Cause for conflict: The Catholic Church and property rights in American law

In what is now a decades-long trend, reports of American Catholic dioceses declaring bankruptcy continue to filter into the news.

To a large extent, this financial retreat is fallout from the ongoing clergy sexual abuse scandal and the legal liabilities it has carried. But it is also the latest chapter in a long history of struggle, as the Catholic Church has sought to secure and defend its property rights within the context of American civil law.

The case of Maryland

Before the American Revolution, the ownership of ecclesiastical property was not a live question in most of the British colonies, where the legal status of Catholics was tenuous, Catholics were few, and Catholic churches were rare. Church leaders were more concerned with survival and with ministering to a widely scattered flock than with acquiring and managing real estate. In Maryland, however, Catholics were more numerous and priests were largely free to exercise ministry. The religious use of property was thus permitted and, consequently, the Church faced immediately some of the problems that would characterize ecclesiastical property ownership in the American context going forward.

The Maryland colony was established in 1634, in part as a refuge for Catholic settlers who wished to escape the oppressive anti-Catholic laws of post-Reformation England. Jesuit priests were on the first shipload of colonists to arrive, and they played a role in shaping the colony’s property regime. In an early legislative debate over the repeal of the colony’s Act to Prevent the Growth of Popery (1718), Jesuit Father Peter Attwood argued successfully that Maryland—not English—law obtained in the colony.

This argument was reprised during a property dispute in the 1720s. A priest had willed his property to a Catholic mission in Maryland. Upon his death, his Anglican brother challenged the bequest, arguing that England’s Act for the Further Preventing the Growth of Popery forbade priests from owning property. The lawyer for the Catholic heirs countered that England’s laws did not apply in Maryland; in fact, the colony had passed its own act to prevent the growth of popery, and in that version there was no prohibition on individual priests owning property. An English court accepted the Catholic argument and the priest’s property remained in Catholic hands.

In this way, Maryland Catholics protected their property by appealing to the colony’s anti-Catholic law over and against the empire’s anti-Catholic law.

Individual Catholics continued to hold property throughout the period, and some of them accumulated a great deal. Among them was Charles Carroll of Carrollton, who helped to ensure that the constitution of the new state following independence would return to the animating principle of the first Lord Baltimore: preservation of rights—including property rights—to all, regardless of religion.

There was one significant exception to this freedom, however, which involved the disposition of property. The Declaration of Rights, which became part of the Maryland Constitution, included article 34, which prohibited gifts of property to “any minister, public teacher or preacher of the gospel, as such, or to any religious sect, order or denomination, or to or for the support, use or benefit of, or in trust for, any minister, public teacher or preacher of the gospel, as such, or any religious sect, order or denomination.” According to Maryland legal historian Alfred Niles, article 34 was understood to be “analogous to the British statutes of mortmain,” which were intended to prevent ecclesiastic individuals or institutions from accumulating property that would remain in their possession in perpetuity.

Thus, the trajectory was set for American property law in the early decades of the New Republic. Religious bodies would not be permitted to hold property as institutions, but religious individuals—including Catholics—might buy and own as much property as they wished. The legal foundation was laid for a Catholic Church that would enjoy the use of extensive real estate, but one that would also be rife with conflicts over the control of that property.

Property, Church, and State in the nineteenth century

The relationship between church and state, and between property law and canon law, continued to develop in complicated and sometimes ironic ways over the course of the nineteenth century.

Disestablishment of state churches—which might be seen as an effort to disentangle church from state—actually led to extensive involvement of government in religious affairs. The removal of official state support for church institutions, legal scholar Sarah Gordon observes, was “the prelude to a gradual yet broad-ranging nationwide attempt to limit the ability of religious organizations to acquire and hold wealth.”

In Gordon’s view, whereas mortmain in the English context had been primarily about preserving income for the Crown (taxes could be avoided by lodging property in the church), in the American context, it was primarily about limiting the power of churches. To what extent the sentiment driving this effort to restrict church power was anti-Catholicism specifically as opposed to more general fear of religious tyranny is an open question.

In any case, the nature of Catholic property-owning remained unsettled. The emergence of corporation laws in the nineteenth century—and their extensive use by religious bodies—enabled many Catholic institutions such as parishes and religious orders to normalize their affairs to some extent, but this process itself was not without strife. There were, for example, extensive and rancorous “trustee controversies” that roiled the Catholic communities in many cities, as bishops and pastors fought lay trustees for control of church lands. Corporation laws, meanwhile, did not entirely solve the problem of reconciling canon and civil law.

The incompatibility of canon law and civil law

The matter of church property is dealt with in the Catholic Church’s Code of Canon Law in book 5 under the heading of “the temporal goods of the Church.” These statutes concerning property ownership by the Church exhibit peculiarities and ambiguities that have had consequences for the American church.

One peculiarity is the identity of juridic persons. A juridic person is an aggregate (versus individual) and fictitious (versus natural) person, fulfilling in canon law a function similar to that of a corporation in American civil law. Parishes and dioceses are juridic persons; priests and bishops are not. All church property belongs to juridic persons. Priests and bishops are not owners, then, but instead canonical administrators or stewards, who serve a role similar to that of corporate trustees or directors in civil law.

Canon 1284 states that stewards must ensure that ownership of property is protected through civilly valid methods—in sum, that the legal title to property must be properly registered with the relevant civil authority. In their excellent treatment of canon law on property, Adam Maida and Nicholas Cafardi explain what this means in the American context: “The form of these corporations [incorporated juridic persons] must be such that the canonical steward has the civil law authority to carry out his or her canonical obligations in faith and in administration of the affairs of these corporations.” Canon 1284 further stipulates that administrators have an obligation to honor the intentions of the donors of church property.

Thus, as administrators strive to organize church property according to civil law, they must simultaneously seek to serve the ends of canon law, such as retaining proper authority and honoring the intentions of donors. Exactly how this is to be done remains uncertain because the juridic person is, from the viewpoint of civil law, a peculiar entity: “The public juridic person, as such, has no civil law equivalent and no civil law identity. Its only existence is juridical in the canon law. It is a religious concept and not a civil one.”

To this peculiarity is added the complication of an ambiguity: while canon law recognizes the ownership of goods by any of various juridic persons, it simultaneously grants to the bishop authority over all church property within his diocese and to the pope “supreme authority” over all church property everywhere. The distinction between authority and ownership does not have an exact analogue in civil law, and therefore the relationship of the hierarchy to parcels of church property at the parish level has been a problematic one. In other words, administrators are obligated to follow both canon law and civil law, yet the two are not necessarily compatible.

Historically, there have been five possible ways of holding church property in the United States: 1) corporation sole; 2) nonprofit religious corporation; 3) charitable trust; 4) unincorporated religious association; and 5) fee simple. These five legal arrangements may be further refined according to whether property is organized in a unified fashion under the auspices of the diocese, or instead as individual parish entities. A unified structure includes 1) corporation sole (with the bishop as the sole director and the parishes as separate corporations or divisions of the diocesan corporation); 2) nonprofit corporation (with the bishop as the only member and again with parishes as either separate corporations or divisions of the diocesan corporation); 3) charitable trust (with the bishop as the trustee); or 4) fee simple (with the bishop as the actual owner). An individuated structure would have each parish as 1) a membership corporation; 2) a nonprofit religious corporation; 3) a charitable trust (with the pastor as administrator); 4) an unincorporated religious association; or 5) owned fee simple (with a layperson or a pastor holding title).

Some of these are evidently more aligned with the requirements of canon law than others. Since pastors and bishops are not juridic persons, their owning property in fee simple clearly contradicts canon law. This arrangement can no longer be found, but it was used in the early days of the Church, when corporations were rare and church structure was rudimentary. American Catholics were compelled to innovate during the nation’s early years in part because civil law prevented arrangements that would have been favored by canon law. In some states, for example, anticlerical and anti-Catholic sentiment generated corporation statutes that required that ecclesial property be held in trusts whose boards were populated by laypeople.

In 1911, the Vatican issued norms for American bishops indicating that the parish corporation was the preferred method. Whether this remains the method favored by Rome appears to be a matter of some debate. Many states now permit ecclesial corporations sole, and Maida and Cafardi contended in 1985 that this was the preferable method.

How closely a bishop is associated with the ownership and control of individual parishes is not merely an academic exercise in the application of canon law. Technical distinctions between the various forms of corporate organization can have massive consequences when it comes to financial liability, as has become evident in litigation concerning child abuse cases.

To take but one case among many, in a lawsuit against the Diocese of Spokane, Washington, lawyers for Bishop William Skylstad argued that diocesan liability extended only to diocesan property, not to parish schools and churches. The Diocese of Spokane, like many American dioceses, was organized under a corporation sole arrangement: parochial properties were held in the name of the bishop. This was a matter open to interpretation then. Was the corporation sole arrangement simply an expression in civil law of canon law’s declaration of episcopal authority over all Catholic institutions in the diocese? Or did this arrangement, in fact, make the bishop the owner of every piece of church property located within the diocese?

A federal bankruptcy judge deemed that the latter was correct and subjected the assets of all of Spokane’s parishes to sale toward the payment of penalties from lawsuits. (The diocese later reached a settlement that spared the closure of most of its parishes.)

No easy answer

The Church’s experience of decentralized property ownership in the trustee controversy, combined with the requirements of canon law, motivated American bishops to pursue legal arrangements that provided clearer lines of episcopal control. In the context of abuse lawsuits, these lines of control became demonstrations of liability, exposing dioceses to multimillion-dollar awards and settlements.

Given this history, the norms of canon law, and the character of civil law, the Catholic Church in the United States is caught on the horns of a dilemma. Less centralized models of ownership risk compromising hierarchical authority, while more centralized models make the Church vulnerable to catastrophic legal attacks. The question of how best to legally organize the Church’s ownership of property continues to yield no easy answer.