584 B.R. 82
Bankr. D.P.R.2018Background
- Catholic School Employees Pension Trust (the Pension Trust) filed a voluntary Chapter 11 petition on January 11, 2018; creditors/beneficiaries moved to dismiss for ineligibility.
- Trust established in 1979 to hold employer contributions for a pension plan; participants do not contribute directly; trustees administer investments and distributions.
- The Board terminated the pension plan in March 2016 and ceased pension payments as of June 30, 2016; liquidation of remaining assets was planned.
- Movants (pensioners/creditor-beneficiaries) argued the Trust is a passive, non‑business “wasting asset” and therefore not a "person" or a "corporation" (i.e., not a "business trust") under 11 U.S.C. §§ 101(41), 101(9).
- Debtor argued the trust has corporate attributes: board functioning like directors, invests funds, employs staff, invoices employers, and contracts professionals, supporting classification as a business trust.
- Evidence (trust deed, plan, testimony of Board president) showed trust had no inventory, real estate, IP, loans, or profit motive; primary function was preservation and distribution of contributed funds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Pension Trust is a "business trust" (thus a "corporation" and a "person" eligible to be a Chapter 11 debtor) | Trust is passive, formed to preserve and liquidate pension assets after plan termination and lacks corporate attributes or business profit motive | Trust functions like a corporation (board as directors), conducts investment and administrative activities, maintains employees and tax accounts, and thus is a business trust | Trust is not a business trust; not a "corporation" under §101(9)(A)(v); petition dismissed |
Key Cases Cited
- In re John Q. Hammons Fall. 2006, LLC, 573 B.R. 881 (Bankr. D. Kan.) (bankruptcy law, not state law, governs whether a trust qualifies as a business trust)
- In re Blanche Zwerdling Revocable Living Trust, 531 B.R. 537 (Bankr. D. N.J.) (court must conduct fact‑specific totality‑of‑circumstances test to classify a trust)
- In re Gonic Realty Trust, 50 B.R. 710 (Bankr. D.N.H.) (transferability and other corporate attributes relevant to business‑trust status)
- In re Woodsville Realty Trust, 120 B.R. 2 (Bankr. D.N.H.) (same; corporate attributes inform business‑trust analysis)
- In re Parade Realty, Inc., Employees Retirement Pension Trust, 134 B.R. 7 (Bankr. D. Haw.) (analysis of trust characteristics in determining business‑trust status)