French v. Blum (In re Davis)
| Decision Date | 15 October 2014 |
| Docket Number | Adv. Pro. No. 13-3166,Case No.: 13-30450 |
| Parties | In Re: Richard A. Davis, Debtor. Bruce Comly French, Trustee, Plaintiff, v. Mary Blum, et al, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
Hon. Mary Ann Whipple
This adversary proceeding is before the court on Plaintiff's Motion for Summary Judgment as to Rickey Good's Claimed Interest ("Motion") [Doc. # 18] and Defendant Rickey Good's response [Doc. # 24]. Plaintiff is the Chapter 7 trustee in the underlying bankruptcy case. In his complaint brought against Rickey Good ("Good"), Monitor Bank, Home Loan Savings Bank, and two other parties, Plaintiff alleges that Debtor Richard A. Davis ("Debtor") owns certain real and personal property, including a Sciton Joule Laser, that Defendants Monitor Bank and Home Loan Savings Bank claim an interest in certain property,including the Joule Laser, and that the net proceeds of the sale of the real and personal property and other funds are held by the bankruptcy estate. Plaintiff seeks a determination of the appropriate ownership interest of the parties in the property and funds and the priority of liens.
Neither Monitor Bank nor Home Loan Savings Bank filed a response to Plaintiff's Motion. Given the caption of Plaintiff's Motion, the court construes the Motion as seeking summary judgment only with respect to Good's interest in the Sciton Joule Laser.1 For the following reasons, Plaintiff's Motion will be denied in part and granted in part.
Plaintiff cites to no materials in the record in support of his Motion. Good supports his response with his affidavit and certain documents attached thereto from which the court finds the following facts to be undisputed.
By letter dated September 14, 2011, Sciton responded to an email sent to it by Debtor wherein Debtor asked Sciton to consider an offer to purchase the Joule Laser that Debtor indicated was in his possession. . The offer considered by Sciton, as set forth in the letter, provides as follows:
[Id. at 1]. Sciton countered that offer by adding certain provisions for recovery of the Joule Laser in the event the October 1, 2011, payment would not be made and by increasing the April 1, 2012, payment to $52,423.07 to include local sales tax, at which time Sciton stated it would acknowledge transfer of ownership of the Laser. [Id. at 1-2]. Sciton's letter states that "[i]f these conditions meet with your approval please sign and date below and return a PDF copy of this letter," which statement is followed by signature lines for both Debtor and Good. [Id. at 2]. On September 16, 2011, the counter offer was signed by both Debtor and Good. [See id., Good Aff. ¶ 4]. According to Good, the Laser was in the possession of Sciton at the time of the counter offer. [Id. at ¶ 3].
On September 26, 2011, Debtor and Good entered into an agreement captioned "Dr. Richard Davis and Rick Good Loan Agreement" ("the Agreement"). [Id. at ¶ 5 & attached Ex. B]. The Agreementprovides in its entirety as follows:
[Id.]. In accordance with the Agreement, on September 28, 2011, Good provided $57,000, which was forwarded to Sciton for the purchase of the Joule Laser. [Id. at ¶¶ 5-6]. Debtor did not fulfill his payment obligations to Good under the Agreement. [Id. at ¶ 7].
Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code on February 13, 2013. As an asset of the bankruptcy estate, Debtor scheduled a one-half interest in the Joule Laser, stating that it is jointly owned with Good. [Case No. 13-30450, Doc. # 17, p. 7/42].2 Debtor also scheduled Good as holding a secured claim in the amount of $50,298.31 pursuant to the September 26, 2011, Loan Agreement. [Id. at 9/42]. On June 27, 2013, Good filed a proof of claim in the underlying bankruptcy case in the amount of $50,298.31. [Doc. # 1, Complaint, ¶ 11 and attached Ex. 1; Doc. # 5, Answer, ¶ 11]. This amount is the principal amount owed to him by Debtor after twelve monthly payments, as set forth in the debt amortization schedule attached to the Agreement. [See Doc. # 24, Good Aff. ¶ 5 and attached Ex. B, p.2]. As the basis for the claim, Good's proof of claim states that he is one-half owner of the Joule Laser. [Id.]. Plaintiff, as trustee of the bankruptcy estate, holds proceeds in the amount of $32,500.00 from the auction sale of the Joule Laser. [Complaint, ¶ 14; Answer, ¶ 11].
Under Rule 56 of the Federal Rules of Civil Procedure, made applicable to this proceeding by Federal Rule of Bankruptcy Procedure 7056, summary judgment is proper only where there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). In reviewing a motion for summary judgment, however, all inferences "must be viewed in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-88 (1986). The party moving for summary judgment always bears the initial responsibility of informing the court of the basis for its motion, "and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the moving party has met its initial burden, the adverse party "may not rest upon the mere allegations or denials of his pleading but . . . must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A genuine issue for trial exists if the evidence is such that a reasonable factfinder could find in favor of the nonmoving party. Id.
In his Motion, Plaintiff seeks a determination of the parties' respective interests in the proceeds from the sale of the Joule Laser. He argues that the Agreement between Good and Debtor gave Good a security interest in the Joule Laser but that, under 11 U.S.C. § 544, Good's failure to properly perfect that interest renders his interest to be that of an unsecured creditor. Good, on the other hand, states that he does not claim a security interest in the proceeds and argues instead that the Agreement gave him a one-half ownership interest in the Joule Laser. For the reasons that follow, the court finds that, as trustee of Debtor's bankruptcy estate, Plaintiff has an interest in the entirety of the proceeds subject to an enforceable security interest held by Good in one-half of the proceeds.3
The court rejects Plaintiff's argument that Good is merely an unsecured creditor of Debtor given his failure to perfect his security interest. Although Plaintiff offers no evidence of Good's failure to do so, Good states in his answer that he "does not claim a security interest in the laser." [Doc. # 24, p. 2]. The court will, therefore, assume for purposes of this Motion that his security interest was not perfected. Nevertheless, Plaintiff's reliance on § 544 in support of his argument is misplaced. Although § 544 givesa trustee certain avoidance powers, including avoidance of an unperfected security interest, see, e.g., Graham v. Huntington Nat'l Bank, 472 B.R. 444, 451 (Bankr. N.D. Ohio 2012), that section is not self-executing, In re Burks, 181 B.R. 303, 307 (Bankr. N.D. Ohio 1995) (); Noland v. HSBC Auto Finance, Inc. (In re Baine), 393 B.R. 561, 566 (Bankr. S.D. Ohio 2008) (). The Trustee's complaint does not allege an avoidance claim under § 544. Seeking avoidance of Good's security interest by motion is improper. See Fed. R. Bankr. P. 7001(2) ().
The court thus considers only whether Good's interest in the proceeds from the sale of the Joule Laser flow from an ownership interest or a security interest in the...
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