Robinson v. World Omni Financial Corp., d/b/a Southeastern Toy

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
WILSON DIVISION
IN RE:
KIM S. ROBINSON
DEBTOR
CASE NO.
10-01996-8-SWH
KIM S. ROBINSON,
PLAINTIFF,
v.
WORLD OMNI FINANCIAL CORP. d/b/a
SOUTHEAST TOYOTA FINANCE,
DEFENDANT.
ADVERSARY PROCEEDING NO.
10-00151-8-SWH-AP
ORDER DETERMINING LACK OF STANDING TO ASSERT CERTAIN CLAIMS
The matter before the court is the defendant World Omni Financial Corp. d/b/a Southeast
Toyota Finance’s motion to dismiss the debtor’s complaint. A hearing on the motion was held in
Raleigh, North Carolina, on November 23, 2010.
SO ORDERED.
SIGNED this 01 day of February, 2011.
________________________________________
Stephani W. Humrickhouse
United States Bankruptcy Judge
____________________________________________________________
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The debtor purchased a 2007 Toyota Highlander SUV (the “Vehicle”) from Mark Jacobson
Toyota in January of 2007 and obtained financing through Southeast Toyota Finance, a registered
fictitious name for the defendant, World Omni Financial Corp. (“WOFC”). WOFC is engaged in
the business of providing financing to duly licensed franchised dealers of Toyota Motor Corporation
by purchasing certain designated retail installment contracts from them. 	The debtor’s retail
installment contract was subsequently assigned by WOFC to World Omni Auto Receivables, LCC,
and then to World Omni Auto Receivables Trust 2007 (the “Trust”), in an asset-backed
securitization. The debtor’s certificate of title indicates that a first lien on the Vehicle is held by the
defendant, who also remains the servicer of the retail installment contract on behalf of the Trust, but
does not hold the indebtedness.
The debtor filed a Chapter 13 petition on March 14, 2010, and listed the Vehicle on her
Schedule B as having an estimated value of $16,499. The debtor listed Southeast Toyota Finance
on her Schedule D and indicated that she disputed the amount of the claim, whether Southeast
Toyota was the valid holder of the claim, and the secured status of the claim. The Trust’s alleged
security interest in the vehicle is not noted on the certificate of title. On April 27, 2010, “World
Omni Financial Corp. Its Successors and Assigns” filed a proof of claim in the case asserting a
secured claim in the amount of $14,193.68. No objection has been filed to the proof of claim as of
the date of this order.
On July 5, 2010, the debtor initiated an adversary proceeding against WOFC, seeking a
determination that (1) WOFC is unsecured and that any lien claimed by it should be avoided (the
“Avoidance Count”), (2) WOFC violated the automatic stay (the “Stay Count”), (3) WOFC filed a
fraudulent proof of claim (the “Proof of Claim Count”), and (4) WOFC committed 	unfair and
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deceptive trade practices (the “UFDTP Count”). WOFC filed a motion to dismiss the complaint on
September 2, 2010. In her response to the motion, the debtor voluntarily dismissed the Stay Count
and the Proof of Claim Count pursuant to Rule 41(a)(1)(A)(i) of the Federal Rules of Civil
Procedure, made applicable to this adversary proceeding by Bankruptcy Rule 7041, and sought leave
to amend the UFDTP Count.
The substantive issue presented to the court by the parties is whether an assignee of a lender,
whose claim is secured by a motor vehicle but whose security interest is not noted on the certificate
of title, can prevail when the security interest is attacked under § 544 of the Bankruptcy Code. The
court declines to reach the issue at this time because, as is more fully discussed below, it finds that
the debtor does not have standing to assert the Avoidance Count.
DISCUSSION
In ruling on a motion to dismiss, the court must accept as true all well-pleaded factual
allegations and draw all reasonable inferences in favor of the plaintiff. Nemet Chevrolet, Ltd. v.
Consumeraffairs.com, Inc., 591 F.3d 250 (4th Cir. 2009). However, before considering application
of that standard to the facts and law presented by the parties, the court must address the issue of
standing, which is determined as of the time the action was commenced. Lujan v. Defenders of
Wildlife, 504 U.S. 555, 570 (1992).
The Avoidance Count contained in the complaint is brought by the debtor pursuant to § 544
of the Bankruptcy Code (the “Code”). The debtor recites in paragraph 39 of the complaint that “the
Plaintiff” has certain “strong arm” powers set forth in § 544 which enable her, as the plaintiff, to
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avoid improperly perfected security interests. 	However, § 544(a) provides that the trustee shall
have such powers:
The trustee shall have, as of the commencement of the case, and without regard to
any knowledge of the trustee or of any creditor, the rights and powers of, or may
avoid any transfer of property of the debtor or any obligation incurred by the debtor
that is voidable by - -
(1) a creditor that extends credit to the debtor at the time of the
commencement of the case, and that obtains, at such time and with
respect to such credit, a judicial lien on all property on which a
creditor on a simple contract could have obtained such a judicial lien,
whether or not such a creditor exists . . . .
11 U.S.C. § 544(a) (emphasis added). The section refers explicitly to rights and powers of a trustee
and does not mention the chapter 13 debtor. In re Binghi, 299 B.R. 300, 301 (Bankr. S.D.N.Y.
2003). Accordingly, the debtor cannot base her standing on this section and must find the authority
to bring the action elsewhere in the Code.
The rights and powers of a chapter 13 debtor are set out in § 1303 of the Code as follows:
Subject to any limitations on a trustee under this chapter, the debtor shall have,
exclusive of the trustee, the rights and powers of a trustee under sections 363(b),
363(d), 363(e), 363(f), and 363(l), of this title.
The language of this provision clearly indicates that chapter 13 debtors were not granted the
trustee’s avoidance powers found in chapter 5 of the Code. Although the Fourth Circuit has not
weighed in on the issue, there is guidance from the Middle District of North Carolina. In In re
Hollar, 174 B.R. 198, 203 (M.D.N.C. 1994), the court held that “there is no statutory authority in
Chapter 13 which grants a Chapter 13 debtor independent standing to sue under [the Chapter 5
avoidance powers].” The majority of courts to consider this issue have applied similar statutory
analysis to reach the same conclusion. See In re Stangel, 219 F.3d 498, 501 (5th Cir. 2000), cert.
denied, Stangel v. United States, 532 U.S. 910 (2001) (holding that Chapter 13 debtors do not have
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standing to assert trustee's strong arm's power, relying on Hartford Underwriters Ins. Co. v. Union
Planters Bank, N.A., 530 U.S. 1 (2000) and In re Hamilton, 125 F.3d 292, 296 (5th Cir.1997) stating
that “no specific statutory provision” authorizes chapter 13 debtors to “exercise trustees' avoidance
powers”); Binghi, 299 B.R. at 301-302; In re Redditt, 146 B.R. 693, 697 (Bankr.S.D. Miss.1992)
(stating that “[b]y the statute's own terms, only the trustee has standing to exercise the strong-arm
avoidance powers”).
Additional support for this position is found when the limitations on the power of the
chapter 13 debtor to bring avoidance actions under § 1303 is compared to §§ 1107 and 1203 of the
Code, which explicitly grant debtors under chapter 11 and chapter 12 the rights of a trustee to pursue
avoidance actions. This court agrees with other courts which have found that “Congress could have
given Chapter 13 debtors the same broad sweep of powers given in Chapter 11 but chose not to do
so.” 	Hollar, 174 B.R. at 203. See also In re Steiner, 251 B.R. 137, 140 (Bankr.D. Ariz. 2000)
(stating that “Congress did not elect to confer such extraordinary [avoidance] powers on Chapter 13
debtors,” and emphasizing the “significant differences between § 1107 and § 1303”); In re
Henderson, 133 B.R. 813, 817 (Bankr.W.D. Tex. 1991) (stating that the Code “unambiguously gives
avoidance powers to bankruptcy trustees and to chapter 11 and 12 debtors, but not to chapter 13
debtors”). Based upon this analysis, the court finds that the debtor does not have standing to bring
the Avoidance Count.
In her final claim, the UFDTP Count, the debtor claims that defendant’s alleged violations
of Chapters 20 (the North Carolina Motor Vehicle Act) and 25A (the Retail Installment Sales Act)
of the North Carolina General Statutes constitute unfair and deceptive acts and practices in violation
of chapter 75 of the North Carolina General Statutes, and that such violations give rise to damages
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under the provisions of § 75-16.1. 	Defendant moved to dismiss the UFDTP Count on the grounds
that it has not violated either state statute as a matter of law. In response, plaintiff asked the court
to allow leave to amend that count.
In light of the fact that neither party raised the standing issue in their papers or at the hearing,
and that the standing deficiency can be cured with the joinder of the Chapter 13 trustee, the court
will defer final ruling on both the motion to dismiss and the debtor’s request for leave to amend the
UFDTP Count for 60 days, during which time the trustee is directed to evaluate the causes of action
asserted by the debtor in accordance with the standards set forth in Rule 9011 of the Federal Rules
of Bankruptcy Procedure and either join the action or affirmatively notify the court and the parties
that he does not believe the action is warranted.
SO ORDERED.
END OF DOCUMENT
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