The Honorable Jeffery A. Deller, United States Bankruptcy Judge.
The matter before the Court is an Expedited Joint Motion to Dismiss the Chapter 11 Case for Cause (the "
Pursuant to the Motion to Dismiss, the movants make a number of contentions including the claim that the Dille Family Trust is not a "business trust" and is therefore ineligible to be a debtor in bankruptcy pursuant to 11 U.S.C. § 109(d).
Objections have been lodged against the Motion to Dismiss by: Robert S. Bernstein in his capacity as Chapter 11 Trustee, Louise A. Geer (who is the non-bankruptcy trustee of the Dille Family Trust), the putative debtor Dille Family Trust, and the Nowlan Family Trust. These parties contend that the debtor is a "business trust" and, as such, the debtor is eligible for relief.
The Motion to Dismiss is a core proceeding over which this Court has the requisite subject matter jurisdiction and authority to enter a final judgment.
This case is a saga. After much litigation before the United States Patent & Trademark Office's Trademark Trial and Appeal Board, the United States District Court for the Central District of California, the United States District Court for the Eastern District of Pennsylvania, and the United States District Court for the Western District of Pennsylvania, the legal controversies concerning the Dille Family Trust found itself on this Court's docket when the Dille Family Trust filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code on November 28, 2017.
Since the Dille Family Trust was in the throes of litigation when it sought bankruptcy protection, its adversaries went on the offensive in this bankruptcy case and sought either relief from the automatic stay to complete the non-bankruptcy litigation that was consuming the debtor, and/or dismissal of this bankruptcy case alleging a myriad of "cause" including allegations to the effect that: (1) the Dille Family Trust is an ordinary trust and not a "business trust" thereby rendering it ineligible for bankruptcy relief, and (2) this bankruptcy case was not filed in "good faith" since it was allegedly filed as a litigation tactic to forestall ongoing litigation.
By way of background, the Dille Family Trust purports or alleges that it owns copyrights, trademarks and other intellectual property rights relative to the fictional comic character known as the 25th century space explorer "Buck Rogers" (also known as "Anthony Rogers").
The intellectual property rights claimed by the Dille Family Trust include the rights relating to a novella entitled Armageddon 2419 A.D., where the character "Anthony Rogers" first appeared. This novella was allegedly written by Phillip Francis Nowlan in 1928 or 1929 while he was under contract with either John F. Dille or his companies (John F. Dille Co., National News Service and/or National News Syndicate).
These circumstances led to a dispute between Nowlan and Dille as to rights to the intellectual property. However, it appears that in 1942, Mr. Nowlan's estate released and assigned such rights and interests
On August 16, 1979, the Dille Family Trust was created. On that same date, it has been alleged that "Buck Rogers" and related trademark rights were conveyed to the Dille Family Trust. Approximately a year later copyrights were also alleged to have been assigned to the Dille Family Trust. Other assignments to the Dille Family Trust have also occurred, but the record in that regard is not fully developed. Inasmuch as this description is for background purposes, the specifics of various intellectual property assignments are not outcome determinative to the instant matter before this Court.
For reasons that are unknown to the Court, certain registrations of the "Buck Rogers" trademark were cancelled in 2011. Notwithstanding the cancellation, the Dille Family Trust contended that it continued to use the trademarks in commerce. In fact, the Dille Family Trust contended that in 2009 it had filed applications with the United States Patent & Trademark Office relative to certain marks and classes of use.
In January of 2008, the Nowlan Family Trust filed an application with the United States Patent & Trademark Office seeking registration of the "Buck Rogers" mark based upon an intent to use. The Dille Family Trust opposed the application, and in 2015 the opposition was overruled by the Trademark Trial & Appeal Board because the Dille Family Trust could not "demonstrate its proprietary interest in the asserted mark."
While this matter was making its way through the federal court system, Team Angry Filmworks, Inc. filed suit against the Dille Family Trust and its trustee, Louise A. Geer, in the United States District Court for the Central District of California.
Team Angry Filmworks is a film production company owned by Don Murphy. According to the lawsuit filed by Team Angry Filmworks against Dille Family Trust and Ms. Geer, Mr. Don Murphy is a "well known motion picture producer whose production credits include `Natural Born Killers,' `The League of Extraordinary Gentlemen,' `From Hell' and `The Transformers' motion picture franchise. Motion pictures on which Mr. Murphy has acted as a producer have generated in excess of four billion dollars in box office revenues."
The lawsuit filed by Team Angry Filmworks was ultimately transferred to the Western District of Pennsylvania because the non-bankruptcy trustee for the Dille Family Trust, Louise A. Geer, resides in New Castle, Pa.
The gravamen of the Western District litigation is a claim by Team Angry Filmworks that "Buck Rogers" and Armageddon 2419 A.D. entered the public domain in the United States in 1956. The claim by Team Angry Filmworks also includes a contention that these marks or works entered the public domain worldwide in 2010.
As such, the litigation commenced by Team Angry Filmworks included causes of action seeking a declaration that the marks and works are in the public domain and that the same may be used by Team Angry Filmworks as part of its commercial ventures and film productions. The Western District litigation also sought injunctive relief enjoining the Dille Family Trust and Ms. Geer from interfering with Team Angry Filmworks use of the "Buck Rogers" and Armageddon 2419 A.D. intellectual property in Team Angry's projects, and attorneys fees and costs pursuant to 17 U.S.C. § 505.
The Dille Family Trust's litigation against the Nowlan Family Trust in the Eastern District progressed to the point in which the case was ready for trial. In fact, trial was scheduled to begin on February 5, 2018. The litigation against Team Angry Filmworks in the Western District also progressed past the pleadings stage and entered into the discovery phase. Efforts at mediation also failed, and the case proceeded.
With the trial looming in the Eastern District, it appears that the Dille Family Trust's ability to fund payment of the fees and expenses of its legal counsel ended. Apparently, the beneficiaries of the Dille Family Trust are the surviving children of Robert C. Dille (i.e., Robert Nichols Flint Dille and Lorraine Dille Williams). The latter, Lorraine Dille Williams, was lending the trust monies enabling the Dille Family Trust to mount its litigation efforts, despite the fact that the trust on its own was not generating enough income to pay for such expenses. However, Lorraine Dille Williams ultimately ceased funding the litigation citing, among other things, alleged irregularities by either Ms. Geer or Mr. Herman, or their firm Geer and Herman, P.C. and other related entities.
Without funding for the litigation, the Dille Family Trust filed for Chapter 11 relief on November 28, 2017. The effect of the filing was that all litigation was stayed and, instead, the parties sharpened their litigation arrows before this Court.
By way of example, upon the filing of this bankruptcy case, the Dille Family Trust sought to engage an auctioneer to sell the intellectual property rights "free and clear" of competing interests. Naturally, the Nowlan Family Trust and Team Angry Filmworks opposed such efforts because these parties claimed a right to utilize the intellectual property.
Team Angry Filmworks also moved to dismiss this bankruptcy case as a "bad faith" filing, contending that the debtor did not belong in Chapter 11 because it had no meaningful business operations and because the bankruptcy filing was merely a litigation tactic designed to avoid the various non-bankruptcy lawsuits.
Team Angry Filmworks also contended that dismissal was warranted because the debtor was an ordinary trust as opposed to a "business trust" thereby rendering it ineligible for bankruptcy relief pursuant to 11 U.S.C. § 109(d). As an alternative request for relief, Team Angry Filmworks also contended that these circumstances provided ample "cause" to grant Team Angry relief from the automatic stay pursuant
Similarly, the Nowlan Family Trust filed its own request for relief from the automatic stay adopting the arguments raised by Team Angry Filmworks.
Around this time, the Dille Family Trust filed its proposed Chapter 11 Plan and Disclosure Statement. The gist of the plan was to liquidate the intellectual property interests.
Hearing was had on the Disclosure Statement, where the various parties (including the Nowlan Family Trust, Team Angry Filmworks, Robert Nichols Flint Dille and Lorraine Dille Williams) appeared and raised many of the same issues that had been permeating this case, including challenges to the debtor's eligibility as a "business trust" and challenges regarding the good faith filing and prosecution of this Chapter 11. The Nowlan Family Trust and Team Angry Filmworks also pressed their motions for relief from stay and for dismissal of the bankruptcy case. No decision was made at that time regarding these dueling motions because the parties argued that questions of fact remained.
The Court then scheduled an August 21, 2018 trial on the motions for relief from stay and for dismissal of the case. The Court also authorized the parties to undertake discovery in advance of trial.
During the discovery period, the Dille Family Trust failed to comply with discovery requests resulting in the filing of various motions to compel against the debtor. At a July 25, 2018 hearing it became evident that not only was the failure to produce discovery willful, but that there were many other inherent problems with this Chapter 11 case. The result was that this Court exercised its discretion and appointed a Chapter 11 Trustee instead of dismissing the case at that time. In this regard, the Court found and determined as follows:
Attorney Robert S. Bernstein was duly appointed Chapter 11 Trustee in this case. In this regard he has exercised his duties admirably and consistent with his fiduciary duties.
Despite the appointment of the Chapter 11 Trustee, the trial of the motions to dismiss and relief from stay remained on the Court's calendar for August 21, 2018. On or about that date, the Chapter 11 Trustee and Team Angry Filmworks reached a tentative agreement whereby the Team Angry motions were withdrawn without prejudice, and the Chapter 11 Trustee and Team Angry Filmworks proposed a Chapter 11 Plan to be funded through the development and monetization of the intellectual property. The Nowlan Family Trust was also granted relief from stay to complete the Eastern District litigation.
Thereafter, the Chapter 11 Trustee filed a motion seeking approval of the Team Angry deal pursuant to Fed.R.Bankr. 9019. This deal, however, was opposed by the Nowlan Family Trust, Ms. Geer, Mr. Herman and others. Geer and Herman then filed their own competing plan whereby Geer and Herman would allegedly control the monetization of the "Buck Rogers" related intellectual property for themselves and certain creditors.
A hearing was then held on November 27, 2018. At that hearing, the Chapter 11 Trustee observed, in so many words, that this case is a difficult case and that the negotiations have been fluid.
Specifically, much to the surprise of Team Angry Filmworks, the Chapter 11 Trustee advised the Court at the November 27, 2018 hearing that the Chapter 11 Trustee was exercising his business judgment and elected to abandon the Team Angry Filmworks proposal and forge ahead with a plan agreed upon by the Nowlan Family Trust, Ms. Geer, and Mr. Herman.
Mr. Bernstein's analysis of the competing proposals was that the joint proposal of Nowlan Family Trust and Geer & Herman was a better offer for creditors because it proposed remitting to the bankruptcy estate $ 500,000 for creditors. It was represented that this sum would pay creditors a dividend of approximately fifty cents on the dollar. It has been stated in these
Obviously Team Angry Filmworks and Don Murphy were dismayed at this turn of events. Ms. Williams and Mr. Flint Dille were also dismayed. As such, at the November 27, 2018 hearing, counsel for Team Angry Filmworks orally renewed the Team Angry motion to dismiss.
At the November 27
Thereafter, on December 11, 2018, the expedited Motion to Dismiss was filed by Team Angry Filmworks, Don Murphy, Lorraine Dille Williams, and Robert Nichols Flint Dille.
This written motion renewed the challenge to the debtor's eligibility to be a debtor, and argued that the Dille Family Trust is not a "business trust." This motion also reasserted the claims of "bad faith" that were contained in the prior motion. The motion also asserted various claims that Ms. Geer and Mr. Herman committed various misdeeds in connection with both their representation of the Dille Family Trust and the filing and prosecution of this bankruptcy case.
A hearing on the Motion to Dismiss was held on January 7, 2019. At that hearing, argument was spirited by all parties including the Chapter 11 Trustee and Team Angry Filmworks. In addition, Lorraine Dille Williams appeared pro se and counsel for Robert Nichols Flint Dille appeared. At the hearing, these beneficiaries reported to the Court that they lost confidence in Ms. Geer and are concerned that no estate fiduciary is looking out for the interests of the beneficiaries.
The Court then took this matter under advisement and ordered supplemental briefing. Briefing was completed on February 5, 2019, and thereafter the Chapter 11 Trustee filed a slew of motions including: a motion to convert this case to a Chapter 7 liquidation, a motion to sell assets, and a motion for bid procedures.
The gist of these motions is that given all of the acrimony, and the costs attendant to litigation, the Trustee believes that a reorganization is neither possible nor likely. The Trustee would therefore like to sell the intellectual property and other assets for the benefit of creditors and convert this case to a Chapter 7 liquidation. The putative stalking horse bidder of the assets is an entity owned or controlled by one of the co-trustees of the Nowlan Family Trust, and the effect of such sale is to result in no distribution on account of the beneficial interests of Lorraine Dille Williams and Robert Nichols Flint Dille. The current offering price for the assets in question is $300,000, and such price will also result in less than full payment to unsecured creditors whose claims listed on the Court's official claims register exceed $4.8 million.
Having duly considered the record and arguments of counsel, this Court concludes that the Dille Family Trust is ineligible to be a debtor in bankruptcy. As such, the Court need not address the merits of the other items complained by the movants. The Court's analysis of the eligibility issue is set forth below.
Beginning with the allocation of the burden of proof, courts have held that the burden of proof in establishing eligibility for bankruptcy relief lies with the party filing the bankruptcy petition, which in this case is the Dille Family Trust.
This case, however, is in somewhat of a unique position because a Chapter 11 Trustee has been appointed. Because the Chapter 11 Trustee stands in the proverbial shoes of management of the debtor, and because the Chapter 11 Trustee is advocating for debtor eligibility, this Court concludes that it is appropriate to allocate the burden of proof to the Chapter 11 Trustee. This holding is consistent with
Of course, a traditional trust is not an entity in and of itself. Rather, it is a
Turning to the relevant statutes that guide this Court's rule of decision, 11 U.S.C. § 109(d) provides, in pertinent part, that only "a person ... may be a debtor" under Chapter 11. The term "person" is further defined in the Bankruptcy Code as including an "individual, partnership, and corporation..."
The rationale for such a conclusion lies not only in the language of the statutes set forth above, but also in the history behind them. As the court noted in
The preceding analysis is further supported by the fact that the term "entity" in the Bankruptcy Code includes a "trust." 11 U.S.C. § 101(15). But, according to the Bankruptcy Code, debtor eligibility is not afforded to all "entities." 11 U.S.C. § 109(d). Rather, it is limited to "persons," and the only trust within the definition of a "person" is a "business trust."
The statutory interpretation set forth above is consistent with the fact that a traditional trust merely embodies a fiduciary relationship, while a business trust has long been determined to be an unincorporated business entity.
Legal scholars have traced the origins of business trusts to eighteenth century England.
In the United States, "Massachusetts served as the forefront of the practical and legal evolution of business trusts because it was one of the last states to permit incorporation without a special legislative act."
This definition of a "business trust" seems relatively straight forward. However, this generalization is nuanced upon closer inspection. Specifically, this Court's research reveals that the case law in this area is convoluted because no uniform standard has emerged to define what constitutes a valid "business trust" for purposes of debtor eligibility in bankruptcy.
By way of example, there is a disagreement in some of the cases as to whether a "business trust" determination is based upon state law or whether it is a federal question.
This conclusion also makes sense in light of the United States Supreme Court decision in
This does not mean that matters of state law play no role in the analysis. As numerous courts have observed, a trust's failure to qualify as a "business trust" under state law may be evidence of the settlor's intent that the trust not operate as a business trust.
Even with these precepts, the federal question of what constitutes a "business trust" in bankruptcy is not an easy question to answer. The Court makes this observation because some courts have had difficulty finding a standard definition of the term "business trust." As one court noted: "[t]he decisions are sharply, and perhaps hopelessly divided."
Regardless of the division or differences of opinion, nearly all courts look to the underlying trust instrument for guidance.
The United States Court of Appeals for the Third Circuit has yet to weigh in on the issue in the context of debtor eligibility under the United States Bankruptcy Code. Notwithstanding this fact, it has examined the differences between a "business trust" and traditional trust for purposes of diversity jurisdiction.
In
The preceding statement by the Third Circuit is somewhat different than definitions or descriptions utilized by other courts. For example, in analyzing the issue of what is a "business trust" in the context of debtor eligibility, the United States Court of Appeals for the Sixth Circuit utilized what is called the "primary purpose" test.
As the Sixth Circuit explained: "[t]he basic distinction between business trusts and nonbusiness trusts is that business trusts are created for the purpose of carrying on some kind of business or commercial activity for profit; the object of a nonbusiness trust is to protect and preserve the trust res."
The Sixth Circuit therefore fashioned the following test for a business trust: "trusts created with the primary purpose of transacting business or carrying on commercial activity for the benefit of investors qualify as business trusts, while trusts designed merely to preserve the trust res for beneficiaries generally are not business trusts."
The Second Circuit Court of Appeals has also opined on the issue of what constitutes a "business trust" for purposes of debtor eligibility.
Other tests have been utilized by various trial courts. For example, the United States District Court for the Eastern District of Pennsylvania utilized a four-part test as part of its analysis in determining whether a "business trust" in bankruptcy exists. The four key elements highlighted by the Eastern District of Pennsylvania are:
In another trial court opinion, the United States District Court for the Eastern District of Missouri looked to the "totality of the circumstances" test previously utilized in IRS tax cases to determine whether an entity is eligible for bankruptcy as a "business trust."
In this regard, the District Court in
A fair reading or synthesis of the case law cited above is that the riddle of whether a trust constitutes a valid "business trust" turns upon two generally required elements. The first is whether the trust itself was created for the purpose of transacting business for a profit (as opposed to merely preserving a res for beneficiaries). The second is whether the trust in-fact has all of the indicia of a corporate entity. If both of these items are present, then the trust at issue is more than a gratuitous or ordinary trust and is a business trust. If any one of these two characteristics is not present, then the trust is not a "business trust" and is ineligible for bankruptcy relief under Chapter 11 pursuant to 11 U.S.C. § 109(d).
As to the first element (i.e. whether the trust was created for the purpose of transacting business for a profit or whether it was created merely for preserving a res for beneficiaries), the Court looks to the trust instrument and surrounding circumstances for guidance.
Turning to the plain language of the relevant trust documents, there is no question that the purpose of the Dille Family Trust is to create an estate-planning vehicle or otherwise preserve the res for family beneficiaries. The text of the governing documents supports this conclusion.
For example, the title of the trust instrument describes the trust as a family trust, as opposed to being a business trust. In fact, the trust document is plainly labeled
That the trust at issue is an ordinary trust, as opposed to a business trust is also supported by the fact that the trust document unequivocally provides that the powers of the trustee are "set forth in subparagraphs (1) through (17) inclusive of Section 1120.2 of the California Probate Code ..."
The Court notes that the objectors to the Motion to Dismiss discount these provisions in The Dille Family Trust contending that the trust document affords the trustee "broad ranging powers and privileges necessary to conduct business ..."
The Court is not convinced that these provisions carry the day. Many ordinary trusts empower the trustee to engage in business activities and remit income from trust assets to beneficiaries, and such facts do not per se transform a trust into a "business trust." For example, in
The primary purpose of the Dille Family Trust appears to protect and preserve the trust res for the settlors and their two children- Lorraine Dille Williams (formerly known as Lorraine Virginia Dille) and Robert Nichols Flint Dille. Section 4.A. of Article IV of The Dille Family Trust supports this conclusion, where the trust empowers the trustee to "receive, take possession of, sue for, recover and preserve the assets of the trust fund, both real and personal, coming to its attention or knowledge, and the rents, issues and profits arising from such" assets.
Section 5.F. of Article V of The Dille Family Trust provides further support, where it states with respect to tangible personal property the following: "In the event husband and/or wife surrender any such property to the trustee, or upon their deaths, trustee shall take possession, assume control, preserve and maintain such property."
Section 6.A. of Article VI of The Dille Family Trust also supports this conclusion where it states: "During the term of this trust agreement, trustee shall hold, manage, invest and reinvest the trust fund, collect the income and profits from it, pay the necessary expenses of trust administration, and distribute the net income and principal as provided in this ARTICLE VI."
Other provisions of The Dille Family Trust reflect the estate planning nature of the trust. For example, the document contains provisions relating to the "Division of Trust Fund Upon Death of First Settlor," "Authorized Actions at Settlors' Deaths," "Deceased Spouses Expenses" (including provisions for estate or inheritance taxes, and funeral expenses), "Payments of Income to Surviving Spouse," "Payments of Principal to Surviving Spouse," "Special Withdrawal Rights of Surviving Spouse," "Power of Appointment in Surviving Spouse," and "Distribution at Surviving Spouses' Death."
That the Dille Family Trust is primarily an estate or succession planning device designed to protect and preserve the res is embodied in the Amendment dated January 5, 1982. A stated purpose of the amendment was that "several provisions of said [Dille Family Trust] agreement require revision in view of the changes in the Federal Estate Tax Law effective January 1, 1982..."
The Amendment also contains various provisions addressing "Division of Trust Fund Upon Death of First Settlor," "Authorized Actions at Settlors' Deaths," "Deceased Spouses Expenses," payments to "Surviving Spouse," and "Special Withdrawal Rights of Surviving Spouse."
The Amendment further highlights that in exercising discretion conferred upon the trustee, the "trustee is requested to take into consideration the fact that settlors' intent is to benefit primarily the Surviving Spouse and the interests of the remaindermen should be considered of secondary importance."
The record reflects that Lorraine Dille Williams has filed with the Court a letter dated February 5, 2019. In this letter, Ms. Williams admitted that the Dille Family Trust was "created as an estate planning vehicle."
Such statements made by Ms. Williams and Mr. Fox are hearsay, because they are out of court statements not made under oath and are offered for the truth of the matter asserted.
Regardless, the Court observes that Ms. Geer has filed various documents with the Court.
In addition, neither the Chapter 11 Trustee nor Ms. Geer has offered any explanation as to why the Dille Family Trust, if it is a true "business trust" to be treated as an entity other than a small business trust, did not file its tax returns using IRS series 1120 forms (which relate to taxation of corporate entities or unincorporated associations having the attributes of corporate entities).
A review of the litigation before the California District Court reflects that the Dille Family Trust argued as much.
In support for this assertion, Ms. Geer further stated that a "trust is not a legal entity" but rather is a fiduciary relationship.
All of these circumstances reflect that the Dille Family Trust is to be regarded as an ordinary trust as opposed to a business trust.
It is true that the Dille Family Trust has from time to time licensed certain "Buck Rogers" related intellectual property. The extent and magnitude of these affairs is hardly clear in the record.
For example, Ms. Geer points to the Documentation of Flint Dille in Support of Proof of Claim as evidence of the alleged extensive business activities of the Dille Family Trust. Aside from being hearsay, this document is far from being convincing support for the legal position of Ms. Geer because it states unequivocally at paragraph 23: "There were numerous deals that did not happen due to either incompetence or other agenda of the Trustee of the Trust."
In addition, the 2012 tax returns filed by Ms. Geer reflect no net income
In filings made by Ms. Geer before this Court under penalty of perjury, the gross revenue of the Dille Family Trust was admitted as being "none" when this bankruptcy case was commenced.
The scant record relating to business activities means that neither the Chapter 11 Trustee nor Ms. Geer have met their burden of proof. Regardless, as the Second Circuit Court of Appeals remarked in
The fact remains that "examination of trust documents is essential to a just determination of whether a trust qualifies as a business trust."
In reviewing the circumstances of the Dille Family Trust, this Court concludes that the facts of this case are similar to the facts of
Given the foregoing, this Court finds that the primary purpose of the Dille Family Trust is to protect and preserve the res for the benefit of the family beneficiaries under the trust, and not primarily for transacting business for a profit. For this reason alone, the Dille Family Trust does not qualify as a "business trust" and is therefore ineligible for bankruptcy relief by operation of 11 U.S.C. §§ 101(9), 101(41), and 109(d).
As to indicia of corporateness, the Court has canvassed the record and submissions of the parties and finds that the weight of the record supports a finding that the Dille Family Trust lacks sufficient characteristics of a corporate entity and is therefore determined to be an ordinary trust not eligible for bankruptcy.
The Third Circuit has held that the general distinction between traditional and business trusts is that a traditional trust facilitates a donative transfer, whereas a business trust implements a bargained-for-exchange.
The Second Circuit in
Nothing in the Dille Family Trust suggests that the trust was created by a group of "investors." Rather, it appears that the trust was created by Mr. & Mrs. Dille to preserve their assets for the benefit of themselves and their children. Thus under the tests articulated in these cases, the Dille Family Trust is not a business trust.
The United States Supreme Court in
The Dille Family Trust, however plainly states that:
In rendering its decision, this Court has not forgotten about the extensive work performed by the Chapter 11 Trustee in this case. Indeed, the record in this case reflects that the Chapter 11 Trustee approached this case with the utmost vigor and professionalism.
Had this Court been afforded the opportunity to write this opinion on a clean slate, it surely would deny the Motion to Dismiss and afford the Chapter 11 Trustee the opportunity to finish his work.
Unfortunately, the fact remains that the Dille Family Trust is not a "business trust." The plain language of the Bankruptcy Code therefore precludes this Court from rendering the Dille Family Trust eligible for bankruptcy relief by way of judicial fiat. As this Court has observed before, equity follows the law and is not a basis for the Court to re-write the Bankruptcy Code.
For purposes of completeness, the Court has duly considered the question of whether the movants have waived any claim that the Dille Family Trust is ineligible for bankruptcy relief. In a different context, such arguments might be persuasive because the debtor eligibility provisions of the Bankruptcy Code are not jurisdictional and could be waived by parties-in-interest.
The arguments of the Chapter 11 Trustee and the other objectors are not persuasive because the record of this case reflects that the elements of waiver have not been met. According to the Third Circuit Court of Appeals, a waiver is an "intentional relinquishment or abandonment of a known right."
The record in this case is that there has been no intentional abandonment
These circumstances also preclude the application of equitable estoppel. "Equitable estoppel is a doctrine that prevents one from doing an act differently than the manner in which another was induced by word or deed to expect."
The only promise that Team Angry Filmworks and Don Murphy made with respect its prior motion to dismiss was that it was withdrawn "without prejudice." The record reflects that there was no inducement or promise that such parties would
Lastly, the Court recognizes that the Chapter 11 Trustee and other objectors have argued in passing that the movants lack standing to prosecute the Motion to Dismiss. The record reflects, however, that Lorraine Dille Williams and Robert Nichols Flint Dille are the beneficiaries of the Dille Family Trust, and the current plan and motions of the Chapter 11 Trustee allegedly impair their interests.
The Dille Family Trust's schedules also reflect that Lorraine Dille Williams holds undisputed claims aggregating $ 363,409.57.
While such claims of Team Angry Filmworks and Mr. Dille may be disputed, the claims objections have not been fully litigated and Team Angry and Mr. Dille still hold "claims" as defined in the Bankruptcy Code.
This determination is supported by the fact that 11 U.S.C. § 1109(b) states unequivocally that: "A party in interest, including... a creditor, [or] equity security holder ... may appear and be heard on any issue in a case" under Chapter 11.
In the opening lines of this Memorandum Opinion, the Court described this case as a saga. When the Court appointed a Chapter 11 Trustee in this case, it was done with the hopes that the appointment would have the positive impact of paving the way to consensual resolution of much of the litigation between the parties. Unfortunately, that has not occurred.
For the reasons set forth above, this saga may continue albeit before a different court (or courts) because the Dille Family Trust is ineligible for bankruptcy relief. For this reason, a separate order shall be entered that dismisses this case with prejudice. Dismissal of the instant bankruptcy case shall also result in the denial of all pending motions that remain in this case, as such motions are now moot.
The matter before the Court is an Expedited Joint Motion to Dismiss the Chapter 11 Case for Cause (the "
For the reasons set forth in the Memorandum Opinion issued contemporaneously herewith, the Court hereby ORDERS, ADJUDGES and DECREES as follows:
ECF No. Description 252 - Expedited Motion To Vacate Appointment of Trustee and to Dismiss filed by Debtor 277 - Objection To Nowlan Family Claim filed by Ch. 11 Trustee 331 - Motion To Reject Lease/Contracts with IM Global filed by Ch. 11 Trustee 377 - Motion To Withdraw as Counsel (for Nowlan Fam Trust) filed by Max Morgan 411 - Objection To Geer and Herman Claim filed by Ch 11 Trustee
ECF No. Description 413 - Objection To Louise Geer Claim filed by Ch 11 Trustee 416 - Expedited Motion To Disqualify Counsel (Herman) filed by Ch 11 Trustee 449 - Amended Ch. 11 Plan by Ch. 11 Trustee 450 - Amended D/S filed by Ch 11 Trustee 453 - Expedited Motion to Dismiss filed by Murphy, Lorraine Dille, Flint Dille and Team Angry 461 - Objection to Team Angry Claim filed by Ch 11 Trustee 491 - Motion To Strike Brief (of Flint Dille) filed by Nowlan Family Trust 515 - Expedited Motion to Convert filed by Ch 11 Trustee 523 - Motion For Entry of Order Approving Bid Procedures, etc. filed by Ch 11 Trustee 526 - Motion For Sale of Property filed by Ch 11 Trustee 537 - Motion to Withdraw Amended Plan & Amended D/S by Ch. 11 Trustee
