In re Roman Catholic Arch. of Portland in or., Bankruptcy No. 04-37154 ELP11.
| Decision Date | 20 July 2006 |
| Docket Number | Adversary No. 04-3292.,Bankruptcy No. 04-37154 ELP11. |
| Citation | 345 B.R. 686 |
| Parties | In re ROMAN CATHOLIC ARCHBISOP OF PORTLAND IN OREGON, and Successors, a Corporation Sole, dba the Archdiocese of Portland in Oregon, Debtor. Tort Claimants Committee, Plaintiff, v. Roman Catholic Archbishop of Portland in Oregon, and Successors, a Corporation Sole, dba the Archdiocese of Portland in Oregon, et al., Defendants. |
| Court | U.S. Bankruptcy Court — District of Oregon |
Thomas V. Dulcich, James M. Finn, Susan Stevens Ford, Tiffany A. Harris, Margaret Hoffman, Teresa H. Pearson, Thomas C. Sand, Thomas W. Stilley, Portland, OR, L. Martin Nussbaum, Colorado Springs, CO, James L. Phillips, Seattle, WA, for Debtor.
In this chapter 111 case, the Tort Claimants Committee (TCC) filed this adversary proceeding to obtain a declaration of whether certain real and personal property is property of debtor Roman Catholic Archbishop of Portland's (debtor) bankruptcy estate. The parties have filed cross-motions for a determination of whether the Perpetual Endowment Fund (fund), which was established in 1981, more than 20 years before bankruptcy, is property of debtor's estate. In the alternative, the TCC seeks a determination that debtor's beneficial interest in the fund and certain powers it may exercise are property of the estate.
Debtor is a corporation sole, organized under Oregon non-profit corporation law. It filed chapter 11 in 2004. In its Statement of Financial Affairs filed in connection with the bankruptcy case, debtor listed ed a Perpetual Endowment Fund,2 valued at approximately $36,000,000, as "personal property held for another." Debtor takes the position that the fund is held in a charitable trust and therefore is not part of the bankruptcy estate and is not available to pay the obligations it may owe to the tort claimants. The TCC takes the position that the fund is not a valid trust, and is therefore part of debtor's bankruptcy estate and is subject to the claims of creditors.
The fund was created in 1981 by a Declaration of Trust. Because interpretation of the particular provisions of the declaration is the key to resolving these motions, I will set out at length the language of the Declaration of Trust:
CORNELIUS M. POWER, Archbishop of Portland in Oregon, being mindful of the solemn duty imposed upon him by reason of his office to see to the perpetuation of the work of the Church in western Oregon, hereby establishes the Perpetual Endowment Fund (Fund) for the Archdiocese of Portland in Oregon (Archdiocese).
Source of Endowment Fund.
The net proceeds from the sale of land in Washington County, Oregon, known as the St. Mary's Home property, shall constitute the initial assets of the Fund. Other money or property may, from time to time, be designated by the Archbishop as assets of the Fund. In addition, any gifts, bequests or other assignments of property to the Fund, upon acceptance thereof, shall become a part of the Fund, subject to the provisions of this Declaration of Trust.
Goals and Objectives.
The primary goal of the fund shall be the perpetuation of the mission of the Church. The particular objectives of the Fund are as follows:
1. The funding of the operating expenses of the Chancery Office of the Archdiocese.
2. The funding of the religious, charitable and educational programs of the Archdiocese.
3. The funding of the religious, charitable and educational programs of the Roman Catholic Church in America and throughout the world.
Management of the Fund.
The management of the assets of the Fund shall be handled by one or more Investment Managers selected by the Vicar for Business Affairs of the Archdiocese, with the approval of the Archbishop. Subject to other provisions of this Declaration of Trust and the authority of the Archbishop or other authorized officers of the Archdiocese, the Investment Managers shall have, in dealing with the assets of the Fund, all of the powers and duties set forth in the Uniform Trustees' Powers Act as the same is now or may hereafter be enacted in the State of Oregon.
. . . .
Investment Objectives and Inviolability of Principal of the Fund.
The primary investment objective shall be the safety of the principal of the Fund. In order to protect the Fund from erosion by inflation, the Investment Managers shall annually return to the principal of the Fund such amount as shall be directed by the Vicar for Business Affairs, but not less than 5% nor more than 20% of the income of the Fund.
Subject to the foregoing priority, the Fund shall be managed with a view to maximum income. Subject to long-term economic trends, it is contemplated that the income from the Fund should be not less than 10% per annum.
Distribution and Uses of Income.
After reinvestment of a portion of the income to preserve the integrity, of the Fund, as provided above, the annual income of the Fund shall be distributed for the following purposes:
1. The first priority shall be the operating expenses of the Chancery of the Archdiocese. To the extent that income from the Fund is sufficient, minimal assessments shall be levied upon the parishes of the Archdiocese for such purpose.
2. The second priority for the use of the income from the Fund shall be the support of programs of the Archdiocese, including St. Mary's Home.
3. The third priority for the use of the income of the Fund shall be assistance to other segments of the Church in the United States and throughout the world.
All uses of the anticipated income of the Fund shall be subject to the normal budgetary procedures of the Archdiocese.
Procedure for Withdrawal of Income from the Fund.
After appropriate budgets have been completed, income from the Fund shall be distributed in such manner as the Fund managers are instructed in writing by three corporate officers of the Archdiocese.
Modification and Amendment of this Declaration of Trust.
The Fund established hereby is intended to be perpetual. However, recognizing that change is inevitable, the power to amend or modify any of the provisions of this Declaration of Trust is reserved to the office of the Archbishop of Portland in Oregon. Should this instrument be terminated or the Fund otherwise dissolved, all assets of the Fund shall be distributed to the General Treasury of the Archdiocese.
The entity that established the fund in 1981 was the Archdiocese of Portland in Oregon, an Oregon non-profit corporation incorporated in 1909 (the 1909 corporation). In 1991, the 1909 corporation merged with debtor, the Roman Catholic Archbishop of Portland in Oregon. Debtor is the surviving corporation.
The fund was originally made up of the proceeds from the sale of certain land owned by the 1909 corporation. There is no indication that the real property was a substantial portion of the real property used in the 1909 corporation's operations. Additions to the fund included unrestricted gifts to the Archdiocese or the Archbishop, and interest income on the fund that was retained in the fund. Declaration of Leonard Vuylsteke at ¶ 4.
After debtor filed its chapter 11 petition, it listed the fund in its Statement of Financial Affairs as personal property held for another. The TCC filed an adversary proceeding to obtain a determination whether the fund and other assets listed by debtor as being held for others were in fact property of the bankruptcy estate. With regard to the fund, the TCC filed a motion for summary judgment "(a) declaring that the fund ... is not subject to a valid trust and is property of the Debtor's estate; or, alternatively, (b) declaring that Debtor's powers to amend, modify, terminate and direct distribution of the Fund, together with Debtor's beneficial interest in the Fund, are property of the estate." TCC'S Fourth Motion for Partial Summary Judgment at 2. Debtor in turn filed a cross-motion for partial summary judgment "that the Perpetual Endowment Fund is a charitable trust and is not property of the Debtor's estate." Debtor's Cross Motion for Partial Summary Judgment at 2.
1. Whether the fund is property of debtor's bankruptcy estate.
2. Whether debtor has a beneficial interest in the fund or certain powers that are property of the estate.
The court shall grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c), made applicable to adversary proceedings by Fed. R. Bankr.P. 7056.
The filing of a bankruptcy petition creates an estate that is comprised of "all legal or equitable interests of the debtor in property as of the commencement of the case." § 541(a). Property of the estate does not include "any power that the debtor may exercise solely for the benefit of an entity other than the debtor," § 541(b)(1), or "[p]roperty in which the debtor holds, as of the commencement of the case, only legal title and not an equitable interest § 541(d). Under § 541(d), property held in trust by a debtor for another is not property of the bankruptcy estate. In re Unicorn Computer Corp., 13 F.3d 321, 324 (9th Cir.1994); In re Bishop College, 151 B.R. 394 (Bankr.N.D.Tex.1993) ().
Debtor asserts that the fund is a valid charitable trust and that, as trustee,...
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