In re Cummings
| Decision Date | 08 January 2001 |
| Docket Number | 99-33500.,No. 00-3111,00-3111 |
| Citation | 266 BR 138 |
| Parties | In re Charles/Tammy CUMMINGS, Debtors. Van Wert Co. Hospital, et al., Plaintiffs, v. Bruce C. French, Trustee, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Ohio |
Janice A. Quatman, Lima, OH, for debtors.
Bruce C. French, Lima, OH, for Estate of debtors.
James F. Hearn, Wapakoneta, OH, for plaintiff.
Anthony L. Geiger, Lima, OH, for creditor.
This cause comes before the Court upon Trustee's Motion for Summary Judgment, and Memorandum in Support; and the Plaintiff's Motion for Summary Judgment, Memorandum in Support, and Response to the Trustee's Motion for Summary Judgment. In addition, Robert K. Holmes, Clerk of Courts for the Municipal Court of Lima, as a third-party defendant, submitted a Response to the Trustee's Motion for Summary Judgment. This Court has now had the opportunity to review the arguments of Counsel, the exhibits, as well as the entire record of the case. Based upon that review, and for the following reasons, the Court finds that the Trustee's Motion for Summary Judgment should be Denied; and that the Plaintiff's Motion for Summary Judgment should be Granted.
The relevant facts of this case, which are not in dispute, are very straightforward. In 1998 the Debtors, Charles Cummings and Tammy Cummings (hereinafter referred to collectively as the "Debtors") were sued by two separate creditors for unpaid debts. These creditors were the Plaintiff, Van Wert County Hospital, and Anesthesia Associates of Lima, Inc. Attorney Hearn served as legal counsel for both of these creditors.
In July of 1998, the Van Wert County Hospital obtained a default judgment in the amount of Six Hundred Forty-seven and 08/100 dollars ($647.08) against the Debtors after they failed to appear in the state court proceeding. In order to enforce this judgment, Attorney Hearn, obtained on August 21, 1998, an order of garnishment against the Debtor, Charles Cummings (hereinafter referred to individually as the "Debtor") which was then served on the garnishee (the Debtor's employer) on August 24, 1998. On August 5, 1999, almost one (1) year after service of the Plaintiff's garnishment order was perfected on the garnishee, it appears that in accordance with the garnishment order, the garnishee paid to the Lima Municipal Clerk of Courts an amount of slightly less than Three Hundred dollars ($300.00). However, before these funds were disbursed, the Debtors, on August 23, 1999, filed a petition in this Court for relief under Chapter 7 of the United States Bankruptcy Code.
On August 25, 1999, the Lima Municipal Court received notice of the Debtors' bankruptcy petition. In addition, on that same day, the Debtors, by and through their attorney, filed a Motion to release the garnished funds to the Trustee. This motion was then granted by an order entered on September 1, 1999, by the Honorable Rickard Workman. However, just before this order was entered, the Lima Municipal Clerk of Courts, on August 29, 1999, processed and mailed the approximately Three Hundred dollars ($300.00) in garnished funds to Attorney Hearn, who has since refused to turnover the funds to the Trustee. The reason given by the Clerk of Courts for issuing the garnished funds to Attorney Hearn, in opposition to Judge Workman's order, was that the release of the garnished funds, in addition to being done in accordance with state law, was done before the turnover order was received.
On October 20, 1999, the Trustee filed a Motion, which was subsequently granted, to intervene in the state court proceedings, the purpose of which was to allow the Trustee to protect those funds which Judge Workman had ordered be turned over. The Trustee then, after the occurrence of some interim events which included the consolidation of the Creditors' cases, filed a Notice of Removal to this Court in accordance with 28 U.S.C. § 1452 and Bankruptcy Rule 9027. Thereafter, pursuant to Bankruptcy Rule 7056, the Trustee filed a Motion for Summary Judgment in which he asked for the following relief:
In support of his requests for relief, the Trustee asserts that the garnished wages turned over by the Debtor's employer to the Lima Municipal Clerk of Courts constituted property of the Debtors' bankruptcy estate under 11 U.S.C. § 541(a). On this issue, the Trustee also asserts that the turnover of funds by the Clerk of Courts to Attorney Hearn violated the automatic stay as contained in 11 U.S.C. § 362(a). In addition, the Trustee contends that the funds transferred by the Clerk of Courts was a preference, and thus is avoidable pursuant to 11 U.S.C. § 547(b). On these issues, Attorney Hearn, on behalf of the Van Wert County Hospital, filed a Summary Judgment Motion, asking that it be determined that the garnished funds at issue in this case are solely the property of the Creditor, Van Wert County Hospital, and not property of the Debtors' bankruptcy estate.
Section 541 of the Bankruptcy Code provides in pertinent part:
Determinations concerning the administration of the debtor's estate, orders to turn over property of the estate, and other proceedings affecting the liquidation of the assets of the estate are core proceedings pursuant to 28 U.S.C. § 157. Thus, this case is a core proceeding.
The instant case has been brought before the Court upon the Parties' cross-motions for summary judgment. Under the Federal Rules of Civil Procedure, which are made applicable to this proceeding by Bankruptcy Rule 7056, a party will prevail on a motion for summary judgment when, "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 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); Fed.R.Civ.P. 56(c). In order to prevail, the movant must demonstrate all elements of the cause of action, but once that burden is established, the opposing party must set forth specific facts showing that there is a genuine issue for trial.R.E. Cruise, Inc. v. Bruggeman, 508 F.2d 415, 416 (6th Cir.1975); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-51, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). Inferences drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Matsushita v. Zenith Radio Corp., 475 U.S. 574, 586-88, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). In addition, in cases such as this, where the Parties have filed cross-motions for summary judgment, the Court must consider each motion separately, since each party, as a movant for summary judgment, bears the burden to establish the nonexistence of genuine issues of material fact, and that party's entitlement to judgment as a matter of law. Thus, the fact that both parties simultaneously argue that there are no genuine factual issues does not in itself establish that a trial is unnecessary, and the fact that one party has failed to sustain its burden under Fed. R.Civ.P. 56 does not automatically entitle the opposing party to summary judgment. Charles Alan Wright, Arthur R. Miller & Mary Kaye Kane, 10A Federal Practice and Procedure § 2720, at 16-17 (1983).
When a debtor files for bankruptcy relief, any and all property that the debtor has a legal or equitable interest in, wherever located, becomes property of an estate. 11 U.S.C. § 541(a). Thereafter, any property encompassed within the scope of estate property is subject to an action for turnover by the bankruptcy trustee. In re Iferd, 225 B.R. 501, 502 (Bankr.N.D.Fla.1998). Conversely, property in which the debtor no longer has any ownership interest in, at the time the bankruptcy petition is filed, may be held free from the claims of both the debtor and the bankruptcy trustee. In conformance with this latter principle, Attorney Hearn, on behalf of the Van Wert County Hospital, contends that the funds garnished by the Debtor's employer are not subject to turnover because the Debtors, upon filing for bankruptcy, had no interest in such funds-the funds having been transferred by the Debtor's employer to the Lima Municipal Clerk of Courts prior to the time the Debtors filed for bankruptcy relief. In addition, Attorney Hearn asserts that even if the Debtors' bankruptcy estate has an interest in the garnished funds, the disbursement of the funds to the Lima Clerk of Courts and then to him would not, as the Trustee contends, constitute an avoidable preference as there exists a statutory defense thereto under 11 U.S.C. § 547(c)(8). In addressing these arguments, the Court begins with Attorney Hearn's contention that the Debtors, and thus by implication the Trustee, had no interest in the garnished funds once those funds were transferred to the Lima Municipal Clerk of Courts.
For purposes of § 541(a), a person's interest (or lack thereof) is determined by reference to applicable state law, which for purposes of this case means that Ohio law will be applicable since all the events which give rise to this proceeding transpired in Ohio. In re Greer, 242 B.R. 389, 394 (Bankr.N.D.Ohio 1999); In re Sielaff, 164 B.R. 560, 566...
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