Friday, January 17, 2014

In re Treasure Island Land Trust case brief summary

In re Treasure Island Land Trust case brief summary

The debtor is not entitled to be a Debtor
Case Facts
- Petition filed in name of TILT on Nov 29, 1979
- Nov 30 secured creditors moved to dismiss the petition on the basis that the Trust is not entitled to be a DEBTOR.
- Trust: contractual document Land Trust Agreement. 1971.
- §109(a) only a persona that resides in the US or has a domicile a place of business or property in the US can be a debtor…
(d) only a person that may be a debtor under CH 7…definition of person in §101(41)…definition of corporation §101(9) Includes business trusts.
TILT is in reality a simple trust and as such it cannot be a debtor under the Bankruptcy Code. Movants presented a motion to dismiss.
Motion to dismiss granted.
- Debtor's argument:
  1. Contends that it is a business trust. (Illinois trust land is similar to business trust, present state law.)
    1. However, nowhere in the instrument does the word land trust appear, not Illinois. Florida Law governs this case.
  2. Look at economic realities, not the form! Created to carry on business and then divide profits. Operates as a business enterprise.
    1. Unable to point to any business activity.
    2. Court is faced with continuous assertions and conduct to the contrary: SEC filing. Trust sought to avoid registration requirements of Securities laws. Estoppel theory binding the creditor to its own representations?
  • The movants contend that they are not: look at the language of the instruments creating the trust.
    • Difference between business trust and others is that it is created with the purpose of carrying on some kind of business or commercial activity for profit. (object of the others: protect and preserve the trust assets) Language of A 5 Trusts: “to hold title and protect and conserve property until sale, liquidation or disposition”
-Equity consideration: embraces consistency. The Courts view is that TILT has become a business trust on November 29, 1979 a day after it filed its petition. TILT is not registered in Florida as a business trust as Florida law requires.

-TILT does not qualify as a business trust within the meaning of the code.
  • The motion to dismiss granted.

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