In re Hunter, Bankruptcy No. 03-68413.

• Decision Date: 24 January 2008
• Docket Number: Adversary No. 05-2588.,Adversary No. 06-2032.,Adversary No. 05-2203.,Adversary No. 05-2023.,Bankruptcy No. 03-68413.,Adversary No. 06-2361.,Adversary No. 05-2024.,Adversary No. 06-2362.,Bankruptcy No. 04-53276.,Bankruptcy No. 05-59738.,Bankruptcy No. 05-71605.,Bankruptcy No. 04-51179.,Adversary No. 05-2130.,Bankruptcy No. 04-55750.,Bankruptcy No. 05-69492.,Bankruptcy No. 03-55454.
• Citation: 380 B.R. 753
• Parties: In re Tracey R. HUNTER, Debtor. Susan L. Rhiel, Trustee, Plaintiff, v. OhioHealth Corporation, Defendant. In re Brigitte Ann Strange, Debtor. Susan L. Rhiel, Trustee, Plaintiff, v. OhioHealth Corporation, Defendant. In re Alean M. Bell, Debtor. Frederick L. Ransier, Trustee, Plaintiff, v. Plan Administrator, OhioHealth Retirement 403(b) Savings Plan, Defendant. In re Kevin Douglas Longnecker and Rebecca Jean Longnecker, Debtors. Frederick L. Ransier, Trustee, Plaintiff, v. AIG The Variable Annuity Life Insurance Company, Plan Administrator, Defendant. In re Harvey J. Guikema and Debra L. Guikema, Debtors. Susan L. Rhiel, Trustee, Plaintiff, v. The Variable Annuity Life Insurance Company, Defendant. In re Roger Lee Burns and Pamela Sue Burns, Debtors. Larry J. McClatchey, Trustee, Plaintiff, v. OhioHealth Corporation, Defendant. In re James S. Brown and Joyce A. Brown, Debtors. Frederick L. Ransier, Trustee, Plaintiff, v. Plan Administrator, OhioHealth 403(b) Savings Plan, Defendant. In re Kenneth Hawkins and Jacqueline D. Hawkins, Debtors. Susan L. Rhiel, Trustee, Plaintiff, v. OhioHealth Corporation, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

380 B.R. 753

In re Tracey R. HUNTER, Debtor. Susan L. Rhiel, Trustee, Plaintiff, v. OhioHealth Corporation, Defendant. In re Brigitte Ann Strange, Debtor. Susan L. Rhiel, Trustee, Plaintiff, v. OhioHealth Corporation, Defendant. In re Alean M. Bell, Debtor.

Frederick L. Ransier, Trustee, Plaintiff, v. Plan Administrator, OhioHealth Retirement 403(b) Savings Plan, Defendant.

In re Kevin Douglas Longnecker and Rebecca Jean Longnecker, Debtors.

Frederick L. Ransier, Trustee, Plaintiff, v. AIG The Variable Annuity Life Insurance Company, Plan Administrator, Defendant.

In re Harvey J. Guikema and Debra L. Guikema, Debtors.

Susan L. Rhiel, Trustee, Plaintiff, v. The Variable Annuity Life Insurance Company, Defendant.

In re Roger Lee Burns and Pamela Sue Burns, Debtors.

Larry J. McClatchey, Trustee, Plaintiff, v. OhioHealth Corporation, Defendant.

In re James S. Brown and Joyce A. Brown, Debtors.

Frederick L. Ransier, Trustee, Plaintiff, v. Plan Administrator, OhioHealth 403(b) Savings Plan, Defendant.

In re Kenneth Hawkins and Jacqueline D. Hawkins, Debtors.

Susan L. Rhiel, Trustee, Plaintiff, v. OhioHealth Corporation, Defendant.

Bankruptcy No. 03-68413.

Bankruptcy No. 03-55454.

Bankruptcy No. 04-51179.

Bankruptcy No. 04-53276.

Bankruptcy No. 04-55750.

Bankruptcy No. 05-59738.

Bankruptcy No. 05-69492.

Bankruptcy No. 05-71605.

Adversary No. 05-2023.

Adversary No. 05-2024.

Adversary No. 05-2130.

Adversary No. 06-2361.

Adversary No. 05-2203.

Adversary No. 05-2588.

Adversary No. 06-2362.

Adversary No. 06-2032.

United States Bankruptcy Court, S.D. Ohio, Eastern Division.

January 24, 2008.

COPYRIGHT MATERIAL OMITTED

Robert D. Bergman, Susan L. Rhiel, Samuel L. Calig, Frederick L. Ransier, III, Aaron Glasgow, Columbus, OH, Lawrence M. Maley, Lancaster, OH, Nicholas

W. Jones, Delaware, OH, Roger L. Weaver, Canal Winchester, OH, Norman Brusk, Reynoldsburg, OH, for Debtors.

Before: CHARLES M. CALDWELL, JOHN E. HOFFMAN, JR. and C. KATHRYN PRESTON, Bankruptcy Judges.

MEMORANDUM OPINION ON MOTIONS FOR SUMMARY JUDGMENT

JOHN E. HOFFMAN, JR., Bankruptcy Judge.

I. Introduction

These adversary proceedings arise in the underlying bankruptcy cases of seven individual Debtors who participate in retirement savings arrangements made available through their employers under 26 U.S.C. § 403(b) (collectively, "Retirement Plans").¹ The Chapter 7 trustees ("Plaintiffs") of the Debtors' estates have filed complaints under 11 U.S.C. § 542 for turnover of the account balances in the Retirement Plans as of the Debtors' respective petition dates. In response, as well as in its own motions for summary judgment, Defendant OhioHealth Corporation ("OhioHealth") argues that the assets of the six Debtors ("Ohiollealth Plan Debtors") who participate in the OhioHealth plan ("OhioHealth Plan") are not subject to turnover because 11 U.S.C. § 541(c)(2) excludes the Debtors' interests from their respective estates. Defendant The Variable Annuity Life Insurance Company ("VALIC") makes the same argument with respect to the retirement annuity ("VALIC Annuity") it issued to Debtor Debra L. Guikema ("Guikema").² In response, Plaintiffs assert that § 541(c)(2) does not exclude the Debtors' interests in the Retirement Plans.

A property interest is excluded from property of the estate under § 541(c)(2) if: (i) the interest is a beneficial interest in a trust; (ii) there is a restriction on the transfer of the interest; and (iii) the restriction is enforceable under applicable nonbankruptcy law. Taunt v. Gen. Ret. Sys. of Detroit (In re Wilcox), 233 F.3d 899, 904 (6th Cir.2000). Applying this test, the Court finds that each of the OhioHealth Plan Debtors has a beneficial interest in a trust, each interest is subject to a transfer restriction under the OhioHealth Plan, and each restriction is enforceable under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1056(d)(1). As a result, the OhioHealth Plan Debtors' interests are not property of their estates. The Court therefore grants OhioHealth's motions for summary judgment and denies Plaintiffs' summary judgment motions against OhioHealth.

The Court also denies—although for a different reason—the motion for summary judgment filed by Plaintiff Susan L. Rhiel ("Rhiel") against VALIC insofar as it seeks immediate turnover of Guikema's interest in the VALIC Annuity. In contrast to the interests of the OhioHealth Plan Debtors, Guikema's interest in the VALIC Annuity is not excluded from her estate under § 541(c)(2) because it is not a beneficial interest in a trust. But Guikema's estate contains no more rights in the VAIC Annuity than Guikema had as of the Petition Date—a future possessory interest contingent upon events that have not yet occurred. Because Rhiel has not carried her burden of proving that Guikema is entitled to a distribution under the VALIC Plan, the Court denies the summary judgment motion against VALIC insofar as it seeks immediate turnover of Guikema's interest in the VALIC Annuity. Rhiel's summary judgment motion is granted insofar as it seeks a determination that Guikema's interest in the VALIC Annuity is property of her bankruptcy estate.

II. Jurisdiction

The Court has jurisdiction to hear and determine these consolidated adversary proceedings pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in this district. This is a core proceeding. See 28 U.S.C. § 157(b)(2)(A) and (E).

III. Procedural Background

The OhioHealth Plan Debtors³ and Guikema each filed bankruptcy cases prior to the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"). Plaintiffs then commenced adversary proceedings seeking turnover of the account balances in the Retirement Plans, net of any taxes and penalties, as of each Debtor's respective petition date.⁴

On March 13, 2006, April 19, 2006 and June 21, 2006, the Court entered orders consolidating the adversary proceedings.⁵ By those orders the Court also designated Adv. Pro. No. 05-2023 as the lead adversary proceeding.⁶ In Rhiel v. Ohio Health Corp. (In re Guikema), 363 B.R. 853, 854-55 (Bankr.S.D.Ohio 2007), entered March 17, 2007, this Court recounted much of the procedural history of the consolidated adversary proceedings up to that date. Subsequently, on May 29, 2007, a three-judge panel made up of Judges Caldwell, Hoffman and Preston heard oral argument ("Hearing") on Plaintiffs' motions for summary judgment, OhioHealth's motions for summary judgment, and the responses to those motions. Participating at the Hearing were Rhiel, on her own behalf and on behalf of Trustee Larry J. McClatchey; Brenda Bowers, on behalf of Plaintiff Frederick L. Ransier; Jack R. Pigman and Ann M. Caresani, on behalf of OhioHealth; and Peter Hahn and Charles E. Ticknor, III, on behalf of VALIC.

During the Hearing, the Court established a schedule for additional briefing on certain issues. Consistent with that schedule, the parties filed the following post-hearing briefs: (1) Post-Hearing Brief of OhioHealth Corporation (Doc. 58); (2) Post-Hearing Brief of The Variable Annuity Life Insurance Company (Doc. 59); (3) Joint Post Hearing Brief of Susan L. Rhiel, Trustee, Larry J. McClatchey, Trustee, and Frederick L. Ransier, Trustee (Doc. 60); and (4) The Variable Annuity Life Insurance Company's Notice of Supplemental Authority (Doc. 61). Post-hearing briefing was completed on September 20, 2007.

This matter is before the Court on the post-hearing briefing as well as the previously-filed summary judgment motions and the objections and other responses to those motions.

IV. Undisputed Facts

During the Hearing, the parties agreed that there are no material facts in dispute and that the legal question before the Court involves the interpretation of Retirement Plan documents. All documents necessary to the Court's determination are before the Court. The Court sets forth the pertinent provisions of these documents below.

A. The OhioHealth Plan

The following documents relate to the OhioHealth Plan Debtors' interests in the OhioHealth Plan: (i) the OhioHealth Retirement Savings Plan (403(b)) ("Ohio-Health Plan") and the amendments thereto; (ii) the Agreement between CitiStreet Associates LLC and Smith Barney Corporate Trust Company ("CitiStreet Agreement") with respect to a group trust of which the OhioHealth Plan is a part; (iii) the CitiStreet Retirement Services Mutual Fund Select Portfolios 403(b)(7) Custodial Account; and (iv) the Service Agreement with respect to the OhioHealth Plan.

The OhioHealth Plan contains numerous references to a trust and a trustee. Article I of the Plan contains the following definitions: "`Trust' or `Trust Fund' shall mean the assets of the Plan and Trust as shall exist from time to time[,]" OhioHealth Plan § 1.53, and "`Trustee' shall mean Smith Barney Corporation Trust Company [("Smith Barney")] or the person(s) or entity(ies) serving as Trustee pursuant to Article VIII and any successor thereto." Id. § 1.54.

The OhioHealth Plan provides as follows:

All assets of this Plan shall be held in Trust by the Trustee which shall have exclusive authority and discretion to manage and control the assets of this Plan and Trust, except to the extent that the Trustee shall be subject to the direction of the Committee as expressly provided herein or to the authority of an investment manager as may be so delegated pursuant hereto.

Id. § 8.3.

In addition, § 8.1 of the OhioHealth Plan states that:

All assets of this Plan shall be held in such Trust (or separate Trusts) as shall from time to time be created and maintained by the Employer as part of this Plan. Any such Trust shall be maintained by written trust agreement which shall contain such terms and conditions, consistent with the provisions of this Plan, as the Employer or, if the Employer so delegates, the Committee on one part and the Trustee on the other part shall agree. . . .

Id. § 8.1.

Under the OhioHealth...