 1213 (1940).

Out of these protections of religious freedom has grown a restriction on the jurisdiction of the courts to decide certain disputes touching on religious matters. The TCC calls the restriction the "ecclesiastical abstention" doctrine; debtor calls it "church autonomy law." By whatever label, the concept is well-established. "[T]he First Amendment prohibits civil courts from resolving church property disputes on the basis of religious doctrine and practice." Jones v. Wolf, 443 U.S. 595, 602, 99 S.Ct. 3020, 61 L.Ed.2d 775 (1979). Religious organizations have the freedom "to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine." Kedroff v. St. Nicholas Cathedral of Russian Orthodox Church in N. Am., 344 U.S. 94, 116, 73 S.Ct. 143, 97 L.Ed. 120 (1952).

The restriction on the court's jurisdiction does not mean that it may never adjudicate matters involving church property, however.

Thus, the ...