Matter of Captran Creditors Trust, Bankruptcy No. 85-45.

• Decision Date: 03 October 1985
• Docket Number: Bankruptcy No. 85-45.
• Citation: 53 BR 741
• Parties: In the Matter of CAPTRAN CREDITORS TRUST, Debtor(s).
• Court: U.S. Bankruptcy Court — Middle District of Florida

53 B.R. 741 (1985)

In the Matter of CAPTRAN CREDITORS TRUST, Debtor(s).

Bankruptcy No. 85-45.

United States Bankruptcy Court, M.D. Florida, Tampa Division.

October 3, 1985.

Kevin F. Jursinski, Fort Myers, Fla., for Joe Wear, Jr. & Michael Glantz.

Jeffrey Warren, Tampa, Fla., for petitioners.

ORDER ON LEGAL NATURE OF CAPTRAN CREDITORS TRUST

ALEXANDER L. PASKAY, Chief Judge.

THIS IS an involuntary Chapter 11 case and the matter under consideration is the eligibility vel non of the above-named Debtor for relief under Title 11. This case presents an interesting factual setting in that it is the Debtor, Captran Creditors' Trust (CCT), which seeks a dismissal of this case based upon its own ineligibility to be a Debtor. The facts as developed at the hearing on this matter may be summarized as follows:

On January 9, 1985 Captran Resorts International, Inc. (CRI) filed a Petition for Relief under Chapter 11 of the Bankruptcy Code. Subsequent to that filing, CRI, the creditors committee and the major secured creditors of CRI entered into a settlement agreement whereby the Chapter 11 case would be dismissed and a large portion of CRI's assets would be transferred to CCT for liquidation and distribution to the creditors of CRI. The settlement was approved by this Court and the case was dismissed.

CRI had been involved in the development and marketing of interval ownership, time-sharing resort projects. The assets transferred to CCT consisted of raw land, notes receivable, mortgages receivable, unit weeks at time-share projects, residual balances of accounts receivables assigned to factors, and five resort projects, all but one of which was completed and in the process of being sold as time-share units.

The Trust Agreement states the purpose of the Trust as follows:

"Purpose" This Trust is organized for the primary purpose of liquidating the assets transferred to it with no objective to continue or engage in the conduct of a trade or business.

Creditors of CRI were given an option to participate in the Trust or not. Creditors were sent a large booklet (Cr.Ex. # 4) which set forth the settlement proposal and which closely resembles a prospectus found in the public offering of securities. Contained in the booklet was a document entitled "OPT IN — OPT OUT SHEET" which read as follows:

"Dear

After reviewing your letter of November 19, 1982, and all documents attached, I have decided to: (Check only A or B)

A. ____-Opt In — By opting in, I understand that I become a settlor of the Captran Creditors\' Trust and that I am bound by the terms of the Captran Creditors\' Trust and have the right to look only to the assets purchased by the Captran Creditors\' Trust from Captran, or collateral posted for the warranties in the Agreement, and I hereby recognize that by opting in, I hereby assign my debt to the Captran Creditors\' Trust, and I will look only to the Captran Creditors\' Trust and the Distribution Plan set forth in the Captran Creditors\' Trust Agreement for collection of my debt, and I hereby covenant and agree not to pursue any remedy at law, equity or otherwise against Captran for the collection of this indebtedness. The Captran Creditors\' Trust dated as of the 19th day of November, 1982, is incorporated by reference so as to make this single sheet a counterpart, and I execute this single page counterpart for the purpose of being bound by the terms of the Captran Creditors\' Trust.

B. ____-Opt Out — By opting out, I understand that the Captran Creditors\' Trust is being formed and certain assets are being sold to the Captran Creditors\' Trust and that the Captran Creditors\' Trust is assuming certain creditors\' debts by disposing of assets. However, I do not want the Captran Creditors\' Trust to collect my debt, and I desire to preserve my full rights to pursue Captran directly or otherwise exercise all legal rights and remedies.

Creditor: ________________________ Address: _________________________ Telephone: _______________________ Authorized Signature: ____________ Title: __________________________"

Two trustees were named by the Trust Agreement: David W. McConnell (McConnell) and Gerard A. McHale, Jr. (McHale). The trustees could be removed under the terms of the Trust and successor trustees appointed by the written direction of the beneficiaries with a majority interest in the debt assumed by the Trust. Sometime after the Trust was formed, a Mr. Jack Grobowsky came to hold "proxies" representing a majority in interest and in November, 1982, removed McConnell and McHale as trustees and appointed Michael Glantz (Glantz) and Sylvia Steeves (Steeves) to serve as successor trustees. It is the petitioning creditors position that Mr. Grobowsky, without consideration for the rights of other creditors, directed Glantz and Steeves to sell off certain assets held by the Trust. It is this activity by the trustees which the petitioning creditors claim precipitated this case.

McConnell and McHale testified as to their activities while trustees as follows:

1. Sold mortgages to Berkley Federal Savings and Loan for cash and used the proceeds to pay creditors.

2. Entered into a contract with CRI whereby CRI would act as sales agent on time-share units held by CCT. The contract provided for a 38% commission to CRI on each sale.

3. Built two additional buildings at one of the projects. CRI acted as the developer on the project and arranged for zoning changes, etc. . . .

4. Sold additional mortgages.

5. Paid out monies to some of the creditors pursuant to the Trust Agreement and retained some funds for future expenses.

Both McConnell and McHale testified that they acted so as to maximize the return to the beneficiaries. Their activities were designed to realize a greater return then would have been received had the assets been sold at auction.

While CCT maintains a separate bank account, it has no offices of its own, no employees, no business license, has not filed income tax returns, and has not obtained loans or been extended credit. The Debtor claims that the Trust is controlled by the trustees and that the beneficiaries have little control over the management of the Trust. However, inasmuch as the beneficiaries have the ultimate power to remove a trustee, it appears to this Court that they exercise considerable control over the management of the Trust. In fact, it appears that the control exercised by one beneficiary, Mr. Grobowsky, has been extensive.

Based upon the foregoing, CCT claims it is not eligible for relief because it is not a person within the meaning of the Bankruptcy Code. Section 109 defines who may be a debtor.

§ 109. Who may

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