Miller et al v. Federal Deposit Insurance Corporation, as Receiver

OCR transcription for search; preserved printed pages are authoritative

UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OHIO

In Re: )
) JUDGE RICHARD L. SPEER
Lonnie/Susan Miller )
) Case No. 08-3345
Debtor(s) )
) (Related Case: 08-3 0460)
Lonnie Miller, et al. )
)
Plaintiff(s) )
)
v. )
)
Federal Deposit Ins. Co. )
)
Defendant(s) )
DECISION AND ORDER

This cause comes before the Court on the Parties’ respective Motions for Summary
Judgment. Previously, this Court had stayed the Defendant’s Motion to Dismiss brought under Rule
12(b)(6) so as to allow the Parties to conduct further discovery. In support of their respective
Motions for Summary Judgment, the Parties submitted supporting arguments and documentation.
The Court has now had the Opportunity to review these materials. Based upon this review, the Court,
for the reasons set forth below, finds that the Plaintiff's Motion for Summary Judgment should be
Denied. The Defendant’s Motion for Summary Judgment will be Granted in Part and Denied in Part.

AUTHENTICATED /| ’

U.S. GOVERNMENT
INFORMATION Z|

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Lonnie Miller, et al. v. Federal Deposit Ins. Co.
Case No. 08-3345

FACTS

On February 7, 2008, the Debtors, Lonnie and Susan Miller (hereinafter the “Debtors”), filed
a petition in this Court for relief under Chapter 12 of the United States Bankruptcy Code. At the time
they filed for bankruptcy relief, the Debtors represented that they were solvent, having assets worth
$792,334.71 and liabilities of $663,393.73. Of the Debtors’ liabilities, $604,215.70 represented

secured claims; the remaining $59,178.03 represented unsecured, nonpriority claims.

Prior to filing for bankruptcy relief, the Debtors had executed a number of notes in favor of

the Oakwood Deposit Bank Company. Relevant in this proceeding are three transactions:

On May 24, 1996, the Debtor, Lonnie Miller, executed a note in the amount of $22,305.72
to purchase an item of farm machinery, providing the lender with a security interest in the farm
implement. Thereafter, a UCC financing statement was filed, perfecting the lender’s interest. This

financing statement later lapsed pursuant to O.R.C. § 1309.515(C).

On December 29, 1999, the Debtors executed a note and mortgage for the sum of
$139,094.15. On the same date, the Debtors executed a note in the amount of $22,305.72, providing
the lender with a security interest in all their farm equipment. Thereafter, a UCC financing statement
was filed, perfecting the lender’s interest in the farm equipment. As with the earlier security interest,

this financing statement later lapsed pursuant to O.R.C. § 1309.5 15(C).

Subsequent to the execution of these notes, the Defendant, the Federal Deposit Insurance
Corporation (hereinafter the “FDIC”), was appointed receiver of the lender, the Oakwood Deposit
Bank Company. The appointment of the FDIC as a receiver for THE Oakwood Deposit Bank was
precipitated, at least in part, by the conduct of its CEO, Mark Steven Miller, who later plead guilty

to charges for money laundering and embezzlement. As receiver, the FDIC re-filed financing

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statements for those two transactions regarding the Debtors’ farm equipment. Both the financing
statements were filed on November 28, 2007, a period within 90 days of the commencement of the

Debtors’ bankruptcy case.

The FDIC has multiple claims in this case, two of which are relevant in the proceeding:
Claim Numbers 12 and 16. Claim number 12, concerning the mortgage and note, sets forth an
original balance of $139,094.15, and $87,496.18 in accumulated interest, for a total of $226,563.33.
Claim number 16, concerning the $22,305.72 equipment note executed contemporaneously with the

mortgage note, sets forth an outstanding balance of $17,322.71.

On November 7, 2008, the Debtors commenced this adversary proceeding against the FDIC
seeking three overall forms of relief: (1) A reduction of the Defendant’s claim against the Plaintiffs’
bankruptcy estate; (2) the avoidance of certain transfers made to the Defendant on account of the
transfers being preferential for purposes of 11 U.S.C. § 547; and (3) the voiding of liens asserted by
the FDIC against estate property. Each of these matters will be addressed in order.

DISCUSSION

For purposes of jurisdiction, the matters before the Court concern the liquidation of a claim
against the estate, a determination of whether certain prepetition transfers are preferential for
purposes of 11 U.S.C. § 547(b) and the determination of the validity of liens asserted against the
estate. 28 U.S.C. § 157(b)(2)(B)/(F)(K). As such, the matters before the Court are core proceedings
over which this Court has jurisdiction to enter final orders and judgments. 28 U.S.C. § 157(b)(1).

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Lonnie Miller, et al. v. Federal Deposit Ins. Co.
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Claim of the FDIC

The Debtors’ first request for relief involves the mortgage note executed on December 29}
1999. It is the Debtors’ position that the original balance of this note should be set at $85,782.83
representing a reduction of $53,311.32. According to the Debtors, this adjustment to the claim of thd
FDIC is necessary because the actual consideration received by the Debtors was just $85,782.83, not

$139,094.15 as represented by the face value of the mortgage note.

The mortgage note at issue in this matter was executed in Ohio; thus Ohio law applies when
determining the amount and validity of the note. Butner v. United States, 440 U.S. 48, 57, 54, 99
S.Ct. 914, 59 L.Ed.2d 136 (1979) (state law generally governs the substance of claims). Under Ohio
law, it is a “long-held principle that parties to contracts are presumed to have read and understood
them and that a signatory is bound by a contract that he or she willingly signed.” Preferred Capital,
Inc. v. Power Engineering Group, Inc., 112 Ohio St.3d 429, 432, 860 N.E.2d 741 (2007). Also, a
contract that is valid on its face will be presumed to be valid in all other respects. Consequently, it
is recognized that “ordinarily a party asserting the invalidity of a contract bears the burden of proving

a defense to it.” Fletcher v. Fletcher, 68 Ohio St.3d 464, 467, 628 N.E.2d 1343 ( 1994).

For their burden, the Debtors do not deny that they signed the mortgage note; nor do the
Debtors take issue with the fact that facially the original balance of the mortgage note was
$139,094.15. Instead, for their position that the consideration extended on the mortgage note was

in actuality only $85,782.83, the Debtors called attention to the following:

First, the Debtors pointed to the stated purpose of their mortgage note with the Oakwood
Bank, as well as the purpose expressed in the contemporaneously executed equipment note. In both
these notes, it was set forth that their stated purpose was to “Pay-Off” existing business debts. The

facts in this regard are not disputed.

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Lonnie Miller, et al. v. Federal Deposit Ins. Co.
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On July 19, 1999, approximately five months prior to the Debtors’ execution of the mortgage
and equipment notes, the Oakwood Deposit Bank satisfied a third-party mortgage debt owed by the
Debtors in the amount $85,782.83, and a third-party equipment loan for which the Debtors were
liable in the amount of $22,305.72. According to the Debtors, no additional consideration was

received.

As evidentiary support for their position, the Debtors pointed to the testimony taken of the
Debtor, Mr. Miller, during discovery. In this testimony, Mr. Miller explained that he was initially
unaware of the loan balance on the mortgage note, recalling that in July of 2009, he signed a number
of documents in blank with the understanding that Mark Steven Miller, the former CEO of the
Oakwood Deposit Bank, would handle the details of repaying, with the proceeds from the mortgage
note, a preexisting obligation secured against their real property. (Doc. No. 30, at pg. 13).

The response of the FDIC is straightforward: The Debtors should be held to the unambiguous
terms of the mortgage note, which set forth an original principal balance of $139,094.15. As support
for this position, the FDIC raised two affirmative defenses: laches and the statute of frauds as
provided in 12 U.S.C. § 1823(e).' On the matter of the original principal balance due on the
mortgage note, each of the Parties seeks summary judgment.

The standard when addressing a motion for summary judgment is set forth in Federal Rule
of Civil Procedure 56(c), which is made applicable to this proceeding by Bankruptcy Rule 7056. It
provides for in part: A party will prevail on a motion for summary judgment when “[t}he pleadings,

1

“No agreement which tends to diminish or defeat the interest of the Corporation in any asset
acquired by it under this section or section 1821 of this title, either as security for a loan or by
purchase or as receiver of any insured depository institution, shall be valid against the
Corporation .. .”

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depositions, answers to interrogatories, and admission 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.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91
L.Ed.2d 265 (1986). In making this determination, the Court is directed to view all the facts in a light
most favorable to the party opposing the motion; similarly, all doubts should be resolved in favor
of the party against whom judgment is sought. Matsushita v. Zenith Radio Corp., 475 U.S. 574,
586-588, 106 S.Ct. 1348, 1356, 89 L-Ed.2d 538 (1986). In addition, in situations such as this where
the Parties have each filed Motions for Summary Judgment, the Court must consider each motion
separately, since each party, as a movant for summary judgment, bears the burden of establishing
both the nonexistence of genuine issues of material fact, and that party’s entitlement to judgment as
a matter of law. French v. Bank One, Lima N.A. (In re Rehab Project, Inc.), 238 B.R. 363, 369
(Bankr. N.D.Ohio 1999).

Under this standard, summary judgment is not considered appropriate where, to adjudicated
an issue in controversy, the trier-of-fact will be required to assess a witnesses’ credibility. F.D.IC.
v. Jeff Miller Stables, 573 F.3d 289, 295 (6" Cir. 2009). However, where live testimony will add
nothing to a party’s case, the entry of summary judgment is proper. As against the Debtors, the Court
finds this to be the case so that live testimony will add nothing to successfully controvert that the
amount originally owed by the Debtors on their mortgage note is represented by the amount set forth
therein. That is, even accepting that the Debtor, Mr. Miller, will convincingly testify that he signed
the mortgage note in blank, and that he believed the note was for only $85,782.83, such evidence is
legally insufficient in this matter to refute that the consideration actually received was $139,094.15,

as represented by the face value of the note.

Particularly noticeable is the paucity of financial records offered by the Debtors surrounding
the transaction in question. Thus, even in giving the Debtors the benefit of the doubt, there exists a

glaring deficiency with their position: Any finding that the Debtors did not receive the full

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$139,094.15 in consideration as evidenced by the mortgage note is not supported by corroborating

evidence, anecessity when seeking to overcome the presumption of validity afforded to an otherwise

facially valid document.

To explain this, the Debtors put forth that many of their financial records were destroyed in
a fire. The Debtors also raised the specter of fraud in this case, noting that the former CEO of the
Oakwood Bank plead guilty to money laundering and embezzlement. In this Court’s assessment,
however, these circumstances do not corroborate the Debtors’ position. Instead, the Debtors’ actions

(or inactions) speak louder than words.

The Debtors executed the mortgage note to the Oakwood Bank late in 1999. Yet, the Debtors
did not seek to dispute the mortgage note until after they filed for bankruptcy relief in 2008. Given
this long interval of time, the Court finds it hard to believe that the Debtors did not receive any
statement or document from the Bank which would have alerted them to the supposed discrepancy
with their loan. Even if not the case, the difficulty caused by the destruction of the Debtors’ financial
records should not be placed upon the FDIC. In this regard, it is noted that this Court had previously
denied a motion brought by the FDIC to dismiss so as to afford the Debtors the opportunity to obtain

financial records (or evidence thereof) from other sources.

Finally, the Court rejects the Debtors’ implied assertion that, as with the contemporaneously
executed equipment note, it should be assumed that a one-to-one correlation exists between the prior
third-party obligation which was satisfied with the proceeds from the mortgage note. In this way, it
does not strike this Court as unusual that the Debtors would have received additional consideration
for their own use. This frequently occurs; a debtor refinances a preexisting obligation, obtaining in

the transaction additional consideration to be used for other needs.

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Consequently, for all these reasons, it would be pure speculation to assume that the Debtors
did not receive from the Oakwood Bank consideration of $139,094.15 as evidenced by the mortgage
note. Such speculation, however, is simply insufficient to overcome the presumption that is afforded
to the terms of an otherwise facially valid contract. Consequently, as a purely evidentiary matter, the
Court is not persuaded that the Debtors’ did not receive the full value of the consideration
represented by the mortgage note dated December 29, 1999. Accordingly, as set forth in claim
number 12, the FDIC will be allowed a secured claim in the amount of $226,563.33, representing

the original balance of the note, $139,094.15, and $87,496.18 in accumulated interest.

Preferential Transfer 11 U.S.C. § 547

The next issue before the Court on the Parties’ respective motions for summary judgment
concerns two alleged preferential transfers made by the FDIC. In their complaint, the Debtors allege
that the financing statements re-filed by the FDIC for the two security agreements executed by the
Debtors, dated May 24, 1996 and December 29, 1999, are preferential transfers and subject to
avoidance under 11 U.S.C. § 547(b).

A preferential transfer occurs when a debtor favors one creditor over another by paying that
creditor to the detriment of other creditors. Preferences are treated with disfavor in bankruptcy
because they contradict the fundamental bankruptcy policy of ensuring the equitable distribution of
a debtor’s nonexempt assets among similarly situated creditors. In re Wheeling Pittsburgh Steel, 360
B.R. 649, 651 (Bankr. N.D.Ohio 2006). To this end, bankruptcy law provides for the avoidance of
prepetition transfers that qualify as preferential under § 547.

The party moving for the avoidability of a prepetition transfer under § 547 bears the burden
to establish that the transfer was preferential within the meaning of statute. 11 U.S.C. § 547(g). The

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Bankruptcy Code defines an avoidable preferential transfer according to five elements, as set forth
in § 547(b):

Except as provided in subsections (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 such
transfer was an insider; and

(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.
While this provision provides standing to only a bankruptcy trustee to bring an action to avoid a
preferential transfer, a debtor operating under Chapter 12 of the Bankruptcy Code is conferred with
the powers of a trustee and is therefore entitled to bring an action to avoid a preferential transfer

under § 547(b). 11 U.S.C. § 1203.

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By definition, an avoidable preference under § 547(b) requires the existence of a transfer of
adebtor’s interest in property. This matter, of whether there has been a transfer of a property interest
of a debtor, is governed in part by federal law and partly by state law. Field v. Lebanon Citizens Nat'l
Bank (In re Knee), 254 B.R. 710, 713 (Bankr. S.D.Ohio 2000), citing Barnhill v. Johnson, 503 U.S.
393, 397-98, 112 S.Ct. 1386, 118 L.Ed.2d 39 (1992). First, whether an interest has been transferred
is controlled by federal bankruptcy law. In re Knee, 254 B.R. at 713. But whether a debtor even has
an interest in property is determinated by applicable nonbankruptcy law, here Ohio law. Jd.

Placed within this context, the FDIC acknowledged that its financing statement, covering the
security interests it holds in the Debtors’ farm equipment, lapsed under Ohio law, pursuant to O.R.C.

§ 1309.515(C). This provision provides:

The effectiveness of a filed financing statement lapses on the expiration of
the period of its effectiveness unless, before the lapse, a continuation
statement is filed pursuant to division (D) of this section. Upon lapse, a
financing statement ceases to be effective, and any security interest or
agricultural lien that was perfected by the financing statement becomes
unperfected, unless the security interest is perfected otherwise. If the security
interest or agricultural lien becomes unperfected upon lapse, it is deemed
never to have been perfected as against a purchaser of the collateral for value.

For purposes of this provision, the FDIC also acknowledged that, although re-perfecting the security
interests in its collateral, it did so within the 90-day preference period provided in § 547(b)(4)(A),

supra.

A transfer, for purposes of bankruptcy law, is defined very broadly, and includes “the creation
of alien” as well as “each mode, direct or indirect, absolute or conditional, voluntary or involuntary,
of disposing of or parting with property or an interest in property.” 11 U.S.C. § 101(54)(A)/(D). It
follows, therefore, that since a lapsed financing statement ceases to be effective under O.R.C.

§ 1309.515(C), and results in an unperfected lien, the re-perfection of the lien qualifies as a transfer

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under bankruptcy law. Taken then to its logical conclusion, and one which is widely accepted,” when
a creditor re-perfects its security interest in a debtor’s property, after the original perfection has
lapsed, the re-perfection of the security interest potentially constitutes a preferential transfer of

property, avoidable under § 547(b).

It is on this basis by which the Debtors seek to avoid the FDIC’s re-perfection of its security
interest in the Debtors’ farm equipment. In opposition thereto, the arguments put forth by the FDIC
did not take direct issue with the preferential effect the refiling of a financing statement may have
on a creditor’s security interest. Instead, the FDIC, pointing to § 547(b)(5), takes the position that

its re-perfected security interests are not preferential because the Debtors have not sustained their

burden of showing that all the elements of a preferential transfer have been met.

Section 547(b)(5), supra, requires that a party seeking to avoid a preferential transfer show
that, as a result of the transfer, the creditor received more than it would have if the case were a
chapter 7 liquidation case and the disputed transfer had not been made. Still v. Rossville Bank (In re
Chattanooga Wholesale Antiques, Inc.), 930 F.2d 458, 464 (6" Cir.1991). From this test, these

conclusions follow.

First, had the disputed transfers not been made, whereby the FDIC re-perfected its security
interests within the preference period, the claims of the FDIC would be treated as unsecured. See 11

U.S.C. § 544(a)(1) (allowing trustee to avoid unperfected interests in property). What is more, given

2

Inre Hyperion Enterprises, Inc., 158 B.R. 555, 565 (D.R.I. 1993), citing Inre Karisda, Inc., 90
B.R. 196 (Bankr. D.S.C. 1988). See also Inre Provident Hosp. & Training Ass’n, 79 B.R. 374,
378-79 (Bankr. N.D. Ill. 1987) (as applied to § 547, where the perfection of a security interest
lapses, a transfer is deemed to have occurred at time of reperfection); In re Abell, 66 B.R. 375,
381 (Bankr. N.D. Miss. 1986) (when a perfected security interest lapses, a transfer under § 547
occurs upon the date of filing of the second financing statement).

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the Bankruptcy Code’s priority scheme, a prepetition transfer made to an unsecured creditor will
normally enable that creditor to receive more than other similarly situated creditors. In a case
construing § 547(b)(5), the Sixth Circuit Court of Appeals explained: “[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 received under a Chapter 7 liquidation.”

In re Chattanooga Wholesale Antiques, Inc., 930 F.2d at 465 (internal parenthetical omitted).

Yet, as also pointed out, if a debtor’s estate has sufficient assets to provide a 100%
distribution to all unsecured creditors, no preference will exist. Of course, the purpose of the
Bankruptcy Code is to provide relief for financially distressed debtors who are unable to meet their
monetary obligations. Jn re Scheffler, 86 B.R. 576, 578 (Bankr. W.D. Wis. 1986). Thus, rarely will
a debtor’s Chapter 7 estate have sufficient assets to pay a 100% distribution to all unsecured
creditors. But, this will not be the case where a debtor, at the time they file for bankruptcy relief, is
solvent. In re Liptak, 304 B.R. 820, 835 (Bankr. N.D.IIl. 2004).

By definition, a debtor who is solvent has sufficient assets to pay all of their claims. In this
way, the opposite condition, insolvency, is defined by the Bankruptcy Code as a “financial condition
such that the sum of such entity’s debts is greater than all of such entity’s property, at a fair valuation

...”11LUS.C. § 10132).

Set within this definition, the Debtors’ represented that at the time they filed their bankruptcy
petition they were solvent, holding property worth $792,334.71, an amount exceeding the sum of
$663,393.73 which the Debtors disclosed to be their cumulative liabilities. These representations,
besides tending to defeat the necessary requirement for a preference as set forth in § 547(b)(5), also
go contrary to the express requirement, as contained in § 547(b)(3), that a debtor actually be

insolvent at the time of the alleged preferential transfer.

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It is recognized that when determining the existence of a preference, a debtor is presumed
to be insolvent “during the 90 days immediately preceding the date of the filing of the petition.” 11
U.S.C. § 547(f). At the same time, while the financial figures disclosed by a debtor are not

dispositive, they are probative — particularly in this matter since, as the party seeking to establish

the existence of a preferential transfer, the financial figures disclosed by the Debtors constitute a
statement against interest. Accord Inre Burkett, 329 B.R. 820, 825, 828 (Bankr. S.D.Ohio 2005) (“a
debtor’s scheduling of a debt does not constitute an admission by a trustee, but as a sworn statement
and admission against interest, it is nevertheless strongly probative of the claim’s validity.”). At the
very least, the financial figures disclosed by the Debtors raise a genuine issue of material fact
regarding the existence of a § 547(b) preference, thereby precluding the entry of summary judgment

in the Debtors’ favor. The same is also true respecting the FDIC’s motion for summary judgment.

Against the Debtors’ claim that the refiling of its financing statements constituted an

avoidable preferential transfer, the FDIC cited to § 547(c)(9) which provides:

(c) The trustee may not avoid under this section a transfer—

(9) if, in a case filed by a debtor whose debts are not primarily

consumer debts, the aggregate value of all property that constitutes or

is affected by such transfer is less than $5,475.
It is the burden of the FDIC, as the party against whom avoidance is sought, to prove the
nonavoidability of transfers under subsection (c) of § 547, including § 547(c)(9). 11 U.S.C. § 547(g).
As applied to § 547(c)(9), this burden is met by showing that (1) the Debtors’ debts were not

primarily consumer debts and (2) the aggregate value of the property transferred is less than the

statutory threshold which at the time of the transfer in this matter was set at $5,475.

3

As provided in 11 U.S.C. § 104, this amount is periodically adjusted to reflect changes in the
Consumer Price Index.

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In the case sub judice, the position of the FDIC falters on the second element.* According to
the FDIC, the monetary threshold of § 547(c)(9) has not been exceeded because the financing
statement related to at least one of its claims only totals $3,250.66. However, while this may be true,
§ 547(c)(9) does not speak to claims, but rather looks to the aggregate value of the property
transferred. Thus, whatever the value of the claim filed by the FDIC, the issue of § 547(c)(9) is
whether the property, at the time of the transfer, was worth more than $5,475.00. At this time, the

Court has insufficient evidence to make this determination.
The validity of liens asserted by the FDIC against estate property

The final issue before the Court on the Parties’ respective Motions for Summary Judgment
involves the underlying validity of the same two liens just discussed. In the absence of a finding that
the above two liens are avoidable as preferential transfers, the Debtors seek to void the liens based
upon a defect in their implementation. Specifically, the Debtors put forth that the FDIC should be
treated as an unsecured creditor because they did not authorize the filing of the new financing
statement. In the Debtors’ words, “the FDIC’s filing of a new financing statement without the
Debtors authorization is violative of Ohio law, does not result in perfection of any security interest

and is [sic] therefore the FDIC is not a secured creditor in any equipment.” (Doc. No. 28, at pg. 10).

For their position, the Debtors cite to O.R.C. § 1309.516, and the following language:

4
The Debtors, by filing for relief under Chapter 12 of the Bankruptcy Code, have represented
that, as mandated by the first element of § 547(c)(9), their debts are not primarily consumer
debts. See 11 U.S.C. § 101(18) (defining ‘family farmer’ as an individual whose debt, among
other things, is not less than 50% comprised of obligations arising from farming operations.);
11 U.S.C. § 109(f) (limiting Chapter 12 relief to family farms and fisherman); 11 U.S.C.
§ 101(8) (defining consumer debt as “debt incurred by an individual primarily for a personal,
family or household purpose.”).

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(A) Except as provided in division (B) of this section, communication of a
record to a filing office and tender of the filing fee or acceptance of the record
by the filing office constitutes filing.

(B) Filing does not occur with respect to a record that a filing office refuses
to accept because:

(3) The filing office is unable to index the record because:

(a) In the case of an initial financing statement, the record
does not provide a name for the debtor;

(b) In the case of an amendment or correction statement, the
record:

(i) Does not identify the initial financing statement as
required by section 1309.512 or 1309.518 of the
Revised Code, as applicable; or

(ii) Identifies an initial financing statement whose
effectiveness has lapsed under section 1309.515 of the
Revised Code.

In applying this provision, however, the Court is unable to discern how the financing

statements re-filed by the FDIC are rendered ineffective on the sole basis that the Debtors did not

authorize their refiling. As a preliminary matter, there is simply no evidence, as is required in the
opening of § 1309.516(B)(3)(a), that the filing office was unable to index the FDIC’s re-filed
financing statements because they did not contain the name of the Debtors. As it concerns
§ 1309.516(B)(3)(b), the Court must agree with the FDIC that its re-filed financing statements do

not constitute, within the meaning of the provision, an amendment or correction statement.

Page 15

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08-0!

Lonnie Miller, et al. v. Federal Deposit Ins. Co.
Case No. 08-3345

Amendments and corrections to financing statements are addressed in O.R.C. § 1309.512 and
involve the addition or deletion of collateral covered by a security agreement as well as amending
the information contained in the financing statement. The filing of an amendment, however,
generally “does not extend the period of effectiveness of the financing statement.” O.R.C.
§ 1309.512(B). Contrary to such attributes, the refiling of the financing statements submitted by the
FDIC did not seek to amend or correct its originally filed financing statements, but rather sought only

reinstate the effectiveness of the financing statements which had lapsed under O.R.C. § 1309.515(C).

In summation, the Court holds that, based upon the original value of the mortgage note
executed by the Debtors, the FDIC shall be allowed a secured claim, denominated in this case as
Claim Number 12, in the amount $226,563.33. Summary judgment thus will be entered in favor of
the FDIC and against the Debtors on this matter. Neither party, however, is entitled to summary
judgment on the issue of whether the refiling by the FDIC of its financing statements constitute
preferential transfers for purposes of § 547(b). Finally, the Debtors are not entitled to summary
judgment on their claim that the financing statements re-filed by the FDIC are void.

In reaching the conclusions found herein, the Court has considered all of the evidence,
exhibits and arguments of counsel, regardless of whether or not they are specifically referred to in

this Decision.

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Lonnie Miller, et al. v. Federal Deposit Ins. Co.
Case No. 08-3345

Accordingly, it is

ORDERED that the Motion for Summary Judgment filed by the Debtors, Lonnie and Susan
Miller, be, and is hereby, DENIED.

IT IS FURTHER ORDERED that the Motion for Summary Judgment filed by the
Defendant, the Federal Deposit Insurance Corporation, be, and is hereby, GRANTED IN PART and
DENIED IN PART.

IT IS FURTHER ORDERED that for Claim Number 12, the Federal Deposit Insurance

Corporation is hereby deemed to hold an allowed secured claim in the amount of $226,563.33.

IT IS FURTHER ORDERED that, within 21 days from the entry of this Order, the Debtors
report to the Court their position with regards to pursuing their cause of action to avoid alleged

preferential transfers made to the Defendant, the Federal Deposit Insurance Corporation.

Dated: March 8, 2010

ULZ

a
Richard L. Speer
United States
Bankruptcy Judge

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CERTIFICATE OF SERVICE

Copies were mailed this 8" day of March, 2010, to the following parties:

Federal Deposit Insurance Corp

as Receiver of the Oakwood Deposit Bank Co
1910 Pacific Ave

Dallas, TX 75201

Larry L Goodman

Federal Deposit Insurance Corporation
3501 Fairfax Drive

Arlington, VA 22226-3501

Susan M. Miller
Lonnie J. Miller

RR #1

Box 107

Grover Hill, OH 45849

Steven L Diller
124 E Main St
Van Wert, OH 45891

Office of the U.S. Trustee

201 Superior Ave, E, #441
Cleveland, OH 44114

/s/ Robert C.W. Birmingham
Deputy Clerk, U.S. Bankruptcy Court

08-03345-rls Doc 32 FILED 03/08/10

ENTERED 03/08/10 16:09:46 Page 18 of 18