Sicherman v. GMAC Financial Services

UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO
In re:
Kimberly A. Saley,
Debtor.
___________________________________
Marvin Sicherman, Ch. 7 Trustee,
Plaintiff,
v.
GMAC Financial Services,
Defendant.
)
)
)
)
)
)
)
)
)
)
)
)
)
Chapter 7 Proceedings
Case No. 08-13599
Judge Arthur I. Harris
Adversary Proceeding
No. 09-1312
MEMORANDUM OF OPINION 1
This matter is currently before the Court on cross-motions for summary
judgment filed by the plaintiff-trustee, Marvin Sicherman (trustee), and the
creditor-defendant, GMAC Financial Services (GMAC). At issue is whether the
1 This Memorandum of Opinion is not intended for official publication.
The court incorporates by reference in this paragraph and adopts as
the findings and orders of this court the document set forth below.
This document was signed electronically on April 22, 2010, which may
be different from its entry on the record.
IT IS SO ORDERED.
Dated: April 22, 2010
_____________________________
Arthur I. Harris
United States Bankruptcy Judge
__________________________________________________________________________________________
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 1 of 16

trustee may avoid a prepetition payment the debtor made to GMAC for a motor
vehicle loan when the vehicle was titled solely in the name of the debtor’s spouse.
For the reasons that follow, the motion of the trustee for summary judgment is
granted, and the motion of GMAC for summary judgment is denied.
FACTS AND PROCEDURAL BACKGROUND
Unless otherwise indicated the following facts are undisputed. On
May 14, 2008, the debtor Kimberly Saley (debtor) filed a voluntary petition under
Chapter 7 of the Bankruptcy Code (Case # 08-13599). The debtor’s husband Jason
Saley did not file for bankruptcy. On August 22, 2008, the debtor received a
discharge.
1. Retail Installment Sale Contract and obligation to GMAC
On September 30, 2004, the debtor and her spouse entered into a retail
installment sale contract (contract) to purchase a 2004 GMC Yukon (vehicle) from
Classic Pontiac GMC. According to the contract, the vehicle’s total cost was
$49,800.24, which was to be paid in 72 monthly payments of $691.67. The debtor
signed the contract as a co-buyer. Under the terms of the contract, “A co-buyer is a
person who is responsible for paying the entire debt.” “An other owner is a person
whose name is on the title ....” See Docket #22-3.
On October 8, 2004, the certificate of title for the vehicle was issued. The
2
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 2 of 16

certificate of title lists the debtor’s husband as the owner of the vehicle. The debtor
is not listed on the certificate of title as an owner of the vehicle. According to the
debtor’s affidavit, her spouse is the sole owner of the vehicle. GMAC is listed as
the first lienholder.
The debtor listed GMAC as an unsecured creditor in Schedule F of her
bankruptcy petition. On June 26, 2008, GMAC filed a proof of claim in the
debtor’s bankruptcy case, in which GMAC asserted that it held a secured claim of
$21,715.52.
2. Prepetition Transfer from the debtor to GMAC
On or about April 17, 2008, the debtor paid GMAC $1,621.95. According
to the debtor’s affidavit, the funds were drawn from a National City checking
account which she owned.
3. The Current Adversary Proceeding
On September 14, 2009, the trustee initiated this adversary proceeding
against GMAC to avoid the transfer of $1,621.95 from the debtor to GMAC
pursuant to 11 U.S.C. §§ 544, 547, and 551. On October 20, 2009, GMAC filed its
answer. On February 22, 2010, the trustee and GMAC filed the following joint
stipulations of fact.
1. 	The Plaintiff’s claims in this adversary proceeding are within the core
matter jurisdiction of the Bankruptcy Court.
3
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 3 of 16

2. 	On May 14, 2008, the Debtor, Kimberly A. Saley (the “Debtor”), filed
a petition in the United States Bankruptcy Court for the Northern
District of Ohio seeking relief under Chapter 7 of title 11 of the
United States Code (the “Debtor’s Case”).
3. 	The Plaintiff is the Trustee in Bankruptcy for the Debtor.
4. 	On or about April 17, 2008, funds were transferred in the sum of
$1,621.95 to GMAC (the “Transfer”).
5. 	An accurate copy of the check evidencing the Transfer to GMAC is
attached hereto as Exhibit “A” and is incorporated herein by
reference.
6. 	At the time of the Transfer, the Debtor was indebted to GMAC in a
sum not less than $20,000.00.
7. 	The Transfer was more than the minimum monthly payment of
$691.67 due to GMAC.
8. 	An account summary for the debt to GMAC, dated as of March 24,
2008, is attached hereto as Exhibit “B” and is incorporated herein by
reference.
9. 	Pursuant to the Trustee’s calculation(s), creditors with general
unsecured claims will not be paid in full in the Debtor’s Case,
regardless of whether the Transfer is avoided as a preference.
10. 	The parties stipulate to the fact that no appraisals were conducted on
the 2004 GMC motor vehicle on the date the bankruptcy was filed, or
in the 90 days preceding the filing of the bankruptcy.
On February 22, 2010, the trustee and GMAC filed cross-motions for summary
judgment. The briefing on the cross-motions for summary judgment is now
complete, and the Court is ready to rule.
4
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 4 of 16

JURISDICTION
The Court has jurisdiction over this action. Actions seeking to avoid
preferential transfers are core proceedings under 28 U.S.C. § 157(b)(2)(A), and (F).
The Court has jurisdiction over core proceedings under 28 U.S.C. § 1334 and
157(a) and Local General Order No. 84, entered on July 16, 1984, by the United
States District Court for the Northern District of Ohio.
SUMMARY JUDGMENT STANDARD
Rule 56(c) of the Federal Rules of Civil Procedure, as made applicable to
bankruptcy proceedings by Rule 7056 of the Federal Rules of Bankruptcy
Procedure, provides that a court shall render 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.
The party moving the court for summary judgment bears the burden of showing
that “there is no genuine issue as to any material fact and that [the moving party] is
entitled to judgment as a matter of law.” Jones v. Union County, 296 F.3d 417,
423 (6th Cir. 2002). See generally Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986). Once the moving party meets that burden, the nonmoving party “must
identify specific facts supported by affidavits, or by depositions, answers to
interrogatories, and admissions on file that show there is a genuine issue for trial.”
5
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 5 of 16

Hall v. Tollett, 128 F.3d 418, 422 (6th Cir. 1997). See, e.g., Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 252 (1986) (“The mere existence of a scintilla of
evidence in support of the plaintiff’s position will be insufficient; there must be
evidence on which the jury could reasonably find for the plaintiff.”). In
determining the existence or nonexistence of a material fact, a court will review the
evidence in a light most favorable to the nonmoving party. See Tennessee
Department of Mental Health & Mental Retardation v. Paul B., 88 F.3d 1466,
1472 (6th Cir. 1996).
DISCUSSION
The parties have filed cross-motions for summary judgment. In its motion
for summary judgment, GMAC argues that the $1621.95 prepetition payment from
the debtor was in repayment of a secured loan, the collateral for which is the
vehicle. GMAC asserts that it is oversecured. Consequently, GMAC argues that
the trustee cannot satisfy the elements of a preferential transfer since it would be
paid in full from liquidation of the collateral. In his motion for summary judgment,
the trustee argues that pursuant to Ohio Revised Code § 4505.04 the debtor does
not have an ownership interest in the vehicle, meaning that GMAC is an unsecured
creditor. Consequently, the trustee argues that the $1,621.95 payment made by the
debtor to GMAC constitutes a preferential transfer under
6
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 6 of 16

§ 547 of the Bankruptcy Code.
A. Ownership of the Vehicle
Whether the debtor has an ownership interest in the vehicle is crucial in
determining if the trustee or GMAC is entitled to summary judgment. If the debtor
has an ownership interest in the vehicle, then GMAC is a secured creditor. As the
Sixth Circuit stated, “Payments to a creditor who is fully secured are not
preferential since the creditor would receive payment up to the full value of his
collateral in a Chapter 7 liquidation. Payments to an unsecured or undersecured
creditor, however, are preferential.” Ray v. City Bank and Trust Co. (In re C-L
Cartage Co.), 899 F.2d 1490, 1493 (6th Cir. 1990).
That GMAC may be secured by property that is not owned by the debtor is
irrelevant. See, e.g., Smith v. Creative Fin. Mgmt., Inc. (In re Virginia-Carolina
Fin. Corp.), 954 F.2d 193, 198 (4th Cir.1992) (prepetition transfer to creditor that
is fully secured by property of third party in which the debtor holds no interest is
subject to avoidance under section 547); In re Pameco Corp., 356 B.R. 327 (Bankr.
S.D.N.Y. 2006) (same). “Indeed, the purpose of § 547 is not to establish ‘whether a
creditor may have recovered all of the monies owed by the debtor from any source
whatsoever, but instead ... whether the creditor would have received less than a
100% payout in a Chapter 7 liquidation.’ ” In re Pameco Corp.,
7
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 7 of 16

356 B.R. at 336 (quoting In re Virginia-Carolina Fin. Corp., 954 F.2d at 198). As
such, before the Court addresses whether the transfer from the debtor to GMAC
constitutes an avoidable preference under § 547 of the Bankruptcy Code, the Court
will determine whether the debtor has an ownership interest in the vehicle.
Section 541 of the Bankruptcy Code specifies the property that comes into
the bankruptcy estate; however, the Court looks to state law to determine
ownership of an asset. See Butner v. United States, 440 U.S. 48, 54 (1979)
(“Congress has generally left the determination of property rights in the assets of a
bankrupt’s estate to state law”).
Section 4505.04 of the Ohio Revised Code addresses ownership of a motor
vehicle. Section 4505.04 provides in pertinent part:
(A) No person acquiring a motor vehicle from its owner, whether the owner
is a manufacturer, importer, dealer, or any other person, shall acquire any
right, title, claim, or interest in or to the motor vehicle until there is issued to
the person a certificate of title to the motor vehicle, or there is delivered to
the person a manufacturer’s or importer’s certificate for it, or a certificate of
title to it is assigned as authorized by section 4505.032 of the revised code;
and no waiver or estoppel operates in favor of such person against a person
having possession of the certificate of title to, or manufacturer’s or
importer’s certificate for, the motor vehicle, for a valuable consideration.
(B) Subject to division (C) of this section, no court shall recognize the right,
title, claim, or interest of any person in or to any motor vehicle sold or
disposed of, or mortgaged or encumbered, unless evidenced:
(1) By a certificate of title, an assignment of a certificate of title made
8
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 8 of 16

under section 4505.032 of the revised code, a manufacturer's or
importer's certificate, or a certified receipt of title cancellation to an
exported motor vehicle issued in accordance with sections 4505.01 to
4505.21 of the revised code;
(2) By admission in the pleadings or stipulation of the parties.
Courts are split over whether this provision permits a court to look beyond
the certificate of title to determine ownership. Some courts have determined that
the plain language of the statute only permits a court to consider the certificate of
title when determining ownership. See In re Caddarette, 362 B.R. 829, 837
(Bankr. N.D. Ohio 2006) (“as a matter of law, § 4505.04 compels that the name, as
set forth on a vehicle’s certificate of title, controls when making a determination as
to property of the estate under § 541”) (Judge Speer). Other courts have found that
where an express trust exists and the beneficial owner is not listed on the certificate
of title a court may look beyond the certificate of title to determine ownership. See
Bavely v. Powell (In re Baskett), 219 B.R. 754, 762
(6th Cir. B.A.P. 1998) (even though the certificate of title listed the debtor as the
owner the court found that “if an express trust existed and Powell was the
beneficial owner, the vehicle would not be property of the bankruptcy estate and
would not be subject to turnover”); see also In re Amos, 201 B.R. 184, 187 (Bankr.
N.D. Ohio 1996) (Judge Snow).
9
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 9 of 16

The Court does not have to decide which line of cases to follow. Those
courts which have looked beyond the certificate of title to determine ownership did
so only after finding that an express trust existed. For example, in In re Groves the
debtor’s son obtained a loan to purchase a car, but the debtor took title so she could
obtain temporary tags while her son was away at school. See In re Groves, No. 05-
76317, 2006 WL 6211798, at *4 (Bankr. N.D. Ohio
April 13, 2006) (debtor’s agreement to take title to vehicle solely as an
accommodation to her son “created an express trust, under which Debtor holds title
for the benefit and use of [her son]”) (Judge Whipple); see also In re Amos, 201
B.R. at 186 (express trust created when debtor’s boyfriend paid for and used
vehicle, but debtor agreed to take title because boyfriend’s driver’s license had
been suspended).
The situation in this case does not involve an express trust. While an
express trust does not require any particular formalities, it does require an intent to
create a relationship that would constitute a trust. See In re Amos, 201 B.R. at 186-
87 (citing Restatement (Third) of Trusts § 13, cmt. a (Tentative Draft No. 1 1996)).
Here, the debtor stated that the vehicle is solely owned by her husband, who is also
the only person listed on the certificate of title. (Saley Aff. ¶ 10, Pl. Summ. J.) (“I
never owned the vehicle, and my name was never on the title of the vehicle”).
10
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 10 of 16

There is no evidence that the debtor’s husband holds title for the benefit of the
debtor, or that they ever intended to create a settlor trustee relationship.
Since this case does not involve an express trust, the Court will look to the
certificate of title in determining ownership of the vehicle. The debtor’s spouse is
the only person listed on the certificate of title. As such, the Court finds that the
debtor does not have an ownership interest in the vehicle. In addition, the Court
rejects as inapplicable GMAC’s reference to case law holding that a person takes
an ownership interest in a motor vehicle upon taking possession of the vehicle,
even if the person’s name is not placed on the certificate of title until later. See,
e.g., Whittaker v. Ford Motor Credit Co. (In re Edney), 47 F.3d 1168 (Table)
(6th Cir.1995), 1995 WL 16883 (unpublished); In re Jackson, 2006 WL 3064087
(Bankr. N.D. Ohio Oct. 23, 2006) (Adv. 06-6082); In re Knee, 254 B.R 710
(Bankr. S.D. Ohio 2000). In each of these cases, the court held that the date of
delivery, not the date of issuance of the certificate of title, determines the timing of
the passage of title and the attachment of the security interest. See 254 B.R. at 710
(citing In re Edney at *3-4); 2006 WL 3064087 at *3-4. In each of these cases, the
creditor failed to perfect its security interest within the 10 days permitted under
then applicable provisions of 11 U.S.C. § 547(e)(2). What distinguishes the
present case from Edney and its progeny is that, in the present case, the debtor’s
11
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 11 of 16

name was never placed on the certificate of title. While GMAC may have had a
security interest in property of the debtor’s estate had the debtor’s name ultimately
been placed on the certificate of title, GMAC cannot have a security interest in
property of the estate if the debtor herself has no ownership interest in the vehicle.
Consequently, GMAC’s claim will be treated a general unsecured claim.
B. Preference Under § 547
The trustee seeks to avoid the transfer of $1,621.95 from the debtor to
GMAC pursuant to 11 U.S.C. § 547(b). 	Section 547 of the Bankruptcy Code
enables a trustee to “avoid certain transfers made to creditors within 90 days prior
to the commencement of the bankruptcy case.” Chase Manhattan Mort. Corp. v.
Shapiro (In re Lee), 530 F.3d 458, 463 (6th Cir. 2008). The five elements of a
preferential transfer are set forth in § 547(b). See In re Lee, 530 F.3d at 463.
Section 547(b) provides:
Except as provided in subsection (C) and (I) of this section, the
trustee may avoid any transfer of an interest of the debtor in property –
(1) 	to or for the benefit of a creditor;
(2) 	for or on account of an antecedent debt owed by the debtor
before such transfer was made;
(3) 	made while the debtor was insolvent;
(4) 	made –
(A) on or within 90 days before the date of the filing of the
petition; or
(B) between ninety days and one year before the date of the
filing of the petition, if such creditor at the time of the transfer was
an insider; and
12
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 12 of 16

(5) 	that enables such creditor to receive more than such creditor
would receive if –
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent
provided by the provisions of this title.
The trustee has satisfied each of the elements. The first element requires the
plaintiff to show that the transfer was made for the “benefit of a creditor.”
§ 547(b)(1). The debtor paid GMAC $1,621.95, which was more than double the
monthly payment of $691.67 that was specified in the contract. The debtor made
the payment from funds that she had in a National City Bank checking account.
The debtor made this payment for the benefit of GMAC.
The second element requires the plaintiff to show that the transfer was made
“on account of an antecedent debt owed by the debtor.” § 547(b)(2). On
September 30, 2004, the debtor and her spouse entered into the contract to
purchase the vehicle for $49,800.24. (Ex. C, GMAC Resp. to Pl.’s Mot. Summ. J.).
The debtor signed the contract as a “co-buyer.” (Ex. C, GMAC Resp. to Pl.’s Mot.
Summ. J.). 	The debtor made the prepetition payment of $1621.95 to GMAC on
account of this debt.
The third element requires the plaintiff to show that the transfer was made
“while the debtor was insolvent.” § 547(b)(3). Under the Bankruptcy Code, “the
debtor is presumed to have been insolvent on and during the ninety days
13
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 13 of 16

immediately preceding the date of the filing of the petition.” 11 U.S.C. § 547(f).
The transfer at issue occurred on or about April 17, 2008. The debtor filed for
bankruptcy on May 14, 2008, which was less than ninety days after the date of the
transfer. Consequently, the debtor was presumptively insolvent at the time of the
transfer. While this presumption may be overcome, neither party has provided any
evidence that the debtor was solvent at the time of the transfer. GMAC, in its
answer to the complaint, states that the debtor was not insolvent at the time of the
transfer. (GMAC’s Answer to Complaint, ¶ 9); however, GMAC has provided no
evidence to support this assertion. Nor is the Court aware of any evidence which
would overcome the statutory presumption of insolvency in § 547(f). As such, the
Court finds that the debtor was insolvent at the time of the transfer.
The fourth element requires the plaintiff to show that the transfer was made
“on or within 90 days before the date of the filing of the petition.” § 547(b)(4)(A).
Since the transfer was made within ninety days of the date that the debtor filed her
bankruptcy petition, the fourth element is satisfied.
To satisfy the final element a plaintiff must show that the transfer “enables a
creditor to receive more than it would receive if the case were a Chapter 7 case and
the transfer had not been made.” Still v. Rossville Bank (In re Chattanooga
Wholesale Antiques, Inc.), 930 F.2d 458, 464 (6th Cir. 1991). Additionally, the
14
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 14 of 16

Sixth Circuit has held that, “[u]nless the estate is sufficient to provide a 100%
distribution, any unsecured creditor ... who receives a payment during the
preference period is in a position to receive more than it would have under a
Chapter 7 liquidation.” In re Chattanooga Wholesale Antiques, 930 F.2d at 465.
According to the proof of claim that GMAC filed in the debtor’s bankruptcy
case the debtor owes GMAC $21,715.52. 	Just weeks before the debtor filed for
bankruptcy, GMAC received $1,621.95, which was more than double the monthly
payment of $691.67 that was specified in the contract. The claims register shows
claims for $68,543.70, of which at least $33,262.41 is unsecured. 	Additionally,
the claim of GMAC is listed as a secured claim; however, as the Court already
determined, the claim of GMAC is a general unsecured claim. As such, unsecured
claims total at least $54,977.93. According to the trustee’s affidavit, he has
collected $1,250.00 for the bankruptcy estate. (Sicherman Aff. ¶ 5, Pl. Summ. J.).
The only additional funds that the trustee might be able to collect would come from
a recovery in this adversary proceeding. (Sicherman Aff. ¶ 6, Pl. Summ. J.).
Consequently, the trustee does not expect to pay creditors in full. (Sicherman Aff.
¶ 7, Pl. Summ. J.).
The payment that GMAC received from the debtor represented a repayment
of 7% of GMAC’s total claim. Based on the trustee’s affidavit, this is a higher
15
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 15 of 16

return than other unsecured creditor’s stand to receive. Accordingly, the trustee
has satisfied the fifth element.
The transfer was a preference under § 547(b). As such, the trustee may
avoid the transfer and recover from GMAC $1,621.95 pursuant to § 550 of the
Bankruptcy Code.
CONCLUSION
For the reasons stated above, the trustee’s motion for summary judgment is
granted, and GMAC’s motion for summary judgment is denied. The Court will
enter judgment in favor of the trustee and against GMAC in the amount of
$1,621.95 plus prejudgment interest from September 14, 2009, at the judgment rate
provided under 28 U.S.C. § 1961. Each party shall bear its own costs and
attorney’s fees.
IT IS SO ORDERED.
16
09-01312-aih Doc 33 FILED 04/22/10 ENTERED 04/22/10 09:23:10 Page 16 of 16