Roman Catholic Church of the Archdiocese of Santa and Associated Case in US District Court

UNITED STATES BANKRUPTCY COURT

DISTRICT OF NEW MEXICO

In re:

ROMAN CATHOLIC CHURCH OF Case no. 18-13027-t11

THE ARCHDIOCESE OF SANTA FE,

Debtor.

OPINION

Before the Court is a motion filed by an abuse victim to enforce “non-monetary covenants”

agreed to by Debtor as part of its confirmed plan of reorganization. The covenants obligate Debtor,

inter alia, to keep and update a list of “all known past and present alleged clergy perpetrators of

[Debtor], who have been determined by the Archbishop in consultation with the Independent

Review Board to be credibly accused of sexual abuse.” Movant asks that the Court require Debtor

to add to the list the name of a priest she identified in her proof of claim as having abused her.

Debtor opposes the request, saying that movant lacks standing to enforce the covenants. Debtor

further argues that the priest should not be added to the list because he was determined not to have

been “credibly accused” of sexual abuse.

The Court has reviewed the covenants, the confirmed plan, and related documents and has

heard oral argument on the dispute. It now rules that movant lacks standing to enforce the particular

covenant in question. Alternatively, on the merits, the Court rules that the covenants do not obligate

Debtor to add a priest to the list unless Debtor has made a “credibly accused” finding for that

priest.

A. Facts.

For the limited purpose of ruling on the motion, the Court finds:1

Debtor Roman Catholic Church of the Archdiocese of Santa Fe (“ASF”) filed this chapter

11 case on December 3, 2018. Movant filed a sexual abuse proof of claim on May 19, 2019. In her

proof of claim, she identified Fr. Richard Spellman as her alleged abuser. Fr. Spellman is deceased.

ASF’s first amended plan of reorganization, filed November 3, 2022 (the “Plan”), was

confirmed on December 28, 2022. The effective date of the Plan was February 16, 2023.

Under the Plan, the process for review and allowance of sexual abuse claims was turned

over to a “Tort Claims Reviewer.” ASF agreed not to object to any sexual abuse claims.

The Plan created an “ASF Settlement Trust,” from which all reviewed and allowed sexual

abuse claims would be paid. ASF and various insurance companies and affiliates transferred about

$130,000,000 into the trust and a trust for unknown abuse victims. A trustee was appointed to

disburse payments to sexual abuse claimants from the ASF Settlement Trust once the Tort Claims

Reviewer had reviewed and allowed their claims.

Paragraph 10.10 of the Plan provides:

Non-Monetary Commitment to Healing and Reconciliation. In order to further

promote healing and reconciliation, and in order to continue its efforts to prevent

Abuse from occurring in the Archdiocese in the future, the Reorganized Debtor

agrees that beginning within 30 days after the Effective Date (unless a different

date is provided below), it will undertake the commitments set forth in the

Stipulated Non-Monetary Covenants attached hereto as Exhibit L attached hereto

[sic]and incorporated herein, including the establishment of the Abuse Documents

Archive.

The following provisions of the Stipulated Non-Monetary Covenants (the “Covenants”)

are relevant:

1 The Court takes judicial notice of its docket. See St. Louis Baptist Temple, Inc. v. Fed. Deposit

Ins. Corp., 605 F.2d 1169, 1172 (10th Cir. 1979).

11. Disclosure Requirement. ASF will continue to maintain and update the list of

credibly accused clergy[2] as soon as reasonably practicable but, in any event, no

later than forty-five (45) days after the relevant determination. ASF will share this

information with the public by posting the information on its website.

15. Publication of Accused List. Within ten (10) days of the effective date of a

chapter 11 plan, ASF will prominently (“one-click”) post on its website the list of

names of all known past and present alleged clergy perpetrators of ASF, who have

been determined by the Archbishop in consultation with the Independent Review

Board[3] to be credibly accused of sexual abuse. ASF will update the list to include

any clergy who are identified in any proof of claim filed in the Chapter 11 Case

(unless the identification has been withdrawn in any amendment or

supplementation to the Proof of Claim). Survivors will provide ASF with

permission to use their confidential proofs of claims to update the list and the

deadline to add a name will be extended until such permission is received. ASF

shall maintain this list on its website in perpetuity.

20. Remove Perpetrator Recognitions. The ASF Parties will undertake to remove

all plaques, pictures, statutes, or other public recognitions of all known past and

present alleged perpetrators who have been determined by the Archbishop in

consultation with the Independent Review Board to be credibly accused of sexual

abuse, including those who are identified in any proof of claim filed in the Chapter

11 Case.

27. Jurisdiction and Standing. The Bankruptcy Court shall retain jurisdiction to

adjudicate disputes that arise with respect to these non-monetary provisions. The

Committee and any trust created for the benefit of Sexual Abuse Claimants shall

have standing and shall be authorized, but not directed, to seek enforcement of any

of the terms of these non-monetary undertakings.

The Debtor received a discharge pursuant to § 1141.4 All filed motions, contested matters,

and adversary proceedings have been finally resolved. The Plan has been substantially

consummated.

Movant’s counsel contacted counsel for ASF before Plan confirmation, requesting that

Fr. Spellman be added to the List because he was identified in Movant’s proof of claim. ASF’s

counsel responded that “Fr. Spellman will be considered for inclusion on the Credibly Accused

2 The “List.”

3 The “IRB.”

4 Unless otherwise indicated, all statutory references are to 11 U.S.C.

list along with the other new perpetrators (there are many) in accordance with the non-monetary

covenants the parties agreed to as part of the Ch. 11 settlement.”

On July 19, 2023, counsel for ASF informed movant’s counsel that “the IRB convened in

April [2023] and recommended that Fr. Spellman not be put on the credibly accused list, and the

Archbishop accepted their recommendation.” The motion followed.

The parties disagree about the proper interpretation of the Covenants. Movant interprets

them to require ASF to add Fr. Spellman to the List, whether or not ASF has made a “credibly

accused” determination. ASF, on the other hand, interprets the Covenants to require the addition

of clergy identified in proofs of claim only if ASF has determined that the clergy has been credibly

accused of sexual abuse.

B. Standing.

ASF argues that Movant lacks standing to enforce the Covenants.5 To rule on standing, the

court will apply New Mexico law, which is the law applicable to interpretation of the Plan and the

Covenants.6

ASF points to the following language of paragraph 27 in support of its standing argument:

5 If Movant has received payment from the ASF Settlement Trust and signed the required release,

that might affect her ability to pursue this dispute; the release is very broad and may encompass

this issue. No evidence of such payment is in the record.

6 See Section C(1) below. See also United States v. McCall, 235 F.3d 1211, 1215 (10th Cir. 2000)

(citing Carr v. Runyan, 89 F.3d 327, 331 (7th Cir.1996) (“A settlement agreement is merely a

contract between the parties to the litigation, … [a]s such, the formation, construction, and

enforceability of a settlement agreement is governed by local contract law”)). Movant

acknowledged that New Mexico law applied to the standing issue by citing New Mexico cases in

support of her standing argument.

The Committee[7] and any trust[8] created for the benefit of Sexual Abuse Claimants

shall have standing and shall be authorized, but not directed, to seek enforcement of

any of the terms of these non-monetary undertakings.

Movant responds that she is an intended third-party beneficiary of the Covenants and

therefore has standing. In support of her position, Movant cites to Fleet Mortgage Corp. v.

Schuster, 112 N.M. 48, 49-50 (S. Ct. 1991) (“Whether a party is a third-party beneficiary depends

on if the parties to the contract intended to benefit the third party”); and McKinney v. Davis, 84

N.M. 352, 353 (S. Ct. 1972) (the prime requisite for third party beneficiary status is that “the parties

to the contract intended to benefit the third party, who must be something more than an incidental

beneficiary”).

Another New Mexico case, Casias v. Cont’l Cas. Co., discusses third-party beneficiary

standing:

A third party who is not a promisee and who gave no consideration has an

enforceable right by reason of a contract made by two others (1) if he is a creditor

of the promisee ... or (2) if the promised performance will be of pecuniary benefit

to him and the contract is so expressed as to give the promisor reason to know that

such benefit is contemplated by the promisee as one of the motivating causes of his

making the contract. A third party may be included within both of these provisions

at once, but need not be. One who is included within neither of them has no right,

even though performance will incidentally benefit him.

125 N.M. 297, 300 (Ct. App. 1998) (quoting Permian Basin Inv. Corp. v. Lloyd, 63 N.M. 1, 7 (S.

Ct. 1957)). Movant is not a creditor of any promisee, nor would she benefit financially from

enforcing the covenant in question.

7 The Official Committee of Unsecured Creditors. The Committee consists of nine people, each of

whom is an abuse survivor or relative of an abuse survivor. The Committee was appointed by the

Office of the United States Trustee and acted on behalf of the sexual abuse claimants.

8 Two trusts were created for the benefit of Sexual Abuse Claimants: the ASF Settlement Trust

and an Unknown Tort Claims Trust.

Here, the number of potential third-party beneficiaries is large and may include, for

example, the abuse victims, the general public, and/or any children who might come in contact

with ASF’s churches, priests, schools, etc. If a contract has many third-party beneficiaries, the

contracting parties may intend to benefit the third parties without giving them standing to sue for

breach. Cases addressing standing issues with city contracts provide a useful analogy. In the

leading case of H.R. Moch Co. v. Rensselaer Water Co., Judge Cardozo opined:

In a broad sense it is true that every city contract, not improvident or wasteful, is

for the benefit of the public. More than this, however, must be shown to give a right

of action to a member of the public not formally a party. The benefit, as it is

sometimes said, must be one that is not merely incidental and secondary. Cf.

Fosmire v. National Surety Co., 229 N. Y. 44, 127 N. E. 472. It must be primary

and immediate in such a sense and to such a degree as to bespeak the assumption

of a duty to make reparation directly to the individual members of the public if the

benefit is lost. The field of obligation would be expanded beyond reasonable limits

if less than this were to be demanded as a condition of liability. A promisor

undertakes to supply fuel for heating a public building. He is not liable for breach

of contract to a visitor who finds the building without fuel, and thus contracts a

cold. The list of illustrations can be indefinitely extended. The carrier of the mails

under contract with the government is not answerable to the merchant who has lost

the benefit of a bargain through negligent delay. The householder is without a

remedy against manufacturers of hose and engines, though prompt performance of

their contracts would have stayed the ravages of fire. ‘The law does not spread its

protection so far.’ Robins Dry Dock & Repair Co. v. Flint, 275 U. S. 303, 48 S. Ct.

134, 72 L. Ed. 290.

247 N.Y. 160, 164-65, 159 N.E. 896, 897 (1928). Moch was followed in New Mexico by Blake v.

Public Service Co. of New Mexico, 134 N.M. 789, 793 (Ct. App. 2003) (public utility under

contract with a city owes no duty to a person injured as a result of failure to provide or maintain

streetlights); see also Bishop v. Hamya, Inc., 2017 WL 6944795, at *5 (M.D. Tenn.) (citing Blake);

Laprocina v. Lourie, 250 A.3d 1281, 1287 (R.I. 2021) (same).

Some paragraphs of the Covenants benefit only the Sexual Abuse Claimants (e.g., survivor

access to documents). The claimants may have standing to enforce those covenants.9 Other

paragraphs, like paragraph 15 (publishing and updating the List), are directed toward prevention

of future sexual abuse. The Court finds and concludes that Movant does not have standing to

enforce paragraph 15 of the Covenants. Rather, standing to enforce that paragraph was given solely

to the Committee and the trusts.

C. ASF is Not Required to Add Fr. Spellman to the List.

Alternatively, turning to the merits of Movant’s request, the Court will construe the

Covenants and decide whether they require ASF to add Fr. Spellman to the List.

1. The Plan is a contract, interpreted under New Mexico law.

A confirmed plan generally is interpreted according to the rules governing the

interpretation of contracts. See Miller v. United States, 363 F.3d 999, 1004 (9th Cir.

2004) (confirmed plan is akin to a contract and “must be interpreted according to

the rules governing the interpretation of contracts.”); Connolly v. City of Houston

(In re Western Integrated Networks, LLC), 322 B.R. 156, 160–61 (Bankr. D. Colo.

2005) (chapter 11 plan is a contract that must be interpreted according to the general

rules of contract interpretation); In re K.D. Co., Inc., 254 B.R. 480, 490 (10th Cir.

BAP 2000) (confirmed plan has some indicia of a contract).

In re Flying Star Cafes, Inc., 568 B.R. 129, 136 (Bankr. D.N.M. 2017); see also In re Lacy, 304

B.R. 439, 444 (D. Colo. 2004) (“The plan is essentially a new and binding contract, sanctioned by

the Court, between a debtor and his preconfirmation creditors.”).

Courts apply the substantive law of the forum state when interpreting confirmed plans. See,

e.g., In re Miller, 253 B.R. 455, 458 (Bankr. N.D. Cal. 2000), aff’d, 284 B.R. 121 (N.D. Cal. 2002),

9 “When a contract in its entirety does not provide that a party is a third-party beneficiary, however,

courts consider generally the third-party beneficiary issue when a party claims to be a third-party

beneficiary of a contract provision and that same contract provision’s breach is at issue . . . [citing

cases] . . . The Restatement (Second) of Contracts also discusses intended beneficiaries referring

primarily to individual promises instead of contracts.” Howes v. New Mexico Dep’t of Health,

2023 WL 1419832, at *64 n. 39 (D.N.M.).

aff’d, 363 F.3d 999 (9th Cir. 2004) (“It is well established that a chapter 11 plan is a contract

between the debtor and its creditors that is subject to the general rules governing the interpretation

of contracts under the law of the state in which the plan was confirmed.”); In re Kimball Hill, Inc.,

595 B.R. 84, 103 (Bankr. N.D. Ill. 2019), vacated in part on other grounds, 2019 WL 5208853

(N.D. Ill.), (following Miller); In re Irwin, 558 B.R. 743, 746 (Bankr. E.D. Pa. 2016) (same;); and

In re Sunnyland Farms, Inc., 2016 WL 1212723, at *3 (Bankr. D.N.M.) (citing In re K.D. Co.,

Inc., 254 B.R. 480, 491 (10th Cir. BAP 2000), this Court held that “in the Tenth Circuit, a court

may resort to state law to interpret a plan.”).

2. Ambiguity. A contract is ambiguous if it is “capable of more than one reasonable

interpretation.” Sunnyland Farms, 2016 WL 1212723 at *3.

It is important to bear in mind that the meaning the court seeks to determine is the

meaning one party (or both parties, as the circumstances may require) attached to a

particular term or expression at the time the parties agreed to those provisions. See

3 Corbin § 537 (rules governing admissibility of proof of surrounding

circumstances depend upon person whose meaning is at issue).

C.R. Anthony Co. v. Loretto Mall Partners, 112 N.M. 504, 509 (S. Ct. 1991).

In Movant’s favor, the second sentence of paragraph 15 states that “ASF will update [the

List] to include any clergy who are identified in any proof of claim filed in the Chapter 11

Case. . . .” There is no requirement in this sentence that the clergy be found to have been credibly

accused.

On the other hand, in ASF’s favor are the following:

• paragraph 11 requires AST to “maintain and update the list of credibly accused

clergy as soon as reasonably practicable but, in any event, no later than forty-

five (45) days after the relevant determination.”

• The first sentence of paragraph 15 refers to the same List mentioned in

paragraph 11. It requires ASF to post the List on its website within 10 days of

the Plan’s effective date.

• The third sentence of paragraph 15 requires Sexual Abuse Claimants to give

permission for ASF to use their proofs of claim to update the List “and the

deadline to add a name will be extended until such permission is received.”

The deadline referred to must be the one in paragraph 11, i.e., within 45 days

after a credible determination” is made. At any rate, there is no other deadline

(the ten-day deadline in the first sentence of paragraph 15 is for posting the

List on ASF’s website); and

• Paragraph 20 requires ASF to remove public recognitions for all past and

present alleged perpetrators who have been credibly accused of sexual abuse,

“including those who are identified in any proof of claim filed in the Chapter

11 Case.” The language implies that only credibly accused clergy are on the

List.

The second sentence of paragraph 15 conflicts with the paragraphs and sentences cited

above, creating an ambiguity.10

“Once the agreement is found to be ambiguous, the meaning to be assigned the unclear

terms is a question of fact.” Mark V, Inc. v. Mellekas, 114 N.M. 778, 781 (S. Ct. 1993). When “the

parties do not offer evidence of the facts ... surrounding execution of the agreement ... the court

may resolve any ambiguity as a matter of law by interpreting the contract using accepted canons

of contract construction and traditional rules of grammar and punctuation.” Bank of Albuquerque,

N.A. v. Ambassador Dev., LLC, 2013 WL 4511931, at *2 (N.M. App.) (quoting Mark V, 114 N.M.

at 782). There is no evidence of the facts surrounding execution of the subject paragraphs in the

record.

3. Resolving the Ambiguity. The Court concludes that the following rules of contract

construction are helpful in resolving the ambiguity in the Covenants.11

10 The Covenants needed, but did not receive, a careful and thorough editing.

11 There is a general rule of construction that ambiguities are to be construed against the drafter.

Castillo v. Arrieta, 368 P.3d 1249, 1253 (N.M. App. 2016). It is difficult to use this particular rule

because the Court does not know if the Covenants were drafted by ASF, the Committee, or both.

a. Interpret the whole agreement. The contract should be viewed “as a

harmonious whole, [to] give meaning to every provision, and accord each part of the contract its

significance in light of other provisions.” Citizens Bank N.A. v. Burnworth, 2021 WL 5630398, at

*3 (N.M. App.) (citing Pub. Serv. Co. of N.M. v. Diamond D Constr. Co., 131 N.M. 100, 108 (Ct.

App. 2001)). “Courts should interpret contract as a whole and interpret words in light of all the

circumstances and the principal purpose of the parties.” Sunnyland Farms, 2016 WL 1212723 at

*4. “The contract must be considered and construed as a whole, with meaning and significance

given to each part in its proper context with all other parts, so as to ascertain the intention of the

parties.” Schultz & Lindsay Const. Co. v. State, 83 N.M. 534, 535 (S. Ct. 1972). “[C]onsideration

of this contract must take in the entire contract as a whole and not a mere sentence or isolated

paragraph . . . .” Hoge v Farmers Market & Supply Co. of Las Cruces, 61 N.M. 138, 141 (S. Ct.

1956).

b. Reasonable interpretation. The law favors a reasonable interpretation of

contract language over an unreasonable interpretation. Brown v. Am. Bank of Com., 79 N.M. 222,

226 (S. Ct. 1968); State ex rel. Udall v. Colonial Penn Ins. Co., 112 N.M. 123, 130 (S. Ct. 1991);

McLaughlin v. Santa Fe Cmty. Coll., 2023 WL 7018418, at *3 (N.M. App.); see also Sunnyland

Farms, 2016 WL 1212723 at *3 (an interpretation that gives a reasonable, lawful, and effective

meaning to all terms is preferred to an interpretation that leaves a part unreasonable, unlawful, or

of no effect).

c. Avoid surplusage. “[E]very word, phrase or part of a contract should be

given meaning and significance according to its importance in context of the contract.” Brown, 79

N.M. at 226 (citing Phillips Petroleum Co. v. McCormick, 211 F.2d 361 (10th Cir.1954), and

Hondo Oil & Gas Co. v. Pan American Petroleum Corp., 73 N.M. 241 (S. Ct. 1963)); see also

Bank of New Mexico v. Sholer, 102 N.M. 78, 79 (S. Ct. 1984) (citing and following Brown).

4. Applying the rules of construction.

a. Whole agreement. Reviewing the Covenants in its entirety favors ASF’s

interpretation. Paragraphs 11 and 15 refer to “the list of credibly accused clergy.” Not “a” list;

“the” list. The second sentence of paragraph 15 requires ASF to add clergy identified in proofs of

claim to the List. However, it makes no sense to add clergy to the List that have not been found to

be credibly accused. It would no longer be “the List” but some other list.

ASF’s counsel told Movant’s counsel in an email dated December 14, 2022, that “there are

many” new perpetrators. The existence of the new perpetrators apparently comes from the proofs

of claim filed in the bankruptcy case. If many new perpetrators were added to the List without the

“credibly accused” determination process, the List would lose much of its significance. Further,

adding names of priests who were identified in a proof of claim could add names of clergy who

have been wrongfully accused, or clergy who were never accused at all but were identified in a

proof of claim for some other reason. Restricting the List to those who have been credibly accused,

as determined by the IRB and the Archbishop, both protects innocent clergy and gives significant

weight to the List.12 In its current form, the List is an admission of appalling wrongdoing. Under

Movant’s interpretation of the Covenants, that important fact would be undermined.

Further, the requirement in paragraph 15 that the survivors give ASF permission to use

their proofs of claim and extending “the deadline to add a name” until the permission is given, can

only refer to the deadline in paragraph 11, which is 45 days after the “credibly accused”

determination has been made.

12 The List currently contains 86 names.

Finally, ASF’s construction harmonizes paragraph 15 with paragraph 20, which limits

inclusion on the List to those clergy identified in proofs of claim who have been determined to

have been credibly accused.

In sum, reading the second sentence of paragraph 15 with the rest of the Covenants as a

whole shows that Fr. Spellman should not be added to the List unless a credible accusation

determination has been made.

b. Reasonable interpretation. The construction advocated by ASF is more

reasonable than Movant’s. It is not reasonable to add names to the List without a robust vetting

process of some kind. The List has never been about mere accusation, but about credible

accusation. That is what gives the List its force as an admission and a warning. With claim review

transferred to the Tort Claims Reviewer and ASF’s agreement not to object to claims, there is no

bankruptcy-related process for weeding out false claims. The parties relied instead on ASF’s

internal “credibly accused” review process.

c. No surplusage. The construction advocated by ASF does not result in

surplus language. The second sentence of paragraph 15 requires ASF to take all names from the

sexual abuse proofs of claim and run them through the “credibly accused” review process. Within

45 days after completion of the review, ASF is obligated to add any “credibly accused” clergy to

the List. It provides a method for ensuring that the List is complete. There is no surplusage.

Conclusion

Only the Committee or the trusts have standing to enforce paragraph 15 of Covenants. In

any event, the paragraph does not require ASF to add Fr. Spellman to the List unless and until ASF

determines, after consultation with the IRB, that Fr. Spellman has been credibly accused of sexual

abuse. The Court will enter a separate order denying the motion.

Hon. David T. Thuma

United States Bankruptcy Judge

Entered: June 21, 2024

Copies to: electronic notice recipients

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