In re Troy
| Decision Date | 15 January 1974 |
| Docket Number | No. 73-1287.,73-1287. |
| Citation | 490 F.2d 1061 |
| Parties | In re William Norman TROY, Bankrupt. MENTOR LAGOONS MARINA, Petitioner-Appellant, v. Myron WASSERMAN, Trustee, Respondent-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Albert C. Nozik, Nozik & Nozik, Mentor, Ohio, on brief, for petitioner-appellant.
Lawrence I. Byrnes, Spieth, Bell, McCurdy & Newell, Cleveland, Ohio, on brief, for respondent-appellee.
Frank Fetchet, Cleveland, Ohio, on brief for amicus curiae, National City Bank of Cleveland.
Before WEICK, EDWARDS and LIVELY, Circuit Judges.
This case arose in the Bankruptcy Court and involved the title to a sailboat which at one time had belonged to William N. Troy, who was adjudicated a bankrupt on February 8, 1972.
The Trustee in Bankruptcy filed an application in the Bankruptcy Court to sell the boat. He made as parties defendant to the application The National City Bank of Cleveland (Bank), Albert C. Nozik (Nozik), and Mentor Lagoons Marina (Marina). He alleged in the application to sell that the Bankrupt Troy was the owner of the boat; that the Bank had a security agreement noted as a lien on the Certificate of Title to the boat; that Nozik and Marina may have a lien or claim, the details of which were unknown to the Trustee; and that there is a reasonable prospect that a surplus will be left for the Bankrupt's estate upon the sale of the boat. He prayed for an order of sale free from liens, which liens would be transferred to the proceeds of sale.
Upon the filing of the application to sell, the Bankruptcy Court entered an ex parte order requiring the defendants to show cause why the Trustee should not be permitted to sell the boat free from liens.
Marina filed an answer to the application to sell, alleging that it, and not the Trustee in Bankruptcy, was the owner of the boat, and prayed that the application to sell be dismissed.
The Bankruptcy Court, after hearing, adopted findings of fact and conclusions of law holding that the Trustee in Bankruptcy was the owner of the boat, and ordered that the Trustee sell the boat.
The boat was appraised for $10,000, and later was sold for $7,500.
Upon review by the District Court, the decision of the Bankruptcy Court was affirmed. Marina appealed. We reverse.
In determining the issues we accept the findings of fact of the Bankruptcy Court, which findings were adopted by the District Court. We reject only its conclusions of law.
Troy acquired the boat in 1969. He borrowed from the bank $10,605, to enable him to purchase it, and he executed and delivered to the Bank a Security Agreement which was duly noted as a lien on his Certificate of Title.
On March 11, 1971 the loan to the Bank was in default, with an outstanding balance of $7,582.23.
On July 1, 1971 Marina addressed a letter to the Bank enclosing a check for $707, a copy of which letter is as follows:
MENTOR LAGOONS MARINA
"Paradise of the Great Lakes"
HARBOR DRIVE, MENTOR, OHIO 44060 July 1, 1971 Mr. Zammerra National City Bank of Cleveland 623 Euclid Avenue Cleveland, Ohio 44114
Dear Mr. Zammerra:
Pursuant to our telephone conversation of June 30, 1971, we herewith enclose our check #4993 in the sum of $707.00 representing four (4) monthly payments @ $176.75 on account of William Troy.
Said payment will be accepted by you upon the following conditions:
Should there be any question with reference to any of the items contained herein, please call the writer. May we please have your acknowledgement.
Very truly yours MENTOR LAGOONS MARINA /s/ Albert C. Nozik s Albert C. Nozik ACN:eas enclosure Three weeks later, on July 21, 1971, the Bank, acting pursuant to the instructions contained in the letter, arranged to have Troy execute the assignment portion of the Certificate of Title with the name of the assignee thereof left blank. Troy's signature thereon was acknowledged before a Notary Public.
Marina continued to make monthly payments to the Bank. On the date of bankruptcy, February 8, 1972, there was a balance due to the Bank of only $5,475.73. On March 16, 1972 Marina paid to the Bank the balance due amounting to $4,940.33. The Bank then inserted in the blank space on the Certificate of Title the name of Marina as assignee, and delivered the Certificate of Title to Marina. Marina applied to the Clerk of the State Court for a new Certificate of Title, which was issued to it on May 3, 1972.
It was the theory of the Trustee in Bankruptcy that the assignment on the Certificate of Title, executed by Troy seven months before bankruptcy, was invalid merely because the name of the assignee was left blank; that Marina, in making the payments to the Bank was a pure volunteer; and that the Bankrupt's estate is entitled to be enriched to the extent of the entire proceeds of sale, free from the Bank's lien which Marina paid.
We have consistently held that the Trustee in Bankruptcy stands in the shoes of the Bankrupt. He also stands in the position of an execution creditor. He is not an innocent holder for value, but takes title to the property of the Bankrupt subject to all liens and equities. In Re Alikasovich, 275 F.2d 454 (6th Cir. 1960), aff'd sub nom. Lewis v. Manufacturers Nat'l Bank, 364 U.S. 603, 81 S.Ct. 347, 5 L.Ed.2d 323 (1961); In Re Easy Living, Inc., 407 F.2d 142, 144 (6th Cir. 1969).
As we view the transaction between the Bank, Troy and Marina, under the letter dated July 1, 1971 there was a relinquishment by...
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