DRAFT DOCUMENT -- SUBJECT TO REVISION AND REVIEW

A Proposed Model for Structuring a Diocese and its Parishes

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Prepared by Fr. Jason Gray, December 7, 2005
Copyright © 2005 by Fr. Jason Gray
All rights reserved

Other persons are permitted to copy, distribute, or display this work with the following provisions:  Reproduction of this work must contain proper attribution to the author.  No reproduction of this work is allowed for commercial purposes.  This text may not be used to produce a derivative work, whether by altering, transforming, or building on this text.  Other permissions to copy, distribute, display, or reprint this work require the expressed permission of the author.  This document is cited as follows:

Gray, Jason A., Proposed Model for Structuring a Diocese and its Parishes; available from http://www.jgray.org/docs/structuring.html; Internet; accessed 1 January 2006.

              

In the United States, there is ample evidence that dioceses should avoid the corporation sole or sole proprietorship model when structuring themselves.   A corporation aggregate model is preferred.   However, even if this model is adopted, there is a danger in our litigious society that a person seeking financial damages from a diocese might try to acquire the assets of parishes or other institutions in a diocese.   In discussions with a group of legal and canonical experts, there are several ways in which the assets of parishes and diocesan institutions can be protected from the legal argument of "piercing the corporate veil."

In presenting these observations, a model will be proposed for structuring a diocese, its parishes and institutions.   The model presented is not the only way to address these questions.   This model must be adapted to local circumstances and must take into account the applicable state law that governs the civil incorporation of religious organizations for each diocese.

These observations will be divided into general observations about any juridic person subordinate to a diocese, and specific observations about specific juridic persons.

GENERAL OBSERVATIONS

First and foremost, the separate incorporation of the individual parishes and institutions of a diocese is paramount.   Insofar as possible, each separate civil corporation should be canonically established as a juridic person, and each juridic person should be civilly established as a separate corporation.   The separate incorporation is accomplished according to the requirements of state law.{1}   The status of a juridic person is conferred either by the law itself (for a parish as in canon 515 §3) or by a decree of the diocesan bishop (for a diocesan school or another diocesan entity as in canon 116 §2).   The clear separation, canonically and civilly, helps minimize any confusion or lack of clarity about the status of each parish or other entity in a diocese.

Secondly, the statutes of each institution (juridic person) should be carefully reviewed.   The circumstances that have exposed a company to the risk of piercing the corporate veil have included:   two corporation that share the same name; two corporations that have the same board of directors; two corporations with nearly identical statutes; two corporations that are under the ultimate authority of the same person; two corporations with co-mingled assets or whose assets are used for the same purpose.

The fundamental legal issues in a "piercing" case is the question of control.   The following principles should govern the incorporation and the statutes of a parish, a diocesan school, or another entity:{2}

Statutes

Considerations in state law

Some definitions

Local control

Diocesan control

Local officials

Ordinary and extraordinary administration

SPECIFIC OBSERVATIONS

I.      Parishes and Missions

Parishes should be separately incorporated and should have their own statutes which are tailored to their specific situation.   The general observations made above should be applied to a parish with the following adaptations:

Parish corporate structure

Officers of the corporation

Actions of the executive committee

Role of the lay trustees

Actions of the board of directors

What constitutes extraordinary administration?

What constitutes ordinary administration of greater importance?

Parochial assets

Special issues governing missions

Observations for the State of Illinois

II.      Other institutions in the diocese

Some other institutions may be at risk because they are not automatically separated by the code or by clear structures.   These institutions may include diocesan high schools, Newman centers, hospitals, cemeteries, and other diocesan institutions.

These institutions should be separately incorporated, erected as a juridic person, and should have their own statutes that are tailored to their specific situation.   The general observations made earlier should be applied to these institutions with some of the following adaptations.   The fundamental issue of diocesan control is at the heart of the matter.

Diocesan high schools

The following is one possible model for erecting a diocesan high school.

Other institutions

Any diocesan Newman centers, hospitals, and cemeteries should have their own board and statutes.   It is important to determine an appropriate way for decisions to be made on a local level regarding the selection of board members and the administration of financial assets.

III.      Pooled Assets Held by the Diocese:   Diocesan Foundations

Other special consideration should be given to any pooled funds held by the diocese but which are set aside for a special purpose.

The following factors should be considered:

Some examples of these funds might include:

{1} The code directs administrators of temporal goods to protect those goods by civilly valid methods (c. 1284 §2 2º).

{2} For the purposes of this essay, all the juridic persons described will be presumed to be public.   Public juridic persons are more closely governed by ecclesiastical authority in a diocese and act more directly in the name of the Church (c. 116 § 1).   Private juridic persons in a diocese tend to be autonomous and are not likely to be the target of a "piercing" argument.

{3} A public juridic person is always created by some act of the competent ecclesiastical authority (c. 116 §1).   The juridic personality is either conferred by the law itself at the time the entity is erected by competent ecclesiastical authority, or by the decree of the competent ecclesiastical authority (c. 116 §2).

{4} A public juridic person may be suppressed by competent ecclesiastical authority, or by inactivity for one hundred years (c. 120 §1).   It is appropriate for the statutes to address reasons that might lead to dissolution.   Nevertheless, the public juridic person may not dissolve itself; it may recommend to competent ecclesiastical authority that it be suppressed.

{5} The diocesan bishop has the right to tax a public juridic person, in proportion to its income, for the needs of the diocese after consulting with the diocesan finance council and the presbyteral council (c. 1263).

{6} The ordinary retains the right to intervene in the case of the negligence of an administrator (c. 1279 §1).   The ordinary also has the right to appoint a temporary administrator of a public juridic person when no administrator is provided by law (c. 1279 § 2).   In general, the ecclesiastical authority that erects an office has the right to provide for that office (c. 148).   Unless otherwise specified, the diocesan bishop freely appoints persons to ecclesiastical offices in his diocese (c. 157).   In general, the one who appoints a person to an office has the power to remove that person (c. 193 §3).   The circumstances of the juridic person must be weighed when determining if the diocesan bishop can or should retain the right to appoint or remove the administrator.

{7} Administrators invalidly place acts that exceed the limits and the manner of ordinary administration unless a faculty from the ordinary has been obtained.   The acts of extraordinary administration are to be defined in the statutes (c. 1281 §§1 and 2).

{8} The diocesan bishop is required to hear his finance council and college of consultors in order to place actions of administration that are of greater importance (c. 1277).   This provision of the law can be applied analogously to other juridic persons

{9} It may be sufficient to cite a few canons.   The bishop, vicar general and the pastor are appointed for an indefinite period of time unless, in the case of a pastor, he serves only for a term (cc. 477 §1 and 522).

{10} It may be sufficient to cite a few canons.   The diocesan bishop loses office when the Holy Father accepts his resignation, transfers him or removes him in accord with the norm of law (cc. 184 §1 and 401).   The vicar general loses office when removed by the diocesan bishop (c. 477 §1).   The pastor loses office when the diocesan bishop transfers or removes him or when he accepts his resignation in accord with the norm of law (c. 538 §1).   A diocese whose pastors have terms should also add the loss of office by the lapse of a term (c. 522).

{11} This level of administration borrows the concepts of canon 1277.   The consultation of the two lay trustees is only required for validity if it is expressly stated in the statutes (c. 10).

{12} A financial report must be submitted to the local ordinary by each parish (c. 1287 § 1).

{13} A budget is strongly recommended for a parish.   Particular law can require each parish to prepare a budget and can determine the rules that govern the preparation of this budget (c. 1284 §3).

{14} Pastors of parishes are obligated to present a financial report to the parishioners (c. 1287 §2).

{15} Before the diocesan finance council and college of consultors give their advice to the diocesan bishop in an act of alienation, those persons are to be thoroughly informed both of the economic state of the juridic person in question, and of any previous acts of alienation (c. 1292 §4).   By extension, it is reasonable to require that the parish lay trustees be similarly informed before offering their counsel.

{16} The code requires the consent of the ordinary for these long term investments (c. 1284 §2 6º).   A long term investment would generally be funds invested for more than one or perhaps two years.