MEMORANDUM
I. INTRODUCTION
Villаge Green Realty Trust (“Village Green,” the “Trust” or the “Debtor”) filed a petition under Chapter 11 on January 8, 1990. The petition states that “[pjetitioner is qualified to file this petition and is entitled to the benefits of Title 11, United States Code.” On January 24, 1990, Lowell Institution for Savings (“LIFS” or the “Bank”) filed a motion for dismissal, appointment of a trustee, and relief from stay. LIFS maintains that, contrary to the statement made in the petition, as a nominee trust Village Green is ineligible for bankruptcy relief. In the alternative, LIFS seeks a declaration that the beneficiary of the trust be declared the de facto debtor. As is evident from the caption of LIFS’ motion, LIFS also seeks the appointment of a Chapter 11 trustee and relief from the automatic stay imposed by section 362 оf the Bankruptcy Code so that it may proceed with the foreclosure sale it previously had scheduled for January 9, 1990.
*107 II. FACTS
The Court conducted an evidentiary hearing on March 5, 1990, at which time counsel to LIFS made an offer of proof, four witnesses testified, and 14 exhibits, including the declaration of trust creating Village Green, which instrument was duly recorded, were admitted into evidence. The Court agreed to accept the Bank's offer of proof, subject to the Debtor’s right to submit evidence to counter any of the proffered facts.
In his offer of proof, counsel to LIFS stated that the Debtor is a nominee trust whose sole asset is a strip shopping center located in Sudbury, Massachusetts, containing approximately nine rental units. Counsel indicated that the trust has few unsecured creditors, and no employees. Moreover, according to counsel’s offer of proof, the bankruptcy filing occurred on the eve of the Bank’s foreclosure sale. Finally, counsel indicated that liens and encumbrances on the trust property total $3,596,-822, including $368,000 in unpaid real estate taxes, $2,223,000 in principal and interest owed to LIFS on its first and second mortgages, and $756,000 owed to the Bank from cross collateralized notes. According to the Bank, the appraised fair market value of the property is $3,550,000 and the liquidation value is $3 million, less 10% selling costs, leaving no equity in the property for the Debtor.
The Bank’s first and only witness, Walter Marsella, testified about the history оf the loan and corroborated the amounts due the Bank as outlined by counsel in his offer of proof. Mr. Marsella testified that LIFS made demand of the Debtor in January of 1989 and scheduled the first of many foreclosures sales in March of that year. Mr. Marsella also alluded to a state court action commenced by the Debtor which successfully forestalled the Bank’s attempts to foreclose on the property for several months.
The Debtor’s three witnesses, an appraiser and the trustee and the beneficiary of Village Green, primarily addressed the issue of whether the Bank’s interest in the property could be adequately protected pursuant to a series of transactions contemplated by Robert Quirk, the sole beneficiary of the trust. These transactions included the refinancing of the subject property, as Well as the granting of mortgages on property outside the jurisdiction of the Bankruptcy Court.
With respect to the Bank’s offer of proof, the Debtor did not challenge the Bank’s characterization of the trust as a nominee trust. However, the Debtor attempted to show that the trust was engaged in business and was more than a mere holder of real estate for investment and preservation. The testimony of Mr. Quirk and Mr. Thomas Sheridan, the trustee, revealed that Village Green filed tax returns and had a federal identification number. The testimony also revealed that, although Mr. Sheridan was responsible for the day to day management and operation of the property from an office in his home, Mr. Quirk was instrumental in acquiring tenants for the property and that it was through his efforts that a major tenant was acquired to replace a restaurant whose bankruptcy resulted in vacant space and cash flow problems for the shopping center. Mr. Sheridan indicated that he was not an employee of the trust. He stated that he was compensated for his activities as an independent contractor instead. It was abundantly clear from the testimony that Mr. Quirk, not Mr. Sheridan, was that party responsible for negotiating with LIFS and making the critical decisions affecting the trust property.
Mr. Quirk testified that he infused substantial sums of his own money into property owned by the trust. Despite this testimony, however, there is a lis pendens on the property that relates to a state court law suit through which Mr. Quirk’s sister is challenging this assertion.
The declaration of trust, which is dated February 21, 1978, provides that the trustee is “authorized to purchase and hold title to lands and tenements, to build and develop real estate and to buy, lease, sell, mortgage, control and operate such real estate, all for the benefit of the designated Beneficiary or Beneficiaries.” The trust instru *108 ment further provides that all the net income of the trust in any given year is to be distributed to the beneficiary or the beneficiaries in accordance with their interests, and that the trustee, who is to hold legal title to all property, is vested with all the powers necessary for the execution of the purposes of the trust, including the power to buy, sell, develop, build, control, operate, lease and rent lands and buildings; the power to make all necessary contracts, the power to prosecute, defend and settle law suits; and the power to borrow money on a secured or unsecured basis. The trust also provides that neither the trustee nor the beneficiary or beneficiaries shall be personally liable for failure of the trustee to perform under contracts and that any person or corporation contracting with the trustee shall look to the funds and property of the trust for payments that may become due or payable by reason of the trustee’s failure to perform.
The trust instrument does not identify the beneficiary or beneficiaries, although it indicates that the “each beneficiary has been given simultaneously herewith a Certificate of Beneficial Interest in the amount or proportion designated in the said certificate.” The trust neither provides that the certificates are transferable nor does it prohibit or condition the transfer of certificates in any way. The certificate or certificates owned by Mr. Quirk were not offered into evidence. The trust also does not include provisions relative to the removal of the trustee or how it can be amended. Mr. Sheridan became the trustee in January of 1989. Neither he nor his predecessor were named in the original instrument, which provided for two successor trustees to the original trustee/settlor, Seta Nercessian.
In addition to the foregoing facts, the Court notes from an examination of the Debtor’s schedules that the Debtor lists two unsecured creditors whose claims total approximately $13,000, and that the petition and schedules and statement of affairs were signed by the beneficiary, Robert D. Quirk, “as he is duly authorized.”
III. DISCUSSION
A. Background
With the recent downturn in the real estate market in Massachusetts, the number of trusts filing bankruptcy has increased dramatically. Village Green Realty Trust is typical of a number of single asset eases being filed by trusts. In circumstances such as these, the Court is quickly confronted with a secured рarty’s motion to dismiss on the ground that the trust is a nominee trust ineligible for bankruptcy relief, followed by the Debtor’s seemingly invariable response that it conducts a business and is thus a business trust eligible for relief under the Code pursuant to 11 U.S.C. section 101(8)(A)(v).
In a recent opinion, Judge Queenan sets forth in detail the statutory foundations for the arguments outlined above.
In re Medallion Realty Trust,
The decisions are sharply, and perhaps hopelessly, divided on the meaning of “business trust.” Some, following the pattern established under the prior Act, hold that it means a trust which is deemed a corporation for federal income tax purposes under the test enunciated in Morrissey v. Commissioner,296 U.S. 344 , 359,56 S.Ct. 289 , 296,80 L.Ed. 263 (1935), namely a trust having (i) business function, (ii) transferable certificates of beneficial interest, (iii) centralized management, (iv) continuity of life and (v) limited liability.... Others look to *109 the trust’s operations to determine whether they include substantial business activities, disregarding the terms of the creating document.
The Court agrees with the observation made by Judge Queenan about the seemingly disparate treatment of trusts. Courts apрear to struggle with the issues raised by their filing, and, as noted by Judge Yacos in
In re Gonic Realty Trust,
B. Case Law
In May and October of 1980, shortly after the Bankruptcy Reform Act’s elimination of the requirement contained in section 1(8) of the Bankruptcy Act of 1898 as amended in 1926 that beneficial interest or ownership of trusts be evidenced by certificate or written instrument, two bankruptcy court opinions from this district were issued:
In re Ponn Realty Trust,
In
Ponn Realty, supra,
the court framed the issue as follows: “Can Chapter 11 properly be invoked to forestall a secured creditor from foreclosing a mortgage on a one-family, debtor-occupied residential dwelling and thereby also seek readjustment of the mortgage debt?”
The court based its decision to dismiss the case upon the petition, schedules, statement of affairs, admissions in open court, and a compelling analysis of congressional intent with respect to readjustment of mortgages on owner-occupied single family homes under Chapter 11, рarticularly where there are no creditors other than mortgagees. The court also referred to the abstention provisions of section 305 of the Bankruptcy Code. 11 U.S.C. § 305. The court held that “[t]he reorganization of an owner-occupied, single family dwelling that produces no income and has only mortgage creditors does not have any similar characteristics [sic] and was not intended to be the subject of a Chapter 11 business reorganization.”
Id.
at 231. The court succinctly stated that “Chapter 11 of the Bankruptcy Code was intended for utilization solely in the business setting and not in a consumer context.”
Id. Accord Wamsganz v. Boatmen
's
Bank of De Soto,
In G-2 Realty Trust, supra, the court dismissed a bankruptcy case filed by a realty trust on the basis of bad faith. The trust in question was amended three weeks prior to the filing of an involuntary petition to provide that it was a business trust with *110 fully transferable beneficial interests, rather than a nominee trust with beneficial interests that were neither assignable nor transferable. Since it was uncontested that as a nominee trust G-2 would be ineligible to be a debtor, the court did not elaborate on the reasoning to support this conclusion.
Although the court ruled that there was no evidence of collusion between G-2 and the petitioning creditors, an issue raised by the movant, it found that the actions surrounding G-2 Realty’s trаnsformation from a nominee trust ineligible to become a debt- or under Chapter 11 to a business trust did not demonstrate “exemplary motives and scrupulous good faith” and was merely an alteration in form and not in substance, since no change in the operation or management of the trust was contemplated.
Clearly, the early cases establish the beginnings of a framework for the analysis of filings by trusts. Where the trust appears to be created solely for the benefit of family members and does not involve any “business,” as that term is commonly understood, or unsecured creditors, it is ineligible to be a debtor regardless of what it is labeled. Likewise, prepet-ition activities of a questionable nature cannot immunize a trust from dismissal as an ineligible debtor even if the debtor did not file the petition itself.
In 1985, Judge Yacos decided a case on facts similar to the ones that have emerged in the instant case.
See In re Gonic Realty Trust,
As outlined by the New Hampshire court, the trust documents contained provisions similar to those present in the instant case. Additionally, the court found that “[t]he beneficial interests in the trust are freely transferrable [sic] but are evidenced only by the declaration of trust and not in separate certificates.”
Like Village Green, the Gonic trust had no employees, only independent contractors working for it, and the trustee handled the affairs of the trust from his home or other business premises. Moreover, Gonic Realty Trust paid taxes and all expenses relating to the mill complex. Unlike Village Greеn, though, the Gonic Realty Trust owned property in addition to its major asset — the mill complex, namely machinery and equipment valued at $100,000, and it had more unsecured creditors.
From this set of facts, the court concluded
“somebody
was conducting business at the Rochester mill complex.”
While the language in somе opinions may be read as setting forth a definitive list of essential facts to constitute a business trust, I take the actual bases of decision in such cases to be the use of those factors to support the evidentiary conclusion that the trust in question was actually operating a business in the commonly accepted meaning of such activity.
*111
The Gonic court, as has been mentioned, raised the issue of good faith and the possible abuse of bankruptcy court jurisdiction. The New Hampshire court, after giving the movant an opportunity to submit evidence relative to whether the trust and its beneficiaries had sufficient assets to fund a plan of reorganization, pay unsecured creditors and refinance the bank’s debt, concluded that a Chapter 11 reorganization was essential. Id. at 714. This Court suspects that the New Hampshire court’s decision may have been influenced by the equities in the case, particularly the fact that the trust was not an obligor of the movant.
A year after the
Gonic
case, Judge La-vien issued a “Memorandum on Nominee Trust” in the case of
In re L & V Realty Trust,
In reaching its decision, the
L & V
court relied upon the characteristics of a business trust delineated by the Supreme Court in
Hecht v. Malley,
This change, when applied to the facts of this case, presents a distinction without a difference. First, the Supreme Court has defined business trust in Massachusetts to require transferable shares, Hecht v. Malley,265 U.S. at 146 ,44 S.Ct. at 463 . Second, even if it were theoretically possible to have a business trust in Massachusetts that did not comply with Massachusetts General Law 182 section 1, this is not the case. The court in reaching the decision that the trust in question does not satisfactorily meet the requirements of a business trust considered its failure to meet the other *112 factors mentioned in Pope and Cottle,124 F.2d at 133 ....
The most recent, and perhaps most interesting decision in this circuit, is
In re Medallion Realty Trust,
Like other courts addressing the issue of the eligibility of trusts for relief under Chapter 11, the Medallion court reviewed the statutory and legislative framework, observing that “[i]n denying general eligibility to trusts, Congress presumably viewed trusts, even those of the intervivos variety, as being much like estates in that they are typically enmeshed in an estate plan and are under the control of the state probate court.” 3 Id. at 11. The court concluded that
Congress intended to permit bankruptcy relief for all trusts which are created for the purpose of transacting business and whose beneficiaries make a contribution in money or money’s worth to the enterprise, without regard to whether the trust has characteristics of a corporation such as separate certificates of ownership.
Id. at 11-12. This standard appears fairly consistent with the Gonic decision. The Medallion court unequivocally concluded that the Medallion trust met this standard, thereby permitting the inference that the trust was eligible to file as a business trust. Indeed, the court stated: “[t]o the extent that the Debtor may be regarded as a trust, it is an eligible ‘business trust.’ ” Id. at 14. However, the court, because of the agency relationship between the trustee and the beneficiaries and the fact that the trust was a mere conduit for the income of the beneficiaries, in its words, “properly classified” the trust as a partnership under the name Medallion Realty Trust.
In reaching its decision, the
Medallion
court disclaimed reliance on Massachusetts cases holding that a Massachusetts business trust can be a partnership depending upon the control over its affairs exercised by the beneficiaries. Additionally, the court did not discuss the issues of good faith or unfairness to creditors. However, this Court suspects that awareness of the unfairness of permitting a “partial entity” to avail itself of the protection afforded by the Code may have been an underрinning of the court’s decision to classify the trust as a partnership, a decision made without the procedural vehicle of an adversary com
*113
plaint for declaratory judgment. Moreover, the court did not address the issue identified by Judge Lavien in
L & V Realty,
namely whether there can be a business trust in Massachusetts that does not comply with M.G.L. ch. 182.
4
See L & V Realty Trust,
From Medallion, it is clear that, whether or not one looks to Massachusetts decisions holding that a Massachusetts business trust may be a partnership depending upon the degree of control the beneficiaries themselves exert over the affairs of the trust, a nominee trust instrument creates an agency relationship between the trustee and the beneficiaries. However, the type of relationship that exists between the beneficiaries poses another question altogether. In other words, the principal in the principal/agent relationship created by a nominee trust, as the Medallion court properly noted, may be a partnership, a business trust, a co-tenancy, a co-venture, a corporation, or an individual. Thus, if this Court were to follow the Medallion decision, Robert Quirk, the beneficiary/principal, would be the appropriate “person” before the Court, doing business as Village Green Realty Trust.
The Court’s review of the cases just discussed compels the conclusion that there are three possible avenues to follow with respect to alleged nominee trusts: 1) dismiss them, if they are unable to meet the criteria set forth in M.G.L. ch. 182 (i.e., transferable shares and proper recordation with the secretary of state and with the clerk of every city or town where the trust has a usual place of business) or if they were created merely to preserve assets for family members or as estate planning devices;
see In re L & V Realty Trust,
This Court concludes that dismissal is the correct approach to a bankruptcy court filing by a so-called nominee trust if the trust is unable to meet the state statutory criteria, regardless of whether or not the debtor can also show that it is conducting business. Since the Bankruptcy Code does not define what constitutes a business trust, and since the decisions are, if not hopelessly divided, at least certainly divergent, this Court must look, to state law for guidance.
See Butner v. United States,
In that regard, it is helpful to keep in mind that a business trust, on the one hand,
is created by the voluntary act of the parties and is bаsed on contract. It is intended for the purpose of carrying on some kind of business or commercial activity for profit. Indeed, the profit-mak *114 ing function is one of the most significant characteristics of the business trust. Title to the capital of the organization is vested in trustees, who usually manage the affairs of the trust. The beneficial interests in the trust estate and in the profits are evidenced by transferable certificates, similar to corporate shares, and the existence or life of the organization is not affected by the death or disability of a member or shareholder or by the sale or transfer of his interest.
13 Am.Jur.2d “Business Trusts” § 3 (1964) (footnotes omitted.).
See also Hecht v. Malley,
A nominee trust, on the other hand, may be created for various purposes, inсluding anonymity of ownership (since a schedule of beneficial interest holders need not be recorded with the trust instrument); ease of title transfer; and avoidance of title transfers (since the assignment of beneficial interests may eliminate the need to purchase documentary stamps and/or avoid mortgage provisions permitting acceleration or default upon transfer of title). See Birnbaum and Monahan, “The Nominee Trust in Massachusetts Real Estate Practice,” 60 Mass.L.Q. 364 (1976). The key to the nominee nature of a trust, as has been stressed, is the provision giving the beneficiaries the power to direct the trustee’s activities with respect to the trust property. This provision “defeats the stated intention of creating a trusteе-beneficiary relationship and creates instead, under Massachusetts law, the relationship of principal-agent (at least in so far as third parties are concerned).” Id. at 365.
Since the beneficiaries of a nominee trust have the exclusive power to direct the activities of the trustee, it makes sense to view the beneficiaries as the owners of the trust res and to look to their relationship to each other for bankruptcy purposes.
See In re Medallion Realty Trust,
Despite the apparent simplicity of distinguishing between business and nominee trusts as thus described, the label “nominee trust” appears to be applied with a broad brush, and there may be instances where an alleged nominee trust/debtor may be able to establish the criteria set forth in M.G.L. ch. 182, as well as its business function, and thus be eligible for bankruptcy relief. However, a so-called nominee trust that fails to meet the requirements of Massachusetts law to be a Massachusetts business trust cannot be a “business trust” for bankruptcy purposes, even though the draftees of the Bankruptcy Code eliminated the requirement of transferable shares, thereby resolving the issue raised in
In re L & V Realty Trust,
Since the Code defines a corporation to include a business trust, it stands to reason that a business trust should have at least some of the indicia of a corporation and be more than a mere agency. Although bankruptcy courts routinely look tо substance over form, this Court, unlike the
Medallion
court, cannot ignore the nominee trust’s inability to qualify as a Massachusetts business trust under state law. It is not this Court’s intention to look behind the trust to find an eligible debtor in the form
*115
of the beneficiary. On the contrary, this Court intends to put the onus for an appropriate filing on the trustee or the trust beneficiaries rather than designating the individual or other entity holding the beneficial interests in a nominee trust as the proper debtor. In short, the Court will not squeeze itself into the keyhole to open the door to bankruptcy protection when the beneficiaries of a nominee trust hold the key. The beneficiaries can open the door by filing individual or partnership bankruptcies or live with the consequences оf their choice of the nominee trust vehicle. This approach, in addition to the benefit of simplicity, eliminates substantive and procedural concerns stemming from the disregard of the trust vehicle by the court, particularly where the intent to operate as a partnership or sole proprietorship is problematic. It also may obviate consideration of the related issue of good faith that all too frequently arises in these cases, and it certainly avoids the ironic result of appearing to reclassify as another entity a trust that resembles a corporation and is held out to the public as an operative trust, if properly recorded,
see
M.G.L. ch. 182, § 2 (West 1958); M.G.L. ch. 203, § 2 (West 1958). (“If a trust concerning land is creаted or declared by such instrument, the recording of the instrument in the registry of deeds for the county or district where the land lies shall be equivalent to actual notice to every person claiming under a conveyance, attachment or execution thereafter made or levied.”)
See also Swartz v. Sher,
C. Debtor’s Eligibility
With respect to the instant case, nothing in the Declaration of Trust dated February 21, 1978 compels the trustee of Village Green to operate a business. Indeed paragraph III of the trust instrument merely authorizes the trustee “to purchase and hold title to lands and tenements, to build and develop real estate and to buy, lease, sell, mortgage, control and operate such real estate, all for the benefit of the designatеd beneficiary or beneficiaries.” This is a far cry from a mandate to carry on a profit making enterprise. Nevertheless, assuming that the factors enunciated in
Morrissey v. Commissioner,
Despite these facts which might support the conclusion that Village Green is eligible, the Court is bereft of evidence with respect to whether or not the certificates of beneficial interest are transferable. Since the certificates, if they exist at all, may contain language conditioning or precluding their transfer, the Court cannot construe the silence of the trust instrument to signify that the certificates are in fact transferable. In the absence of this evidence and a complete record of where the trust instrument was filed, the Court cannot make a determination that Village Green is a business trust for purposes of M.C.L. ch. 182. Accordingly, the Court must turn to the Bank’s second ground for dismissal — bad faith.
Village Green like so many real estate trusts, filed on the eve of a foreclosure sale, the trustee of the trust holds title to a single asset, the shopping center, and the filing essentially entails only a single dispute between the principal of the trust, Robert Quirk, and LIFS. In short, the filing was merely an attempt by the Debtor to effectuate a workout with the Bank, since the unsecured debt is minimal. In
In re Bryan,
1. The debtor has few or no unsecured creditors;
2. There has been a previous bankruptcy petition by the debtor or a related entity;
3. The pre-petition conduct of the debt- or has been improper;
4. The petition effectively allows the ' debtor to evade court orders;
*116 5. There are few debts to non-moving creditors;
6. The petition was filed on the eve of foreclosure;
7. The foreclosed property is the sole or major asset of the debtor;
8. The debtor has no ongoing business or employees;
9. There is no possibility of reorganization;
10. The debtor’s income is not sufficient to operate;
11. There was no pressure from non-moving creditors;
12. Reorganization essentially involves the resolution of a two party dispute;
13. A corporate debtor was formed and received title to its major assets immediately before the petition;
14. The debtor filed solely to create the automatic stay.
Id.
at 558,
citing In re Wentworth,
IV. CONCLUSION
In accordance with the foregoing, the Court hereby allows the motion of LIFS to dismiss.
Notes
. According to the Massachusetts decisions cited by Judge Lavien,
e.g., Williams v. Milton,
. The First Circuit in
Pope and Cottle Co. v. Fairbanks Realty Trust,
. In this regard, this Court is in complete agreement with the result in
In re Vivian A. Skaife Irrevocable Trust Agreement
#
1,
Likewise, this Court agrees with the result in
In re Saint Augustine Trust,
. In Massachusetts, M.G.L. ch. 182 recognizes the existence of business trusts as voluntary аssociations and imposes obligations and liabilities upon them. Specifically, section 1 of chapter 182 defines a trust for purposes of chapter 182 as "a trust operating under a written instrument or declaration of trust, the beneficial interest under which is divided into transferable certificates of participation or shares, other than a trust established for the sole purpose of exercising the voting rights pertaining to corporate stock or other securities in accordance with the terms of a written instrument." M.G.L. ch. 182, § 1 (West 1987). Additionally, section 2 requires recordation with the secretary of state and with the clerk in every city or town where the trust does business, and section 6 permits suits against associations or trusts and permits them to use a seal. Id. at § 2 and § 6.