In re Gunder, Bankruptcy No. 2-80-02479.
| Decision Date | 31 December 1980 |
| Docket Number | Bankruptcy No. 2-80-02479. |
| Citation | 8 BR 390 |
| Parties | In re Kevin Lynn GUNDER, Andrea Arlene Gunder, Debtors. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
Mitchel D. Cohen, Columbus, Ohio, for debtors.
Roland T. Gilbert, Columbus, Ohio, for BancOhio Nat. Bank.
Frank Pees, Worthington, Ohio, trustee.
ORDER ON MOTION
This matter is before the Court on the merits of a Motion to Recover Repossessed Automobile filed by the debtors. The matter was tried to the Court on its merits and was submitted for decision.
The debtors have a Chapter 13 proceeding pending before this Court. The terms of their plan, as proposed, include payment of $44.00 per week to the Chapter 13 trustee for a period of approximately forty-eight (48) months, payment of administrative expenses and priority claims in full, payment of secured claims in full to the value of their security as determined by the Court, and a dividend of 100% to all allowed unsecured claims. The debtors filed their petition on July 14, 1980 and listed BancOhio National Bank (BancOhio) as a creditor secured in a 1978 Plymouth Horizon which had been repossessed before the filing. BancOhio filed its proof of claim on August 22, 1980, attaching a certificate of title to the 1978 Plymouth Horizon which reflected John Gunder, the father of the debtor Kevin Gunder, as the owner of the vehicle. BancOhio filed its claim as unsecured.
The present motion under consideration is the attempt of the debtors to assert an interest in the 1978 Plymouth sufficient to cause its return to their possession for use in executing the terms of their proposed plan. A threshold question to be addressed by the Court concerns the objection raised by BancOhio to the introduction of any evidence tending to dispute the ownership of the car except as reflected on the title. Section 4505.04 of the Ohio Revised Code provides:
This statute sets out a conclusive presumption of ownership based upon a notation on the face of the certificate of title to the automobile. See, The Kelley Kar Co. v. Finkler, 155 Ohio St. 541, 99 N.E.2d 665 (1951). To the extent 4505.04 O.R.C. states a rule of evidence or sets forth a matter of procedure, this statute has no effect in a federal bankruptcy court. Rules 101 and 1101(a) & (b) of the Federal Rules of Evidence, Rule 13-1 of the Rules of Bankruptcy Procedure, and § 405(d) of the Bankruptcy Reform Act of 1978 (P.L. 95-598). It has been said, however, that a conclusive presumption is not merely a rule of evidence or a procedural guide, but rather that, in effect, it is a rule of substantive law. 21 O.Jur.2d Evidence § 101, McCormick on Evidence § 342 . In the area of bankruptcy law, the United States Constitution has expressly granted power to the federal government to make uniform laws regarding bankruptcy. U.S.Const. Art. I, § 8, cl. 4. In such an area, where power has expressly been granted to the federal government, any state statute which conflicts with that federal law will have to yield to the federal rule of law. U.S.Const. Art. 6. A state has no power to make or enforce any law which conflicts with the federal bankruptcy laws. International Shoe Company v. Pinkus, 278 U.S. 261, 49 S.Ct. 108, 73 L.Ed. 318 (1929). Furthermore, decisions of state courts defining property rights do not bind the federal bankruptcy courts when those decisions are contrary to the policy and proper construction of the bankruptcy laws. Board of Trade of the City of Chicago v. Johnson (In Re Henderson), 264 U.S. 1, 44 S.Ct. 232, 68 L.Ed. 533 (1923). The policy of the Bankruptcy Code, as reflected in 11 U.S.C. § 541, is to provide for an estate consisting of all legal and equitable property interests of the debtors. Section 4505.04 of the Ohio Revised Code cannot be applied in this proceeding to the extent that it purports to deny to the bankruptcy court the right to hear evidence pertaining to any interest which the debtors may have in the 1978 Plymouth. A clear intent of the Bankruptcy Reform Act of 1978 was to minimize, if not eliminate, the vagaries of state law upon the administration and application of the bankruptcy law. With the recognition of certain limited areas of exception (for example, the matter of exemptions under § 523), this intent should be implemented by a restrained deference to state law on matters raised in a bankruptcy case. In the present case, this Court holds that the state statute (§ 4504.04, O.R.C.) on the presumption of ownership will not be applied.
Section 541 of the Bankruptcy Reform Act of 1978 (11 U.S.C. § 541) has eliminated the concept of title as it relates to the inclusion of property as property of the estate. See 4 Collier on Bankruptcy § 541.02 (15th ed. 1980). All legal and equitable interests in property are included. Moreover, federal law will determine what property becomes property of the estate. State law, to the extent it does not conflict with the policy or spirit of the bankruptcy laws, will then be used to determine the type or extent of the interest which the debtor possesses. Property of the estate is generously defined under federal law and does not exclude novel interests. Segal v. Rochelle, 382 U.S. 375, 86 S.Ct. 511, 15 L.Ed.2d 428 (1966) (). Important recognition is often given to interests which are not necessarily considered relevant in state law allocation of title. R.C.A. Corp. v. Altschul (In the Matter of Spanish Language Television of Arizona Inc.), 456 F.2d 159 (9th Cir., 1972).
This Court finds that the 1978 Plymouth automobile is property of the debtors' estate. Although the interest of the debtors in the vehicle is not a legal interest under applicable state law, a literal interpretation of that state law is not appropriate where certain intervening events have occurred. Other courts, when faced with intervening situations, have recognized equitable rights in persons not shown on the certificate of title. In the Matter of Lee, Inc., 129 F.Supp. 920 (N.D.Ohio, 1955) and U.S. v. Birns, 395 F.2d 943 (6th Cir., 1968).
This Court, therefore, concludes that Kevin and Andrea Gunder have an equitable interest in the 1978 Plymouth which subjects the disposition of the vehicle to the jurisdiction of the bankruptcy court. The Court notes that it was established by uncontested testimony at the hearing on this matter that the car had been placed in Kevin Gunder's father's name so that a fleet discount price and fleet insurance could be obtained by John Gunder as part of an insurance package covering other vehicles which he owns. The cost to the debtors was thus lower than the debtors, as minors, could obtain were the car titled in their names. Kevin Gunder then testified that his father had co-signed with him and his wife on the note to BancOhio, but that inquiries and notices from the bank had always been sent to Kevin Gunder (at least one demand letter, however, was also sent to John Gunder). Furthermore, the payment book issued by BancOhio was in the name of Kevin and Andrea Gunder, and no payments had ever been made directly by John Gunder.
Having concluded that Kevin and Andrea Gunder have an equitable interest in the 1978 Plymouth, the Court must next determine the nature and extent of that interest under state law. Ohio Revised Code § 1309.49 states in relevant part:
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