The Sacramento Catholic bishop and Loretto High School donors are suing the nuns who shuttered the all-girls school earlier this month.

It is the first time in recent memory that a local Catholic bishop has sued a religious order.

Bishop Jaime Soto and seven other financial contributors say in the lawsuit – filed Thursday in Superior Court – that the money they donated to the all-girls campus was designated for the education of local Catholic students and must stay in Sacramento.

They allege that the nuns from the Institute of the Blessed Virgin Mary want to use these contributions to pay for the nuns' retirement at their motherhouse in Wheaton, Ill.

"We want to make sure funds given in good faith go to support schools in Sacramento," said Kevin Eckery, diocesan spokesman. "It shouldn't be a bait-and-switch."

The suit does not seek to stop the sale of Loretto High School, which is now in escrow. Instead, the suit asks the court to hold the proceeds of the sale and assign an arbitrator to determine how to allocate the money.

The first test comes today, when the plaintiffs go to court seeking a temporary injunction that would keep the money in escrow while the lawsuit moves forward.

Officials with the women's religious order declined to comment for this story.

Loretto school officials surprised students, church leaders and donors in January when they announced that declining enrollment would force them to close one of Sacramento's premier Catholic high schools at the end of the school year.

Loretto supporters rallied to save the school, but officials with the religious order said they had to sell. Aspire Schools, a charter school, has since purchased the 9.28-acre campus on El Camino Avenue.

The property, listed for $10.3 million, is expected to close escrow in the next 30 days, according to John Banchero, the real estate broker who listed the property.

The Institute of the Blessed Virgin Mary is a worldwide religious community of Catholic women and follows the path of its founder, Mary Ward, "working for freedom, justice and integrity," according to the order's Web site.

Loretto wasn't operated by the diocese; institute nuns ran it from its inception in 1955.

Over the years, the nuns educated more than 4,000 students, including daughters from some of the region's leading families. Maureen Reagan sent her daughter to Loretto, as did former Kings coach Rick Adelman.

Representatives for the religious order said that the nuns intend to pay off outstanding debts related toLoretto High and use the rest of the money to provide for retired members of the order in Illinois, according to the suit.

"That is not what this money was given for," said Eckery, the diocesan spokesman.

He said church leaders tried repeatedly to negotiate with the nuns through letters and attempts at meetings. The diocese has donated approximately $1.5 million in cash, loan forgiveness and scholarship fund contributions "for the express purpose of educating women of high school age in the Sacramento region," according to the suit.

Eckery said the bishop joined the suit because he believed he had a canonical duty to people in the diocese, which covers 20 counties and represents 900,000 Catholics in Northern California.

"It's unfortunate that it's come to this point," said diocesan attorney James Sweeney. "Most cases involving conflicts in religious institutions usually get settled."

Other plaintiffs – who include donors and board members – listed in the lawsuit are: Agnes Anderson, Mary Anderson, Jeanne Anderson-West, Robert Biko, John Frisch, Kent Daft and Bruce Stimson.

Agnes and Mary Anderson, two sisters who live in Sacramento, donated about $2 million to Loretto over the years, according to the suit.

Agnes Anderson and her late husband, Walter, contributed $500,000 to the school's capital campaign. The science wing was named after the couple, who met as students in pharmacy school in the 1940s.

Tom Anderson, the couple's son, said his 85-year–old mother, who has given to the Catholic Church and educational causes for decades, learned of Loretto High School's closure in The Bee in January.

"They could have told her they were thinking about this," he said.

Anderson said his mother contributed both to the school and to the nuns' motherhouse in Illinois. He said she wants the money she donated to Loretto to go toward local Catholic educational needs.

"She does not ever want to be involved in any litigation whatsoever," he said. "But at this point her faith is at the crossroads; it's being tested."

The suit also alleges that Loretto officials began withdrawing funds at the end of 2008, "without the knowledge or consent of the Board of Trustees of the Loretto Endowment" to pay off debt for Loretto and the nuns' order.

Loretto parents said they had mixed feelings about the lawsuit.

Denise Davis of Carmichael praised the education her daughter received at the school but was frustrated with how the closing was announced.

"A lot of things could have been handled differently," said Davis. "I think it is right that the money should stay in the Sacramento community. It seems that's what it was intended for."

Call the Bee's Jennifer Garza, (916) 321-1133.